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The Search for Consumer Content in Energy Marketing and Retailing

Fortnightly Magazine - September 15 1996

It created astonishing choice for consumers, lowering food prices and virtually eliminating the formerly "essential" local farmer's market (today only a niche player).

The combined infrastructure of a multimedia Internet (em with personal information portals, massive data warehouses, and sophisticated high-volume call centers (em will most certainly transform energy retailing into a creative and efficient national enterprise. These developments will consign the almost 5,000 local gas and electric retailing entities that now populate the energy market to the same economic oblivion that erased the local greengrocer, general store, butcher, baker, and farmer's market.

Energy retailing, as we know it, has much in common with the

village general store of the last century: a low-volume, limited-selection, indifferent-quality, high-margin business conducted by many with little sophistication and modest knowledge. In 10 years or so, the emerging infrastructure anchored by an evolved multimedianet will transform energy retailing into a high-volume, high-selection, superb-quality, and (relatively) low-margin business conducted by a few of great sophistication and intimidating knowledge.

The infrastructure of cyberspace will prove inherently and crushingly superior to that of physical space as far as delivering desired and valuable energy solutions to consumers. The price/performance ratio of energy services offered via cyberspace will dominate. Physical space will carry commodities: electrons and molecules. Cyberspace will carry products and services: combinations of voice, data, text, and image occupying almost infinite shelf space. The ongoing deregulation of the electromagnetic spectrum will make cyberspace delivery cheaper and more flexible. Yet even the wire-based cyberspace will eventually concede dominance to wireless and fiber-optic applications technologies.

Soon enough, the notion of even a few retail vendors of energy and ancillary services will seem quaint and unacceptable. The meter reader will go the way of the milkman. Future home buyers will inquire about energy management systems as routinely as they now ask about home security systems (and will expect both to be integrated with the computing and telecommunications infrastructure of the home). Businesses that finance and install domestic and small commercial energy, environment, and infrastructure systems will grow. Individuals will expect ambient temperature, humidity, and lighting to reflect personal tastes in the home, apartment, hotel, and office.

Large, sophisticated firms (many affiliated with or owned by energy retailers) will emerge to provide unobtrusive "domestic infrastructure" monitoring, management, and maintenance services, deploying a combination of remote measurement (sampling within-the-premise information every few seconds), diagnostics (using pattern-recognition and fault-analysis software), and anticipatory as well as post-failure intervention. These firms will supplant the HVAC, plumbing, electrical, and appliance maintenance companies that homeowners and property managers employ today. Apartment buildings, small commercial and institutional establishments, and office complexes will outsource management of the "internal vertical infrastructure" (including, of course, energy and ancillary services) to the same firms that manage the domestic infrastructure.

Initially, such services will likely be priced according to the traditional and comforting formula of a one-time installation and activation charge plus a monthly fee. Later, as the installed base grows for an intelligent infrastructure, consumers will treat the service as a routine, branded-product buying decision. Pricing will reflect virtually limitless variation and gradation in