but outsourcers could be cutting in.Wholesale competition and the prospect of competitive retailing are leading many electric utilities to turn their distribution activities into discrete business units. But the emergence of the "DisCo" as a distinct entity may only mark the first step in a more radical disaggregation.
Why the distribution business may see radical change isn't immediately apparent. Electric utilities staking out positions in the emerging electricity commodity markets will be tempted to view their DisCos as a source of dependable cash flow and, perhaps, as durable brand franchises that will continue to retain significant local market shares in the event of retail competition. In contrast to generation and retailing, distribution looks safe and staid. It remains a natural monopoly (it will rarely make sense to duplicate pipe or wire), and will likely continue subject to local regulation. Functions (such as marketing) that are critical to survival under retail competition are migrating to other parts of the utility.
Nevertheless, electricity distribution, along with gas distribution, remains a mammoth industry. With the wholesale commodity value of kilowatt-hours and therms removed, the distribution industry in the United States still generates revenues of about $50 billion in electricity, and $25 billion in natural gas. Most of these revenues, arguably, represent the value added from energy distribution (em and compensation for a wide-ranging and complex set of activities. In the electric utility industry, distribution represents only one-third of the assets, but half of the employees and an even larger share of the collection of
technologies and skills involved in creating and delivering kilowatt-hours.