And why policy on
stranded costs defies
a traditional legal or
There are sound economic reasons why policymakers should allow electric...
When I took this job three years ago, I posed the question, "Price or Service?" in the title of my first frontlines column.I suggested that natural gas utilities appeared willing to sell on price, but not electrics. The CEOs all claim that electricity has become a commodity. But I'll bet the franchise that electric utilities haven't yet figured out whether they are selling electrons (a commodity) or comfort and peace of find (a niche service). But then they claim that the key to competition lies in getting close to their customers.
Here it is, 1997, sixty-five columns later, and I'm writing the "Price or Service?" piece all over again.
If energy is a commodity, then all customer value comes from price, period. Anything else is a distraction. But if electricity is a service--a product that aspires to consumer desires, no matter how peculiar--then all this worry about low costs seems misplaced.
At the Press Conference
I'll remember June 24 as the date of one of the most peculiar press conferences I've ever attended. UtiliCorp United had invited the utility trade press to the unveiling of its new venture, EnergyOne L.L.C. When the meeting ended, and we listened to the answers given to all our questions, a strange silence ensured. We were perplexed--stunned, really.
From my conversations with others heading down the elevators after the press conference, a consensus developed. None of us could figure out what EnergyOne was really about. It just didn't make sense. It seemed to us that EnergyOne was giving away control of its brand name, violating a cardinal rule of marketing.
Initially, UtiliCorp and PECO Energy will each hold a 50-percent equity interest. The new company, described as a "marketing management company," will team with ADT, the home security company, and AT&T, which will supply residential long-distance service to Energy-One Customers. AT&T Solutions, another venture partner, will supply "customer care" to EnergyOne consumers, as well as consulting and systems integration services to EnergyOne's business customers.
Then comes the most peculiar news. EnergyOne will franchise the use of its brand name to other energy companies. First, it will sell franchises upstream to energy marketers, who will inject energy at wholesale into the EnergyOne portfolio. Second, it will sell franchises downstream to regulated distribution utilities, who will then sell the EnergyOne brand retail to their electric and gas customers.
But what exactly is the product?
According to the formal press announcement, EnergyOne will provided "premium-brand energy, telecommunications, protection and information-based products and services packaged for participating utilities to deliver to their local customers."
A niche, perhaps, but certainly the mother of all niches.
To make matters more confusing, at the press conference. EnergyOne President and CEO Andrew M. Guarriello conceded that EnergyOne customers nationwide would not all pay the same price for identical energy services. prices, he said, would depend in part on which distribution utility was acting as a franchisee.
Similarly, when asked whether EnergyOne would compete on price or on service, Guarriello appeared stumped for an answer. At one point, UtiliCorp CEO Rick Green stepped in. "Electricity is