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Inventing a Business in Wires & Pipes

Fortnightly Magazine - June 15 1998

Yet he knows of few other "T&D only" companies but GPU domestically, and his company is only halfway there.

Two U.S. companies that are transmission-only are Maine Electric Power and Vermont Electric Power Corp. The second company has just 534 miles of line and is owned by 16 of Vermont's 22 utilities, to which it provides a return on equity of 8 percent.

Looking at GPU activities throughout the corporate hierarchy, one could draw the conclusion that it could be sending mixed messages on its vision. After all, it's investing in co-generation plants in Georgia in the U.S., England, Columbia, Bolivia, Pakistan, Turkey, the Philippines and Canada. At press time, GPU also was pursuing a partnership with the Williams Cos. to sell commodity.

Hafer says there are explanations for both endeavors.

On the commodity side, he says, the company still sees a place for itself with small and medium-size customers, particularly commercial customers.

"So when I talk about not wanting to be in the commodities business, I agree, I'm not being totally honest," he says. "I say it in the sense I think of that in terms of bulk power trading and the generation game. I think that is a business that's going to be characterized by a relatively few, very large players. I believe that there's a second level, however, for regional players. And that is at this retail, small and medium-size customers."

Co-gen, Hafer admits, is a remnant of the past, but it still fits into overall strategy.

"In those areas where the generation business is going to be converted from the essentially the contract business that it is today under the regulatory scheme into a commodity business, we have said we are exiting that," he says. "However, for those businesses where it is a contract generation business - that is, we have a contract with a company or a system to take the output of the plant at an established set of prices - those are businesses we will continue to be in and in fact if new opportunities present themselves, we would entertain taking on more of those projects."

Looking toward the future, GPU hopes to augment its telecommunications network that uses the same poles and towers covered by its 66,000-square-mile U.S. T&D system. It plans on investing $10 million to extend its fiber optics in the near future.

It had hoped to learn more about gas distribution in Australia but Texas Utilities Co. may squash those plans.

GPU had received a 10-percent interest in Allgas Energy Limited, a natural gas distribution company in Brisbane, when it sold its 50 percent interest in Solaris Power, an electric distribution company. The Solaris sale was required by the state of Victoria so GPU could buy PowerNet. Cross-ownership in the electric industry is prohibited in Victoria.

But GPU's future in Allgas is uncertain. At press time, TU had topped competitive bidder Boral Ltd. to buy the gas distribution company. If TU is successful, GPU plans to sell its stake and write the company off as a learning experience, says Dennard, the