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LG&E?s Don Santa: Choice in a Low-Cost State

Fortnightly Magazine - June 1 1998

to our attention. PCC members are a lot of the more pro-competitive¼ and when we put the LG&E position side by side with the PCC's principles they were remarkably alike. So we decided this was probably the most effective way for us to participate.

Is Dec. 15, 2000 still a realistic goal now that it's already 1998?

I don't think anything is locked in concrete, and I think that if and when it comes time for the horse trading that goes in to writing legislation, it's certainly something that could be on the table. I think you have to be sensitive to the fact that as the states move forward and as they commit to dates some of them may have phase-ins that go beyond Dec. 15, 2000. [Legislation] might have to grandfather what the states have done. PCC went with the date that was in Rep. Dan Schaefer's (R-Colo.) bill. I think it [made] a statement in terms of a commitment towards wanting choice sooner rather than later.

Too Many Mergers?

Will we eventually see a shake out down to five to ten giant utilities and energy providers, with all the recent mergers? [At the time of the interview, the FERC had not yet announced its approval of the LG&E-Kentucky Utilities merger.]

The conventional wisdom, and I think it's well supported, is that in a restructured industry, scope and scale are going to be important, especially in those aspects of the business that are going to be competitive, so I think you're probably going to see a further consolidation of industry. It's premature to speculate on the ultimate number but I think that you're probably going to see further consolidations dictated by the need for scope and scale in order to be competitive. This doesn't preclude the further vertical disaggregation of the industry as people decide what part of the business that want to be in. It doesn't preclude there being niche players, although they may not be a huge nationwide player.

Will that be best for customers? Won't it reduce choices?

Consumers are ultimately going to benefit from a number of strong companies that have the wherewithal to go out there and basically beat each other over the head, ultimately to the benefit of the consumer. You can say, "the more competitors the better," but the companies need to have the wherewithal to be in it for the long haul. That gets back to the point of scope and scale: There are going to be certain economies of size that will dictate that to be a big player, and certainly a big player nationally, [companies will] need a certain critical mass. If it got to a point where the industry became so consolidated that you only had two or three players really competing, yes, you've got a problem, but we are a long, long way from seeing that happen.

On Returning to the Private Sector

A recent international survey of utility executives by Andersen Consulting found that more than half of the respondents felt that regulators don't understand or recognize