The battle to control profit margin really boils down to a battle for the customer premises, where the serious money resides.The gas and electric industries in the United States control about $900 billion in assets (production, logistical, merchant). They employ these assets to serve about 150 million customers (counted separately for gas and electric), but they manage to offer only two rudimentary products (em molecules and electrons (em and at only two levels of service: firm (supposedly) and interruptible (obviously). Such a poverty of consumer content stands without precedent in the history of U.S. business.
That this game is coming to an end should elicit no surprise.
True retail competition in the gas and electric industries will become a transforming and quotidian reality within five years, creating great shifts in revenue and capital:
s A $50-billion drop in annual consumer energy spending.
s From $200 to $300 billion extinguished over seven to 10 years in noncash book value in the pipes and wires and energy production industries.
s Tens of billions of dollars in new investments, particularly gas-fired merchant and distributed generation plants, and computing and communications systems.
s Many more billions in new enterprise value for efficient and innovative firms.
The old business model emphasized industrial technology and quantitative increases in consumption of energy commodities. The new model, supplanting the old, will accentuate information technology and qualitative increases in consumption of energy services.