Marriage of convenience eyes retail market.
By Richard S. Green and J. Michael Parish
Enron's proposed entry into the electric energy business is a "wake-up call." Open competition will continue to accelerate, and new, aggressive players will seek ways to become involved as the energy and energy services businesses converge.
A combined Enron/Portland General Corp. (PGC) would join PacifiCorp, Pacific Gas & Electric Co., and Puget/Washington Energy as a substantial company operating in the Pacific Northwest, with clear ambitions to operate nationally. Enron/PGC might be able to drive prices down by exploiting differentials between electricity and gas prices, and could also challenge current players in the wholesale electric power markets in the Pacific Northwest. Those companies may find themselves under pressure to get into or expand their presence in the gas business.
Indeed, some analysts have suggested that even regional "pure utility" companies may not be large enough to survive in a fully competitive market. Smaller electric utilities and local gas distribution companies will have to consider how to respond to potential competition from these and other large companies in the years to come, by offering more services or by expanding through strategic alliances or business combinations.
Enron/PGC bears some resemblence to the proposed combination of Utilicorp United with Kansas City Power and Light Co. (KCPL). In both cases, a corporation that has pushed into entrepreneurial nonutility operations, both domestically and internationally, seeks to combine with a strong, traditional, domestic utility company.