Fortnightly Magazine - September 15 1998

Does it make sense to deregulate utility meters before knowing how (or if) competition will work in the electricity industry? Or is it better to wait, to get a better idea of what customers will want, need and be willing to buy?

After all, the point is to give better choices to consumers. Shouldn't they have a say?

To open electric metering to competition implies standardization - collecting groups of engineers and scientists to approve technical standards for data formats and telecommunications protocols to achieve some degree of interoperability for equipment and software.

THE LIST OF COMPANIES STUNG BY RECENT ELECTRICITY. price spikes in he Midwest continues to expand, as cries for price caps grow loader. Much has been said of the dollar amounts lost and who has incurred those losses; yet few have questioned the fundamentals driving this market. Understanding what's behind the recent market uproar is the first step in deciding how well the market functions.

Regulators should be careful not to slow the restructuring process simply because of this price volatility, but they should pay very close attention to its causes.

Efforts to make generation competitive have induced several electric utilities to sell their power plants. Some sales are voluntary. Some are forced by rules mandating functional segregation from transmission and distribution. Of those sales announced or completed, most have involved high-cost utilities, and all have garnered at least book value, suggesting an attempt by sellers to deal with stranded costs.

Why then, are buyers willing to pay more than book value? They must believe they can improve on cash flows - either by raising revenues, trimming costs, or both.

Credit card companies say they're seeing an increase in volume for energy transactions despite claims by utilities that it costs more for them to receive monthly bills on plastic.

As proof of their desire not to take the credit card route, the utilities that allow customers to pay with a card don't always promote that option.

Holding utilities back are the transaction fees they pay for bill processing. These fees can run as high as 3 percent or more. If a customer doesn't pay the full card balance each month, the servicing bank profits even more.