In less than a decade, three powerful trends will converge on gas distributors. These trends promise to transform local distribution companies (LDCs) beyond recognition, whether municipal or investor-owned.
Few LDC executives and Board members today care to acknowledge these trends. Many find it more comforting to ignore, deny, or misconstrue their impact. But LDCs, having led a sheltered life, now confront a truly defining moment. These trends represent threats to survival. Right or wrong choices can lead to assertive prosperity or befuddled extinction.Threat #1 - Electric Competition
The electric utility industry ($200 billion a year in sales) is restructuring from a lumbering, high-cost business into a competitive provider of electricity and regulated services. This transformation will create powerful unregulated merchants intent on unearthing every conceivable business opportunity among energy consumers. Transmission and distribution firms will maximize deliveries; commodity power generators operating at high capacity will pump electricity under an array of pricing arrangements tailored to capture market share.
Technological and service innovation will explode. Next-generation metering, billing, and customer service systems will accompany efficient electro-technologies-not just for large industrial customers, but also residential and commercial users as well. This potent combination of customer service and product innovation-anchored by steadily falling prices at the meter-will turn electricity into the energy form of choice. Gas distributors will face threats aimed both at industrial users and their core base of institutional, commercial, and residential consumers.