Fortnightly Magazine - January 1 1996

Differences of opinion make for good horse races and bad jokes about economists, and those who are studying the recent wave of electric utility merger announcements have not let us down. Some of these economists optimistically believe that the mergers act as forces for competition, since they will combine corporate assets and staffs to bolster operating efficiency and market acumen at the merged companies. Other economists, who see transmission as the root of monopoly power, are more pessimistic.

The North Carolina Utilities Commission (NCUC) has adopted a new set of guidelines to help settle disputes between electric and gas utilities over utility-sponsored promotional programs. It also established a rule for evaluating proposed incentive programs, approving a new food-service rate program designed by Duke Power Co. to encourage the installation of electric food preparation equipment in commercial kitchens.

As we move toward open energy markets, new players will be competing to offer consumers many of the services utilities offer today. It will no longer be enough to just meet our obligation to serve. We will also need to provide the products and services that customers value, at a level superior to that of the competition, while enhancing value to shareholders.

To retain customers, utilities need to understand the nature of the market. What customer values shape it?

Bunker Hill. Gettysburg. Pearl Harbor. Iwo Jima. The Cold War. Each of these famous conflicts resonates in our history books. Despite the end of the Cold War, we may face another battle, this time between the Federal Energy Regulatory Commission (FERC) and the states over jurisdiction.