Deregulation hoopla hits a few bumps

July 18, 2000
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INCLINE VILLAGE, NV — Once upon a time, deregulation was touted as a godsend. It would sweep the country, drive down costs, and keep more money in customers’ pockets.

Now, just a few years after all the hoopla, deregulation is often viewed as a prodding inevitability. It’s not living up to its hype. Instead, it is moving along slowly and with a mix of success and failure.

Those were some of the thoughts of Jane Sidebottom, Trane manager of Utility/ESCO programs, in a presentation she made to contractors and technicians here at the annual MSCA meeting.

What's been going on

She gave a brief review of deregulation activities over the past two years. In 1998, she said “It moved forward in California and Pennsylvania — slowly.” For example, in the entire state of California, only 5,000 customers shifted from their long-time traditional power supplier.

She said one reason for the slow response is because of fixed rates being imposed for four years regardless of who the supplier was.

“Merger mania has met with some successes and some failures,” she said, noting a mix of electric utilities, gas utilities, water companies, and contracting companies merging to become better known in areas of the country where they wish to establish a presence.

Merger movement by utilities was also slowed in 1998, she said, by unrelated hot weather problems creating electricity shortages. “Utilities learn that weather can be hard to predict.”

1999 picture and beyond

“Deregulation continued at an [even] slower place, while at the same time consolidation of the contracting community slowed considerably.” Again, she said, hot weather forced utilities to focus on providing power.

In her crystal ball gazing, Sidebottom said, “Deregulation will continue at a relatively slow pace.” One reason, she said, is because utilities are devoting much attention to Y2K matters.

A second issue, she said, will be stranded costs. Utilities want to pass along to customers previously incurred costs for power plant construction, but often face resistance in doing that. “This,” said Sidebottom, “is the number-one hindrance to regulation.”

Also continuing will be merger-acquisition activity that will throw a curve into the pace of deregulation. Furthermore, she said, the topic is not expected to be a high priority in Congress.

Who the players are

She noted that a deregulated industry would consist of generation companies, transmission companies, distribution companies, and energy service companies (ESCOs), the latter often doing the buying of power.

Sidebottom said such ESCOs provide a good avenue for service contracting companies to benefit from deregulation.

“There is an opportunity to work with these [utility] companies if you are a service provider. They need you desperately. They don’t know you are out there. They are only aware of the big consolidators.”

In addition to contracting companies providing service to utilities, she urged those companies’ officials to “continue to help building owner customers to make good decisions” as deregulation impacts them.

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