By: Kathleen Davis, Associate Editor
Cap Gemini Ernst & Young interviewed over 100 executives across the globe between late August and November 2001 for their recently released study, Making De-regulation Work; Have the Basics been Forgotten?, and received an overall excited response to the concept of deregulation. Twenty-eight percent of those surveyed worked in generation, with another 28 percent network providers. Eighteen percent labeled themselves as primarily distribution, with 23 percent in exchanges and 3 percent representing regulators. As far as in-company standing, the interviewees split fairly evenly: 50 percent were CEO or board members, 40 percent were line management, with a miscellaneous 10 percent.
Although the study looked positive for the future of restructuring, Cap Gemini consultants advised caution.
“While [the study] indicates enthusiasm for all things deregulated, the 20-year history of the airlines and telecom sectors tell us there is often more pain than gain from an individual perspective,” stated Bill Hunter, Utilities Restructuring Leader of Cap Gemini Ernst & Young Energy, Chemicals & Utilities practice in the Americas. “We know many airline executives who might have embraced airline deregulation in its early days did not survive its effects on the industry.”
Executives from 15 different countries participated in the survey, with those from the Americas making up a rough 15 percent. So, while a number of positive aspects were cited, it was also obvious that the U.S. had a definite slowdown, with California being the main cause cited.
Nearly two-thirds of the respondents would label deregulation a success, a number Cap Gemini called “surprisingly high” given the current environment. Having the basics for third-party access and wholesale markets in place or in development was the second positive interviewees cited. And, finally, most respondents saw California as a “special case,” which gave deregulation higher marks on the whole as well.
However, the survey pointed out that not all is rosy on the restructuring front; there are challenges ahead. Cap Gemini stated that while there is a reasonable degree of confidence when dealing with normal operating conditions and a gradual evolution in a deregulated market, confidence slides with the thought of exceptional conditions, like California, or prolonged change.
“From the survey we know that economic uncertainty is accepted as part of executives’ new operating environment,” Hunter said. “However, confidence in the current regulatory system remains a major concern, as does the lack of clarity over market rules and standards.”
Despite the uncertainly, there are leaders in the deregulation game. When asked to name a winning player, survey respondents listed three distinct groups: trading-oriented organizations, retail specialists and developing utilities.
Enron received a large number of mentions under the first category, as the survey was conducted prior to most of Enron’s current problems. Overall, the group identified several attributes to apply to all categories: clarity of strategy and focus, adaptability, leadership in IT, a focus on clients.
In a late February interview on Williams’ Web newscast, Energy News Live, Hunter pointed out that concerns vary by region and by regulatory risk, which he stated has the tendency to “chase away capital.”
Overall, he asked that those enthusiastic executives take a lesson from the pages of history–specifically the airline and telecom evolutions–and wade into the waters of deregulation with a bit of courage.
“My theme would be: deregulation is messy; it’s not for sissies,” he commented.
More information on this survey can be found at www.cgey.com/energy or by calling Cap Gemini Ernst & Young in Houston at 713-982-1700.