Driven in large part by the Internet and deregulation, changes taking place in the utilities market indicate a new way of thinking and performing business processes. Alongside these changes, pressure remains to reduce operating costs while increasing shareholder value by leveraging new-market assets. To cope with such demands, utility companies have broken themselves down vertically, creating generation, transmission, distribution and energy service companies. At the same time, they are horizontally consolidating their original components-through mergers and acquisitions-to scale into the new economy and bolster their competitive edge. Succeeding in this practice requires that companies realize the full value of each asset and how it can be leveraged to create new revenue sources. This horizontal expansion is turning utilities’ assets into commodities-a transformation driven by technology and the Internet.
Revenue and profit growth have been limited in the traditional regulated market. As deregulation evolves, utilities must abandon the rate-based mentality and instead focus on marketing. Effective assimilation of mergers and acquisitions is necessary to make deregulation work. Mergers or acquisitions can result in cost savings through the elimination of redundant activities. For example, a merged company needs only one human resources department, one information systems department, one financial department, etc. Additionally, utility revenue and margins are limited or controlled to some extent by the geographic area served. Should a Southern utility generating high levels of kilowatts in the summer merge with a Northern utility generating high levels of kilowatts in the winter, the end result would be a better load balance creating higher efficiencies and a more steady revenue stream. The same applies if an electric utility merges with a gas utility. The merged corporation could enhance revenue and margins by balancing revenue from the two energy sources.
In addition to strategic mergers and acquisitions, opportunities exist for utility companies poised to deploy new technologies. In the future, it may be possible to generate electricity in one geographic region for transport to another. This will occur as interconnects between regional electricity grids are enhanced to handle such energy transfers and maintain the voltage levels required for reliability. Assuming that environmental and regulatory constraints evolve, more sophisticated transmission grids will be built that allow utilities to overcome monopolistic, political and natural energy delivery constraints. Such an approach currently exists for natural gas, which can be delivered from the Gulf of Mexico to Bangor, Maine, through pipelines. The technology either exists in part or is being developed to support such a dynamic delivery system for the electric industry. Evolving e-business capabilities allow energy customers to buy energy, pay their bills and make requests to their energy providers via the Internet. Large industrial customers can view energy availability and buy futures to hedge their energy costs. Energy companies can buy energy electronically from other utilities to support their systems economically or operationally. Today, several companies offer comprehensive software that helps utilities bill for complex rates, provide customers with Internet access to their accounts, electronically read utility meters, and forecast future energy usage based on weather.
Changes in technology as well as mergers and acquisitions require that utility companies accommodate the evolving marketplace, maintaining high levels of customer service and competitive pricing with fewer employees. Their future will rely on optimizing each customer relationship and synchronizing relationship-critical workflows. While redefining processes is the first step to this end, an end-to-end business solution that successfully unifies customers and businesses must be incorporated. Through Web-enabled customer management, utility companies can achieve increased customer satisfaction, growth and retention; uncover new revenue opportunities; and streamline mission-critical operations.
While it may appear unlikely that any such solution exists in a compact package, the technology is already in place. Companies poised to accept deregulation’s challenges now can access multi-company, multi-service solutions that harness the power of the Internet to achieve results.
Today’s technology provides the foundation for integrating diverse organizations and reengineering business processes to adapt with changing markets. For the utilities industry, integrated e-business solutions simplify deregulation’s complexities and provide utilities the opportunity to expand and thrive in the e-business revolution. They enable companies to leverage the Internet for strong returns from mergers and acquisitions and for stronger customer relationships.