Managing the transition from regulated electric utility to energy marketing company
Companies that hope to succeed in converging energy service business must plan to trade bundled and unbundled energy commodities in paper as well as physical markets. The winners will be those who realize the immensity and crucial importance of the former. Many traditional electric utilities are spending most of their time defensively on stranded asset issues, and only token amounts of time proactively on how to become a Btu company. The vacuum they are creating is being filled by those companies - Enron, UtiliCorp United, Duke Power, and a few others who have made preparing for the future their core mission rather than a sideshow. Important as the stranded asset issue is - and it is especially critical in nuclear-heavy regions like New England - the author believes that senior executives of all electric utilities must immediately relegate this {open_quotes}work of the past{close_quotes} to second place. It is urgent that they now begin to do what Enron decided to do almost ten years ago: acknowledge that an enormous paradigm shift has taken place in the energy industry and devote all available brainpower to preparing for that change. Electric utilities are on the threshold of an era in which electricity prices will be determined, not only by supply and demand as traditionally understood, but by the supply and demand for electricity in paper markets. In traditional market nomenclature, prices are determined by supply and demand. In paper markets, while the analytical metaphor is identical, the language and dynamics are different: Prices will emerge from the interplay of those who are {open_quotes}short{close_quotes} (i.e., willing to sell in the power futures markets at given prices). Electric utilities must master the dynamics of both markets. No less than their corporate survival is at stake.
- OSTI ID:
- 443482
- Journal Information:
- Electricity Journal, Journal Name: Electricity Journal Journal Issue: 1 Vol. 10; ISSN ELEJE4; ISSN 1040-6190
- Country of Publication:
- United States
- Language:
- English
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