The new electricity industry: What`s at stake?
- McKinsey & Co., Los Angeles, CA (United States)
- McKinsey & Co., San Francisco, CA (United States)
- McKinsey & Co., Washington, DC (United States)
There is enough potential for value creation and growth in the emerging electric industry to overcome the very significant downside facing today`s utilities. In the transition to competition, electricity customers will gain lower prices, and new or retooled competitors will take market share. To emerge a winner, utilities will have to move quickly on three fronts-strategic, organizational, and regulatory. Market forces, now being accommodated by deregulation, are remaking the electric utility industry. As in banking and telecommunications before it, this industry is now in the early stages of a complete transformation. There will be mergers and massive consolidation. There will be new competitors who will redefine the economics and competitive dynamics of the business, as MCI did in telecom and Fidelity has done in banking. As in banking and telecom, there will be traditional players, like Citibank or ATT, who make and actually shape the transition, and others who dwindle, vanish or are subsumed. The winners will create significant value for their shareholders. The once vertically integrated electric industry will fragment into three distinct, but linked, businesses - generation, wires and power services - plus a dispatch function. Each will have its own competitors and particular competitive dynamics. Generation will be a highly competitive, cost-based commodity business. Wires businesses, comprised of transmission and distribution functions, will be regulated, open access networks. Power services, encompassing wholesale and retail commodity sales and including other energy and non-energy products, will be provided by a third set of services competitors. Scheduling and dispatch, grid control and price settlements will be provided by independent, regulated entities and are outside the scope of this article.
- OSTI ID:
- 447678
- Journal Information:
- Electricity Journal, Vol. 9, Issue 7; Other Information: PBD: Aug-Sep 1996
- Country of Publication:
- United States
- Language:
- English
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