Supply management: The next competitive advantage for utilities

Journal Article · Thu Aug 01 04:00:00 EDT 1996 · Electricity Journal

DOI:https://doi.org/10.1016/S1040-6190(96)80286-7· OSTI ID:447685

Budd, S; Heard, F

Almost three-quarters of the cost of operating a typical utility is attributable to supply management activities - planning, acquisition, handling, disposition, and payment for materials, services, and fuel. Reducing their costs can substantially improve one`s competitive position. Three performance indicators will be paramount in determining which utilities survive and prosper: (1) Price. Energy is a commodity. As such, the principal driver of market penetration in the new era of wholesale and retail wheeling will be price. Therefore, the determinant of success will be the ability to provide products and services to the marketplace at the lowest possible price. (2) Service quality. Beyond price, the most meaningful differentiation among energy delivery companies is in the perceived quality of services provided. Customer service and reliability will be the key means by which a provider differentiates itself, positively or negatively, from the competition. (3) Earnings growth. With the application of incentive regulation, earnings will be governed by a company`s ability to compete successfully in the market. This will place extreme pressure on utilities to enhance revenues - which is difficult in a mature market - and/or to reduce costs through productivity gains and process changes.

• OSTI ID: 447685
• Journal Information: Electricity Journal, Journal Name: Electricity Journal Journal Issue: 7 Vol. 9; ISSN ELEJE4; ISSN 1040-6190
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
BUSINESS
COMPETITION
DEREGULATION
ELECTRIC UTILITIES
MANAGEMENT
SUPPLY AND DEMAND