Alliances with non-utility partners to enhance competitive position: the development of the Comfort Flame electric fireplace.

• Author: Handy, Scott W.

"Compete: to strive to outdo another, as for supremacy."

Random House Dictionary

Competition is a concept most people believe doesn't apply to the electric utility industry. Each utility's service area is fixed, prices are set on a cost-plus basis, and we can all operate in our own little isolated worlds, right?

Not exactly. In fact, not at all. The days of cost-plus pricing and isolationism are long gone. Many utilities, but not all, do enjoy some semblance of stability in service area. But this, too, is changing quickly. There is even direct competition for some market segments in the utility industry. Ask anyone who markets electricity for space and water heating if competitors are actively pursuing these markets.

Cass County Electric Cooperative has been dealing with many forms of competition for a long time. Since developing an aggressive dual energy heating program in the early 1970s, stiff competition from suppliers of oil, propane, and more recently, natural gas, has been the norm. Territorial competition posed a major threat to the cooperative's growth area in and near Fargo, North Dakota in the mid-1980s.

We have tried a number of things over the years to meet and beat the competition. One of the more unique ideas is a joint venture partnership with a manufacturing company to produce and market a quality electric fireplace. This article is the story behind this project.

Background and Introduction

Cass County Electric is fortunate to serve in and around the fastest-growing metropolitan area in North Dakota. Now this may sound more imposing than it really is, because even though Fargo is the largest city in North Dakota, it has a population of only 80,000.(1)

Northern States Power Company (NSP) is a large, investor-owned utility serving electricity to most of Fargo, and natural gas to all of Fargo and area communities. NSP aggressively markets natural gas in the growing areas of Fargo, most of which lie in Cass County Electric's service area.

It has been said that competition inspires a company to better performance. This has certainly been the case for Cass County Electric. Competing with NSP has helped us to sharpen our focus and concentrate on those things which will help us survive and stay one step ahead. In fact, NSP is largely responsible for Cass County Electric's venture into this project.

NSP has a gas line extension policy which makes it cost-prohibitive for the owner of a new home to have both electric heat and a gas fireplace. This is a serious issue because of all the new homes built in Fargo in 1993, over half had a gas fireplace. The gas line extension policy requires the customer to pay the entire cost of the extension to serve a gas fireplace ($800 to $1,000) if the home is not heated with gas. Needless to say, this policy has cost Cass County Electric considerable market share in space and water heating in the new house construction market.

Our attempts to deal with this matter through political channels have not...