Girding their grids for competition.

• Position: Utilities sector in North Carolina - Industry Overview

In the power business, not only are the lines of competition becoming blurred, so are the utilities themselves. Duke Power Co., the state's largest electric utility, announced in November that it would buy Houston-based PanEnergy Corp., a fast-growing natural-gas company, for $7.7 billion.

The deal, expected to close this fall, will create an energy giant with 22,000 employees and annual revenues of $10 billion from customers spanning half the continent. Duke officials say the move will put the new company, to be called Duke Energy, in position to provide customers with all their energy needs as deregulation redefines the utilities sector. Duke Chairman and CEO William H. Grigg went so far as to call it a "watershed event" that is "industry defining." When Grigg retires later this year, Duke Power President Richard Priory will become chairman and CEO of Charlotte-based Duke Energy. PanEnergy CEO Paul M. Anderson will be president.

The PanEnergy acquisition is the latest example of Duke's willingness to put itself at the forefront of deregulation. In late 1995 it received regulatory approval to open up its lines to other electricity providers who want to transfer power over Duke's grid - about a year before the state Utilities Commission began working out the nuts and bolts of how to ensure competition for wholesale electricity contracts.

"The idea," says Gisele Rankin, a staff attorney for the commission, is that a North Carolina utility "can buy and sell to anyone in the country - any wholesaler that can reach its transmission lines." Likewise, she adds, "all the cities, instead of having to buy power from CP&L or Duke, they could buy elsewhere, and the cooperatives could buy elsewhere."

Raleigh-based Carolina Power & Light Co. spent 1996 positioning itself for deregulation by continuing to trim costs. It cut 400 jobs in 1996 and now has 6,800 employees, down from a peak of 9,500 in 1987. It also restructured its purchase agreements with Charlotte-based Cogentrix Energy Inc., whose five plants use surplus steam to make electricity. The move will save CP&L about $175 million.

In the phone business, the question for 1997 is whether the long-distance companies and local providers will get the green light to compete head-to-head. The Telecommunications Act of 1996 will allow Bell companies to get back into the long-distance market. In return, long-distance companies get to offer local service. "People like AT&T will be coming in and saying...