Meter Minder provides a competitive edge.

• Author: Nikula, Rod
• Position: Home security service of Wright-Hennepin Electric Cooperative

Wright-Hennepin Electric Cooperative determined that they are in the business to provide a 24-hour critical human service. The home security business is the same type of business. Our author discusses the strategic, financial and operational aspects of the diversification efforts.

INTRODUCTION

The electric utility industry is moving into a new era of deregulation, retail wheeling and out and out competition for the customer's business. Our thinking processes will need to undergo some radical changes because we have had a captive customer for so long. In the past we have used pricing signals to alter the way we wanted customers to use our services. Examples of this are time-of-day rates and load management programs.

The bottom line is that customers want to be in control of their own choices. They want the ability to shop for goods and services that meet their needs at the prices they can afford. We need to unbundle our electric service packages and bundle our customer service options. The customer's service choices will come from businesses that we traditionally have not been involved in. This is a link or sink concept. We need to establish relationships with other companies to strengthen our market position. Ultimately we will need to become very good at asking for and earning the customer's business.

DIVERSIFICATION

AT&T reported losing 40% of their revenues the day their customers were given a choice. Companies such as Entergy, TVA and others are predicting anywhere form a 25-40% loss in revenues when the electric market is opened up. Because of this, most industry leaders are looking to diversification as a means to take up the slack if electric revenues are lost in a competitive environment. But the electric industry so far has not had a good record at diversification. It can fail if there is not a good fit with the present organization, or if the diversified business is attempting to be run like a utility. Business cultures clash and negative energies are spent destroying the diversification rather than positive energy being spent to make it successful.

We are heading toward a renewed wave of competition for the customer's business. Utilities are searching for growth opportunities and rate stability. Companies need growth to continue and certainly pricing will play a key role in that growth.

So what are our choices?

We cannot increase rates to offset rising internal costs. In most cases that could be the event to trigger shareholder or member uprisings. We can cut out costs by reducing the work force. This usually is not a good option as many American companies are finding out. We can cut our costs by implementing load management strategies. We can cut our costs by automating our business processes. But one solution will most likely not meet all needs.

So perhaps a more appropriate first question is: What is our business?

Are we not in a 24-hour critical human service business? Do our customers consider us to be a dependable, trusted service provider? Is it not very much a recurring revenue business?

What customer needs are not being met right now that we could be...