Standing the electric industry on its head.

• Author: Brown, Matthew H.

After years as a regulated monopoly, the electric industry is on unfamiliar competitive ground and so are the states that are letting it happen.

In June 1995 the New Hampshire legislature did something that would have been unthinkable a year before. It passed a law to let 17,000 New Hampshire residents choose their electric company. Frustrated with electric rates that were among the highest in the nation and believing that the state's monopoly utilities should face some real competition for their business, the legislature was the first in the nation to establish this kind of experimental program.

It was a harbinger of things to come around the country. Now a few states have passed far-reaching legislation to let all electric customers in the state choose where they want to buy their electricity. And almost every other state is considering the merits of taking the nation's most capital intensive industry from monopoly to competition. Known as "retail wheeling," this move to let customers choose their electric company, just as we all now choose our long distance phone company, is already putting the electric industry through some of its most fundamental changes in half a century.

The traditionally stodgy and predictable electric industry will look different five to 15 years from now, but no one knows just how it will look. Between now and the time that new industry emerges from today's confusion, it will have become very clear just how much the electric industry permeates every aspect of our lives. Legislators will have to make decisions that affect their states' economy, jobs, environment, tax revenue and the reliability of the electric system.

A GLIMPSE OF THE NEW INDUSTRY

Close to two years after the New Hampshire legislature passed HB 168, the state's experiment with retail wheeling has taken off and gives a glimpse of the shape of tomorrow's electric industry. "Only by trying it could we see how a competitive electric industry might work," says Representative Clifton Below. The pilot experiment took place at the same time legislators were working on much more comprehensive legislation to restructure the electric industry, Below says. "This gave us a chance to incorporate some of the lessons from the program into our legislation."

In New Hampshire, 31 different electricity suppliers wooed the pilot program's 17,000 customers with marketing ploys and incentives. Some offered electricity at extraordinarily low prices of less than 1.5 cents per kilowatt hour, others offered savings bonds or different prices for buying different amounts of electricity. One power supplier offered free bird-houses to those who signed up. A few companies tried to identify themselves as clean or "green" power providers, guaranteeing that they would supply power that was generated only from certain "clean" sources, although the definition of what was clean varied from one company to another.

What was new about this was associating a brand name and identity with electrons. Companies began to try to distinguish themselves from each other by becoming the "cheap" power company, the "green" power company or the power company that was a responsible corporate citizen. At no other time has anyone needed to or tried to associate electricity with brand identity. This change alone was a fundamental shift in the character of the previously staid industry.

It was not only the old power companies that were competing for customers. Working Assets, the company that made its name by offering a credit card associated with environmentalism, became one of the "power marketers" competing for customers. Working Assets signed long-term contracts to buy power that came from environmentally friendly sources rather than, for instance, big polluter plants. It then sold that power through traditional mass marketing techniques. Working Assets and the other power marketers selling in New Hampshire...