VALUE NETWORKS - THE FUTURE OF THE US ELECTRIC UTILITY INDUSTRY

Several forces are creating challenges and opportunities in the electr ic power business. Customers and legislators are pushing for greater c ompetition, while utilities are trying to preserve the status quo. Pow er companies are increasingly competing against each other, much like airlines and trucking and telecommunication companies. Changes in gene ration, transmission, and distribution are changing every segment of t he value chain. Weiner et al. predict five ways in which the electric utility industry will be affected: 1. Prices. Competition and consolid ation will result in reduced prices. 2. Contracts. The number of short -term contracts will increase, as customers buy on the spot market. 3. New products and services, Deregulation means that electric utilities will be able to offer such items as online billing, remote appliance scheduling and control, energy-use monitoring, home-security systems, and electrical appliance maintenance contracts. 4. Global scope. Faced with little domestic growth, utilities will have to go abroad to deve lop new markets. 5. Information intensity. The amount of information a nd computer technology to develop efficient markets will grow exponent ially To reduce costs, increase revenue, and expand globally utilities will have to focus on six segments of the value chain: generation com panies, intelligent transmission networks, distribution companies or ' 'WireCos,'' energy sen ices or ''EsCos,'' power markets, and IT produc ts and services. As the industry breaks apart, new entrants focused on high-profit, high-growth niches will not own all or even most of the assets in the value chain. They will configure only those activities t hat add value and that customers want. The authors foresee the evoluti on of three value network models: 1. Regulated value networks. States will mandate the initial form of value network in a transition to comp etition. 2. Virtual value networks. Each company will manage its own a ssets and competencies and expand its product scope to include energy and energy services, telecommunications, computing, and facility servi ces. 3. Customer-designed value networks. With technology and direct m arket access, customers will manage their own networks.