Not since Benjamin Franklin received regulatory approval to fly his kite in the rain has the world of quasi-public utilities received such a shock:
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Competition has come to electricity.
The state of California–which pioneered communications competition in the 1970s by allowing consumers to choose between AT&T and E.S.P.–recently approved deregulation of the electrical power industry.
The new law will allow many private companies to sell electricity. As with long-distance phone service, customers will have a wide array of options.
How would it work? It would be impractical for every new provider to lay thousands of miles of its own power lines. So newcomers will be allowed to use the existing power grid, creating a “virtual” network and offering customers “virtual” savings.
For the customer, it probably means a lifetime of commercials featuring stars like Whoopi Goldberg and Candice Bergen, shilling for companies with names like Multizapco, and VoltTech (formerly Bob’s Garden Supply).
It also suggests a new era of technological and financial flux. If residential power can become competitive, why not other utilities?
Why should Chicagoans be forced to purchase lake water from a monopoly when there are perhaps less expensive sources at hand?
With inventive valve work, customers could open taps and wallow in water from companies pitching distinctive traits (“Turn on Back-of-the-Yards Aquifer Inc. and see the difference!”)
Private sewage treatment plants also would have the flexibility to offer customized billing arrangements. (“Buy flush packs, for the family on the go.”)
Deregulation, of course, can be bumpy. Some companies won’t make it.
An early darling of airline deregulation was People Express, which flew at phenomenally low prices but charged $3 for snacks, $2 for each checked bag and $1 for a soft drink.
There was a rumor that if enough passengers contributed 50 cents apiece, they would bring along a co-pilot.
People Express went bust, but it left wiser consumers in its contrails. Now when a flight attendant offers peanuts and a soda, you know you have already paid at least $4 for it, so you might as well get refills.
For consumers, electricity will be harder to sort out. People need it, but don’t fully understand the corporate fundamentals–such as the fact that no matter what happens, CEOs will get a disproportionate raise.
And since electricity is a commodity, it will be hard to compete on price. A recent study showed that when gimmicks were stripped away, there was only .001 cent difference in the cost of an average minute of long-distance calling among AT&T, MCI and Sprint.
That leaves image as the great battleground in the deregulation of electricity.
Here again, long-distance telephone provides a model: The big three now spend more than $800 million a year imprinting their true voices and dropping pins on the psyche of America.
The Candice-Whoopi-Madison Avenue juggernaut seems the biggest outgrowth of telephone deregulation.
That brings to mind a nifty marketing package for large-scale electricity users who have peculiar peak demands.
Call it “Frankenstein’s Friends and Family.”
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