Give Us An Offer We Cannot Refuse

2 Pages 471 Words

Make Us An Offer We Cannot Refuse—
How the Utility Market Can Be Set Up To Provide Reasonable Prices

In the United States, we have already seen significant developments in “unbundling” activities of former monolithic utility industries. This is not just a matter of identifying the separate activities and hiving off those that are supplying into potentially competitive markets; even for the monopoly networks, this process has involved identifying activities that can be provided on a competitive basis, through contracting out.
Although this process of fragmentation and unbundling has come a long way, there is still further to go. Already, for example, questions are being asked as to whether the services provided by water and sewerage companies can be split up, while in the case of electricity, distribution and supply activities are only now starting to come under separate ownership and regulation.
The process of change is not just about fragmentation, it is also about putting the pieces together again in different ways, to achieve further efficiencies and improve services. Some potential developments include:
o Selling utility services to customers on a combined basis, most notably with “dual fuel” offers, but also extending to water and telecoms;
o Providing broader facilities management services to a range of utilities (e.g. water, gas, electricity);
o Geographical integration, not simply through domestic mergers but through international investment—both inwards and outwards, with increasing involvement of the U.S. Commission rather than domestic competition authorities in considering such mergers; and
o Extending the use of new forms of financing, including Public Private Partnerships (PPPs) and securitisation, which refocus the interests of the company and its funders.
However the utility market develops, success in the United States’ utility markets will still depend ultimately on a company’s ability t...