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Be Willing to Change, Lead, Say Utility Execs

Be Willing to Change, Lead, Say Utility Execs

Need a reason to embrace the future of the power industry? How about 10 reasons? Several U.S. utility executives last week offered their upbeat take on the power generation and natural gas outlook for the next five years, with El Paso Energy, Reliant Energy, Dynegy Inc. and Williams Energy Services giving a birds-eye view of what's ahead during a forum at PowerMart 2000 in Houston.

Though the problems facing the power business today will be similar in the years to come, companies that succeed will be the ones willing to not just change, but willing to take the lead to ensure success for themselves and their shareholders.

Companies able to deal with the myriad changes, including a burgeoning e-commerce economy, a persistent labor shortage and a continuing need to update technological skills present more opportunities than problems, said Gar Seifullin, managing director of El Paso Energy Power Finance.

"There's a lot more entrepreneurial vigor, and over time, our industry has the ability to change," Seifullin said. "We have to take the opportunities we find to market. Entire new businesses are developing, but the impact of true competition is yet to be felt."

Griff Jones, vice president of Dynegy's power trading group for the Midwest and southeastern part of the United States, said that both the power and gas markets have the potential for tremendous growth in the next few years. However, even more than those markets, the communications arena appears to hold even more potential.

"Power, gas and communications markets work together very well," Jones said, referring to the growing telecommunications and bandwidth industries. "Energy and technology convergence is a neat thing. Communications is just a transplant from energy." Jones said that e-business is the "opportunity for us to transfer and grow our business."

Three years ago, Reliant Energy took its first steps into the wholesale market, said Joe Bob Perkins, COO of the wholesale group. "We started at zero," said Perkins. Before entering the wholesale marketplace, Reliant decided to develop strong commercial portfolios in attractive regions, and found "multiple" ways to win. "We're not a one-trick pony," he said.

By developing a regional trading portfolio, Reliant was able to pinpoint favorable supply and demand dynamics, attractive market rules and competitive positioning in the regions it targeted. Now, Reliant, which had already become a leading utility, owns about 30,000 MW throughout the country. Because this strategy has worked so well, Perkins said Reliant would continue to focus on regional opportunities.

"The leaders will get larger, but only a handful will be able to do this," said Perkins. "All told, I see our commercial advantage in actively participating in the market with both an asset book and a trading book. You have to meet the total needs of the customer."

The future of energy, at least from Williams' point of view, is summed up in the "seven Cs" said Dean Jones, vice president of strategic business relations. Competition, customer choice, convergence, consolidations and constant change "churn up the perfect storm," he said. By looking at other industries that have gone through some of the same things facing the power market today, Jones said that utilities companies could learn a few lessons.

"Deregulation is going to take a little bit of time to sort out, as far as competition. And customers want choice. We are close to having the technology in place to know what they want, and this is a critical piece of information to be successful in the future," said Jones.

He also warned that the future "holds more consolidations. It's not over." With "constant change, which is inevitable, this will create opportunities." But Jones warned that because power and gas are more dependent on each other than ever before, "we need to be cognizant of the changes to make sure the infrastructure is in place to guarantee success."

Carolyn Davis, Houston

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