Allegheny Energy Supply Competition
Now Viewing Allegheny Energy Supply's competition in: Electric Power Generation
Call Preparation Questions
Customers, Marketing, Pricing, Competition
Is the utility marketing “green power”? - Many utilities have successfully marketed electric power produced from non-polluting sources to both residences and businesses.
If the utility is in a competitive environment, how is it changing its rates and terms? - In a new competitive environment, some utilities have developed packages tailoring rates and terms to the needs of businesses and consumers.
What is the trend for electricity demand within the market area the utility serves? - Consumption in some market areas in the Northeast is declining as the population shrinks and industries relocate or close.
Does the utility compete directly with public providers – state, federal, or municipal? - Competition can exist for business, industrial, and government customers.
Is the utility price-competitive with other public and private providers in the service area? - Under deregulation, electricity becomes a commodity and providers compete primarily on price.
How does the company market itself? - In deregulated states where markets are highly competitive, power suppliers usually market intensively through newspaper, radio, and TV advertising.
Competitive Landscape
Demand is driven by commercial, government, and residential needs for electrical power, which depend on population growth, economic activity, and electricity prices. Profitability is determined by government regulations and fuel costs. Large companies have an advantage in negotiating fuel contracts and being able to pass the costs of implementing government regulations directly to consumers. Small companies can compete effectively by exploiting market niches, such as offering “green power” in regulated markets. The industry is capital-intensive: average annual revenue per employee is about $640,000.
Business Challenges
CRITICAL ISSUES
Industry Consolidation - Between 2003 and 2006, 271 power plants representing about 12 percent of domestic power capacity changed ownership in the US. Analysts see a likelihood of similar deals, although they caution that the volatility of fuel prices and the involvement of newly invigorated regulators will stymie some plans. The hunt for acquisitions is being driven by the huge capital demands power companies face over the next quarter century. A common premise in the industry is that for every dollar in operating and maintenance expense that can be reduced in a merger, up to five can be invested in infrastructure upgrades.
Declining Power Capacity Margins - Additional power plants beyond those currently planned are required to meet growth of electrical demand. Electric utilities forecast US demand to increase 19 percent over the next 10 years, while generating capacity will increase only 6 percent. This gap will erode capacity margins and could result in regional curtailments of power availability (brownouts and rolling blackouts) during peak demand. Addressing the gap will require large investments by utilities.
Industries Where Allegheny Energy Supply Competes
- Energy & Utilities
- Independent/Merchant Power Production(primary)
- Energy Trading & Marketing
- Wholesale Energy Trading & Marketing
