Support these efforts. The utility competition issue is at a critical point. A federal deregulation bill is in the early draft stage and probably at least two years away from passage. The exact terms of that legislation will determine whether utilities will compete with you for PHC services on more or less equal footing. Meantime, about half the state legislatures are crafting their own deregulation bills, most of which will probably get enacted into law faster than whatever comes out of Washington.
PHC interests have been doing battle against utilities ever since the 1940s, with not too impressive results. Utilities have steadily increased their presence in the PHC field, though with some limits on their encroachment here and there. These restrictions have almost always turned on the issue of cross-subsidization, convincing regulators that it is unfair to expect private businesses to compete against entities subsidized with revenues, manpower and marketing advantages that stem from the guaranteed profits of a regulated monopoly.
Deregulation, depending on its exact rules, threatens to remove the cross-subsidization argument from our industry’s arsenal. In a deregulated environment, utilities presumably will no longer be guaranteed a profit from energy sales or anything else. If that’s the case, they could be allowed to cross-subsidize to their hearts’ content, just as some of you are wont to do when you do a clean and check at below cost in hope of selling upgrades and add-ons. Industry lobbyists are saying that there’s still too much baggage left over from the public utility era for complete deregulation to constitute a level playing field. They are trying, in essence, to attach some strings to deregulation.
Stark Truth: Some utility fighters chatter about preventing deregulation altogether, but pay no heed to such delusions of grandeur. You would be hard pressed to find a single member of Congress, Democrat or Republican, ready to take on this cause. Too much momentum is underway to make a 180° turn. Utility industry deregulation is a given, only its exact shape undetermined. At best you can expect some speed bumps to be placed in its way.
So get behind the fight to protect your interests. But go into it with your eyes wide open, because no matter how well our industry’s lobbyists do their jobs, it is hard to avoid this resounding conclusion—
Utility companies will be major players in the PHC business for the foreseeable future, regardless of what happens with deregulation. Various utility companies have invested millions of dollars buying up PHC companies or starting their own PHC subsidiaries, along with assorted other merchandise and service businesses. Almost everywhere in the country you can find utility companies offering performance contracts, service agreements, equipment leasing, home warranty programs. And virtually every utility executive worth his pay is looking to expand these horizons, because they all know that ancillary businesses offer more profit potential than what they will be able to eke out selling unregulated molecules and electrons. Can this choo-choo be stopped and put in reverse? Get serious.
All this has happened despite legal restrictions against cross-subsidization, which the utilities have found ways to either comply with or circumvent. Formidable competitors already, think of how tough they’ll be when they no longer have one hand tied behind them.
Think of how tough they’ll be a year or two from now when the Wall Street consolidators start selling them the billion-dollar PHC empires they are now frantically accumulating. Or do you have a spare billion dollars laying around to match a utility company’s bid?
Subsidies In Reverse? Does this mean the end of the line for you, the independent PHC contractor? Not necessarily.
Deregulation is a double-edged sword. It frees up the utilities to enter new businesses—which they’ve been doing anyway—but takes away their guaranteed profits. A Department of Energy study predicts that deregulation of the electric utility industry will push electricity prices down 8% to 15%, forcing a number of utilities into bankruptcy. Utility industry CEOs and boards of directors are going to be chugging quite a bit of Maalox when they make the transition from quasi-public to private enterprise.
As competition brings declining energy prices, utility subsidiaries will have to pull their own weight. You might even see reverse subsidization in some cases, with profits from ancillary businesses siphoned off to support a lagging energy sector.
You all know how hard it is to make money in the PHC field. What reason is there to believe that the utility companies have figured out how to tame all the gremlins that you put up with day after day?
Where are they going to find capable service technicians and supervisors? How will they placate angry customers whose handyman neighbor said he’d have done the job for half of what the utility company charged? Wait till they get a belly full of EPA, OSHA, DOE, DOT, EEOC and the rest of the alphabet soup that causes all of you so much indigestion.
Enemies always look 10 feet tall, but they usually prove vulnerable.
Help Thyself: At the same time, you need to do some soul searching about one aspect of utility competition. Our industry’s entire emphasis has been on stopping what the other guy is allowed to do, as opposed to marketing the merits of the independent PHC contractor. "Unfaircompetition" has been bleated into a one-word slogan. We assume that cross-subsidization infects everything the utilities do, without ever stopping to question why they would want to keep shoveling money from a profitable sector into a not-so-profitable one.
Yes, let’s fight the good fight for fairness, but protectionism does not lead to prosperity. Consider the possibility that some of the utility company PHC programs may be successful not necessarily because they are subsidized, but because they are well-run and offer customers good value. And if that’s the case, independent PHC firms need to start asking what they can offer that’s different or better.
Right now the utility war is being waged with legalisms in hearing rooms and courts and regulators’ offices. The ultimate battlefield, though, is the marketplace.
John Q. Citizen’s eyes glaze over with talk of unfair cross-subsidization. He only wants to know where he can get the best value for his dollars. He wants to deal with a company that is skilled, reliable and easy to deal with. He doesn’t care about your problems and doesn’t want to hear why he should not patronize your competitor. He only wants to hear why he should give his business to you.
What exactly do you have to offer that is better than he can get from a utility company or anyone else? What are you doing to make people want to do business with you?
If you can’t think of any answers to those questions, then it doesn’t matter whether the competition is fair or unfair. You have nothing to sell.