The power to
utilities are seeking to expand the use of their telecommunications
Electric utilities, which have
already wired nearly every home and business in America for power, are
quietly maneuvering to become the silent partners in the nation's
Power companies are exploring ways to use their vast internal
telecommunications networks to establish two-way links with households so
they can remotely read meters, curtail energy-gobbling appliances and
charge time-of-day rates that vary hourly depending upon the demand for
"We think the technology will even allow us to offer blue-light
specials on power," said Charles Kelly, a spokesman for Entergy, a
New Orleans utility that is installing a sophisticated two-way system in
about 50 houses near Little Rock, Ark.
Some want to offer their customers an array of conveniences controlled
from the central office - monitoring burglar alarms or turning on lights
at vacationing households.
Atlantic Electric Co. in New Jersey is investigating ways to remotely
switch on power to its seasonal Shore customers - a capability that could
also be helpful when the utility wants to disconnect a delinquent
A few utilities are considering expanding their systems far beyond
their own internal needs and engaging in partnerships - or competition -
with telephone and cable-television companies.
Baltimore Gas & Electric Co. has begun using its excess
communications capacity to compete directly with phone companies. It
connects several large customers directly to long-distance telephone
companies such as MCI and AT&T - bypassing the local telephone
Power companies are interested in expanding into telecommunications for
a very basic reason - their core electric business is increasing at only
1.5 percent annually. Meanwhile, they face mounting competitive pressures
to cut margins and lower power rates.
"Companies are looking for new ways to demonstrate value to their
customers and their shareholders," said David K. Owens, senior vice
president of the Edison Electric Institute in Washington, the trade
association for the nation's investor-owned utilities.
Despite the potential for high profits in the entertainment industry,
power companies seem primarily interested in assuming a background role on
the information highway. The exception is Entergy's system, which will
deliver cable television, long-distance telephone service and
energy-management services on a single cable.
Rather, utilities such as Peco Energy Co. in Philadelphia are hesitant
about straying too far from their central mission of selling electricity.
They seem more intrigued by the possibility of using their growing
networks of fiber-optic cable and wireless transmitters to serve as the
backbone of a larger information system.
"The question is how good of a business opportunity will it be for
us," said Corbin A. McNeill Jr., Peco's president, who added that the
utility had received a "flurry" of inquiries from
telecommunications and cable providers about joining to provide
Utilities say they are well-situated to participate in the information
revolution. They already own power-line rights-of-way and operate
extensive billing and customer-service units that might mesh with the
strengths of a capital-poor cable-television company.
"We suggest strongly that this is our core business, interacting
with our customers," said Owen of the Edison Electric Institute.
"We believe it's a natural fit for us."
Moreover, power companies have amassed years of experience operating
elaborate telecommunications systems, including thousands of microwave
stations and a rapidly expanding array of fiber-optic cable. Utilities
built the internal systems to monitor their far-flung networks of power
plants, transmission lines and substations.
The moves by power companies into communications have already raised
sticky regulatory concerns.
Some utility commissions have expressed fears that electric ratepayers
will subsidize a utility's explorations into telecommunications. Arkansas
regulators balked at allowing Entergy to recover the cost of its Little
And several congressional subcommittees are considering hearings about
whether legislation is needed to restrain electric utilities.
But the electric industry argues that its entrance into the
communications business will make the information superhighway only more
competitive. "We think that sufficient regulator oversight already
exists to provide enough consumer protection," said Owens.
Power companies are hardly telecommunications neophytes. Most utilities
long ago constructed internal communications systems because they were
cheaper and more reliable than depending upon the local telephone company.
Recently, the Federal Communications Commission has been encouraging
power companies to move off the wireless microwave channels they now use
because the government wants those frequencies for cellular telephones.
And so utilities have been expanding their networks of fiber-optic
cable, which uses pulses of light to transmit thousands of times more
information than can be sent on copper wire. They have found that
fiber-optic cable works well in an electric system because it is
unaffected by interference from power lines.
Technological improvements in recent years have vastly increased the
amount of information that can be sent on the 8,000 miles of fiber-optic
cable owned by utilities. Overnight, some power companies found themselves
with far more communications capacity than they themselves needed.
"I don't know if we'll ever be able to fill the capacity of the
system," said George A. Dieter, the supervisor of telecommunications
for Baltimore Gas & Electric, which this year plans to add 55 miles of
fiber-optic trunk lines to its 232-mile network.
Many utilities simply lease their excess fiber-optic capacity to
long-distance telecommunications carriers, who route their phone traffic
over the power company's lines.
But Baltimore Gas & Electric went a step further in 1991 when it
created a subsidiary that sells a limited telephone service to several
large telephone customers. BG&E's sole role is to serve as the conduit
between its large telephone customers and their long-distance carriers.
The arrangement allows the customers to bypass the local telephone
But BG&E does not envision expanding into retail telephone or cable
television. "I doubt you're going to see a Home Box Office charge on
your electric bill," said Dieter.
Still, the potential benefits to power companies could provide the
impetus to make the information highway pay for itself.
Peco, for instance, is intensely interested in installing automatic
meter readers. The utility spends 75 cents a month to read each meter.
Other utilities say that a two-way system that induces customers to
reduce their electrical consumption might be cheaper than building a new
Duquesne Light Co. in Pittsburgh recently asked the Public Utility
Commission to approve a project in which the utility would shut off some
residential air conditioners for 15-minute intervals during peak periods
of electrical demand. The project is expected to postpone the utility's
need to build a new generator.
Entergy, the New Orleans utility, expects that the two-way system it
calls Powerview will achieve similar energy savings - except the Little
Rock system allows customers to decide which appliances to curtail based
upon price signals the utility sends to a computerized controller in their
"The whole idea is that the customer is controlling their energy
usages, not the utility," said Ken Schneider, the chief financial
officer of First Pacific Networks, the San Jose manufacturer of the
Schneider said that the Powerview system was designed to monitor the
energy use for every major appliance - and itemize the cost of powering
each appliance on the monthly bill.
The system, though, is expected to cost more than $1,000 to install
because the computerized controller must be wired to several major
appliances, such as the air conditioner, furnace and water heater.
While some power-company executives are enthusiastic about forming
unions with telephone and cable companies, Peco's McNeill is skeptical
that such joint ventures are workable.
McNeill said Peco's primary interest in participating in a project
would be to install automatic meter readers in poor neighborhoods where
the company's meter readers feel threatened.
But a communications company, he said, might see more potential in
penetrating an affluent neighborhood where residents will spend more on
pay-per-view entertainment and long-distance telephone calls.
"It's not clear if the synergies are there," he said.