Andrew Maykuth Online
The Philadelphia Inquirer
April 12, 1994
The power to communicate
Electric utilities are seeking to expand the use of their telecommunications resources.

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 information superhighway.

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 electricity.

"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 customer.

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 carrier.

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 information services.

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 Rock experiment.

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 company.

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 generating plant.

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 house.

"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 system.

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. home page   
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