Electricity and gas : market and price convergence : fundamentals of restructuring and convergence

One of the results of the transition from regulation to competition in the Canadian and American natural gas and electricity industries is convergence of the two industries. Convergence is occurring in the areas of corporate structuring activities (mergers and acquisitions), natural gas and electricity prices, products and services, and on a geographic basis. This study examines the restructuring and convergence from the perspective of industry stakeholders, consumers, competitors and regulators. The trend to deregulate to establish competitive markets has been driven by the assumption that lower prices and more choices will result. Deregulation has been made easier by technological developments and innovations in the area of conventional generation, distributed generation, information management and analysis, as well as mass communication channels such as the Internet. These changes have made it possible to measure and monitor energy use in real-time. Technological changes will continue to influence the energy industry. The use of different restructuring rules and regulations in jurisdictions that are implementing change may be one of the primary factors that could limit the extent of convergence. Successful competition by energy service providers in converged retail energy markets will depend on several factors, the first of which is the ability to control the customer interface through retail cycle services such as metering and billing. The second is the successful branding of corporate identities, products and services. These will ensure customer loyalty and facilitate the marketing of new products. Another factor would be the effective management of information regarding natural gas and electricity consumption patterns and the establishment of low cost operations through the use of conventional generation technologies. The final factor for successful competition is the effective use of low cost communication technologies such as the Internet. The transition from regulated to competitive markets will have significant impacts on competitors, consumers and on regulators. Experience from other industries suggests that the process may take several years before the transition is complete. 35 refs., 36 tabs., 53 figs., 1 append