Right now my life seems to revolve around youth baseball. My twelve year old son, Jim, is a starting pitcher. Jim pitched his first complete game of the season yesterday, and his team squeaked out a win by a single run. I was so excited or agitated or a combination of the two that I wasn't able to stay in the bleachers. Believe me, these games can be tense, particularly when the playoffs are at stake. Where was this tension back in May during the pre-season? Then, the outcome was not so important. The kids tried out different positions, and the coaches kept the boys stealing every base and diving for every ball. Now, thirteen games into the season, it's a different story. The score counts. Wins and losses are posted weekly. The boys review the records of each team in their league and argue about their chances of making the playoffs.
Curt Volkmann makes a parallel to sports when he states that in many instances our industry is in pre-season, with utilities testing competitive strategies and carefully evaluating talent. But when all customers have choice, the season begins, and the wins and losses start to add up. Those utilities that are unable to successfully compete will find their teams disintegrating, with other teams moving in to pick over the pieces.
I recently interviewed Volkmann, associate partner with the Utilities Practice at Andersen Consulting, for an article in this month's issue. The article reveals what steps utility executives at Boston Edison, Arizona Public Service and the Municipal Electric Authority of Georgia are taking to prepare for competition. As expected in pre-season, each utility has developed unique strategies to maximize strengths and minimize weaknesses.
The season has already started in Australia, and early results are in. Of course, the game played Down Under is cricket, not baseball. With different business climates and regulatory structures, there is no guarantee that the strategies providing early results in Australia will directly apply to other countries. But we can still learn from early wins and losses. Andersen's associate partner in Australia, Rod Kerger, shared how virtual gas distribution companies are emerging in his country while many electric distribution companies now outsource what were once considered core activities.
Will the network management and asset management based business philosophies being aired in Australia soon arrive in other countries? To an extent, they already have. Many utilities are staffing to meet baseline work levels and contract work out to meet peak demand. Some utilities are going a step further and either outsource or threaten to outsource activities that were once considered core competencies: activities such as warehousing, meter reading, construction, customer service, billing and human resources.
But outsourcing is not the only option. I recently chatted with Alan Richardson, the CEO designate of PacifiCorp when the proposed merger with Scottish Power goes through. Alan and his associates believe that a vertically integrated utility, following world class practices, can prosper in competitive climates by delivering high reliability, low cost electricity.
Utilities can make the most of the pre-season by benchmarking their best practices against other utilities. I recently talked with Jim Teague, chairman of the Electric Utility Cost Group's transmission and distribution committee. Representatives from 22 member utilities meet regularly to benchmark transmission and distribution activities such as asset management, storm recovery, predictive maintenance, reliability measures, vegetation management and work management. Hot topics now being addressed include wood pole inspection and replacement, technical training, live-line practices and performance measures. Teague, manager of transmission support at the Tennessee Valley Authority, states that the knowledge gained from these cooperative benchmarking initiatives is enabling member utilities to significantly improve business practices.
The ultimate goal of any utility is to provide low cost, high reliability electrical service. Those organizations that are able to take advantage of the pre-season to develop their players, get their coaching staff in place, and hone competitive strategies will find themselves in the playoffs for the electric utility marketplace.