The fragmented industry-estimated at more than $200 billion-is readying for an explosion of competition that eventually could allow customers to connect to power suppliers all over the country, in the same way they hook up with long-distance tele phone companies.
And utilities are tackling pricing and packaging issues like the consumer goods business, even raiding their executive ranks to create marketing departments that are seeing more marketing dollars come their way. They are also merging like media corporations-no coincidence since power companies will be players in the upcoming Information Age.
But residential customers may have to initially stomach higher rates while utilities make a play for big businesses. Corporate clients will clearly bear the brunt of marketing efforts because they can already shop for suppliers outside their region or generate power of their own.
Utilities and their marketing arms aren't waiting. Billings at ad agencies are climbing as they study how to reach industrial and residential customers.
"The utilities are showing up at conferences, asking frantically what can they do to get brand loyalty," said Max Blackstone, president of Research International, a New York marketing consultancy. "It's a difficult assignment because electricity is rather invisible," said Brian Ritter, account executive at McCaffrey & McCall, Indianapolis, Cincinnati-based Cinergy Corp.'s agency. "It's not like slapping a logo on a package of chicken."
When regional monopolies come crashing down, pricing competitively will be first priority for power companies. Residential rates per kilowatt-hour rise and fall all over the map, from 3 cents in Missouri to 12 cents in New York. The average industrial rates per kilowatt-hour dipped 2.8% to 4.9 last year.
"It will take longer to lower for residences," said Penelope Adelmann, utilities analyst at Gruntal & Co., New York. "Whoever buys bulk gets a better deal. Companies are in a position to switch suppliers or they can construct their own generator."
But state regulatory commissions have raised concerns that utilities won't be able to afford lowering rates for homeowners because the breaks will go to bigger companies in the retail and wholesale markets.
Some utilities are meeting the pricing problem for homeowners head-on. Southern California Edison Co. has set an initiative to lower consumer rates 25% over the next five years. According to VP-Marketing Owens Alexander, more radio and newspaper ads will be on the way to grab a larger audience. The utility's $5 million account is handled by Grey Advertising, Los Angeles.
Decatur-based Illinois Power Co. hired PepsiCo and Keebler Co. vet Ralph Tschantz for the new position of VP-marketing, and expects marketing spending to increase sevenfold in the coming year.
Billings with McConnaughy Stein Schmidt Brown, Chicago, now at $1.5 million, are expected to "increase dramatically," said Jim Buck, communications strategist at Illinois Power.
"Initially we will be geared more to businesses than residents because [businesses] have the buying power to bring about the competition," Mr. Buck said.
UtiliCorp United, Kansas City, Mo., in May consolidated 200 products from eight subsidiaries into the industry's only national brand, EnergyOne. EnergyOne offers a variety of products and services for its gas and electric business clients in 45 states.
UtiliCorp is considering exporting the brand to the U.K., where the power industry is in the throes of deregulation. The marketing department hired 100 people last year and spending is up 30%. Muller & Co., Kansas City; Langston, Stamford, Conn.; and Travers Group, St. Louis, share the $10 million account.
"We want to get subliminal awareness out even before customers have the power to choose," said Bill Burgess, managing VP at UtiliCorp. Mr. Burgess adopted strategies he learned working in marketing positions at Sprint, AT&T and BankAmerica Corp.
The Federal Energy Regulatory Commission gave "wheeling" the nod earlier this year, which allows any utility to pump its electricity into U.S. transmission grids.
But the floodgates haven't burst open yet; at least 30 states will wrangle over deregulation legislation for the next few years.
Non-utilities that specialize in transmitting electri