Report: E-Commerce Will Revolutionize Utility Business

According to a new report from Deloitte & Touche, e-commerce will revolutionize the way that consumers will purchase energy.

“The Internet fundamentally changes the economics of transactions in key industries in ways that benefit both buyers and sellers,” the report says. “The new dynamics of buyer-seller interactions could work fundamental changes in the marketing of energy and related services over the coming decade.”

The report points out that some utilities are already delving into e-commerce, but the full impact has yet to be felt. Deloitte & Touche forecasts several trends developing from 2000 to 2010 that will completely transform the utility industry as we know it today.

Future Scenarios

The study predicts that many old-line utilities will find themselves hard pressed by new dot-com virtual utilities that capitalize on the reduced cost of invading markets by using sophisticated Web-enabled marketing techniques.

“Compressing traditional timelines for building competitive clout, these new entrants are worthy opponents from the start,” the report states.

The situation will force some traditional utilities out of the retail energy business altogether, while others will go on the offensive — establishing their own Web-based retail units to invade fellow utilities’ markets.

New Breed Of Energy Intermediaries

Joining the fray, Deloitte & Touche says, will be a new breed of online energy intermediaries that will offer consumers lower energy prices via shopping bots, online auctions, reverse auctions and buyers’ clubs.

The report adds that such new energy intermediaries will make the utilities’ goal of owning the customer an almost impossible dream.

Customers Will Dictate Services

Another change that utilities will face because of competitive e-commerce will be the customer’s ability to dictate the services they want. However, the report points out, those living in larger rural areas that lack infrastructure could be adversely affected, as utilities are forced to concentrate on tailoring services for consumers who live in urban areas.

Deloitte & Touche also discovered that as energy e-commerce expands, some consumers will be so fearful of fraud, privacy violations and security breaches that they will resist entering into e-business transactions without additional assurances. This scenario will force lesser-known utilities to join other online vendors who must resort to methods such as earning an e-business “seal of approval.”

Taxation Will Become Confused

Finally, the report concludes that as governments try to fashion tax policies for e-commerce, utilities will be caught in the middle.

“Debates flare over what current law says and what the law should say,” the report contends. “While some governments argue against levying new Internet taxes, others do not hesitate to do so for a variety of reasons including the desire to assert control over e-business and to collect new revenue.”