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For the first time, many utilities are finding
that "unbundling" their services is the only way to survive in this newly
competitive environment. Companies that have never had to deal with
restructuring or competition now have to face them head on.
From this day forward, our industry is faced with doing business in a
radically changing climate whether or not the companies involved are
prepared for it.
Most companies see this change as a threat. For Old Dominion and its
members, it's an opportunity. We don't have to get up to speed. "Unbundled"
is the way we've always been. For the industry that's evolving, the Old
Dominion system is the model for the way that electric utilities will need
to operate in the future.
We're used to managing and operating in an unbundled business environment,
so we enjoy a variety of clear-cut advantages. However, there are changes we
will need to make: cost reductions, contract renegotiations, alliance
building, and learning how to operate in the new competitive environment.
But while others are learning to walk the walk, we're on a roll.
Investor-owned utilities have always
operated in a corporate structure of integrated services and operations.
Their wholesale and retail businesses have always been combined under one,
regulated umbrella.
On the other hand, cooperatives like the Old Dominion system have always
been unbundled, managing each "bundle" separately. This fact is of
fundamental importance to our company. For example, we have always operated
with separate pricing for each business segment. With investor-owned
utilities, while it has been important to know what their overall generation
costs have been, there never has been a compelling reason to track costs
segment-by-segment like we have.
Now, investor-owned utilities have to think of their generation business as
a cost-center: a mindset that is foreign to them, at best. With Old
Dominion, generation costs have always been viewed and conducted as a
separate cost center, as has distribution, with separate rates for each.
It's a concept that's been a part of Old Dominion for decades, putting us
one step ahead of the competition. Structurally, this basic difference is a
major strategic advantage.
Our management and members are focused on
individual segments with true data gathered over time, and are able to
tailor changes to real-world conditions of generation and distribution. Any
other way is simply a "best-guess" answer to a question that is exceedingly
complex. Armed with the power of experience, Old Dominion is better able to
focus on each individual segment, realistically concentrating our brainpower
and effort on making enhancements to our operational profitability.
In Virginia, the territory of our franchise covers about 40% of the land
mass. In Maryland and Delaware, on the Delmarva peninsula, we cover
approximately 80%. This is important for Old Dominion, because even though
competition may eventually break down the boundaries around our members'
franchise areas, we've had a 60-year head start in building deep
relationships. We're tried and true not the new kid on the block.
A long history of reliable service to our customers makes Old Dominion and
its member systems the provider of choice, just as we have been for so many
years. A closer examination of our service territories makes another Old
Dominion advantage evident.
Our members are concentrated around the major routes of commerce,
Interstates 95 and 81, where most regional economic growth is occurring.
This growth is projected to continue and increase over time, bringing vital
new customers into our service areas for years to come. We're the folks next
door, the neighbor down the street, the people you know you can count on for
service. Most important we're people that customers know they can depend on
to provide electricity that's reliable and fairly priced.
They're comfortable with us. We have concentrated on delivering quality to
our members for many years, rather than delivering dividends to
shareholders. We've stayed close to our members, taking care of their needs
and becoming an integral part of the communities we serve.
With our member cooperatives, customer loyalty is hard-wired, a position
we've worked hard to attain, and that we'll work even harder to defend. For
over sixty years, our members have made a direct connection providing for
our customers' needs in the communities where they live and work. While
other utilities have closed their district offices, we've stayed put.
Through the steadfast loyalty and reliability of our member co-ops, and by
earning confidence where it matters most, they have forged iron-clad
relationships that have lasted for decades, and will continue into the
future.
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