AOL, IBM plug into power industry
America Online and the computer maker join with Enron to form a new power company to deliver gas and electricity to residences and small businesses.
The New Power Company, which claims an initial investment of more than $120 million, will offer electricity and natural gas in deregulated markets in 24 states. The company will draw from the expertise of Houston-based energy giant Enron.
The advent of The New Power Company reflects a trend toward deregulation in both the energy and telecommunications industries. Both industries were deregulated in the late 1990s in hopes of spurring competition within long-time monopoly markets.
But the alliances also serve to highlight the convergence of communications and utilities. For example, many emerging carriers such as Qwest Communications International, Level 3 Communications and Williams Communications can trace their roots to the rights-of-way along natural gas pipelines. Enron also is a growing telecommunications provider and is building a massive nationwide fiber-optic network.
AOL will market energy services to its 22 million customers as part of a 6-year contract while IBM will provide equipment and services under a 10-year agreement. AOL can gain equity in the new company based on the number of new customers the online giant contributes. AOL customers also will be able to receive and pay their monthly utility bills online.
Donaldson Lufkin & Jenrette, a major investment bank, and retirement funds California Public Employees' Retirement System (CalPERS) and the Ontario Teachers' Pension Plan also have invested in The New Power Company.
Dozens of other energy companies also are embracing communications services, with many building their own networks. Montana Power is aggressively divesting itself of all its energy assets and will continue as a new communications provider, Touch America.
The alliances between Enron, IBM and America Online also provide proof of the Internet's power as a mass marketing tool. AOL's rapid ascent as a media powerhouse has made the company an attractive partner for companies trying to reach mainstream Americans.
H. Eugene Lockhart, a former top consumer services executive at AT&T, was named president and chief executive of The New Power Company. The company will have headquarters in Greenwich, Conn., with some operations in Houston.
The New Power Company expects to complete construction of its infrastructure by late summer and will launch its lower-cost energy services in Pennsylvania and New Jersey during the second half of 2000.