Now you see it, now you don`t

Junior Isles,

Managing Editor

Most magicians` tricks depend on illusion and sleight of hand. It seems that certain London Electricity (LE) representatives would be better suited to pulling rabbits out of a hat than signing up new customers.

In a recent BBC radio programme, a spokesman for the UK supplier was forced to face allegations that its door-to-door representatives had been a touch inventive in obtaining signatures. In one case a man was led to believe he was simply signing up for more information; it turned out that he was actually signing up as a new customer. In another case, a woman seemed to switch supplier without signing anything at all – very impressive.

Needless to say the employees are under investigation. But it shows that anything can happen in a competitive situation where former boundaries across geographic and market sectors are blurring.

It`s ironic that news of LE`s alleged conjuring tricks comes at the same time that the European Commission authorised LE`s acquisition of the electricity supply business of South Western Electricity plc (SWEB). It seems as if bad press runs in the family. EDF, now the owner of LE, has come under fire from other EU countries for failing to meet the conditions of the EU directive. There is particular ill-feeling in the UK which has a fully liberalized electricity market at a time when the French electricity market remains closed.

But this is all part and parcel of competition. A couple months ago, I said that the new market would sort out who`s who in the zoo. Well, welcome to the zoo. Competition is not always fair and some will do whatever is necessary to stay ahead of the game.

Fortunately, most competitors embrace the essence of fair play and use a combination of strength and lateral thinking to succeed. The main battleground in the European electricity market will be Germany. It is in the heart of Europe, and has the biggest market with some of the highest prices. With these factors in mind it will be no surprise if the future champion comes from the heartland of Europe. In August, Germany`s biggest utility, RWE, announced an ambitious growth plan. The company aims to hit DM125 billion ($67.57bn) in annual sales by 2010. However, the road to such targets will not be easy.

RWE sees activities in trading electricity, oil, coal and gas as key to to reaching this goal. This had in fact been part of a keynote presentation at PowerGen Europe in Frankfurt back in June. Prof Dr Wolfgang Straburg, senior vice president, RWE Energie AG, explained: “On the way there, sales and marketing of energy have got to face some enormous challenges to beat the changes in the liberalized market. Germany`s electricity market will only grow by a maximum of one per cent annually.

“At the same time many new competitors are entering the market. This means that former market positions will only be able to be defended and expanded through aggressive and creative marketing strategies.”

The strategies Dr Straburg talked about will be made possible with the merging of the electricity and gas markets. Like we are seeing in the UK, RWE sees one of its strategies being the integrated sale and marketing of electricity and gas. The natural gas market in Germany is expected to be opened up to competition this autumn.

In an agressive move, the company has just slashed its electricity prices and is also looking to double its direct supplies to private households, which stands at about 2.3 million or about six per cent of the market.

The other German utilities, however, are not about to stand quietly on the sidelines. Veba and Viag groups with their energy sector subsidiaries PreussenElektra and Bayenwerk are believed to be in merger talks. If such a merger goes ahead the combined group would overtake RWE as the biggest supplier in Germany.

One can seldom question the German approach to a challenge. Yet it seems even they can also be prone to moments of madness.

Here is a stunt you should not try at home. A 24-year old German climbed a power pylon to get a better view of nature`s trickery – the solar eclipse. While the sun disappeared, he accidentally touched a 20 000 volt electricity cable and ended up in hospital with severe burns. Perhaps he was trying to cause a blackout with a little magic of his own.