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June 23 th , 2006

Energy Distribution Companies & Economic Development in New England Michael Kagan, Vice President Constellation NewEnergy. June 23 th , 2006. Five Forces Model – Industry Attractiveness Depends on the Interaction of the Forces. Focus for today. Source – Michael Porter.

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June 23 th , 2006

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  1. Energy Distribution Companies & Economic Development in New EnglandMichael Kagan, Vice PresidentConstellation NewEnergy June 23th, 2006

  2. Five Forces Model – Industry Attractiveness Depends on the Interaction of the Forces Focus for today Source – Michael Porter

  3. Factors to Consider: Rivalry and Power of Buyers • For Distribution Companies; • Bargaining power of buyers of distribution services • Rivalry with other firms, particularly for capital • For New England Region • Rivalry with other regions, particularly for capital

  4. Competition for Capital • Competitive advantage in attracting capital allows distribution companies to: • Expand • Invest in new technology (the next ipod?) • Improve service • Provide substitute (competition) to generation resources

  5. International Distribution Company Scale & Strategy • Strategic Aspirations • …RWE AG is building a multi-utility structure into its core business…in key markets in Germany, the UK, Central Eastern Europe and North America. • …USA as long term growth opportunity • …convergence of power and gas markets …will be a key competitive advantage and driver of value creation. • A leading player can create more value from holding energy assets even in disconnected markets based on its experience and expertise… Source – E.ON, Strategy and Key Figures 2005 and RWE Annual Report 2005

  6. Policy Actions • Enhance ability of distribution companies and Region to compete: • Minimize regulatory uncertainty by making rules constant • Force consistency between distribution and ISO rules • Allow distribution companies to focus on core distribution capability and profit from all functions • Force competition where ever possible • Create stronger incentives for efficiency and profit • Facilitate investment in advanced metering

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