Question: to what degree do you expect the deregulation of the electric utility industry to impact the foundry industry?

"With increased competition and a variety of new ways to purchase electricity, the overall effect should be a reduction in the unit cost of electrical power. As structured today, opening up the existing power markets to competition is a state-by-state issue. Unless the federal government intervenes and mandates that the states open all power markets to competition, the process could take as long as 10 years or more to complete. However, the cost reductions for the foundry industry will be materials, especially for the heavy electrical users such as plants that utilize induction melt furnaces. The surprising fact may be that the cost reductions, on a percentage basis, will not be as great as some might think. It is primarily the power generation cost that is expected to drop significantly. The power transmission and distribution costs make up more than half the total energy cost and are likely to be as high as before deregulation. The pricing of electricity will be more volatile under the deregulation scenario and similar to what we have seen with the deregulation of the natural gas industry. For foundry operations that take the time to research their purchase options, savings can generally be identified."

- Mike Stovall, procurement director, Citation Corp., Birmingham, Alabama 

"The drive toward deregulation of the electric utility industry is of great interest and probably will offer foundrymen significant energy cost reductions over the long term. While the potential for savings is there, the deregulation process is not proceeding as fast as originally predicted. Also, since only generation will be affected, potential savings will be reduced. Potential opportunities include: one-stop shopping, lower rates and economic growth. It is essential, however, that the foundry know its actual energy usage amounts and patterns and have a plan so that favorable rates may be negotiated. The foundry must do its homework to be prepared to negotiate a favorable contract. Factors to consider include: monthly volume, peak demand, load shape and load shifting. Deregulation will certainly affect most foundries and will most likely result in some energy cost savings. But it is unlikely that the savings will be as great as most foundrymen hope and not likely to occur as soon as they hope."

- John M. Svoboda, president, Process Metallurgy International, Inc., Arlington Heights, Illinois 

"Deregulation of the electric utility industry will have a large impact on the foundry industry. Since electricity plays a significant role in the price makeup of the product, any gains or loses will be greatly amplified. A company wants to gain, not lose, the transition to competition in the electric industry, which is why foundries must take the initiative to be engaged in the process. It becomes an overall question of risk management. Just like other commodities your company purchases, you need to develop a strategy for how your company will purchase electricity. This strategy can be broken down into four main steps: risk analysis is the determination of how aggressive a company wants to participate in the market; internal scan is the determination of where power is used today and how critical the supply is to different loads; short-term objectives are how to maximize the value received from electricity during the transition to a deregulated marketplace; and long-term goals are how to maximize the value in a deregulated market. Foundries must start this strategy planning today in order to ensure winning in a deregulated environment. Thorough planning through proper risk analysis and goal setting will result in maximized value."

- Rick Granite, manager-key accounts, Wisconsin Electric Power Co., Milwaukee

"Deregulation of the electric utility industry will impact foundries in four key ways. First, energy managers will have to be more knowledgable about the multiple options and risk factors involved in buying unbundled electric power services. Second, large power-consuming foundries with high load and power factors will have the highest potential to save money, although the specific amount will be very dependent on geographic location. Third, some foundries in low electric cost areas may actually pay more with deregulation, especially if they now take advantage of current utility rate incentives such as special contracts, economic development rates, off-peak rates or curtailable/interruptible provisions. Lastly, there will be a learning curve for both the supplier and customer similar to what happened with natural gas deregulation. The current pilot programs, with one in progress in Pennsylvania, will help to smooth the transition to full deregulation."

- Victor Moschgat, senior applications engineer in the Pennsylvania electric utility industry

"Deregulation of the electric utility industry will increase competition for your foundry's business. This should stabilize and level electricity costs across the U.S. Short-term price benefits will depend on your location. Each state is taking a different route to a deregulated industry, and short term savings will vary greatly. In the long term of 5 years or more, prices should equalize. Deregulation will require your foundry to be more aware of electricity purchasing. Electricity is vital to your business, and an ill-advised contract could be disastrous. Start now to plan for your needs. Attend seminars to better understand the issues. Obtain legal and technical help, as necessary. Understand how to compare offers from potential vendors. If price differentials are small, other factors may decide which energy supplier has the best offer. Know what other factors are important to your business, such as reliability, power quality, rate structure and billing features, and find the supplier that can provide those features in addition to a competitive price."

- Lowell Griffith, president, L.E. Griffith & Assoc., Inc., Maroa, Illinois 

"The deregulation law in Illinois that was passed in 1997 is not unlike the situation other states are facing. It was supposed to move us toward a situation where we can shop around and negotiate for power outside our own designated area. Our concern with the law is that the playing field for competition amongst foundries of different states is equal, and I don't believe this was first and foremost in the minds of the utility companies. The law appears to do more to protect the utility companies instead of helping the foundries become more cost competitive. This could mean a lot of jobs in the future. When deregulation is fully implemented down the road, the hope is that our original promise will be true, but this is going to take a lot of work."

- James McGill, executive director, Illinois Cast Metals Assn., North Pekin, Illinois