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SCIENTECH IssueAlert, November 15, 2000
Utility.com Uses $22M Financing to Grow eUtilities Partnerships
By: Will McNamara, Director, Electric Industry Analysis
===============================================================

Utility.com announced that it has completed its third round of venture
financing, raising over $22 million. Gaz de France, one of the top three
European gas companies, led the deal. Utility.com will use funds raised
in this third round to support operations as it implements its eUtilities
Program partnerships, which it has formed with traditional utilities in
the United States and abroad.

ANALYSIS: Financing from venture capitalists seems to be the theme of the
week. Just yesterday, I wrote about SmartEnergy finishing its Series A
round of financing, in which it received $15 million from a mix of American
and European investors that included Alliant Energy as a major contributor.
In my analysis, I mentioned Utility.com as a competitor of SmartEnergy,
and argued that the latter appeared to be moving along more aggressively
with a plan to become operational in all 25 deregulating U.S. states and
across Europe. About an hour after I distributed my column, Utility.com
announced this significant round of financing, which certainly rejuvenates
its position as "the world's first Internet utility."

If case you are not familiar with Utility.com's business model, the company
offers electricity, natural gas, telephone and Internet access to customers
in competitive markets. In fact, as individual U.S. states have moved closer
to competition, it seems as if Utility.com has begun operating in all of
those states. Its marketing strategy has been to promote cost savings,
reliability and the convenience of operating online. In addition, with
the bundled services of various offerings, Utility.com promotes a "one-stop
shopping" approach for multiple services, with billing and customer services
all available online.

As noted, Gaz de France led this third round of financing for Utility.com.
It seem curious that Gaz de France would be such a primary participant
in the investments, but keep in mind that Europe continues to privatize
its gas and electricity markets. Gaz de France, along with its electric
counterpart EDF, is investing in various energy companies to both learn
about new competitive techniques and financially benefit when competition
opens fully across Europe. Utility.com, of course, benefits because Europe,
when it does privatize completely, will represent a very lucrative energy
market and one that could potentially exceed the U.S. energy market.

Joining Gaz de France in the investment in Utility.com are some heavy hitters,
both traditional utility companies and investors that are banking on the
hope that companies like Utility.com will start capitalizing from deregulation
in the near-term. The list of investors is impressive: Southern Company
Energy Marketing, Sempra Energy Trading, idealab!, idealab! Capital Partners,
Trident Capital, PRIMEDIA Ventures, Kinetic Ventures, TL Ventures, Moore
Capital Management, and Sumitomo Corporation of Japan. As noted, this was
Utility.com's third round of investments, and all previous investors 
contributed
again in this round.

Utility.com's relationship with Southern Company is one of the foundations
on which the company was built. Southern Company was one of the original
investors in Utility.com and serves as the company's preferred wholesale
provider. What this means is that, as Utility.com markets electricity to
customers across deregulated markets, the power is typically coming from
Southern Company. In previous discussions I've had with Chris King, 
Utility.com's
CEO, he has reiterated that, although Southern Company is a preferred 
provider,
it is not Utility.com's only provider. "Southern has given us very good
pricing, and we've taken advantage of their scale economies, being the
largest energy generator in the country," King told me a few months ago.
"But we don't use them exclusively to ensure that we get competitor pricing
from them. If they ever give us a price that we don't like for whatever
reason, we can go out and get a price from somebody else."

It seems pretty clear that Utility.com will use this financing to grow
its unique eUtilities Program partnerships, along with expanding its core
operations. Its eUtilities partnerships are focused on co-branding and
co-marketing of services with specific utility companies. For instance,
Utility.com has formed eUtilities partnerships with Kansas City Power and
Light and FirstEnergy. The eUtilities program enables Utility.com to put
together a co-branded site where it can sell energy and other related 
services.
The program also has helped Utility.com to expand into states before 
deregulation
has opened competition. For instance, in Missouri*a state that is still
regulated*customers can sign up with Utility.com and still have all of
their utility services consolidated into one online package. Even without
savings generated from deregulation, many customers are still finding value
in the convenience that Utility.com offers.

Just in the last month, Utility.com also began working with electric 
cooperatives.
The company formed a partnership with EnPower, a consortium of member electric
cooperatives providing energy products and services in Iowa, Illinois,
Minnesota, North Dakota, South Dakota, and Wisconsin. Utility.com will
provide participating EnPower member cooperatives with UtilityOne, an 
information
technology and Internet infrastructure platform for utility services. 
UtilityOne
supports marketing and provisioning of multiple utilities over the Internet
and serves Utility.com's electricity, telecommunications and Internet 
customers
across the country. This move follows an expansion of Utility.com's 
telecommunications
offerings with the introduction of Utility.com Long Distance. An introductory
plan called Utility.com Common Cents offers 100 free minutes of long-distance
service to customers for state-to-state calls during the first month of
service. Utility.com hopes to offer this service to customers in 48 states
by the end of this month.

Of course, as I discussed in my analysis of SmartEnergy, it is natural
to speculate on whether or not Utility.com is gearing up for an IPO. When
I spoke with Chris King last summer, he admitted that going public "is
always something you have in mind when you have a company like this." As
Utility.com continues to find willing investors that will support its intended
growth, an IPO would be a natural progression as Wall Street currently
favors energy company stocks that are involved in technologies. Utility.com
does face stiff competition, of course, and SmartEnergy is perhaps the
leader of that group. Another competitor is Essential.com, which offers
a very similar service offering to Utility.com. Both Utility.com and 
Essential.com
are licensed energy providers, meaning that they contract with wholesale
providers to purchase energy that they will resell to end-users. Both 
companies
are responsible for all forecasting and settlement issues, which can be
difficult when working with different states. Yet one key difference that
Utility.com offers is its partnerships with utilities. By partnering directly
with utilities such as Southern Company, Utility.com by association gains
the powerful brand identity of companies that energy customers already
trust. This is a strategy that SmartEnergy also is using by partnering
with Alliant Energy. As additional states deregulate, it will be very 
interesting
to see which of these online providers gain a significant market share,
and whether or not a large percentage of energy customers will want to
conduct their utility transactions online.
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Sincerely,

Will McNamara
Director, Electric Industry Analysis
wmcnamara@scientech.com
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