Instead of spending much time and money building a larger directmarketing operation, Aquila Energy has formed a gas marketingpartnership with Empire District Electric Co., a Midcontinentregion electric utility, to target industrial customers in Empire’selectric service territory. Aquila said the deal is the first ofmultiple partnerships and alliances it plans to form in four keyregions of the country where the market is competitive and it has asignificant presence.

“You know the claim to fame over the last 15 years is everybodyhas tried to do [industrial aggregation] with a direct salesforce,” said Mike Young, vice president and general manager ofindustrial marketing at Aquila. “We’ve looked at that and said ‘howmuch can you effectively touch?’ The cost is fairly prohibitive.You get a fairly good return for your money. But you can’t go outand hire thousands and thousands of sales people and be costeffective.

“What we’ve looked at is to expand our direct sales force andname recognition in regions by working with partners or agents,”said Young. “Empire stood out as a company that had good namerecognition in the energy industry. It fit with our regional corecompetencies and, third, they had a good relationship with theircustomer base. We thought rather than attacking their region thatwe would work in tandem with them.”

According to the agreement, Empire will follow Aquila’smarketing process, procedures, contracting and credit criteria, andin exchange, Aquila will contribute its back-office facilities andtrain Empire’s staff in gas marketing. Both will share the margins.

“Our anticipation is that there’s about 500 customers and 15 Bcfof opportunity,” said Young. “We would expect over time that theyshould get a fairly substantial percentage of the [gas] market [intheir territory] probably 20-30%.”

Empire will market natural gas as a sales representative ofAquila. Initially, it will concentrate its marketing efforts in ageographic area that roughly overlays its existing electricitymarkets in portions of southwest Missouri, northwest Arkansas,northeast Oklahoma and southeast Kansas. Empire serves a10,000-square-mile area with a population of about 400,000.

“There’s really three reasons we’re getting into this program,”said Empire’s Bill Eichman, manager of wholesale and industrialsales. “There seems to be a desire on the part of many of ourcustomers to buy gas and power from a single supplier. The programalso will give us some hands on training in commodity marketing forour industrial sales staff, which will benefit us significantly asthe electricity market becomes deregulated. And obviously it willbring in additional revenue for Empire at little additionalexpense.”

Young said if this partnership is successful Aquila plans toreplicate the process in the Chicago area, the Northeast from itsrecently opened Pittsburgh office and in the Mid-Atlantic from itsrecently opened Chesapeake, VA, office.

Rocco Canonica

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