Electronic Power Trading Systems Promise Market Protection
Wouldn't it be nice to trade power knowing you could quickly
exit the market unscathed when other less fortunate souls are being
wiped out by extreme volatility and soaring prices? That's what
designers say two new electronic power trading systems offer.
A week after rival QuickTrade, a partnership of Dynegy, Sempra
Energy and NICOR, launched its new electronic power trading system
(See NGI, July 13, p.9), Altra Energy Technologies followed suit
with Streamline for Power, a real-time trading system for wholesale
electricity. The two systems have arrived on the market just weeks
after a tumultuous period, in which skyrocketing power prices
forced several marketers to default and many others to suffer big
financial losses. If only they could have seen the market in real
time, some of those losses may have been avoided, said H. Matthew
Frye, Altra's vice president of electronic trading.
Altra said its system should provide users a certain amount of
protection in the unpredictable and often volatile power market. If
you see a storm coming, just click and drag with the mouse and your
positions are off the screen and you are out of the market.
"Through real-time information and processes, such as validated
price discovery and pre-approved counterparties, Streamline for
Power can minimize the likelihood of flagrant price swings," said
Frye. Streamline operates as a broker, matching customers who
decide to accept each others' terms and prices and identifying the
two parties when they agree to a deal. Users still decide with whom
Frye said he expects the power market to take up the system
eagerly. "Four years ago, when Altra introduced Streamline for Gas,
electronic trading was a new concept," he said. "In today's rapidly
evolving power market, the demand for quick, easy-to-use trading
technology has created high interest in Streamline for Power. Since
we announced the product in May, 33 power marketers have committed
to using Streamline for Power, and we anticipate adding 25 or more
in the third quarter."
That's a much faster acceptance rate than what Streamline
experienced when it launched its electronic gas trading system four
years ago. Today, about 250 users trade 2.5 Bcf/d of gas on
Streamline. The system has become a quick and easy method to line
up standard term deals for the winter, said Frye. It also carries a
steady stream of day trades. Frye said while 75% of the gas deals
are very short term, 75% of the volumes are longer term.
Streamline for Power offers power traders a forward-market focus
with the ability to trade a variety of terms, ranging from out
month transactions, down to day trades and the hour-ahead market.
The system costs users $750/month with an incremental transaction
charge of 1 cent/MW. It provides trading at all major power trading
points in North America, including Palo Verde, COB, PJM, ERCOT,
ECAR, Entergy, Cinergy and Ameren. Once a trade is consummated
between pre-approved counterparties, each party is revealed to the
other for the first time and receives automatic electronic and
faxed confirmation of the deal.