Merger turmoil and tight margins are putting the screws to quitea few energy marketers, but Frost & Sullivan still sees plentyof room for the industry to grow. Several of the top-20 marketersof 1998 have exited the market, while other companies have beenspurred to acquire assets and start online trading, according to arecent study by the group.

In some cases, marketers are striking alliances to increasemarket share or just merely survive. At any rate, scores ofmarketers that have sprung up over the past few years suddenly areevaluating whether to remain in the volatile marketplace, accordingto Frost & Sullivan’s “North American Wholesale EnergyMarketing Industry.”

“In 1998, energy marketing, which includes both wholesalenatural gas and power marketing, was a $157 billion industry,growing almost 30% over the 1997 figure of $123 billion,” thereport says. “By the end of the forecast period in 2005, the marketis expected to reach over $313 billion in revenues, growing at acompound annual growth rate of 10.4%.” Last year’s “market growthwas severely disrupted by marketers’ internal restructurings andchanges in strategy following two consecutive summers of pricespikes in the power industry, coupled with low natural gas prices.This, however, is expected to be an anomaly, and growth is expectedto reflect the long-term trend again in 2000.”

Dramatic increases in merchant power generation are expected toprovide increased volumes in the wholesale market, Frost &Sullivan said. “Deregulation has allowed the number of merchantplants to multiply in North America. Because these plants generateelectricity solely for sale in the competitive wholesale market,expansion of this field will drive growth in the power marketingindustry.”

The study found online trading sites are improving efficiencyand decreasing the time needed to complete deals.

“The industry has seen a tremendous increase in the use ofcross-commodity deals that leverage the convergence of electricityand natural gas. These types of deals, such as tolling agreements,allow marketers to capture new arbitrage revenues as the prices ofeach commodity fluctuate against one another.”

Joe Fisher, Houston

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