While incumbents in the natural gas and power electronic tradingfraternity were predicting eventual fall-out and consolidation inthis exploding technology sector (see related story) a new entry— The Energy Consortium, including American Electric Power,Aquila, El Paso, and Reliant Energy and Southern Company EnergyMarketing — entered the fray last week.

The new Internet-based, B2B, over-the-counter energy tradingplatform is expected to be in operation by the end of the year andwill be open to all wholesale energy industry participants. Itsmembers are among the top 10 (by volume) natural gas or electricmarketers or both. (See NGI, March 15) Collectively thecompanies sold 1,062 MMWh, out of the total 2,658 MMWh marketed bythe top 20 power marketers in 1999. Sales of natural gas were morethan 40 Bcf/d, out of 134 Bcf/d sold by the top 20 gas marketers in1999.

“The consortium members’ trading volumes, coupled with theircombined $61 billion in market capitalization, provide extremeliquidity and help to ensure that the new platform will have thesize and staying power that’s sometimes missing in a relatively newmarketplace,” noted Greg Jenkins, President of El Paso MerchantEnergy.

“This Internet platform initially will offer an over-the-countermarketplace for natural gas and electricity in North America,” saidPaul Addis, President of AEP Energy Services, Inc. “But we expectto expand our business to include natural gas liquids, coal,weather derivatives, crude oil and other energy-related commoditiesand instruments as those markets develop.”

“We believe that online energy trading is the wave of thefuture. It may never fully replace the broker system, but we arehopeful its share of total trading will increase in the next fewyears, just as it has in foreign exchange and futures,” accordingto Brad Karp, President of Duke Energy Merchants.

“Collectively we have the market presence and diversity ofcommercial transactions, both geographically and in terms ofcustomers, to ensure that open, unbiased transactions are availableto everyone,” said Gary Morsches, President of Southern CompanyEnergy Marketing.

The six companies expect an increasing amount of their tradingvolumes will be migrating to the internet. AEP is definitely abeliever, having signed deals in the last month to ally with (1)Altra Energy Technologies in its electronic trading system; (2) 15other utilities in an electronic procurement cooperative; and (3)six other energy and telecommunications firms in a fiber opticsventure to generate the bandwidth to carry increased trafficgenerated by the first two. A spokesman said the deal with Altrawill not interfere with its participation in the Energy Consortium.(See NGI, April 2) The Consortium, so far just a gleam in thecompanies’ eyes, expects to sign on other members.

While Altra has been building its online trading systems fornatural gas and electric products for several years, there has beenan explosion of interest and entrants into the field in the lastfew months. The movement accelerated last November with thestart-up of EnronOnline and Coralconnect. (See NGI, Nov. 21, 1999& March 27, 2000) It went into warp speed with thedissemination of a report by Forrester Research last fall —quoted by almost every new entry — predicting natural gas onlinetrades would total $166 billion and online power trades would total$101 billion by 2004. According to Forrester Research, only 2% ofnatural gas trading and 0.2% of electricity trading was conductedon-line in 1999. Those figures are expected to increase up to 25%and 11%, respectively by 2004.

Also on the electronic energy trading front last weekHoustonStreet Exchange of Portsmouth, NH, added a gas platform toprovide real-time access to pricing information and industry news.Besides gas, traders can buy and sell wholesale electricity, crudeoil, refined products (such as jet fuel, unleaded gasoline, dieseland heating oil) and now, natural gas.

PowerSpring.com, a newly-formed marketer-technology partnership,announced a B2B website aimed at bringing commercial customers upto speed with meters and price transparency at citygates across thecountry, and an online auction of oil and gas properties wasscheduled for April 26 at Petroleumplace.com. (See followingreports).

Ellen Beswick, Denver

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