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Avista Puts E-Commerce Sites to the Test
Although energy e-commerce is a burgeoning industry, there are only a few electronic exchanges so far that can be used for serving aggregated retail energy customer loads, and even those that are up and running still may need to be customized, according to Avista Advantage, an Avista Corp. subsidiary.
Advantage has taken a new approach to retail energy services by using its expansive billing customer database as an aggregation tool that could help in achieving customer savings and boosting liquidity on several e-commerce sites. Finding the right sites, however, has been no easy task.
"We're looking for folks [exchanges] that actually are up and running, not vaporware," said Kevin Nicholls, director of e-commerce at Avista. "They have to actually be doing transactions over the Internet, and the majority of the 30 that we were finding were wholesale types of energy traders not retail and were operating with basically a fax machine and an office calling themselves exchanges."
The "typical exchange" at this point in the game only grants control to commodity sellers. Few exchanges support buyer-centric business models where Advantage's clients --- the buyers --- can retain control over the transaction, with the opportunity to review any offer and choose whether to proceed. Advantage was seeking a "reverse-auction" format that searches for the lowest price for gas and electricity, and effectively streamlines the buying process for buyers.
Three exchanges were selected out of more than 30 for an initial trial: Enermetrix, AMDAX and Excelergy. "For Enermetrix there are [seven] buyer members [web sites] currently operating on that platform and instead of bucking up for a buyer member seat ourselves we partnered with one of their existing buyer members called Usource." Enermetrix's buyer members include Americanpowernet.com, Scanaonline.com, Unitil.com, Solutionsondemand.com, Pseget.com, Selectenergy.com and Usourceonline.com (Usource).
Usource, which was launched last year, provides traditional and Internet-based energy services to energy buying groups, commercial, industrial and institutional customers throughout New York, New England and Pennsylvania. It is an affiliate of Unitil Corp. Aggregated electricity requirements for 75 of Avista Advantage's customer sites are in the process of being posted through Usourceonline.com for bid by multiple suppliers utilizing the Enermetrix.com Energy Exchange. Unlike many Internet sites that merely compare prices offered by suppliers, Usource serves as a live auction where pre-qualified suppliers make firm bids against firm commitments by commercial and industrial customers to buy their electricity and gas.
"In the AMDAX case, going to them directly made the most sense," said Nicholls. AMDAX is the platform currently used by Utilityguide.com and Powerspring.com.
"With Excelergy it was pretty straight forward that we would get our own customized web site up and developed in short order. All three of them eventually will be operating divisions of our own web site. Our clients might even be able to access them directly through the channel that we provide them."
Avista Advantage plans to conduct a pilot program to see just how efficient and cost effective energy e-commerce can be over these three exchanges. The results of the evaluation will determine whether Avista should use the exchanges for a larger group of clients, which now represent 50,000 sites across the United States, Canada and Puerto Rico.
"The reason we are doing this as a pilot is because we believe there's a lot of maturity that needs to take place in the exchange business across the board for retail accounts," said John Battista, director of commodity services for Avista Advantage. "What we're not saying is these are the only three [platforms] to go through and they have the final word in exchange marketing. What we are saying is we think that these are the furthest along at this stage in the game for our particular customer group. We expect that to change. We want to get experience in this business, and we want to help form what exchanges look like for the retail sector."
Avista has found three large end-use customers, including Starbucks, that are eager to get the best bang for their buck in energy e-commerce. In total, the customer group represents nearly 400 sites in three deregulated energy markets: Pittsburgh, New York City and San Diego.
"This breakthrough move affirms Avista Advantage's ability to leverage its detailed customer information and data base into something of greater value," said Avista Chairman T. M. Matthews. "This is a clear demonstration of our core business model --- leveraging data on our client's behalf --- and this is just the start. While others are only talking about buying energy through electronic exchanges, Avista Advantage has demonstrated that it can execute the posting of actual data on three different exchange platforms to assist our customers in getting improved market based pricing."
"We've essentially pioneered an approach that creates significant benefits for all involved," said Avista Advantage President Gerry Crooks. "Avista Advantage has expanded its strategic relationships and service capabilities, our clients have access to a valuable service that will assist them in successfully navigating the deregulating energy environment, and the exchanges gain liquidity with every one of our clients that elect to participate."
Finding the right exchanges, however, was a critical component of the service. "We believe it is too early to lock into any one specific format for Internet based exchange buying, because all of the business models, processes and technology are new and evolving," said Battista. "We will continue to offer advanced energy solutions through our successful alliance with Strategic Energy Ltd. and evaluate the electronic energy exchanges for a fit with our customer needs."
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