Noting that the cost of storage is probably three times cheaper today than five years ago, an energy trading firm executive made a pitch for a new marketing process for gas storage capacity at the LDC Gas Forum Midcontinent conference Tuesday in Chicago.
Tripp Dunman, a managing director with Pricelock Inc., touted the use of auctions to streamline the thin-margin storage business. With narrow margins, storage operators are looking for more efficiency in their operations, and that is where Dunman's company, which specializes in online energy trading, is attempting to establish "a whole new market" for storage using auctions.
"While the eBay auctions concept may not be a new idea, one of the new applications of the process is in the gas storage market," said Dunman, noting that two storage capacity auctions are set for October: one by an independent storage operator and the other by a large investor-owned utility. "If you think about the old eBay concept, you bring together select buyers and sellers," he said.
From an auction format, the operators are looking for cost-savings, efficiencies in their operations, more price discovery and providing more "full disclosure to keep regulators happy. Obviously in the era of Dodd-Frank, the latter is going to be increasingly important," Dunman said.
Storage operators today are concerned with price discovery, maximizing fees and additional regulations such as Dodd-Frank, he said. "The storage providers want access to broader markets and a broader customer base."
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