Aquila Forms Gas Marketing Alliance with Empire
Instead of spending much time and money building a larger direct
marketing operation, Aquila Energy has formed a gas marketing
partnership with Empire District Electric Co., a Midcontinent
region electric utility, to target industrial customers in Empire's
electric service territory. Aquila said the deal is the first of
multiple partnerships and alliances it plans to form in four key
regions of the country where the market is competitive and it has a
"You know the claim to fame over the last 15 years is everybody
has tried to do [industrial aggregation] with a direct sales
force," said Mike Young, vice president and general manager of
industrial marketing at Aquila. "We've looked at that and said 'how
much can you effectively touch?' The cost is fairly prohibitive.
You get a fairly good return for your money. But you can't go out
and hire thousands and thousands of sales people and be cost
"What we've looked at is to expand our direct sales force and
name recognition in regions by working with partners or agents,"
said Young. "Empire stood out as a company that had good name
recognition in the energy industry. It fit with our regional core
competencies and, third, they had a good relationship with their
customer base. We thought rather than attacking their region that
we would work in tandem with them."
According to the agreement, Empire will follow Aquila's
marketing process, procedures, contracting and credit criteria, and
in exchange, Aquila will contribute its back-office facilities and
train Empire's staff in gas marketing. Both will share the margins.
"Our anticipation is that there's about 500 customers and 15 Bcf
of opportunity," said Young. "We would expect over time that they
should get a fairly substantial percentage of the [gas] market [in
their territory] probably 20-30%."
Empire will market natural gas as a sales representative of
Aquila. Initially, it will concentrate its marketing efforts in a
geographic area that roughly overlays its existing electricity
markets in portions of southwest Missouri, northwest Arkansas,
northeast Oklahoma and southeast Kansas. Empire serves a
10,000-square-mile area with a population of about 400,000.
"There's really three reasons we're getting into this program,"
said Empire's Bill Eichman, manager of wholesale and industrial
sales. "There seems to be a desire on the part of many of our
customers to buy gas and power from a single supplier. The program
also will give us some hands on training in commodity marketing for
our industrial sales staff, which will benefit us significantly as
the electricity market becomes deregulated. And obviously it will
bring in additional revenue for Empire at little additional
Young said if this partnership is successful Aquila plans to
replicate the process in the Chicago area, the Northeast from its
recently opened Pittsburgh office and in the Mid-Atlantic from its
recently opened Chesapeake, VA, office.
©Copyright 1998 Intelligence Press, Inc. All rights
reserved. The preceding news report may not be republished or
redistributed in whole or in part without prior written consent of
Intelligence Press, Inc.