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Electronic Power Trading Systems Promise Market Protection

July 20, 1998
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Electronic Power Trading Systems Promise Market Protection

Wouldn't it be nice to trade power knowing you could quickly exit the market unscathed when other less fortunate souls are being wiped out by extreme volatility and soaring prices? That's what designers say two new electronic power trading systems offer.

A week after rival QuickTrade, a partnership of Dynegy, Sempra Energy and NICOR, launched its new electronic power trading system (See NGI, July 13, p.9), Altra Energy Technologies followed suit with Streamline for Power, a real-time trading system for wholesale electricity. The two systems have arrived on the market just weeks after a tumultuous period, in which skyrocketing power prices forced several marketers to default and many others to suffer big financial losses. If only they could have seen the market in real time, some of those losses may have been avoided, said H. Matthew Frye, Altra's vice president of electronic trading.

Altra said its system should provide users a certain amount of protection in the unpredictable and often volatile power market. If you see a storm coming, just click and drag with the mouse and your positions are off the screen and you are out of the market.

"Through real-time information and processes, such as validated price discovery and pre-approved counterparties, Streamline for Power can minimize the likelihood of flagrant price swings," said Frye. Streamline operates as a broker, matching customers who decide to accept each others' terms and prices and identifying the two parties when they agree to a deal. Users still decide with whom they trade.

Frye said he expects the power market to take up the system eagerly. "Four years ago, when Altra introduced Streamline for Gas, electronic trading was a new concept," he said. "In today's rapidly evolving power market, the demand for quick, easy-to-use trading technology has created high interest in Streamline for Power. Since we announced the product in May, 33 power marketers have committed to using Streamline for Power, and we anticipate adding 25 or more in the third quarter."

That's a much faster acceptance rate than what Streamline experienced when it launched its electronic gas trading system four years ago. Today, about 250 users trade 2.5 Bcf/d of gas on Streamline. The system has become a quick and easy method to line up standard term deals for the winter, said Frye. It also carries a steady stream of day trades. Frye said while 75% of the gas deals are very short term, 75% of the volumes are longer term.

Streamline for Power offers power traders a forward-market focus with the ability to trade a variety of terms, ranging from out month transactions, down to day trades and the hour-ahead market. The system costs users $750/month with an incremental transaction charge of 1 cent/MW. It provides trading at all major power trading points in North America, including Palo Verde, COB, PJM, ERCOT, ECAR, Entergy, Cinergy and Ameren. Once a trade is consummated between pre-approved counterparties, each party is revealed to the other for the first time and receives automatic electronic and faxed confirmation of the deal.

Rocco Canonica

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