The Online Retail Energy Market Is Scheduled for Lift-Off
While deregulation at the retail level inches along at a snail's pace,
the online retail energy marketplace is quietly gaining market acceptance
and could be become a real stimulant to competition.
Multiple new commodity sales web sites have sprung up. There's the World
Wide Retail Energy Exchange (REX) located at energyagent.com. Others include
energy.com, energymarketplace.com and energyplace.com, all of which in
varying degrees enable customers to gather valuable information to help
them make economic energy choices and provide suppliers with a cheap, efficient
means of reaching potential buyers. The retail marketing tool of the future
is quickly becoming the preferred method of doing business in the present.
"We're being descended upon with interest and business right now.
It's a really exciting time for our company," said John Gaus, president
North American Power Brokers, designer of the REX Internet/intranet system
located at energyagent.com. "Utilities, customers and energy suppliers
are in a vortex around us right now. It's a great solution for all of the
North American Power Brokers, a privately-owned firm based in Maynard,
MA, launched the site last January and has facilitated nearly a thousand
transactions for the purchase of natural gas on 28 utility franchises in
the Northeast and Mid-Atlantic regions. It recently launched power trading
and completed the first retail electricity transaction over the Internet,
according to Gaus.
Gaus said REX was the first and still is the only system to allow retail
customers and suppliers to complete energy transactions over the Internet.
Customers using the other sites have to consummate deals off line. The
REX site is catching on like wild fire with suppliers. So far 50 suppliers,
including many of the large volume marketers such as Duke Energy and PG&E Energy,
are participating in the REX system.
"It seems to be a very convenient way to do business," said
Duke Energy's Stuart Ison, market analyst. "I probably go to their
web site every day to check out what they've posted, the new opportunities
to bid on. We've probably won about 25 bids so far. We started using it
about a year ago.
"It's got a lot of potential, not only as far as natural gas is
concerned but also when we start pricing some power deals as well. I think
it will have more and more of an impact on the way business is done especially
on the retail side." Ison mentioned the ease of completing a transaction
as one of the site's best attributes. "Normally when someone calls
in wanting a bid for 12 months you have to go through the whole process
of getting their bill, their account number and all their information.
Usually they don't know a whole lot about the information that we need
in order to quote them. But North American Power streamlined the process.
All the information is already there. It really makes my job easier."
Most of the transactions on the REX system have been with customers
in New York and New England, but usage is spreading fast. Gaus said his
company is discussing licensing opportunities with 30 utilities and expects
a ten-fold increase in transactions this year.
The company last week announced that one of its owners Duquesne Light
affiliate Duquesne Enterprises plans to license and launch the site for
Pittsburgh's retail energy players inside Duquesne's territory. Licensing
enables the host LDC to put advertising on the site and monitor transactions
done within its citygate for system management purposes.
DQE CEO David D. Marshall touted the site's benefits last week, saying
savings achieved through it were greater than those achieved in the open
market without it. "North American's Internet auction service ensures
customers that their energy orders are considered by the largest possible
group of suppliers, in real time, resulting in lower prices than would
be available using more traditional energy procurement approaches,"
Gaus said a recent study by an independent consultant revealed that
600 New York gas customers using the system saved 19% on their gas bills
compared to their previous regulated gas service and saved 12% compared
to previous third-party supplier transactions.
The site enables industrial, commercial and aggregated residential customers
to enter the specifics about their energy requirements, receive offers
from multiple suppliers and then select the best offer and complete the
deal. The exchange is conducted on an anonymous basis. Following completion
of the transaction, the two parties are introduced to one another.
Energymarketplace Launches Power, Heads East
Another web-based retail marketing tool, Energymarketplace.com, also
is quickly gaining market acceptance. The site, which was started in November
1997 by Southern California Gas and was adopted by the other major California
gas and electric utilities, allows small California customers to price
shop and select the best supplier from among six currently. Ron Kent, SoCalGas
transportation service manager in charge of energymarketplace.com, said
the site handles about 40 requests for proposals from customers each month
but only the suppliers know how many transactions are actually completed.
The deals are consummated off line.
The system works something like a dating service for the two sides of
energy industry transactions. "We don't think everyone is really ready
to consummate deals on line in the retail arena," said Kent. "Lets
get them used to doing this first. At some point the deal will be consummated
on line. We certainly have the capability, but we don't know the market
is ready for that."
He claimed the site has an advantage over others because it provides
the customer with immediate price choices. On some of the other sites,
such as energyagent.com, customers must enter a reverse auction, submit
a request and then evaluate offers from suppliers. Energymarketplace.com
is customer oriented, while energyagent.com is more supplier oriented.
Energymarketplace also launched power trading last week, and sponsors
intend to open the site to retail markets in the Northeast this month.
Some of the other sites, including energy.com and energyplace.com, are
designed more to provide customers with supplier information than to facilitate
actual transactions. However, Columbia Energy Services does have a page
on energy.com. that allows Georgia customers to sign up for service. Energyplace
allows customers to type in zip codes and get listings of suppliers in
"We think everybody is going to be doing business over the Internet,"
said Jeff DeWeese, COO of North American Power Brokers. "Many people
already are. We have a year's worth of transactions to prove it."