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EnronOnline Allies with HoustonStreet, TrueQuote

EnronOnline Allies with HoustonStreet, TrueQuote

EnronOnline embarked on a new e-commerce strategy last week that involves alliances with independent energy trading platforms. Enron signed memorandums of understanding with and and anticipates signing deals with other platforms in the near futures. The deals allow Enron to post its prices on the other platforms and to carry out North American natural gas and electricity transactions through those other sites.

"Think of this [HoustonStreet and TrueQuote] more as a shop front," said EnronOnline COO Louise Kitchen. "We are putting our goods in more and more shops than we were previously, and therefore we expect that somebody who prefers to transact over HoustonStreet or maybe another platform like TrueQuote will still be able transact with Enron through that. It's a customer choice really. We are trying to give our customers as much choice as possible by putting our prices across such platforms.

"There will be some more announcements in the future," she said, referring to negotiations with other trading sites. "We are always looking at more opportunities. I've got quite a few phone calls today."

Enron plans to simultaneously post prices at which it will buy or sell natural gas and electricity on EnronOnline, True and Customers will be able to transact on any of those systems.

EnronOnline handles more than 2,000 mainly gas and power transactions each day and offers buys and sells on more than 800 products. It has become the world's largest e-commerce site in terms of commodity value transacted with more than $90 billion in transactions since the beginning of the year.

"It's amazing," said HoustonStreet CEO Frank Getman. "We haven't even completed the link with Enron yet and today our screens were full. We think we have a really solid, best-in-class platform with functionality that you just don't find in other places. When we get the Enron numbers, I think we'll be in real good shape. To date we've done just under $400 million in transactions since the end of May when we went live with our crude oil, refined products and new power platforms. The majority of that has been on the crude and refined products side. We have over 600 traders registered from about 150 companies. I think we calculated that we have 85% of the folks who potentially could use our system signed up and online."

Portsmouth, NH-based Houston Street Exchange launched with an initial power trading platform last fall, and then expanded with a separate bulk power, crude oil and refined products this spring. HoustonStreet also developed commodity and trading alliances with Conoco, Equiva (the U.S. trading arm for Shell, Texaco and Saudi Aramco), Sithe Energies, Inc., Williams and Vivendi. It is planning to launch natural gas trading platform in September, at which time the direct EnronOnline connection will be made.

"For months now we have been hearing liquidity, liquidity, liquidity; it's all about liquidity," said Getman. "I think what this deal is saying is maybe it's something more.

"It's flipping market convention on its head a little bit in that I think in the end what this is saying is that a number of these exchanges are going to be interconnected and many of the exchanges will have the same numbers. It causes you to say maybe liquidity becomes the commodity not the differentiating factor between the exchanges. If that's the case, then what is it going to be that differentiates the exchanges? I think it brings you to functionality, user experience other value added services, things along those lines, which is where the real value is...

"People have to realize what they are good at. What Enron is really good at is making markets and providing liquidity. What we're really good at is providing what we think is the best exchange platform in the market and using an open architecture so we can provide other value added services, provided not necessarily by HoustonStreet. It may be by Nymex, or whoever."

Nymex also said last week that it is looking into doing something similar to what EnronOnline has done with these two alliances. Nymex plans to provide a live e-commerce feed to other energy trading platforms, allowing traders using those platforms to buy and sell futures contracts and possibly other products such as standardized over-the-counter derivatives (see separate story this issue).

Getman said the e-commerce market is rapidly heading down a path toward standardization and free flow of data between trading platforms and energy companies.

"It's not holding data and information hostage. It's freely sharing it with one another. That's where it is going to head... The reason why you choose one platform over another no longer is because one has better numbers on it."

TrueQuote is a newcomer to the e-commerce scene. Conceived by Louisville, KY-based energy broker APB Energy Inc., the platform will use technology developed by Microsoft Corp. and EnForm Technology LLC. The system has financial support from PG&E Corp., APB Inc., Microsoft and EnForm. It will be ready to launch in the fall, a spokeswoman said.

Rocco Canonica

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