While deal activity in the capacity release markets appears tobe leveling off, the market is still dynamic enough to accommodatenew market entrants, according to energy industry consulting firmSkipping Stone Inc.

Capacity release transaction activity has leveled off from thefirst six months of 1998 to the first six months of 1999. On 42pipelines tracked daily, there were 13,816 capacity acquisitions inthe first six months of 1999 compared to 18,885 during the sameperiod in 1998. Skipping Stone noted the leveling off of activityto about 27,000 deals/year but pointed out some big movers amongthose playing the capacity release game. For instance, in the firstsix months of 1999, Enron Corp. dominated the list of the mostactive capacity traders, doing 973 deals in the period. No. 2behind Enron is Duke Energy, which did 590 deals during the period.Enron’s year-to-year growth in capacity trades done wassubstantial. In the first six months of 1998, Enron only did 554deals and was No. 2 behind Sonat Marketing, which did 563 dealsduring that period.

A big mover on the ranking of capacity traders was ReliantEnergy which moved from No. 9 to No. 3 in Skipping Stone’s tally.Absent from the list of the most active capacity traders during thefirst half of 1999 are Dynegy, TransCanada Gas Services, KN Energy,CNG Energy Services, Allenergy Marketing, Seagull Energy andWilliams Energy.

All of these companies had appeared in the top 20 list of mostactive capacity traders in the first half of 1998.

CNG Energy Services exited the wholesale business, and Dynegyacquired a bundle of capacity on El Paso. However as for the othercompanies, Skipping Stone noted that nothing in the data itanalyzed explained the absence of these companies from the top 20most active capacity traders in the first half of 1999.

A significant new entrant to the top 20 list is PG&E EnergyServices, which ranked No. 9 for the first six months of this year,having done 201 deals during the period. For the first six monthsof 1998, PG&E Energy Services was ranked No. 27 among capacitytraders.

“Even in a market that’s now five years along and very mature,to have companies sort of come from nowhere and be able to get inmeans there aren’t barriers to entry. A company that puts its mindto getting into the capacity business gets to do so and movecommandingly into a position of presence in a broad way,” said GregLander, a principal with Skipping Stone.

“That says a lot about the company that’s doing it. It says alot about the market. What it says about the company that’s doingit is, one, obviously there is management focus in the area; andtwo, a systems focus. They have to have systems that can managethat.”

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