Energy E-Comm.com last week issued a revised draft of a petitionasking FERC to initiate a notice of inquiry (NOI) into the effectsof e-commerce on the regulated natural gas and power industries.The e-commerce-based company has posted it to its web site soenergy companies can comment further on the petition before it’sformally filed at the Commission by the end of the month.

The draft petition, which culled comments made during acollaborative conference in February, argues that an NOI proceedingis warranted because energy companies are “at risk” of being”largely bypassed by one of the most profound technological changesof the last thousand years,” and of “losing control of theircollective corporate destiny to businesses that have barely beencreated, or in some cases, not yet conceived.”

These “are bald, perhaps even shocking, statements,” but they’retrue, according to the draft petition, which was authored by EnergyE-Comm.com, a new company that was formed to assist energycompanies in making the transition to e-commerce. Fred Abrew,formerly of Equitable Resources in Pittsburgh, is its chairman, andVinod K. Dar is CEO.

To illustrate its point, the draft petition compared the marketcapitalizations of the top energy companies to leading softwarecompanies. The combined market cap of Enron Corp., Duke Energy,Southern Co., El Paso Energy and several other top-flight energycompanies came to $191.5 billion. But this was pocket changecompared to the combined market cap of the likes of Cisco Systems,America Online, Yahoo and Qualcomm Inc. and others, which talliedmore than $1 trillion.

“The e-commerce enterprises have created value far in excess ofthe regulated energy enterprises. Yet not a single one of theinformation or e-commerce businesses even existed as apublicly-traded enterprise on Oct. 9, 1985,” when FERC first began”liberalizing” its regulation of the nation’s energy markets, thedraft petition noted. “In some case[s], companies that have beenpublicly valued for but a few months already dwarf energybusinesses that have corporate roots deep — some might say, toodeep — in the 19th century.”

The bottom line “is that the various e-commerce businesses arecreating vast fields of new value; the regulated businesses arenot. Financial and human capital — bucks and brains — are bothfleeing the regulated world to seek increased opportunity andhigher returns in [the] world being transformed more rapidly thanis imaginable by one steeped in regulatory mysteries,” the draftpetition said.

The ultimate challenge for gas and electricity is to “deviseways” to cash in on the Internet. Energy E-Comm.com said the energyindustry needs to take its first step soon. While the Commissionhas done an “extraordinary job in attempting to rewrite thestructural rules,” it has been working “within the box” of existinglaw and regulation.” The time has come for FERC’s vision to reach”outside the box.”

The Commission can begin by agreeing to conduct the requestedinquiry. Specifically, Energy E-Comm.com said the Commission’sinquiry should focus on five key areas: 1) the management of thegas supply chain (including the understanding of how web-basedsystems will affect the integration of transactions acrosspipelines and fuels); 2) the management of electric power flows; 3)the development of uniform business practices that make sense in aweb-enabled business-to-business world; 4) complying with thepublic’s demand for protection of private information; and 5) theimpact of e-commerce on access to capital by regulated companies.

Moreover, the draft petition urges FERC to “move aheadexpeditiously” to review some of the issues that were identified inOrder 637 as being ripe for future discussion, including whether:1) changes are needed to accommodate the convergence of electricand gas markets; 2) FERC should create greater standardization ofservices and penalty provisions; 3) revisions should be made toregulations relating to pipeline affiliates; and 4) changes areneeded for further facilitate upstream and downstream marketcenters, trading areas and greater gas liquidity.

Energy E-Comm.com proposed that the review of these issues beconducted as part of the broader inquiry on e-commerce. Moreinformation on the draft petition can be found atwww.energyecomm.com.

Susan Parker

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