Energy E-Comm.com has 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 later this month.

The draft petition, which incorporates comments made during acollaborative conference in February, argues that a NOI proceedingis necessary 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 bold, 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 is 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 energy businessthat have corporate roots deep — some might say, too deep — inthe 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 partake of a shift in the value chain that allows wholeareas of human endeavor (and associated economic activity) to[switch] increasingly” to the Internet. A successful response tothat challenge could be “years in the making and decades in theexecution,” but Energy E-Comm.com said the energy industry needs totake its first step soon. “Delay in beginning the processwill…..condemn these industries, with their declining billions ofdollars in assets and ever-shrinking workforces, to a future thatis more of the ‘same old, same old.'”

Energy companies can’t blame FERC for all constraints withinwhich they operate, the draft noted. In fact, it believes theCommission has done an “extraordinary job in attempting to rewritethe structural rules…..” But, it said, the Commission has beenworking “within the box” of existing law and regulation. Itbelieves the time has come for FERC’s vision to reach “outside thebox.”

The Commission can begin by agreeing to conduct the requestedinquiry. “We believe the Commission will quickly discover that thee-commerce revolution is rapidly changing the foundations uponwhich a number of its regulatory decisions are built, including,for example, its just-issued Orders 2000 and 637.”

Such an inquiry would aid FERC and state commissions inidentifying which “aspects of the regulated industries must changeradically as ‘the web changes everything’ — and which aspects ofthe regulatory structure reflect enduring policy statements,” thedraft petition said. Delaying the inquiry “may result in importantcomponents of the energy businesses moving ‘offshore.'” and energysuffering capital flight to other industries. “Some would arguethat…..this is already occurring.”

Foremost, FERC needs “to look up and away from the agendapleadings [before it], understand the technological drivers thatare transforming [business-to-business] commerce in the rest of theeconomy, and then relate that understanding back to the day-to-daytask at hand,” the draft petition noted. It believes the FERC Firstinitiative, the distinguished speakers series and the Order 637provision that calls for an ongoing dialogue between the gasindustry and FERC are steps in the right direction.

Specifically, Energy E-Comm.com said the Commission’s inquiryshould focus on five key areas: 1) the management of the gas supplychain (including the understanding of how web-based systems willaffect the integration of transactions across pipelines and fuels);2) the management of electric power flows; 3) the development ofuniform business practices that make sense in a web-enabledbusiness-to-business world; 4) complying with the public’s demandfor protection of private information; and 5) the impact ofe-commerce on access to capital by regulated companies.

“This is admittedly a broad agenda…..It touches on some of theCommission or industry initiatives that are already under way. Whatis not under way, however, is any mechanism for the Commission tosee all of these pieces as the components of a broader whole thatis being driven at breakneck speed by…..the changes thate-commerce is bringing to relationships among suppliers, marketers,transporters and retailers.”

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 to 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. Also, theinquiry should focus on the effects of e-commerce on both naturalgas and electric power arenas, it suggested.

“Increasingly, customers will look at energy purchases as merelyone more input or consumption decision that should be no different— and no more difficult — than others. When Intel, GeneralElectric (or the federal government) move [their] procurementoperations into the e-commerce world, they will not tolerate arequirement to purchase energy through a separate electronicplatform – much less though two separate electronic platforms, onefor power and one for gas. They will insist that energy vendorscomply with the same procurement rules and procedures as vendors ofmore significant commodities…..”

More information on the draft petition can be found atwww.energyecomm.com.

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