The Federal Energy Regulatory Commission could go a long waytoward increasing liquidity in the pipeline transportation marketby combining capacity release and pipeline interruptibletransportation under one set of rules, according to the head of thelargest electronic gas and power trading system.

“They are the same thing…but FERC has effectively bifurcatedthe market,” Rusty Braziel, chairman of Altra Technologies, told aCommission audience last week. “It was evident in Order 637 thatFERC was frustrated because the pipeline transportation market doesnot have the liquidity that has been achieved in commodities.”Combining capacity release and IT would increase liquidity, hesaid, adding that capacity release was designed in too much detail.”A market, where the business part of that market is mandated, isprobably going to fail because it is impossible to figure out inadvance how these things are going to work.”

Braziel suggested FERC e-commerce policy should state policyobjectives “to level the playing field so that regulated incumbentsdon’t have an unfair advantage. Then FERC should stand back and letthe flowers bloom.” Auctions and other new forms of exchanges willbe developed by the market.

Braziel said directives from FERC should leave the field open totransactions in the newer transaction languages, such as XML. Whilethe natural gas industry has invested in the EDI system, newer B2B(business-to-business electronic) systems are gravitating towardother standards such as XML. Braziel gave a simplified descriptionof the difference between EDI and XML, explaining that EDI requiredall the participants to have the exact same updated “map” on theirsystems at all times to handle transactions without crashing, whileXML carried its own map with it. Constantly coordinating systems isjust too difficult with EDI.

Braziel, who traveled to Altra Technologies via Texaco GasMarketing and Williams/Duke’s electronic trading systems, suggestedthat “e-marketplaces are distinctly different animals” thanbilateral electronic systems, such as pipeline bulletin boards. Theindependent e-marketplace is expected to be neutral and unbiasedwhere participants are anonymous. But, “the market looks atbilateral trading sites as extranets and sales channels that areexpected to carry the bias of the operator of the site. It isunderstood that the operator of the site is going to useinformation to make trading decisions.” For transactions onpipeline-operated bulletin boards, only the pipeline has all theinformation on a timely basis, both on the IT side and for capacityrelease – who’s flowing, what’s purchased, where the market stands,what’s actually going on in the physical marketplace.”

“Commission policy should include the adoption of a newmarketplace-like model for transportation rights and eliminate thedistinction between capacity release and pipeline IT,” Brazielsaid.

Meanwhile, “the energy market was in B2B before B2B was cool,”Braziel said, pointing out that “energy is a huge piece of the B2Bcommerce total.” He quoted a recent report putting the B2B commercemarket in 2000 at $55 billion, of which energy transactions were$30 billion. E-commerce is expected to hit $2.7 trillion by 2004.Braziel made his remarks as part of FERC’s Distinguished SpeakerSeries. He was introduced by Chairman James J. Hoecker, who saidthe meeting was designed to “open a window” for the Commission intothe rapidly evolving “migration of energy transactions from thetraditional medium of paper and phone to the online world of theInternet.” Hoecker looked to e-commerce to “add a dynamism and helpmove regulation in a new direction.”

Braziel agreed. “Companies that adopt an end-to-end solution,integrating transactions, consummating, managing, settling online,will be able to drive their transaction costs down by up to 50%,”he said. “It’s a huge savings. Companies that do that will succeed;companies that do not will ultimately exit the market.”

Altra Technologies’ own electronic trading system for naturalgas, liquids and power has grown from 17 employees in 1995 to 300today with 1,800 daily traders. The company did $1.65 billion in11,000 transactions during February. Altra also develops andmarkets back office systems. Last week it announced an alliancewith Junot Systems Inc., an enterprise application integration(EAI) solutions provider, to provide an interface between pipelineEBBs and a user’s own back office systems. Altra Web currentlyinterfaces with the ebbs, but it only works with Altra’s backoffice software. Using Junot’s NLINK(TM) product to connect AltraWeb to existing bulletin board systems, pipelines will be able tominimize the amount of work and time required to achieve andmaintain GISB compliance, Altra said.

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