Southern Company Energy Marketing remains committed to growing its wholesale business, and at the other end of the pipe, developing a business to serve producer needs in an increasingly complex energy industry.

Andy Lang, managing director of Southern Company Energy Marketing, said the joint venture between Southern Company and Vastar will remain focused on the wholesale marketplace of utilities, municipalities and cooperatives. “It goes a lot deeper than just gas and electricity. We’re looking at how we can offer products and services in what we refer to as energy-linked commodities, like coal and fuel oil products.” Particularly attractive is the high revenue pulp and paper industry. “It’s significantly higher than what we see in the gas side of the business, and pulp and paper is a commodity business. It has enormous volatility and fluctuation. And anytime there’s volatility, that’s an opportunity to provide risk management and price management services.” The joint venture, like some other wholesale marketers, also is working with customers on weather derivatives, particularly attractive to electric utilities and local distribution companies.

Southern Company Energy Marketing also plans to be a big player in producer services, Lang told reporters last week in Houston. “You take the relationship that the joint venture has with Vastar, where it is the marketing vehicle for monetizing Vastar’s natural gas production [about 1 Bcf/d of physical volume of the joint venture’s 4.6 Bcf/d at the end of 1997], I think there’s an enormous opportunity to do that with other producers. As this industry is becoming more complex and more sophisticated, I think it’s going to be more and more difficult for a lot of the producers that want to participate in this business to do that. Their real business is EandP, and that’s what they’re good at.

“I think at the same time we talk about producer services, we shouldn’t forget that besides gas producers there are electricity producers. And I think there are going to be equal opportunities to provide those similar services to electric generators as we’ve seen in the producer services side of the business.”

The focus on the upstream and the wholesale market does not mean Southern Company Energy Marketing is unaware of what is going on in retail. In retail, the critical questions are how many customers does a company have and how many can it get, and what does it take to serve them, Lang said. “The joint venture was not set up to go after the mass markets. Southern Company, which obviously has a very large customer base, is still developing its retail strategies with regard to its mass markets, and the venture is not focused at this stage on becoming a mass market player on a national basis. That doesn’t mean we won’t do it at some point down the road, but at this stage there’s enough other opportunity and enough other things on our plate that that’s something where we’ll basically take a wait-and-see attitude.”

Joe Fisher, Houston

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