NGI The Weekly Gas Market Report
While deregulation at the retail level inches along at a snail’s pace, the online retail energy marketplace is quietly gaining market acceptance and could be become a real stimulant to competition.
Multiple new commodity sales web sites have sprung up. There’s the World Wide Retail Energy Exchange (REX) located at energyagent.com. Others include energy.com, energymarketplace.com and energyplace.com, all of which in varying degrees enable customers to gather valuable information to help them make economic energy choices and provide suppliers with a cheap, efficient means of reaching potential buyers. The retail marketing tool of the future is quickly becoming the preferred method of doing business in the present.
“We’re being descended upon with interest and business right now. It’s a really exciting time for our company,” said John Gaus, president North American Power Brokers, designer of the REX Internet/intranet system located at energyagent.com. “Utilities, customers and energy suppliers are in a vortex around us right now. It’s a great solution for all of the parties.”
North American Power Brokers, a privately-owned firm based in Maynard, MA, launched the site last January and has facilitated nearly a thousand transactions for the purchase of natural gas on 28 utility franchises in the Northeast and Mid-Atlantic regions. It recently launched power trading and completed the first retail electricity transaction over the Internet, according to Gaus.
Gaus said REX was the first and still is the only system to allow retail customers and suppliers to complete energy transactions over the Internet. Customers using the other sites have to consummate deals off line. The REX site is catching on like wild fire with suppliers. So far 50 suppliers, including many of the large volume marketers such as Duke Energy and PG&E Energy, are participating in the REX system.
“It seems to be a very convenient way to do business,” said Duke Energy’s Stuart Ison, market analyst. “I probably go to their web site every day to check out what they’ve posted, the new opportunities to bid on. We’ve probably won about 25 bids so far. We started using it about a year ago.
“It’s got a lot of potential, not only as far as natural gas is concerned but also when we start pricing some power deals as well. I think it will have more and more of an impact on the way business is done especially on the retail side.” Ison mentioned the ease of completing a transaction as one of the site’s best attributes. “Normally when someone calls in wanting a bid for 12 months you have to go through the whole process of getting their bill, their account number and all their information. Usually they don’t know a whole lot about the information that we need in order to quote them. But North American Power streamlined the process. All the information is already there. It really makes my job easier.”
Most of the transactions on the REX system have been with customers in New York and New England, but usage is spreading fast. Gaus said his company is discussing licensing opportunities with 30 utilities and expects a ten-fold increase in transactions this year.
The company last week announced that one of its owners Duquesne Light affiliate Duquesne Enterprises plans to license and launch the site for Pittsburgh’s retail energy players inside Duquesne’s territory. Licensing enables the host LDC to put advertising on the site and monitor transactions done within its citygate for system management purposes.
DQE CEO David D. Marshall touted the site’s benefits last week, saying savings achieved through it were greater than those achieved in the open market without it. “North American’s Internet auction service ensures customers that their energy orders are considered by the largest possible group of suppliers, in real time, resulting in lower prices than would be available using more traditional energy procurement approaches,” said Marshall.
Gaus said a recent study by an independent consultant revealed that 600 New York gas customers using the system saved 19% on their gas bills compared to their previous regulated gas service and saved 12% compared to previous third-party supplier transactions.
The site enables industrial, commercial and aggregated residential customers to enter the specifics about their energy requirements, receive offers from multiple suppliers and then select the best offer and complete the deal. The exchange is conducted on an anonymous basis. Following completion of the transaction, the two parties are introduced to one another.
Another web-based retail marketing tool, Energymarketplace.com, also is quickly gaining market acceptance. The site, which was started in November 1997 by Southern California Gas and was adopted by the other major California gas and electric utilities, allows small California customers to price shop and select the best supplier from among six currently. Ron Kent, SoCalGas transportation service manager in charge of energymarketplace.com, said the site handles about 40 requests for proposals from customers each month but only the suppliers know how many transactions are actually completed. The deals are consummated off line.
The system works something like a dating service for the two sides of energy industry transactions. “We don’t think everyone is really ready to consummate deals on line in the retail arena,” said Kent. “Lets get them used to doing this first. At some point the deal will be consummated on line. We certainly have the capability, but we don’t know the market is ready for that.”
He claimed the site has an advantage over others because it provides the customer with immediate price choices. On some of the other sites, such as energyagent.com, customers must enter a reverse auction, submit a request and then evaluate offers from suppliers. Energymarketplace.com is customer oriented, while energyagent.com is more supplier oriented.
Energymarketplace also launched power trading last week, and sponsors intend to open the site to retail markets in the Northeast this month.
Some of the other sites, including energy.com and energyplace.com, are designed more to provide customers with supplier information than to facilitate actual transactions. However, Columbia Energy Services does have a page on energy.com. that allows Georgia customers to sign up for service. Energyplace allows customers to type in zip codes and get listings of suppliers in their territories.
“We think everybody is going to be doing business over the Internet,” said Jeff DeWeese, COO of North American Power Brokers. “Many people already are. We have a year’s worth of transactions to prove it.”
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