An analysis of power marketing sales shows early signs ofconsolidation among power marketers, according to CarolynPengidore, managing director of energy risk management for ArthurAndersen. “I think we’re seeing wholesale changes in the wholesalemarket,” she told the Gas Mart/Power ’98 audience. “The fourthquarter brought a reshuffling among industry leaders based on salesvolume. I’ve called this a race because the leaders have changed ina single quarter,” said Pengidore.

Arthur Anderson has compiled a database of more than 80,000reported electric transactions filed at the Federal EnergyRegulatory Commission, along with other data, including financialdisclosures. Although this data is inconsistent and tends toobscure profitability, Arthur Andersen has determined that theelectric industry is now beginning to manifest the same loss ofmarket share by traditional players as experienced in the earlydays of the deregulated natural gas industry.

The top six providers in wholesale power sales in 1994 weretraditional market players: TVA, Bonneville, Western Area PowerAdministration, New York Power Authority, Southern Company and AEP.Just three years later, in the third quarter of 1997, this list hadchanged dramatically to: Enron, ECI/NGC, Duke, Southern Company,Vitol and TVA.

But the fourth Quarter of 1997 showed a dramatic shift, both inthe players and volume of trade. The major participants becameEnron, Southern Company, TVA, Bonneville, Duke and ECI/NGC. And thevolume of trades fell by 21% overall. Before the fourth quarter themarketers had an average growth rate of 58% per quarter over thelast three years, as compared to 20% for traditional utilities.

“This is the first drop in volume between quarters since webegan collecting the data in 1994,” said Pengidore. “While the datashowing a drop in volume is not conclusive, we know a number ofplayers took losses in the third quarter and the pattern can beinterpreted as an early warning sign of industry consolidation.”

The question is whether companies are making money on theirsales. Pengidore’s “educated guess” is that, based on 1997 FERCdata, two out of three marketers made a profit on gross sales ofpower. But her consulting experience indicates that only one out offour marketers are making a net profit on their business.

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