Williams Energy Marketing & Trading is buying an undisclosedminority stake in Houston Street Exchange, a Web-based powertrading exchange that Williams believes will be actively taken upby the energy trading community.

“Emerging technologies continue to change the way the energyindustry operates, and HoustonStreet.com is on the leading edge ofthe revolution. Internet-based trading has exploded, and we believethat this investment will allow us to play a significant role inthe development of new markets and platforms,” said Bill Hobbs,president of Williams Energy Marketing & Trading.

Since the launch of HoustonStreet.com in July 1999, the exchangehas attracted a large number of power companies. Although it wouldnot release the daily volume currently traded on its physicaltrading platform, called PowerPit, or the number of transactionsthat take place, CEO Frank Getman said there are 125 companiesregistered to use the web site with close to 500 traders.

PowerPit is designed for those who have physical power to sellfrom generation plants or specific loads to meet. It is availableto all regions of the country, “but what we’ve found actually isthat the less liquid regions are more attracted to the PowerPitbecause in liquid regions the standardized products are moreactively traded.”

For that reason, the company is about to launch a new powerplatform, called Speedway, for “financial” power traders or thosewho trade in set bulk increments at specific major hubs across thecountry. The launch of the next tier is expected to significantlyincrease traffic on the site. With Speedway, “all you arenegotiating is price and amount.” Getman said Houston Street foundthere were two sets of needs in the market, one based onflexibility and another based on speed.

Houston Street also is in the process of launching a newWeb-based platform for trading crude and refined products at thewholesale level and is looking into offering electronic trading innatural gas. The crude and refined products platform will beavailable in May. “We are looking at other energy markets,” saidGetman. “We are not going to trade something non-energy related.We’re not going to become a VerticalNet.

“We’re focused on creating a better way to trade. It’s faster.It’s more efficient because you can see the entire depth andbreadth of the market.”

Houston Street lets the user decide the order of the informationthey receive. They can target the price first, the volume first orthe location first depending on their preference or individualneeds.

“It’s one thing to ask traders to pick up their mouse instead ofthe phone; it’s another thing to ask them to change their businessprocesses. We wanted the logic flow and the trading process to besimilar to what they are doing on the phone but be more efficient.”Houston Street charges a transaction-based fee of between 1 and 2cents/MWh.

Electronic trading, sales and procurement systems are “comingout faster than I can look at them,” noted Nancy Gustine, directorof eBusiness for Williams Energy Marketing & Trading. “But fromwhat we’ve seen so far, [HoustonStreet.com] is an attractivesystem. They have good technology behind it, good research fromtheir focus groups, and number one, if the traders want to use itthat’s a good indication [it’s an effective system].”

Gustine said the investment in HoustonStreet.com is just onepiece of Williams’ eBusiness strategy. “By acquiring a stake inthis innovator in the electronic-exchange industry, we cancapitalize on our marketing strengths while helping them transformthe trading industry.

“There are a lot of things going on in the market, and as wetake equity positions in interests in them it’s to support theefficiency and effectiveness of how we do our business. We aregoing to see more and more eBusiness.” She added that this purchasedoes not mean Williams will play an active roll in the softwarebusiness as it had in the mid-1990s with its stake in Altra Energy.It sold its share of Altra to two venture capitalists in 1997.

Getman said having one of the leaders in the energy industryinvest in Houston Street is “a direct validation of our technologyand our vision for the future of energy trading.” Williams is notthe first energy company to invest in Houston Street; Equiva, thejoint crude oil trading arm of Saudi Aramco, Shell Oil and Texacoinvested $6 million in the company earlier this year.

The Portsmouth, NH-based company is a majority-owned subsidiaryof BayCorp Holdings, Ltd., which also owns Portsmouth-based GreatBay Power.

Rocco Canonica

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