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Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: "IssueAlert" <IssueAlert@scientech.com< X-To: X-cc: X-bcc: X-Folder: \Drew_Fossum_Dec2000_June2001_1\Notes Folders\All documents X-Origin: FOSSUM-D X-FileName: dfossum.nsf http://www.consultrci.com ********************************************************************* Editor's Note: I am extremely pleased to see today's launch of SourceBook Weekly. Every Monday morning, SourceBook Weekly will provide analytical summaries of the key issues facing the energy industry, ensuring that you stay inform= ed of the developments that are impacting your business. Within SourceBook Weekly, we are tracking the full array of issues related to the energy industry: deregulation, trading, T&D, generation, new technologies,=20 e-commerce, and international privatization (just to name a few). I have managed SourceBook as a monthly print publication for the past three years. By transforming the publication into a weekly e-zine, I can continue to guarantee that SourceBook Weekly brings you the information you need, when you need it. You can be assured that, as major news and issues develop in the energy industry, SourceBook Weekly will be covering them with the in-depth analytical perspective you've come to expect. Best regards, Will McNamara Director, Electric Industry Analysis wmcnamara@scientech.com http://www.consultrci.com The following are the titles of the articles appearing in this SourceBook Weekly Issue. Today's IssueAlert follows these SourceBook Weekly hotlinks. ************************************************************************ SourceBook Weekly December 4, 2000 Issue:=20 http://www.consultrci.com/web/rciweb.nsf/Web+Pages/SBEntrance.html ************************************************************************ MISO: WHAT IS THE FUTURE OF THE MIDWESTERN TRANSMISSION GRID? The Midwest Independent Transmission System Operator (MISO) has been in a state of flux as of late, as its expansion efforts have taken some dramat= ic turns with major players announcing to withdraw from membership. http://www.consultrci.com/web/rciweb.nsf/Web+Pages/SBEntrance.html ************************************************************************ FERC UNDER FIRE: CALIFORNIA IOUS RESPOND TO PROPOSED ORDER WITH SHARP=20 CRITICISM The Federal Energy Regulatory Commission's (FERC's) concession that the market rules and structure for wholesale of electricity in California are "flawed" resulted in a 77-page proposal early in November to repair the situation. The reaction from California's three investor-owned utilities (IOUs) was immediate and overwhelmingly critical. http://www.consultrci.com/web/rciweb.nsf/Web+Pages/SBEntrance.html ************************************************************************ ESSENTIAL.COM PARTNERS WITH SHELL: ALLIANCE MAY PROVIDE EDGE OVER UTILITY.C= OM In a small step forward for its Internet energy services, Essential.com has partnered up with Shell Energy to offer a lower-cost natural-gas choice to customers of Atlanta Gas Light. It appears that both companies will benefit immensely from the partnership, but in very different ways. http://www.consultrci.com/web/rciweb.nsf/Web+Pages/SBEntrance.html ************************************************************************ ALLEGHENY ENERGY: FORGING AHEAD IN GENERATION DEAL WITH ENRON Allegheny Energy's recently announced purchase of three gas-fired merchant plants from Enron North America reaffirms its strategy of expanding its geographic footprint and strengthening its unregulated generation capabilit= y. From Enron's point of view, the sale confirms its stated policy of pursuing "contractual" rather than "physical" assets. http://www.consultrci.com/web/rciweb.nsf/Web+Pages/SBEntrance.html ************************************************************************ ENERGY PRIVATIZATION IN MEXICO: THE FUTURE RESTS IN THE HANDS OF A NEW ADMINISTRATION Energy privatization and the future of electric supply and demand are issue= s to be dealt with by Mexico's new president, Vicente Fox, as he took over the helm of the country on Dec. 1. http://www.consultrci.com/web/rciweb.nsf/Web+Pages/SBEntrance.html ************************************************************************ WILLIAMS COMMUNICATIONS CONTINUES SPIN-OFF TREND Williams is planning a spin-off of its Williams Communications (NYSE: WCG) subsidiary, which should take effect the first part of next year. http://www.consultrci.com/web/rciweb.nsf/Web+Pages/SBEntrance.html ************************************************************************ =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D SCIENTECH IssueAlert, December 5, 2000 Trends for Commodity Trading, Supply Chain Exchanges Explored at Conference By: Will McNamara, Director, Electric Industry Analysis =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D Approximately 200 industry executives were in attendance at the first day of the Energy Exchanges Online conference, held Monday through Wednesday of this week in Scottsdale, Ariz. The conference was presented by London-ba= sed EyeforEnergy. In morning keynote presentations from Mark Crosno, executive vice president of Altra Energy Technologies, and Keith Butler, COO,=20 DukeSolutions, issues of how deregulation and the Internet have spawned a new species=01*t= he e-utility=01*were discussed. A key focus of the conference was the growing focus on online exchanges and how the entire value chain for the wholesale energy market is being impacted by new technologies. ANALYSIS: I attended and also spoke on a panel discussion during the first day of this conference. What I found particularly noteworthy about the dialogue taking place was that, despite participation from diverse sectors of the energy industry=01*utilities, regulators, consultants, ESPs, IT=20 infrastructure providers, and others=01*several key points were reiterated throughout the discussion. First, there is little doubt left that e-commerce and new technologies are changing the entire complexion of the energy industry. Resulting from that dynamic, energy companies presently find themselves in a transformatio= n related to how they will and should conduct their businesses. While new technologies certainly offer new opportunities for companies to expand information and services that already exist in an electronic form, question= s still remain about how much the market itself will bear in terms of buildin= g new online exchanges for e-commerce. As noted, the conference focused on online exchanges. Within my presentatio= n, I discussed that essentially four different kinds of exchanges have emerged within the last 20 months: supply chain, commodity trading, transmission, and retail exchanges. A supply chain exchange exists primarily to line up buyers and sellers of parts related to the energy industry, with the end goals of lower product prices and procurement processing costs, exposur= e to a worldwide audience, and shorter order and fulfillment cycles. A commod= ity trading exchange exists for companies engaged in bulk wholesale trading to buy and sell energy packages. A new form of exchange is emerging with transmission exchanges. We don't know a whole lot about them yet, but a group of utilities in the Midwest recently proposed a transmission exchange that would "be the electronic clearinghouse of information flow around transmission assets and the market." How a transmission exchange would correlate with an RTO=01*which also manages transmission flow=01*is not yet= clear. Finally, the retail online providers could also be considered a form of exchange in that they are operating exclusively across the Internet. With that established, several key issues will rise to the forefront in 2001 as many exchanges finally come online and the new business segment enters its second year. First and foremost, establishing neutrality seems to be the primary challenge. Questions were raised at the conference about trading exchanges established by a proprietary participant that is involved in every buy or sell on that particular exchange. The general consensus among those present at the conference was that, although concerns about neutrality have not prevented exchanges such as EnronOnline from becoming very successful, regulatory pressure from the FTC may eventually make=20 neutrality a requirement. In addition, when given a choice over various exchanges on which to participate, the sense that I got from the dialogue was that traders would arguably prefer to participate on an exchange where issues of disclosing competitive information are not a concern. The second trend as we move forward is liquidity. With regard to commodity exchanges, what participants want and what makes an exchange the most=20 successful is liquidity (meaning, essentially, the amount of transactions on the excha= nge and, consequently, the opportunity to access beneficial deals). A point that I made in my presentation is that the larger exchanges naturally seem to have the most liquidity. Again, the example of EnronOnline, which=20 reportedly has now logged over $200 billion in transactions, cannot be overlooked. This raises the question of whether or not smaller exchanges will even find opportunities to move into such a saturated market. As a result, a related trend that I see is the consolidation of existing exchanges, along with a blending of current business models into one exchange format. As companies realize that it is already fairly late in the game to be building an exchange, the smart move may be to join or merge with an already-existin= g format. I think we will also see multiple exchanges merging into one to gain a lock on various market niches. The third trend that should emerge over the next year is the separation of commodities. Traders will want the flexibility of having separate platfo= rms for different commodities, including power, natural gas, bandwidth, etc. Dynegydirect is already moving in that direction by offering separate tradi= ng floors that allow traders to group products in a customized way. I think we will see more and more of this trend as traders demand this option. The trends I mentioned here have focused mostly on commodity trading. That is primarily due to the fact that we simply don't know enough about how several prominent supply chain exchanges will operate. Enporion just last week logged its first transactions (five reverse auctions in which UGI was the buyer of natural gas). Pantellos still has another month or so before it comes online. Of course, there are many smaller supply chain exchanges like UtilityFrontier (municipal-oriented), RAPIDpartsmart and Bex.com, but the general consensus at the conference was that all supply chain exchanges will need to provide significant cost savings for=20 participants, and that has yet to be universally demonstrated. Most observers of this particular trend are reserving judgment until next year when real-time results are disclosed. Moreover, the evolving energy marketplace is providing many new opportuniti= es for energy companies to redefine themselves and develop new business models= . However, much of the water that energy companies may be venturing into is uncharted territory. The risks and competition associated with building an online exchange can be formidable, and may dissuade some energy companie= s from developing in that direction. The question is, as we move further down the path of an e-based energy industry, can energy companies avoid participation in some form of an exchange? As always, the answer will proba= bly be found along the bottom line, which for many of these exchanges should emerge sometime over the next year. =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D SCIENTECH is pleased to provide you with your free, daily IssueAlert. Let us know if we can help you with in-depth analyses or any other SCIENTECH information products. If you would like to refer a colleague to receive our free, daily IssueAlerts, please reply to this email and include their full name and email address or register directly at: http://www.consultrci.com/web/infostore.nsf/Products/IssueAlert =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D Feedback regarding SCIENTECH's IssueAlert and SourceBook Weekly should be sent to wmcnamara@scientech.com =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D SCIENTECH's IssueAlerts are compiled based on independent analysis by=20 SCIENTECH consultants. The opinions expressed in SCIENTECH's IssueAlerts are not intended to predict financial performance of companies discussed or to be the basis for investment decisions of any kind. SCIENTECH's sole purpos= e in publishing its IssueAlerts is to offer an independent perspective regard= ing the key events occurring in the energy industry, based on its long-standing reputation as an expert on energy and telecommunications issues. Copyright 2000. SCIENTECH, Inc. If you do not wish to receive any further IssueAlerts from SCIENTECH, pleas= e reply to this message and type "delete" in the subject line.
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