El Paso Corp. (ticker: EP, exchange: New York Stock Exchange (.N))
News Release -
Large Energy Companies Forming Internet Trading Platform
The Energy Trading Consortium
KANSAS CITY, MO, April 13, 2000—
Six of the largest gas and electricity marketers in the U.S.
today announced they have formed a new independent energy trading consortium,
which will own and operate an Internet-based, business-to-business,
over-the-counter energy trading platform. The new trading platform is expected
to be in operation by the end of the year and will be open to all wholesale
energy industry participants.
The consortium's members are American Electric Power (NYSE:
AEP), Aquila Energy, a subsidiary of UtiliCorp United (NYSE: UCU), Duke Energy
(NYSE: DUK), El Paso Energy (NYSE: EPG), Reliant Energy (NYSE: REI) and
Southern Company Energy Marketing, a unit of Southern Company (NYSE: SO). Each
is among the top 10 U.S. marketers in either gas or electricity, or both.
"This Internet platform initially will offer an
over-the-counter marketplace for natural gas and electricity in North
America," said Paul Addis, President of AEP Energy Services, Inc.
"But we expect to expand our business to include natural gas liquids, coal,
weather derivatives, crude oil and other energy-related commodities and
instruments as those markets develop."
The platform is expected to deliver a number of benefits to
users compared to the smaller platforms, single dealer systems and phone brokers
currently used for energy trading.
"We believe that online energy trading is the wave of the
future. It may never fully replace the broker system, but we are hopeful its
share of total trading will increase in the next few years, just as it has in
foreign exchange and futures," according to Brad Karp, President of
Duke Energy Merchants.
"Forrester Research's estimates of the dollar volume by
2004 are $166 billion for natural gas and $101 billion for
electricity, but the formation of a business-to-business platform of this scale
and scope could accelerate the migration to on-line trading of energy and
According to Forrester Research, only 2 percent of natural
gas trading and 0.2 percent of electricity trading were conducted on-line
in 1999. Forrester Research is forecasting these figures to increase up to
25 percent and 11 percent, respectively by 2004.
"Collectively we have the market presence and diversity of
commercial transactions, both geographically and in terms of customers, to
ensure that open, unbiased transactions are available to everyone," said
Gary Morsches, President of Southern Company Energy Marketing. "We
also believe this is the best opportunity for establishing standards for
transaction settlements that will lower costs to the industry in general."
According to published sources, approximately 2.7 billion
megawatt hours of electricity annually and 154 billion cubic feet of
physical natural gas per day are traded in the U.S. In 1999, the six companies
responsible for creating the new trading platform had combined annual
electricity trading volumes of about 1 billion megawatt hours and physical gas
trading volumes of about 42 billion cubic feet per day.
"The consortium members trading volumes, coupled with their
combined $61 billion in market capitalization, provide extreme liquidity
and helps to ensure that the new platform will have the size and staying power
that's sometimes missing in a relatively new marketplace," noted
Greg Jenkins, President of El Paso Merchant Energy.
"We're committed to making this an open and completely
independent platform," noted Ed Mills, President of Aquila Energy
Corporation. "This will allow the platform to provide the real-time price
and data discovery that's often missing in current trading systems. We expect
other benefits will include enhanced liquidity, faster market execution and
considerably lower transaction costs. "
"Formation of the trading platform provides an incentive
for consortium members to transfer their current trading volumes from
traditional sources to the on-line platform. It is also expected to attract
others in the marketplace by creating a centralized, liquid platform offering
greater market efficiency," stated Joe Bob Perkins, President of
Reliant Energy Wholesale Group.
Initial discussions about the new platform were an outgrowth of
the need to speed the resolution of problems related to insufficient liquidity,
price discovery and transparency, the need for technological standards, greater
communication and market efficiency. The consortium is involved in advanced
discussions with several potential technology partners, including some of the
leading trading technology vendors in North America.
This press release includes forward-looking
statements, estimates and projections. Actual events and results may differ
materially from statements, estimates and projections. Factors that could affect
actual results include technology risks, market risks, business
development/operating risks, and regulatory/legislative decisions and other