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January 8, 2001

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Utilities And Energy Companies Turn To Exchanges

New energy marketplaces seek to drive efficiencies in hopes of lowering costs

By Steve Konicki and Martin J. Garvey

More on marketplace applications:

Computer Reseller News: Commerce One Plans Transformation (12/12/00)

TechWeb: Netformx Targets Niche In Marketplace Apps (12/8/00)

TechWeb: Wanted: A Net Marketplace Model That Works (11/09/00)

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eating oil shortages in the Northeast, potential electrical brownouts in California, and high gasoline prices nationwide are front-page news these days. While these problems aren't going to be solved overnight, U.S. utility companies and oil and gas producers around the world are forming trading exchanges to take unnecessary costs out of the process of meeting the energy needs of businesses and consumers. The oil and gas industry is also adopting new enterprise applications that can help alleviate artificial shortages by tying exploration, drilling, and production data into the entire supply chain.

Pantellos.com Inc., an exchange focused on gas and electric utilities that's funded by 21 of the largest U.S. electricity producers, went live last week, using technology from Commerce One Inc. A new exchange for the petrochemicals industry, Trade-Ranger Inc. in Houston, has also signed with Commerce One to operate an exchange backed by 14 big oil and gas producers, including BP and Royal Dutch Shell. Enporion Inc., an exchange founded by seven regional utility companies, went live on Commerce One and SAP software in November.

The expanding role of IT in the energy market is an important trend for an industry that's been slow to adopt E-business, says Aberdeen Group senior analyst Ethan Cohen. As these exchanges mature, they could provide a real-time platform for the buying and selling of oil, natural gas, and surplus electricity, replacing existing EDI trading systems, he says.

Right now, the exchanges are focusing on maintenance, repair, and operations procurement. Enporion co-founder Allete in Duluth, Minn., saw the exchange as a way to drive efficiency into what had been primarily a paper-based supply-chain operation, says VP of IT Claudia Scott-Welty. Allete subsidiary Minnesota Power Inc. saved more than 20% on its first transaction--a contract to keep power lines clear of vegetation. Such savings can translate into more stable energy prices for businesses and consumers, says Art Fischetti, manager of purchasing and logistics for Reliant Energy Inc. in Houston, a founding member of Pantellos.

Commerce One partner SAP is also winning major oil producers as customers of its upgraded oil and gas vertical application suite, released last fall. In recent weeks, Exxon Mobil Corp. and Marathon Oil Corp. have adopted the suite, which now handles every recordkeeping task, including well-field exploration, production management, oil wholesaling, and the gas pump.