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News Analysis

Fortnightly Magazine - September 15 1999

electric competition in six New England states, by allowing up to 130 electric generators, suppliers, marketers, brokers and load aggregators to use the Internet to trade electric supplies and services.

ISO New England, Andersen Consulting and ALSTOM ESCA worked together for two years to create the system and technology infrastructure needed to operate the competitive market. The systems designed for ISO New England allow it to receive bids and contracts for energy and related services from participating organizations, use the bids to schedule and dispatch energy resources, support settlements and billing for market services and publish reports detailing market and participant-specific activities.

But it was the July 8 launch of HoustonStreet.com that ultimately may bring traders around to trading wholesale electricity on the Internet. The initial launch established trading in the NEPOOL, NYPP and PJM markets, with trading throughout the Eastern, Southern and Central United States to be available by this fall. By early August the company had registered more than 60 percent of the active wholesale power trading companies in the United States. According to press materials, more than 270,000 megawatt-hours of electricity were traded in the first four weeks HoustonStreet was online.

In fact, interest in the site has surpassed the company's goals, according to president and CEO Frank Getman. "It's exceeding our expectations, but this is a marathon, not a sprint. We're trying to change the entire way an industry does business," he said.

Billing itself as the "first fully Web-based online trading floor," the company allows the entire purchase to take place online in real time except for the actual exchange of funds. In addition to trading at all hours, 365 days a year, traders may access weather, energy news and financial information through the site. They can even monitor other trades as they happen via a message crawl along the bottom of the screen.

So why would HoustonStreet.com succeed where other electronic trading forums for wholesale electricity have flopped? According to Getman, it's the Internet and its ability to deliver up-to-the-minute information that makes his system better than even traditional trading by phone. While previous trading systems have relied on proprietary software or hardware that limited trading to other users who have the same software or hardware, HoustonStreet.com is an open system.

"Also, I think the timing is right," he added. "Traders use the Internet everyday in their job, so it's not at all foreign."

The trading system doesn't compete with ISO sites, he said; in fact, it's linked to many of them. "ISO New England, for instance, serves a very useful service, but it's not really a trading floor," said Getman. "Our site allows you to trade with the flexibility you have on the phone - any terms, any price."

Furthermore, he noted, the trader maintains his relationship with the ISOs, so transmission problems that might affect a deal continue to be handled directly through the ISO.

Several concerns that have hindered widespread electronic trading of electricity in the past appear to have been resolved through the use of technology in HoustonStreet's design. For instance, proof