Electric Competition Moves On
The recent months have brought a flurry of activity in a number of states:
ARIZONA: The Arizona Corporation Commission approved rules opening...
Pantellos, the utilities mention that they will procure big-ticket transmission and distribution items like power lines, poles, and transformers through the site. However, it is more likely that traditional MRO (maintenance, repair, and operations) goods, like office supplies, will be the first items to be purchased through e-procurement. Utilities will be less likely to forgo long-held vendor relationships with industry giants for their big-ticket, customized items.
First Movers Draw Scrutiny. The market power some online exchanges recently have exhibited has raised the interest of the Federal Trade Commission. B2B exchanges such as Covisint, the automotive exchange started by Ford, GM, and Daimler Chrysler, as well as an evolving airline consortium, have come under FTC scrutiny. Thus, as participants in e-hubs centralize and streamline functions, it will be a challenge for these online exchanges to stay within the bounds of what the FTC deems to be fair trade.
In the end, the convenience and savings of exchanges likely will be enough to move the utility industry into the e-business arena. However, the perception of bias may preclude non-members from participating in exchanges. The following metrics have been vital to the initial success of online exchanges: few companies leading the effort, quick alignment with technology partners, rapid adoption by the CEO and supporting team, the attraction of big-name sellers that can bring big-name buyers, and alignment with industry-accepted purchasing practices.
Above all, the ongoing activity in e-procurement is sure to spark some provocative explorations into the issues and opportunities of e-commerce as its potential is widely recognized. Stay tuned!
Shridharani recommended that risk management, fraud-detecting technologies, and insurance against loss of sensitive corporate information be developed to guard against market power on procurement exchanges.
Nevertheless, he worries that industry-affiliated exchanges are slowing the development of independent exchanges because of the "psychology of intimidation." In other words, said Shridharani, "Independents are worried about keeping their competition."
Enron expressed such worries about utility-owned exchanges in public statements to the FTC:
"Enron shares the FTC's concerns, however, that the transition to electronic commerce ('e-commerce') may result in anti-competitive activity as individual companies employ illegal tactics in an attempt to protect and extend their monopolies into new markets. As a result, Enron cautions the FTC to monitor e-commerce developments to ensure that individual Internet business proposals are truly pro-competitive."
The energy marketer added that it should be a requirement that B2B have firewalls or protective measures to guard against improper flows of information.
But even Enron itself may not escape antitrust scrutiny.
Vinod K. Dar, CEO and founder of Energy E-comm.Com, a vertical business search and knowledge-mining platform, said that independent trading exchanges may be at risk of gaming when linked with proprietary trading platforms such as EnronOnline. He explained that while having many independent markets linked online creates efficiencies, linking different types of platforms may create market distortions.
For example, Houston Street, an independent trading exchange, announced a memorandum of understanding with Enron in mid-July. Under this arrangement, North American electricity and natural gas prices posted on EnronOnline automatically will be posted on HoustonStreet.Com. Traders will be