Since 2002, the annual energy auctions created and administered by the New Jersey Board of Public Utilities have proven to be an innovative and successful way to meet our state's growing demand...
profiting through their equity in the hub. After five to 10 charter buyers are recruited and "enabled," the hub recruits other regional buyers and sellers to participate.
First Utility Anchor
Because energyLeader.com is a Washington, D.C.-based startup, it was natural for us to turn to the hometown electric utility, Potomac Electric Power Co., as a first regional anchor. The utility quickly realized the potential of this new e-commerce model, and joined in developing the first hub. The Pepco-anchored regional hub will be operating by the end of the year. Our firm is working with Andersen Consulting to recruit utilities for other regional hubs, and expects to announce an agreement with a second utility shortly.
The regional hub's revenues will come through transaction fees, advertising, and fees from preferred providers of value-added services, such as shippers, banks, and insurers. Penetration of just 1 percent of a major market would yield over $25 million annually in transaction fees. At this level, the regional hub would become one of the largest Internet exchanges in operation, and get into the black quickly.
The prototype hub will offer many services, such as installation of an e-procurement system for buyers and suppliers, training, and customer care. Among other special features, it will also enable buyers to give preference to businesses owned by local minorities. The regional hub's operating software will allow smooth and organized completion of all types of transactions, from single purchases to complex procurement orders. It also includes a mechanism for pre-qualified vendors to respond to requests for quotes and requests for proposals.
As the B2B market matures, no one model is expected to predominate. If experience has shown anything, it is that there is more than one winning formula, and a wealth of good ideas. It is clear, however, that as buyers see others- in some cases, their competitors-realizing savings, they will demand the same deals or better, and quickly. Aggressive players will thrive, whether in the forms in which they started, or through the consolidation that is inevitable in e-procurement.
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