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Gas Marketers: Oblivious to All the Fuss

New mega-marketers, niche players emphasize opportunity.
Fortnightly Magazine - January 1 2002

the major players, Porter says.

"You'll continue to see regional marketers purchased, especially on the electricity side," says Joe Ewing, an associate with consultant Market Reach Strategies in Columbus, Ohio, and the former strategic sourcing manager of energy for Procter & Gamble. But regional marketers always will come back, Ewing explains. "Business is regional," he says. "It's not a national market."

Niche Players Alive and Kicking

One mid-sized marketer, Tenaska of Omaha, Neb., agrees with the philosophy that it's best to think regionally in developing your business. Tenaska, a name derived from "tenacity" and "Nebraska," was formed in 1987 by a group of former executives with Omaha's InterNorth, the pipeline company that merged with Houston Pipe Line in 1985 to create Enron.

Despite growing into a top-25 gas marketer, Tenaska remains a "regional marketer," says Fred Hunzeker, president of two Tenaska subsidiaries, Tenaska Marketing Ventures and Tenaska Marketing Canada. Hunzeker says he views his company as one that operates in the three distinct markets of Texas/Oklahoma, the Midwest and Canada, with a trading office in each.

Tenaska foresees East Coast gas pipelines and clients in that region as a possible growth area for the company, Hunzeker says. Any expansion into that region, though, would be gradual, he adds.

Tenaska also doesn't view consolidation as a negative development for the smaller trading houses because of its belief that many gas utilities and industrial customers prefer to do business with regional marketers. "We are seeing penetration into our client base increase because of the consolidation," Hunzeker notes, referring to customers who want to do business with a marketer that has an understanding of a particular market.

As for the plight of Enron, Hunzeker believes "someone else will play the role of market-maker."

Aquila, the large energy marketing company in Kansas City, already is seeing business swing its way due to Enron's downfall. "We're anticipating we'll see a lot more business than usual," says Mark Gurley, senior vice president and general manager of trading for Aquila.

Among the changes this winter, Gurley says Aquila will be working with local distribution companies on finding buyers for their large inventories of storage in a market already saturated with gas. During the summer, utilities refilled their contracted storage to near-full levels in order to avoid the price run-up and regulatory scrutiny that occurred last winter when production was low and demand was high.

"This winter, utilities are more worried about getting rid of gas," Gurley notes. Many state regulators blamed utilities for not adequately preparing for last winter's price run-up, a situation about which forecasters and analysts had sounded the alarm all during the summer of 2000.

For California, supply fundamentals indicate this winter will be much different than the last. The state should see adequate supply and stable electricity prices because of robust gas storage levels, much-improved hydroelectric capacity in the Pacific Northwest and softer demand due to the downturn in the economy, Gurley explains.

Despite the optimistic projections for this winter's gas and power supply in the state, some Californians still haven't forgiven marketers for their