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Gas Marketers: Oblivious to All the Fuss

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

alleged profiteering last winter. And California consumer activists also aren't celebrating Enron's perceived comeuppance.

"The energy cartel already has done so much damage in California, and the only thing worse than that would be a more tightly controlled energy cartel," Doug Heller of the Foundation for Taxpayer and Consumer Rights in Santa Monica told the in reference to the short-lived merger proposal between Enron and Dynegy. "These [were] two lawless cowboys forming a single bandit."

Industrials Beat a Different Drum

For the end-user, consolidation also is a prime concern. "As mergers have occurred, you have had a real change of focus, with marketers focusing on their internal corporate structure and the customer has been forgotten," says Ewing.

Industrial end-users often build loyalty with a particular marketing sales representative and will show more allegiance to a representative rather than a company, Ewing says. When corporate consolidation leads to a sales representative leaving the newly merged company, end-users often will follow their old marketing rep to his or her new company.

During his tenure at Proctor & Gamble, Ewing noticed that FERC Order 636 led end-users to reassess other types of relationships. "Eight years ago, industrial end-users had close relationships with producers and their relationships with pipelines were adversarial," he says. That dynamic has changed today, with the producers abandoning end-users in many cases and pipelines offering more flexibility to industrials that hold capacity rights on pipelines, Ewing explains.

End-users also have grown more knowledgeable of the market in recent years, especially since last winter in response to the price spikes. "There's an urgency that they must control their own destiny," Ewing says. "They are significantly increasing their market intelligence," he says. They're not necessarily relying on their marketers or producer contacts for all of their information.

O'Hara contends large consumers of natural gas generally don't want to be a part of the gas industry and don't want to know every facet of the gas industry in order to purchase fuel at a reasonable price. "They just want to deal with someone they can trust," she says. "[M]any suppliers trying to sell gas to industrials felt that these customers, because they don't always understand the gas industry, don't necessarily appreciate that not all things are possible, and there are limits on what any organization in the gas industry can do."

Some large end-users are deciding to go with the total outsourcing of their energy buying needs because they believe it's more efficient to let knowledgeable third parties handle a task that's not part of their core business. But Ewing argues that end-users who separate themselves from energy procurement risk letting the marketers take advantage of them. "That's the worst decision they could make," Ewing says. These gas consumers tend to be those companies with cash-flow problem, he explains.

Ewing believes large industrial companies need to keep at least a portion of the energy procurement duties in house in order to ensure some form of oversight of costs and reliability of service. "I'm very concerned with one industrial that had an outstanding energy procurement department