TARRYTOWN, NY, September 4, 2001 — With “beta” testing of the world’s first anonymous electricity marketplace for highly complex structured electricity products now concluded and analyzed, E-lecTrade, Inc., said today that it is moving forward toward a live launch of this neutral electricity trades structuring desk around the end of the summer.
For approximately a six-week period during May and June, E-lecTrade enabled structured electricity transactions among 17 energy companies using its expert team of structuring agents and its edge technology.
These products are customized “shapes” of electric power for delivery in future days or future years that enable power providers to supply customers with electricity for peak loads and seasonal demand. E-lecTrade identifies these products as “ShapedPower”. Among the organizations participating in the beta test were electric utilities, generators, competitive retail energy providers and independent power producers, all of which are active in one or more wholesale electric markets across the U.S.
When the E-lecTrade ShapedPower™ marketplace goes live, the company said it expects to have up to 20 participants from the following electricity regions – PJM (Pennsylvania, New Jersey and Maryland), NYPool (the New York Pool) and NEPool (the New England Pool). Included among the companies that participated in the beta test are AES NewEnergy, CH Energy Group, Inc., GPU, Inc., the PPL EnergyPlus division of PPL Corporation, and virtually all of the other major electric utilities in those regions.
The beta test provided an organized process for participants to gain familiarity with the features and functionality of E-lecTrade’s unique transaction platform. Participants were given an opportunity to use – in a simulated online environment – E-lecTrade’s structured energy transaction tools with real counterparties.
As a result of the test, E-lecTrade said it was able to consolidate a high level of detailed feedback on its beta version of the application. This feedback will be incorporated into the live production version of the application that is expected launch around the end of the summer.
Over 6.9 million total megawatt hours – enough electricity to power 50 good-sized factories for about a year – were traded in the simulation, of which more than 4.4 million megawatt hours were ShapedPowerTM products. The total executed contract value would have been $518 million – $276 million for ShapedPowerTM deals, $241 million for standard power and $1.7 million for transmission contracts.
All participants reported that E-lecTrade’s structured energy marketplace provided value, noting its uniqueness and depth of functionality. Only a few enhancements to the application were consistently recommended, primarily focusing on improved performance of the application and user diagnostics. Some participants – noting that structured energy transactions are vastly different than standard electricity product transactions – remarked on the need to have better online and offline communication to facilitate the negotiation process around structured deals.
E-lecTrade said that its live version would assist participants, enhancing its operation with features such live structuring agent support, embedded analytic tools for deal evaluation and optimization, negotiations support and user-friendly messaging.
Commenting on the beta test in which he and his company participated, David Selkregg, Pricing Manager, PPL EnergyPlus LLC, said: “The key value of E-lecTrade’s contribution is that electricity-industry-savvy people have developed and are about to launch a much-needed, truly anonymous, neutral structuring desk. This has been long overdue, and we are pleased with the depth of functionality. And while, not every participant will use E-lecTrade’s portfolio management and optimization capabilities, we found that consolidating these aspects of the service with E-lecTrade’s transaction tools is likely to prove beneficial to us over the longer run as the structured energy marketplace continues to grow.”
Dr. Anil Suri, E-lecTrade’s CEO and co-founder, said: “We appreciate the candid feedback we got from our participants about the importance of having created a better way to identify and execute structured transactions. We now have even more reason to believe that our service will help all market participants do a better job buying or selling power in the forward markets. Furthermore, we are convinced that our portfolio management features will emerge as an equally critical management tool for direct portfolio-impact analysis regarding specific transactions that participants are considering. With more and better information, each trader can better balance and manage risk in an electric power market that has never been riskier – as California’s recent price spikes and plunges clearly show.”
“Looking ahead,” Dr. Suri said, “we understand that structured transactions are, by their very nature, less frequently transacted largely because of their complexity. As we add participants who use our neutral structuring desk to do these complex transactions anonymously – instead of using lengthy RFPs or direct negotiations – there will be more liquidity and more efficiency in the way power is traded, distributed and consumed.”
“To achieve critical mass for liquidity, ” Dr. Suri stated, “E-lecTrade’s strategy focuses on selected regions and market participants, and the beta test was a key step in this direction. We recognize that beta was only a beginning, and we are pleased to report that five additional participants are now up and running on our system. After this new “mini-beta”, we expect that they, too, will join, and we will continue to layer in additional participants and move to the live launch over the next several weeks,” Dr. Suri concluded.
When actual trading starts, E-lecTrade’s participants will benefit from an advanced marketplace that permits optimizing risk and more prudent portfolio management of complicated transactions. E-lecTrade’s participants will use advanced proprietary software that acts as a matching agent between the specific requirements – the ShapedPowerTM needs of the buyers – and the available supply from producers. Simultaneously, E-lecTrade’s systems provide tools for companies to evaluate the risk profile of their portfolio in real-time.