February 26, 2001, 3:02 PM — In the midst of energy market upheaval, a crop of Web-based business products and services have emerged, claiming to reduce the complexity of deregulation and manage the pain of skyrocketing energy prices.
A supply crunch, coupled with deregulation, reregulation, and industry restructuring, has many energy customers scrambling for ways to cut procurement costs and manage consumption.
Options include online marketplaces -- designed to help commercial and industrial energy buyers save money when procuring electricity and natural gas -- and software that gives companies insight into their energy use so they can conserve power. The right choices can help companies weather the volatile energy market storm, promoters say.
"Our technology certainly can't increase supply or demand. [But] we certainly can match supply and demand in a more efficient way," says John Gaus, CEO and co-founder of Enermetrix in Maynard, Mass.
Enermetrix licenses software to help customers evaluate their energy use. When they are ready to buy energy, customers use the software to post their requirements on the Web-based Enermetrix Energy Exchange for review by potential energy suppliers. Suppliers who join the exchange can bid according to terms set by the buyer and then seal the deal online.
Other retail energy exchanges (see chart, below) offer similar approaches to peddling complex electronic RFPs (Request for Proposals); but they vary in terms of the services, backers, markets, and suppliers they serve. Generally, the exchanges hope to make their money through transaction fees levied against the sellers, but some also require buyers to pay registration or subscription fees.
Many retail energy electronic marketplaces were designed with a keen eye on deregulation, the state-by-state rollback of regulations that had created utility monopolies. For years, few corporate customers had any option other than buying from nearby established utilities that offered little or no room for negotiation; deregulation was intended, in part, to open markets to competition.
Yet deregulation raises new problems. Don Greenwell, president of YourEnergySource in Kansas City, Mo., says the energy market is fragmented both geographically and functionally, meaning it can be time-consuming and expensive for buyers and sellers to meet and to obtain pricing data.