In case you haven’t noticed, we seem to be having a slight energy problem. Starting in the West and moving steadily eastward, power costs are rising, and the expectation of many energy focus groups is that businesses better start helping out a little. A supply crunch, coupled with deregulation, reregulation, and industry restructuring, has many energy customers scrambling for ways to cut procurement costs and manage consumption. Like magic, a crop of Web-based business products and services have now emerged, claiming to manage the pain of skyrocketing energy prices. How do they do it?

Online Marketplaces Help

There are online marketplaces designed to help commercial and industrial energy buyers save money when procuring electricity and natural gas, as well as to provide 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. The concept is fairly simple. 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 (deregulation was intended, in part, to open markets to competition).

Yet deregulation raised new problems. The energy market is fragmented both geographically and functionally, meaning it can be time-consuming and expensive for buyers and sellers to meet and obtain pricing data. A lack of procurement standards means that buyers and distributors have different terms and requirements. Also, the paper-based process of settling contracts can take weeks with limited opportunity for suppliers to rebid.

For sellers, exchanges can reduce the cost of doing business since sellers do not have to make as many direct sales calls to clients. For buyers, including in-house energy buyers, company agents, and outsourcing firms, marketplaces may save companies money by encouraging competition between suppliers. Even in seemingly tough conditions, some energy buyers can find relative savings by choosing long-term contracts. Pooling energy requirements with other companies can also help. Exchanges allow the customer to take the best prices plus the terms and conditions.

Harsh market realities haven’t allowed all marketplaces to work according to initial plans. The slow pace of deregulation, a tight supply in some regions, and new regulations that discourage competition meant some marketplaces couldn’t muster appealing competitive bids on all customers’ contracts — so some had to shut their doors. The dollars actually flowing through the exchanges are relatively few in comparison to the $235 billion that Yankee Group claims U.S. commercial and industrial consumers spend on energy. Some exchanges expect the volume to approach $2 billion during 2001.

Around The Web

Enermetrix ( licenses software to help customers evaluate their energy use. When they’re 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 complete list below) offer similar approaches to peddling complex electronic RFPs; 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.

Online options for companies seeking to keep a lid on energy costs include exchanges that encourage competitive bids and energy management programs that provide up-to-date data for energy buyers. The next time you’re specifying a new product to one of your clients, suggest that they use one of the online marketplaces listed. They’ll end up saving a lot of money thanks to your recommendation.

  • American Direct Access Exchange (San Diego) – www.amdax, a retail energy exchange company.
  • PowerSpring (Denver) –, provides automatic meter-reading systems for energy management.
  • Silicon Energy (Alameda, CA) –, provides energy management software.
  • UniGridEnergy (Philadelphia) –, a retail energy exchange company.
  • WorldEnergyExchange (Worcester, MA) –, a retail energy exchange company.
  • YourEnergySource (Kansas City, MO) –, a vendor-neutral energy marketplace.