Megawatt Hours for Sale

Even the traditionally conservative energy industry sees growth on B2B exchange

Sept. 12, 2000  Altra Energy Technologies hit a number of record marks with Altrade, an independent online trading exchange for the energy industry. Energy consumers bought 18.9 million megawatt hours (MWHs) in August, surpassing its previous record of 14.8 million MWHs set in February.

These records stem from an especially hot summer that drove up energy demands. However, the fact that energy purchasers are turning to exchanges is certainly a positive sign for the industry.

"Of all our energy commodities, power remains the most volatile with tight bids and offers being our biggest challenge," said Altra President and CEO Paul Bourke. "Our recent successes and growth on the system, however, indicate adoption is occurring as trust in the system and the benefits of online trading are realized. We anticipate our volumes will increase even further after the summer, when the power market typically becomes less volatile."

August also saw a record number of trades. The number of exchange users increased by 25 percent since the beginning of the year, despite slower adoption rates for online trading among power traders as compared to traders of other commodities.

On August 16, Altra's natural gas liquids (NGL) trading platform set a daily record when more than 2.6 million barrels of NGLs were traded over the exchange, representing a record-setting 140 transactions. The daily record helped establish August as the highest volume month on record for Altrade NGL, with 27.9 million barrels traded, surpassing last January's record. On August 17, Altra broke yet another NGL record when nearly 1,500 NGL bids and offers were posted on its system in one day.

"To set these kinds of NGL records in August is significant because, traditionally, the trading of propane, ethane, butane, natural gasoline and other NGLs drops off dramatically in the summer when there is less demand to heat homes and businesses," said Dixie Barrett, Altra's vice president of Electronic Trading Services. "The fact that the record was set in August proves that the market continues to embrace the primary benefits of online trading -- speed, efficiency and cost savings."

Altra continues to witness healthy growth on its natural gas exchange where volumes have increased by more than 200 percent since this time last year. Additionally, second quarter 2000 financial gas volumes were over triple the volume traded during first quarter 2000.

"The number of trades transacted on our systems this year is 42 percent higher than this time last year. These statistics prove what we predicted and have envisioned since our inception in 1996, that the energy industry will adopt an online trading marketplace that is trusted equally by buyers and sellers, and provides value through reduced transaction cost and superior trade execution, said Bourke.

Altrade's high liquidity and record trading volumes can be attributed to the fact that it combines key elements that are attractive to energy commodity traders.

First, the system is based on a "many-to-many" model, which brings together numerous buyers and sellers anonymously in a neutral exchange with the opportunity to find the best deal the market has to offer. Altra offers anonymity so traders can protect their competitive positions while dealing in the market.

Second, Altra's alliance with Amerex and Prebon to develop and promote Altrade Power joins the personal attention provided by traditional voice brokers with the speed and market coverage of an electronic system. The alliance will soon extend into the financial gas market.

Altra, together with its subsidiaries, operates Altrade and is also a provider of electronic trading services, risk and transaction management solutions to the wholesale energy market.