Market for trading structured electricity products to start late summer

With “beta” testing of the world’s first anonymous electricity marketplace for highly complex structured electricity products now concluded and analysed, E-lecTrade, Inc., said Tuesday that it is moving forward toward a live launch of this neutral electricity trades structuring desk around the end of the summer.

For a six-week period during May and June, New York-based E-lecTrade enabled structured electricity transactions among 17 energy companies using its team of structuring agents and trading 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 market 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, GPU, 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 counterparts. 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 MWh — enough electricity to power 50 good-sized factories for about a year — were traded in the simulation, of which more than 4.4 MWh were ShapedPower products. The total executed contract value would have been $518m:$276m for ShapedPower deals, $241m for standard power and $1.7m for transmission contracts.

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, 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”.

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.”

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