American PowerNet can get it for you wholesale

American PowerNet launches Monday a first-of-its-kind service where large electric users can get a retail license allowing them
to buy directly from the wholesale market. Scott Helm, president of the Wyomissing [near Reading], Pa, firm, considers the move a logical next step in a mature marketplace. The process for an industrial to get a license won’t be different from a retailer, said Helm.

American PowerNet has a license as a third-party supplier and offers back-office support such as scheduling and balancing services that free a buyer from having to hire skilled staff. To prove the soundness of the service, Helm put in identical PJM bids for retail and wholesale power for a client and found a significant price difference. Alternative suppliers pay extra fees plus recoup the high cost of up-front credit, he explains, while wholesale buyers don’t have such burdens.

An industrial with good credit can save up to a $1/mwh, Helm finds. American PowerNet’s charges are added to the cost of the wholesale power yet keep the price well below third-party suppliers, he said. Helm forecasts having customers in three RTOs in a year. Buying direct from generators is most economical for one-site, 10-mw companies or firms with multiple sites up to 20 mw.

Large users need a marketer license from FERC and regulators have been “generally supportive” of the idea, Helm reports, since the commission sees the practice as another way to add liquidity to wholesale markets. The RTOs agree, plus industrial members get a vote that will help balance market power, he added. Yet some day, he suggests, questions will rise about the need for industrials to have licenses just to buy their own power even maybe in a year, he predicts.

Is Helm concerned that’s he’s making enemies among retailers? He believes that only a “niche” of large users will elect to be
their own supplier, those who are already low-margin customers.

Reproduced from the July 21, 2003 issue of Restructuring Today with the permission of the publisher, GHI LLC
(+1-202-351-6880, www.restructuringtoday.com).