Richard McMahon

The Alliance of Energy Suppliers, a new division of Edison Electric Institute, represents the dramatic changes that have overtaken the traditional electric utility industry. The Alliance, headed by Richard McMahon, was formed nearly two years ago to focus the resources and capabilities of the one of the nation's most powerful energy trade associations on the exclusive needs of the power suppliers and marketers in today's growing independent power market. The most urgent among them being the need to manage risk in an increasingly uncertain marketplace.

Since launching the Alliance in 1998, McMahon has effectively and creatively leveraged the resources of EEI and its vast network of industry specialists to create a number of new business tools and strategic market intelligence that have already helped many suppliers become more profitable. "We realized from the beginning of this outreach effort that we must start," said McMahon, "with understanding the concerns of our customers and then responding to those concerns by providing actual products or service that can be implemented today."

Ten years with the electric power industry, in addition to his prior experience, prepared him well for his new role. As EEI's Director of Competitive Strategies & Policy, McMahon founded the successful EnviroTech Venture Capital Fund, which invests in emerging electric technology companies. He also spent time on Wall Street with the National Association of Securities Dealers in the NASDAQ Stock Market and in NASD's Surveillance Division.

One of the Alliance's most significant endeavors in today's risk area is the development of a mutual risk mitigation insurance company. The concept is to provide a unique insurance coverage for energy companies engaged in the distribution, transmission, and/or generation of electric power that would address severe dislocations in the pricing of their non-base load power needs. This insurance tool should be used as an alternative to regulatory interventions in wholesale markets is intended for price dislocations beyond their current risk management activities.

While the growing need for new generation became more apparent in 2000, successfully siting new facilities still has its inherent risks. "The steps a developer must take between project announcement to going on line are many, and unique to each state and region," said McMahon. To help make a merchant plant developer's job a bit easier, the Alliance, in collaboration with the Bechtel company, Nexant, is developing step-by-step guides to siting, permitting, and licensing for new generating facilities. Rolling out in Spring 2001, the initial guidebooks will outline the processes and people in ten key states targeted by independent power producers, including the regulatory requirements and contacts, the public participation process, and step-by-step procedures. And what promises to be most helpful, a recent history of siting efforts with a view of what to expect, will be included. A number of major developers have already expressed their interest in participating.

Tomorrow's most successful companies will be those that understand their competitive positioning and are poised to make the necessary changes to grow that critical edge. The first step to ensuring the highest level of performance is benchmarking. Recognizing the need to establish new metrics for an evolving industry, McMahon is now partnering with a major risk management firm, Teknecon Energy Risk Advisors, to offer participating wholesale gas and power marketing companies detailed analysis identifying the very best practices in energy trading and risk management programs - on an enterprise-wide basis.

As a seasoned veteran of the electric industry with a mind for business success, Richard McMahon and the Alliance of Energy Suppliers are prepared for the rapid changes occurring in the industry. "All of our products and services are designed with the forward thinking of how we see the market developing," said McMahon. "We see a market where demand will continue to grow at an unprecedented rate. We see a market where 90% of current capacity will need to be replaced by 2015. "We see a market where the ongoing mergers and acquisitions will shrink the market to a handful of major players. Because of this, we will continue to analyze the industry and acquire the full knowledge of how it's changing, how it operates, and how to succeed in it. We can then supply this knowledge to those who need it."