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."
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