April C. Murelio

Associate Editor

Frank Getman knew the industry was poised for big changes when he left a prominent Boston law firm in 1994 to join what his coworkers called the "stodgy" world of utilities.

"I told them, `You guys just don`t get it. This power trading thing is going to be big`," said Getman, president and CEO of Houston Street Exchange, a subsidiary of BayCorp Holdings.

Today, the speed and size of the electricity industry`s evolution seems limited only by imagination and available capital. And in late June, Houston Street Exchange ramped up that process a few notches with its launch of a new, online trading floor.

Unlike other online trading systems, which require proprietary hardware or software to operate, traders need only an Internet browser and password to trade on HoustonStreet.com.

"We wanted to replicate how business is already done," Getman said. "If you ask traders to pick up a mouse instead of the phone, and then ask them to trade differently, it`s just too big of a leap."

Working with Sapient, an e-services consulting firm, Houston Street invited several power traders into the design studio to develop the web-based floor step-by-step, with a lot of "Ok, what next? What`s the next thing you do?" Getman said.

As a result, he said, traders maintain total control over each transaction, with the ability to view their complete trading history, sort offers and bids by price, term, volume and delivery point, and trade 24 hours a day, 365 days a year. And the online service ensures the security and anonymity of each transaction.

Traders can customize their web pages so they see information that affects decisions on trading strategy such as five-day forecasts for about 150 cities, news headlines about the energy industry, stock prices, and OASIS links. Direct links to the New York Mercantile Exchange (NYMEX) and the California PX (CalPX) are also planned.

Also, he said, users can enter information about trading agreements and credit status without betraying the anonymity of other parties involved with the transactions.

Although HoustonStreet.com now covers the Northeast trading regions-NEPOOL, PJM, and NY-it expects to roll out the remain- ing trading areas over the next several months.

Getman stressed that every form of the electricity commodity can be traded on HoustonStreet.com. "You can trade blocks, peak, off-peak, OpCap (operating capacity), anything you can trade on the phone, you can trade on our web floor," he said.

As one of the trading floor`s risk management features, automatic email and fax messages are sent to all parties involved once they complete transactions. The messages detail the trades and can be saved to a transaction history page, giving risk managers the ability to track and monitor all power deals.

During its pre-launch marketing campaign, a few hundred traders signed up to be notified as soon as the web-based trading floor went live. As of early August, more than 200,000 MW have been traded through the new system.

"The real-time environment of the Web naturally lends itself to trading wholesale power," said Paul Messerschmidt, manager of power markets services at Energy Security Analysis. "Houston Street Exchange is positioning itself as the industry`s wake-up call by providing a secure, reliable and flexible platform that allows us to trade power the same way we do today, but more efficiently."

For more information, contact the trading floor web site at www.HoustonStreet.com.