The Future of Utilities Sales: Real-Time Auctions?
This morning, Pricelock, known as the online leader in energy solutions for US businesses, hosted a $350M natural gas auction for CenterPoint Energy’s Natural Gas Operations using its platform Pricelock Marketplace, the first of its kind to offer companies real-time, customizable auctions for natural gas and motor fuels. In Pricelock Marketplace, buyers and sellers can bid on highly specialized orders to try and “win” large volumes of utilities. Each auction takes into account several different factors, including methods of delivery, custom terms and conditions, and even if weather may be affecting the sale. Pricelock created this platform in order to bring large energy buyers and sellers together on one online system, improving transaction efficiency in the process by saving money, time, and administrative headaches. Costs will also be reduced due to Pricelock Marketplace’s online audit feature, which could potentially eliminate the need for additional sales personnel needed to write and submit bids. In addition, buyers are able to see the prices that participating suppliers are currently offering, allowing buyers to find the best deal for their business by scouting competing suppliers. With this feature, buyers and sellers can not only scout their competition, but can also find new customers by researching those companies participating in the auction.
Currently, Pricelock Marketplace offers several different kinds of auctions, ranging from live auctions to sealed bid auctions. According to Pricelock CEO Naveen Agarwal, the most important feature of these energy auctions is that suppliers can enter their offers in the final seconds of a timed auction, creating a bidding frenzy for utilities in the auction’s waning moments.
While there is no question that Pricelock Marketplace is able to cut down the costs associated with making a sale through these auctions, I am hesitant to jump on the bandwagon. When I think of auctions, I think of trying to find a cheap way to purchase something on EBay that I probably do not need, and therefore will not care if I do not “win” the auction. In those auctions, I am bidding on a definitive product; I know what I will be receiving if I am the highest bidder. But, in such a highly specialized market as the natural gas market, I imagine that it would be tough to completely specify a deal as large as $350M that would cater to more than one interested buyer. While specifics such as transportation and getting through customs may be specified, how will the platform take into account different delivery schedules and unforeseen circumstances such as natural disasters that without question will affect the completion of the transaction? Pricelock seems to be attempting to remove the physical negotiation aspect of deals between energy buyers and suppliers, but to me, there are certain aspects of these deals that can only be negotiated via direct communication since conditions are constantly changing, with prices varying by the hour. This lack of communication could prevent sellers from finding new trustworthy customers. If I am auctioning to buy a $5 poster for my room, I do not really care much about who the seller is, but when dealing with hundreds of millions of dollars in utilities, buyer and seller reputation plays quite a large role. Buyers may not trust certain sellers that they do not know, which could alienate several potential players in this game. Pricelock Marketplace may increase the efficiency of the actual transaction by turning weeks-long negotiations into a 10 minute auction, but may end up causing more headaches in the long run if the specifics of the deal are not crystal clear to both parties involved.