Energy trading floors represent ground zero in electricity crisis

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SAN FRANCISCO (AP) In Houston, it's simply known as ''the power corner.'' Separated by just a few city blocks, four major power wholesalers run Byzantine trading systems that sway energy prices across the nation with minimal oversight from the government.

The Houston trading floors run by Enron Corp., Reliant Energy, Dynegy Inc. and Duke Energy represent ground zero in a power crisis threatening the quality of life in much of the Western United States this summer.

By seizing upon the opportunities created by deregulation and leveraging the Internet, the Houston traders have introduced the ruthlessness of the free market into the once-sedate power industry.

In the process, they have driven two California utilities to the financial brink and electrified the electricity business, just as junk bond traders ignited Wall Street in the 1980s and venture capitalists fueled Silicon Valley in the 1990s.

After raking in billions of dollars for their companies last year, the energy traders are emerging as the first business hotshots of the new millennium.

''They are extremely good at what they do,'' said Severin Borenstein, director of the University of California at Berkeley's energy institute.

''There are guys on Wall Street that spend all their time doing extremely complex calculations on bond yields and figuring out how to make the most money on the spreads. These traders (at the power companies) are doing the same thing with the energy market.''

As they become more sophisticated, the power marketers are moving much of their muscle online, where they are proving more adept at e-business than most of Silicon Valley's fallen Internet companies.

Enron handles much of its trading business on a Web site launched in November 1999. The company describes Enrononline.com as the world's biggest e-commerce site, based on the completion of 548,000 transactions, totaling $336 billion, with 3,000 customers in 2000.

Following Enron's lead, Duke, Reliant and another major California generator, Mirant Corp., banded together with Wall Street investment banks Goldman Sachs and Dean Witter Morgan Stanley to launch IntercontinentalExchange.com.

The 7-month-old site reported daily trading volumes of 3 million megawatt hours in late February.

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