Note the discussion on market share halfway through the article.

Top Gas Gorillas Show Strong Volume Growth
The year 2000 was a banner year for the top players in gas marketing, with 
huge increases in gas prices, enormous volatility, continuing growth in sales 
volumes and major potential for profits. Physical gas sales volumes for the 
top 20 marketers in NGI's ranking grew 17% to nearly 150 Bcf/d, and profits 
among the larger players came in very strong with companies such as Williams 
reporting 2,000% profit increases in their energy merchant segments. 
However, for many of the smaller players it was a tough year. "The big news 
here is probably the price pressure the marketers have had to withstand," 
said Ben Schlesinger, president of Maryland-based consulting firm Schlesinger 
and Associates, which tracks energy marketing. "These people have price 
exposure on both sides of their business: the buy side and sell side. They've 
actively sought to hedge these risks, but there's no question that there have 
been some real stresses in their businesses as a result of quadrupling gas 
prices in 2000." 
Significant shuffling has begun to take place and will continue, not just 
among the leadership but among the whole roster of 500 marketing companies, 
predicted Schlesinger. "For the first time I'm not sure all 500 will make it 
because of the price volatility, and the stresses that it creates on their 
balance sheets and their ability to meet the different needs of their 
customers." If you are on the wrong side of a transaction these days in 
California, you are going to suffer significantly. It's not much different at 
the Henry Hub either, he noted. The harsh reality is that only the strong 
will survive. 
Ronald J. Barone of UBS Warburg believes the California energy crisis and 
fears of lack of gas supply and capacity are driving customers to the 
strongest marketers. "I think that over the long term it will be a positive 
for the bigger players, such as Enron. Customers want to go with somebody who 
is big, has facilities, somebody who is going to guarantee it, somebody who 
can do risk management for them. Enron is the 800-pound gorilla here." 
Enron has been the 800-pound gorilla in gas marketing for years but there 
were always plenty of 750-pound gorillas around. Last year, however, Enron 
found a way to trade natural gas over the Internet and at last glance was 
well over 1,600 pounds, more than double the size of its next closest rival 
gorilla, Duke Energy. Enron sold 23.8 Bcf/d of gas last year compared to only 
13.3 Bcf/d the year prior and compared to the 11.9 Bcf/d sold by Duke Energy, 
which came in second place in NGI's ranking of gas marketers by physical 
sales volume. 
Enron catapulted itself to the next level with the help of its handy new 
tool, EnronOnline, its web-based proprietary energy and commodity trading 
system that now handles about 3,000 mainly natural gas transactions each day. 
In 2000, Enron completed its first full year of deploying EnronOnline, which 
quickly became the world's largest web-based e-commerce site. During the 
year, Enron executed 548,000 transactions online with 3,000 customers, 
totaling $336 billion of gross value. 
The tremendous success of EnronOnline led many observers to wonder whether 
market concentration was beginning to take place in the industry. When you 
look at Enron's massive increase in wholesale transactions you have to wonder 
about that concentration. Enron's 23.8 Bcf/d is pretty large (35%) when 
compared with the 69 Bcf/d that is actually consumed in North America. But 
you have to factor in multiple trades --- one marketer trades a given 
molecule of gas to another marketer and so on. According to Schlesinger, the 
so-called "churning factor" is close to three. 
"In the past several years when we've been polling marketers, we got numbers 
(in 1999) that came to about 60 Tcf. We added up all the physical sales by 
all the marketing companies. We did not have 100% response in our survey --- 
some of the mid-sized and smaller companies didn't respond. We reasonably 
extrapolated that about 65 Tcf, maybe even 70 Tcf of gas was traded each year 
in North America. Physical consumption in North America is about 25 Tcf so 70 
divided by 25 is about 2.8." 
Using that calculation, Enron with 23.8 Bcf/d of physical gas sales in 2000 
ends up with a not unreasonable 12% market share. When the Federal Trade 
Commission looks at markets and market share, it uses several tools, one of 
which is the Herschman-Herfindahl Index, a measure of market concentration. 
It's the sum of the squares of the market share of each participant. If one 
company owns the entire 100% of the market, that's an HHI of 10,000. 
The Department of Justice has been using 1,800 as a red flag when it 
considers approval of mergers and acquisitions. According to Schlesinger, the 
total gas industry has an HHI of only about 200, way below any suggestion of 
market concentration. 
"It's so low that it's unbelievable. It's a highly competitive business. Even 
if one competitor has 12% of the market (HHI of 144) and the next competitor 
has 6% and on down, it certainly doesn't send up any red flags," he said. "It 
could be that market concentration in the gas industry has risen a bit in 
2000, but this information alone would not diminish the fact that the 
industry is one of the most competitive businesses in the United States. 
However, there may be some regional issues we have to think about," he added. 
"We haven't looked at that, so I can't comment on whether anyone has undue 
market power in a particular region or state, for example." 
There is a snowball effect going on among the top marketers. The leaders keep 
getting larger. Volume growth averages at least 10% per year or more. Several 
factors should fuel future growth. Price increases, volatility and 
uncertainty of supplies are driving buyers to the larger marketers, according 
to both Schlesinger and Barone. Online trading has become a new springboard 
for additional growth by allowing greater efficiency and many more trades to 
take place. 
Schlesinger said he believes electronic trading was responsible for a good 
part the 17% increase in volumes. Enron attributed much of its growth to the 
online business. 
According to some observers, online trading still has plenty of room to grow. 
Altra Energy CEO Paul Bourke believes about 30% of all gas trading now takes 
place over the Internet. Bourke said Altra had 8,000 natural gas trades on 
its system in December. 
However Barone predicts there eventually will be a slowdown in gas marketing 
growth in the United States as international energy markets grab the 
attention of many marketers. "International should pick up the slack and 
contribute increasingly to the bottom line," he said. Barone also expects the 
current market situation and the continued interest in service, supply and 
commodity versatility to continue driving marketing companies together. "I 
think size, scope and scale are incredibly significant." 
Only one of the top 20 major marketers last year resulted from the 
combination of two separate predecessors: Axia, which grew out of the 
combination of Koch Energy and Entergy. The rest of the group achieved its 
growth without major acquisitions or mergers. 
Thirteen out of the 20 top marketers showed double- or triple-digit volume 
growth with only two companies in the minus column. PG&E had the largest 
volume deterioration of any of the large marketers with a 40.1% decline in 
annual volumes and a 42% decline in quarterly volumes. PG&E went through a 
significant reorganization last year. The move of its National Energy Group 
(NEG) to Bethesda, MD, from Houston, had the greatest impact on its trading 
activity. But the company also sold its energy services business and its 
Texas gas transmission assets among other changes. "It really slowed down our 
trading [and] a large number of people stayed behind in Houston," said 
company spokesman Patrick Hurston. At the time of the move, the company 
estimated about half, or 100, would make the move. Hurston wouldn't say how 
many actually made the trip, but the company is still actively hiring. 
TransCanada, which also underwent a massive reorganization last year, was the 
other company in the minus column with a 3% decline in sales volume. 
The remainder of the group experienced large increases in volumes: Enron at 
94%, Duke with 15% growth, Sempra with 51% and BP Amoco with 100% growth.