California Credits Net Auction for Help in Energy Crisis

The ability to use an Internet auction to solicit sealed electricity contract bids played a crucial role in helping bring some order to California’s protracted energy crisis, state officials told the E-Commerce Times.

In the 27-hour online auction, held over Tuesday and Wednesday by California’s Department of Water Resources (DWR), 39 power companies submitted sealed electricity contract bids. According to California officials, the online bids from power generators averaged 6.9 U.S. cents per kilowatt — higher than the 5.5 cents California Governor Gray Davis had hoped for, but within the range lawmakers say would keep consumer rates stable.

State officials did say that it was too early to evaluate the true long-term effectiveness of the auction in solving the energy crisis. Nonetheless, the use of the Net auction was considered a success — although an old relic, the fax machine, ended up being part of the procedure in the end.

“If you waited for the normal paper process, it would have taken much longer and there would have been much more uncertainty,” California Energy Commission assistant executive director Claudia Chandler said. “The Net allowed [the bids] to be sent out and received in a very expeditious way.”

Davis called the results of the bidding process “good news.”

Speed Counts

The sealed bids were for peak and off-peak energy contracts to extend over six months, three years, five years and 10 years. The high stakes auction was held Tuesday and Wednesday on the heels of an emergency order, issued by Davis on January 17th, that placed the DWR in charge of negotiating contracts and arrangements for electricity to help the state mitigate the effects of the energy crunch.

Chandler said that speed was of the essence in the bidding process in order to help resolve the situation and stabilize the market.

“Part of the reason why things are on such a roller coaster is because there needs to be some stability introduced into the market,” Chandler said. “Clearly a paper approach could not match the way the DWR implemented these bids.”

Simple, Yet Effective

DWR Webmaster Jan Felter told the E-Commerce Times that the auction “was a very big success, but we tried to keep it as simple as we could to make it as easy as possible for everyone.”

The process essentially consisted of uploading one Microsoft Word and one Excel document onto the DWR’s Web site. Bidders then downloaded the documents to submit their bids via fax.

Fetler said that people were already awaiting the documents when they were posted to the site, but that there were no network problems handling the site traffic. It took approximately 15 minutes to get the files on the site, she added.

“The fact that multiple people could receive it at the same time with no other human intervention was a big factor in the speed issue,” Fetler said.