Utilities to Form Online Exchange

Fifteen major U.S. utilities--including California utilities Edison International, Sempra Energy and PG&E; Corp.--said Wednesday that they are plugging into the hot online trend of forming an Internet-based business-to-business marketplace.

The utilities said they are teaming to form a procurement exchange that is expected to cut purchasing costs while providing the owners with a profit. The business-to-business exchange will buy anything from wire to transformers as well as services such as equipment repair, the companies said.

The electric utilities, some of the biggest in the United States, said in a joint statement that they selected PricewaterhouseCoopers to choose the technology for the site and assist in its development.

The utilities expect Pricewaterhouse’s efforts to lead to a memorandum of understanding forming the business-to-business company by June 1, and see the operation starting up by year-end.

Similar online business-to-business, or “B2B,” marketplaces are fast being embraced by industries across the economy as a means of more efficiently managing supply activities and cutting costs.

Proponents of online B2B systems say they will bring down purchasing costs by fostering greater competition among a larger pool of suppliers.

Online B2B marketplaces have been established recently for more than a dozen major industries, including the automotive; pharmaceuticals; scientific supplies; asset management; building and construction; plastics and chemicals; steel and metals; computer; credit and financing; energy; news and information; and livestock sectors.

Other utilities involved in the consortium announced Wednesday are: American Electric Power, Cinergy, Consolidated Edison, Duke Energy, Entergy, FPL Group, FirstEnergy, Public Service Enterprise Group, Reliant Energy, Southern Co., TXU Corp. and Unicom Corp.

Separately Wednesday, several health-care firms announced plans to form an online marketplace.

Johnson & Johnson, Baxter International Inc., Abbott Laboratories, Medtronic Inc. and General Electric Co.’s GE Medical Systems unit agreed to form an Internet-based marketplace for health-care providers.

The exchange, expected to start operating in the third quarter, will let companies buy and sell products, services and equipment online.

Health-care companies spend about $100 billion a year in the U.S. on products and services. Analysts estimate this exchange will tap about 10% of that market.