The announcement by Williams comes as most US energy companies are still seeking to distance themselves from energy trading, a trend that resulted from the downfall of Houston energy trader Enron.
Williams cited several reasons for its decision to retain the wholesale power business: the free cashflow it generates; the depressed wholesale power markets’ effect on the marketability of wholesale power assets and contracts; and the company’s progress over the past two years in reducing the risk – and increasing the certainty – of cashflow from its long-term electricity contracts.
Williams’ wholesale power business mainly comprises six long-term tolling contracts for a total of 7,700 megawatts of electricity for wholesale markets. Under a tolling agreement, a power buyer - in this case, Williams - supplies fuel to a power generator and in return receives electricity for which it pays a fixed price.
The company's wholesale arm is also a significant participant in the natural gas market, since it has to buy gas to support its tolling agreements and to hedge exposure in Williams' other businesses.
In 2003, the unit marketed 2.7 billion cubic feet of gas a day. Williams’ wholesale business employs about 220 people, down from about 1,000 at its peak in 2001. The company has made some $600 million from the sale, termination or liquidation of wholesale energy contracts and assets since June 2002.