MAINE YANKEE PRUDENCE. The Maine Public Utilities
Commission will investigate the prudence of Maine Yankee Atomic Power Co.'s decision to close its nuclear plant permanently.
just 30 months ago, now claims $1 billion in sales in a $4 billion market, and the market one day may be much larger. In fact, the U.S. Department of Energy places $1 trillion value on the part of the U.S. economy exposed to weather risk.
Weather derivatives are designed to protect against the impact of volatile climate behavior on a firm's sales, also known as volumetric risk. These instruments can be adapted to a host of businesses such as ski resorts and swimwear manufacturers, but have earned a loyal following of electric utilities who recognize that weather is the largest variable affecting power demand.
Clemmons has contributed to changing how energy companies view weather and how they may protect their companies against its negative impacts. - R.S.
What attracts you to weather derivatives?
Weather is so much fun. It is an amazing market. It is the one market that it doesn't matter how big you are, you can't impact it, to the extent of talking about settlement or market size or something like that. It doesn't matter how strong Enron is within the market place, Mother Nature is going to do what she wants to do. It impacts everybody. In my job on a daily basis, I may talk to a bank, an insurance company, a ski resort, a golf company, a construction company and an agricultural entity. So you get to learn about a huge array of businesses [and] just how the weather impacts their businesses.
You sit down and start to think about it. From the local ice cream vendor to the outdoor arena in your hometown, you start to realize what an impact the weather has, and everybody loves to talk about it.
It's a product that takes people from sort of a chuckle initially - "what do you mean you can do something about the weather?" - to "how much does it cost?" in a pretty short timeframe.
How have you been instrumental in winning over the skeptics?
People hear what they want to hear. The skeptics don't want to believe that it can happen because they haven't seen it happen before. When we show them a list of applications or a list of people who are already participating in the market, usually it is sheer momentum of the way the market is moving that will bring them around. If they still believe it is not the product for them, I don't want to push it on them.
Is the pressure to succeed greater now that you have had $1 billion in sales? How do you manage it?
The industry itself is about $4 billion. You always feel pressure, especially if you have had past success. So to the extent that you feel you have to improve, there is certainly more pressure, but to the extent that you have a track record that you can point to, it hopefully opens doors for future business. You know you have done it before; therefore, you have confidence in your team that you can do it again. We tend to