New England is leading the way toward a future that is both cleaner and provides greater electric reliability at reduced cost. New England Independent System Operator (ISO-NE) has created an...
Resource Planning After the Crash
risk (VaR-OP) measures the financial impact to the utility from increasing commodity prices in the absence of hedging, while fixed position risk (VaR-FP) measures the financial impact of declining commodity prices, and how such a price decline might leave management looking imprudent for any hedges that they might have placed. The risk profile incorporates material volatile elements, and considers any natural mitigation effects implicit in the diversity of costs and revenue streams (i.e., covariance effects).
The next step is to produce a consolidated risk profile. This work product shows the critical risk elements, and primary exposures of the utility's natural positions on both a commodity specific and an aggregate basis. Further, it delineates actionable items, and provides a fundamental structure from which to progress a fully constructed Risk Management Program (the short term operational program that is linked but separate from the RIRP™ process).
Once this is accomplished, it defines the metrics that will be used to evaluate alternative portfolios. It is important to use dispatch and financial tools that can accommodate representations of market volatility and correlation among key variables. -GV, MG, AH, TLB, and RM
Articles found on this page are available to subscribers only. For more information about obtaining a username and password, please call our Customer Service Department at 1-800-368-5001.