IT

Market risk remains one of the most significant issues for gas and power merchants. The SEC requires disclosure of market risks in a company’s annual filings. However, the allowable metrics fail to communicate the type of information an investor actually can use to gain an understanding of the market risk embedded in a company’s business.

A defense of the total return to shareholders (TRS). Our authors use TRS as the bottom-line performance indicator, and come up with a number of performance insights.

(September 2006) Pacific Gas and Electric Co. elected Bill Harper as vice president of strategic sourcing and operations support. Piedmont Natural Gas hired Judy Z. Mayo as deputy general counsel at Piedmont. ITC Holdings Corp. appointed Bennett Stewart to its board of directors. Cleco Corp. named Jeffrey W. Hall senior vice president, governmental affairs, and chief diversity officer. And others.

Some states, including Illinois, Oregon, Pennsylvania, and Texas, have been considering smart-metering questions as part of rate cases and resource-planning discussions. Other states, such as Kentucky, Louisiana, Ohio, and Virginia, have initiated EPACT Section 1252 inquiries separately from other proceedings. The tenor of the discussion also varies from state to state, with high-cost power states generally more attracted to AMI than low-cost states are.

Fifteen years ago, you couldn’t fill a small room with energy CEOs interested in discussing how credit risk affects their companies’ bottom lines. But a recent series of contract defaults, bankruptcies, Sarbanes-Oxley controls, and merger-and-acquisition activity has placed credit-risk management squarely on the industry’s radar. Today, it’s clear that an integrated risk system that measures, monitors, and manages credit-related risk is no longer a Wall Street extravagance, but rather an industry essential.

New talent is scarce. And keeping the old talent takes imagination. How are utilities handling changes in personnel markets? We speak with several leading HR consultants to get their views.

Eyeing a launch date of November 2007, Cal-ISO at last has come forward with plans for revamping its widely disparaged wholesale market design. The formal proposal, known as the MRTU (Market Redesign and Technology Upgrade), was filed this past February at FERC.

Why do energy merchants or those utilities with merchant power divisions obsess over “selling” their upside? These companies feel compelled to show steady, predictable profit streams to both the street and their stakeholders, despite the fact that they operate within one of the most volatile markets in the world. Typically, their method of achieving earnings consistency centers on the execution of complicated purchase and sales agreements that effectively lock in the price of fuel and electricity. Don’t these contracts really just eliminate the potential positive return an energy merchant strives to achieve in the first place?

New developments in IT, outsourcing, customer information systems, and customer relationship management are challenging long held notions about utilities’ essential operations.

Understanding the downstream effects of reading and billing from a customer’s meter in a near real-time scenario will increase significantly the data throughput into current customer information systems. Can current systems handle the volume increase? Will call centers have the capacity to handle increased call volumes once customers have access to smart meters and all that they imply? In this case, would outsourcing certain information technology processes be the answer to reducing a utility’s risk and costs?