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Fortnightly Magazine - March 2004

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BYLINE

BYLINE

As a former independent power producer, George Lagassa is sympathetic to the woes of the merchant power industry. Until just a few years ago, he held the license to a micro-hydro qualifying facility (QF) in New Hampshire, so he understands what it takes to compete in a regulated-franchise industry. Yet, as the principal of Mainstream Appraisals in North Hampton, N.H., Lagassa is also a dedicated pragmatist. He sees the industry's consolidation trend as a sort of correction in the U.S. power market.

Byline: 
Michael T. Burr
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Capital Reserve Margins: Hardly Adequate

A pseudonymous executive tells why the CCRO's recommendations don't pass muster.

A pseudonymous executive tells why the CCRO's recommendations don't pass muster.

The latest splash from the Committee of Chief Risk Officers1 (CCRO)-a new white paper regarding capital adequacy for energy companies2-makes barely a ripple. While an improvement over the CCRO's previous efforts,3 the capital adequacy recommendations do not provide adequate standards that can be implemented consistently by energy companies.

Byline: 
David Anthony
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Pricing Power in Whosesale Markets: A Risky Business

A Risky Business Utilities wrestle with how much to charge for their product.

A Risky Business Utilities wrestle with how much to charge for their product.

The trading model has many good points, including the imposition of market discipline upon both transfer prices and prices to external third parties. Trading also encourages the use of resources and capital at their market value and the cultivation of specialized skills within different business units. But applying the model, particularly to the risks of power pricing, continues to be a challenge.

Byline: 
Dr. Lawrence Haar
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Retail Risk-Based Pricing

A new approach to rate design.

A new approach to rate design.

As energy markets have evolved in the late 1990s away from cost-based transactions to competitive market-based transactions, the exposure to market risks for the variable cost of supply has substantially increased.1 Reflected in these market risks are the diminishing reserves for North American gas supply, which has created conditions of extreme volatility in gas supply. The added market risk is compounded by the sensitivity of some retail load customers to weather conditions.

Byline: 
Gary Dorris and Sean Burrows
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