Introduction to Risk Management for Wholesale Electricity Markets

Introduction to Risk Management for Wholesale Electricity Markets

May 22-23, 2024 | Online :: Central Time

“This course provided an excellent and detailed introduction to risk mitigation and avoidance strategies in the power industry.” –Development Manager, PCI

“Great training! The instructors were very knowledgeable and able to communicate to a variety of backgrounds of attendees! Very impressed.” –Lead Accountant, TEP

Electricity markets stand apart from other commodity markets due to the unique nature of electricity in its alternating current form, which cannot be stored and must be generated and consumed instantaneously. Wholesale electricity markets exhibit high price volatility, influenced by the interplay of supply and demand, weather conditions, and correlations with natural gas-fired generators, especially during peak load periods. The dynamic shift in fuel mix, driven by the increasing integration of renewables like wind and solar, adds pressure on conventional baseload fossil-fired and nuclear plants. Consequently, effective trading and hedging strategies become crucial for risk management in this intricate market structure.

Course topics include, but are not limited to:

  • Regulatory oversight
  • Energy trading and hedging fundamentals
  • Risk oversight, measurement, and monitoring
  • Hedge program design

Register your team now for discounts starting at 20% off!

Learning Outcomes

  • Grasp the functions and characteristics of RTOs/ISOs in the US and Canada, as well as the key drivers and stakeholders influencing RTO operations
  • Discuss FERC’s role and implications when it comes to electricity markets
  • Review demand response, energy efficiency, and power system losses in energy markets
  • Assess wholesale electricity price volatility and differentiate between physical/financial markets and forward/real-time markets
  • Explore locational marginal prices (LMPs) and transmission congestion hedging
  • Discuss middle office roles, risk oversight, and organizational governance
  • Analyze market and credit risks, risk limits, and measurement techniques
  • Identify elements of a risk management program and common pitfalls
  • Explore the benefits of anticipating market trends

Agenda

Wednesday, May 22, 2024 : Central time

8:45 – 9:00 a.m.
Log In and Welcome

12:30 – 1:15 p.m.
Lunch Break

9:00 a.m. – 4:30 p.m.
Course Timing

 

Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs)  

  • RTOs/ISOs in US and Canada 
  • RTO functions and characteristics
  • RTO drivers
  • RTO stakeholders

Regulatory Oversight 

  • Role of FERC, State regulatory agencies, and market monitor
  • FERC’s anti-market manipulation authority

Overview of Power Systems 

  • Fundamentals of electricity, terms/definitions, and units
  • Characteristics of electricity as it applies to energy markets
  • Overview of source-to-socket power system components – generation, transmission, distribution, and loads
  • Types of generation resource
  • Demand response and energy efficiency participation in energy markets
  • High level explanation of power system losses as it applies to energy markets

Wholesale Energy Markets 

  • Wholesale electricity price volatility 
  • Types of energy markets
    • Physical vs. financial
    • Forward vs. real time
  • Locational marginal prices as market price
  • Components of LMP – cost of energy, losses and transmission congestion, and examples 
  • Nodal, Hub, and Zonal LMPs in RTOs
  • Cost of transmission congestion and example
  • FTRs for transmission congestion hedging and example
  • FTR market offered by RTOs

Front Office: Basics of Energy Trading and Hedging 

  • Overview of the energy transacting lifecycle, focus on front office roles, and responsibilities
  • Introduction to physical vs. financial markets and transactions
  • Overview of energy market participants and risk profiles; implications on risk governance and oversight requirements
    • Price taker
    • Asset optimizer
    • Proprietary trader
  • Hedging vs. trading
  • Market participants
  • Price volatility, counterparties, and contracts
  • Real time vs. forward markets and forward price curves
  • Overview of common financial hedging instruments 
    • Futures contracts
    • Swaps contracts
    • Options (calls and puts)
    • Case study: executing different instruments under different market conditions
    • Exchange, over-the-counter, and bilateral transactions

Middle Office: Basics of Risk Oversight, Measurement, and Monitoring 

  • Revisit the energy commodity transacting lifecycle
  • Middle office roles and responsibilities
  • Fundamentals of energy commodity risk oversight
    • Governance
    • Organization and segregation of duties
    • Policies and controls
    • Risk reporting and monitoring
  • Market risk
    • Price
    • Volatility
    • Correlation
  • Credit risk
    • Current exposure
    • Collateral and collateral-at-risk
    • Liquidity planning
    • Margin: initial, maintenance, and variation
    • Case Study: potential future exposure
  • Limits: position limits, transaction limits, and risk limits
  • Measuring and reporting risk exposures
    • Different risk simulation techniques (historical, parametric, and Monte Carlo)
    • Advanced “at-risk” metrics
    • Pros and cons of different risk metrics
    • Case Study: applying different risk quantification techniques
    • Key inputs in determining the most appropriate risk metric for your organization

Thursday, May 23, 2024 : Central Time

8:45 – 9:00 a.m.
Log In

9:00 a.m. – 12:00 p.m.
Course Timing

 

Hedge Program Design 

  • Hedging tactics vs. hedging strategy
  • A roadmap to implementing an effective hedging strategy
  • Understanding and quantifying your risk profile and risk appetite
  • Case Study: understanding the revenue-at-risk of different wind projects
  • Defining hedge strategy objectives and linkage to performance objectives
  • Building hedge strategy alternatives – different types of hedge decisions
    • Programmatic (dollar cost averaging) hedges
    • Defensive (risk limits) hedges
    • Contingent (managing foregone opportunities) hedges
  • Hedge strategy design and scenario analysis
  • Case Study: an iterative approach to evaluating the effectiveness of a hedge strategy
  • Implementing a hedge strategy
    • Tactical planning
    • Ongoing monitoring and reporting
    • Case study: the execution of a hedge strategy under different market conditions

Overview of Enabling Technology 

  • Elements of a risk management program
  • Pitfalls many organizations face
  • Information and communication
  • Benefits of seeing around the corner
  • Key takeaways
  • Demonstration: how to bring it all together

Instructors

Omar Ahmed, Director – Risk Management, Key Capture Energy

Omar is currently Director, Risk Management at Key Capture Energy, a leading Battery Storage Developer and Operator. Many of his tasks include managing risks in operations, insurance, and M&A activities, as well as managing balance sheet risk, including commodity prices, cash flow, revenue, liquidity, and enterprise risk. Previously, Omar spent many years working in commodity trading, focused primarily on energy markets within North America. He also worked with Uniper, Twin Eagle, and Mercuria to gain further knowledge of commodity trading industry functions, key factors to success, risks, and how to manage these risks. Additionally, by working with many different types of organizations, he was able to learn different risk management techniques and where to apply this knowledge to achieve the desired goals of the organization.

Omar has a degree in Chemical Engineering from Texas A&M University, and currently lives in Houston, Texas.

Online Delivery

We will be using Microsoft Teams to facilitate your participation in the upcoming event. You do not need to have an existing Teams account in order to participate in the broadcast – the course will play in your browser and you will have the option of using a microphone to speak with the room and ask questions, or type any questions in via the chat window and our on-site representative will relay your question to the instructor.

  • Microsoft recommends downloading and installing the Teams app if possible. You may also use the Edge browser or Chrome.
  • You will receive a separate email with a unique link to a personalized landing page which will include links to join all sessions of this event.
  • If you are using a microphone, please ensure that it is muted until such time as you need to ask a question.
  • The remote meeting connection will be open approximately 30 minutes before the start of the course. We encourage you to connect as early as possible in case you experience any unforeseen problems.

Register

Please Note: This event is being conducted entirely online. All attendees will connect and attend from their computer, one connection per purchase. For details please see our FAQ

If you are unable to attend at the scheduled date and time, we make recordings available to all attendees for 7 days after the event

REGISTER NOW FOR THIS EVENT:

Introduction to Risk Management for Wholesale Electricity Markets

May 22-23, 2024 | Online
Individual attendee(s) - $ 1195.00 each

Volume pricing also available

Individual attendee tickets can be mixed with ticket packs for complete flexibility

Pack of 5 attendees - $ 4,780.00 (20% discount)
Pack of 10 attendees - $ 8,365.00 (30% discount)
Pack of 20 attendees - $ 14,340.00 (40% discount)

Your registration may be transferred to a member of your organization up to 24 hours in advance of the event. Cancellations must be received on or before April 19, 2024 in order to be refunded and will be subject to a US $195.00 processing fee per registrant. No refunds will be made after this date. Cancellations received after this date will create a credit of the tuition (less processing fee) good toward any other EUCI event. This credit will be good for six months from the cancellation date. In the event of non-attendance, all registration fees will be forfeited. In case of conference cancellation, EUCIs liability is limited to refund of the event registration fee only. For more information regarding administrative policies, such as complaints and refunds, please contact our offices at 303-770-8800

CEUs

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EUCI is accredited by the International Accreditors for Continuing Education and Training (IACET) and offers IACET CEUs for its learning events that comply with the ANSI/IACET Continuing Education and Training Standard. IACET is recognized internationally as a standard development organization and accrediting body that promotes quality of continuing education and training.

EUCI is authorized by IACET to offer 1.0 CEUs for this event.

Requirements for Successful Completion of Program

Participants must log in each day and be in attendance for the entirety of the course to be eligible for continuing education credit.

Instructional Methods

PowerPoint presentations, along with open and interactive group discussions, will be used during the course.


Upon successful completion of this event, program participants interested in receiving CPE credits will receive a certificate of completion.

Course CPE Credits: 11.5
There is no prerequisite for this Course.
Program field of study: Specialized Knowledge
Program Level: Basic
Delivery Method: Group Internet Based
Advanced Preparation: None

CpeEUCI is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its web site: www.nasbaregistry.org

 

 

Who Should Attend 

  • Energy traders new to their jobs or new to nodal markets
  • Power marketers new to their jobs or new to nodal markets
  • Risk managers
  • Accounting professionals
  • Utility administrative and support staff working in energy trading or power marketing
  • Policy and communication professionals
  • Generation/power marketers new to nodal markets
  • ISO/RTO administrative and support staff 

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