By - Jon Brown

Best Practices in Portfolio Hedging for Utilities
October 6-7, 2016 | Chicago, IL

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Overview

Utility hedge design has generally focused on creation of balanced physical positions largely independent of market prices and uncertainty.

By integrating the uncertainty in market prices and their joint relationship to loads and intermittent generation, more robust and less rigid hedging strategies can be developed that yield substantially greater risk reduction while preserving value.

This is a hands-on course that will walk attendees through exercises on portfolio hedging for actual utility portfolios. The course provides practical steps and techniques to manage portfolio positions, adhere to budgets and risk limits, and optimize operations.

Learning Outcomes

  • Define key concepts in electricity hedging
  • Identify hedging strategies for a utility in the Midwest and Northeast
  • Examine case studies from PJM, MISO
  • Discuss simulation analysis and risk metrics for utilities
  • Discover a 360 degree view of portfolio risk with market, credit, liquidity and volumetric risk metrics
  • Review forward, futures, swaps and options
  • List price hedging instruments

Credits

AP_LogoEUCI has been accredited as an Authorized Provider by the International Association for Continuing Education and Training (IACET).  In obtaining this accreditation, EUCI has demonstrated that it  complies with the ANSI/IACET Standard which is recognized internationally as a standard of good practice. As a result of their Authorized Provider status, EUCI is authorized to offer IACET CEUs for its programs that qualify under the ANSI/IACET Standard.

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

 

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

Course CPE Credits: 12.0
There is no prerequisite for this Course.
Program Level: Intermediate
Delivery Methood: Group-Live
Advanced Preperation: 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.

 

 

Requirements for a Successful Completion of Program

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

Instructional Methods

This program will use PowerPoint Presentations, group discussions, as well as active participation.

Agenda

Thursday, October 6, 2016

8:00 – 8:30 a.m. :: Registration and Continental Breakfast

8:30 a.m. – 4:30 p.m. :: Course Timing

12:00 – 1:00 p.m. :: Group Luncheon

Review of Key Concepts
  • Spot prices for gas and power
  • Forward prices for gas and power
  • Long and short volumetric and financial considerations
  • Building forward curves in gas and power markets
  • Weather and load as key drivers for gas and power price behavior
  • Case study: Weather, load, gas and power price relationships in PJM and MISO
Price Hedging Instruments (I): Forward, Futures and Swaps
  • Physical forward contracts
  • Futures: Clearinghouses, liquidity and margining considerations
  • Swaps and basis swaps: OTC markets and collateral agreements
  • Comparative analysis of use of instruments in hedging strategies
  • Case study: Hedging with futures vs. swaps
Price Hedging Instruments (II): Options
  • Options as insurance
  • Intrinsic and extrinsic value
  • Call, puts and collars
  • Case study: Uses of options for protection against price spikes
  • Main drivers of option premiums
  • Are options a cost or an investment?
  • Why most utilities should have options as part of their hedging program
Simulation Analysis and Risk Metrics for Utilities
  • Risk metrics and simulation
  • Introduction to distributions, volatility and correlation
  • Cost at risk and other long term risk metrics
  • Case study: Cost-at-risk vs. VaR metrics for utilities
  • Credit risk and potential future exposures
  • Funding risk and potential margin/collateral metrics
  • Introducing volumetric risk from assets such as generation and storage
  • Stress tests and scenario analysis for utilities
  • Analysis of market, credit and liquidity risk reports
Case Study: Hedging Strategy for Utilities
  • Why should utilities hedge?
  • How should the ratepayer’s risk appetite influence the hedging decisions?
  • Introducing the concept of ‘regret’ applied to hedge strategy design
  • Market views and hedge timing
  • The role of utility commission in hedge program design

 Friday, October 7, 2016

8:00 – 8:30 a.m. :: Continental Breakfast

8:30 a.m. – 12:30 p.m. :: Course Timing

Best Practices in Management of Weather, Load and Price Risk for Utilities
  • Volumetric risk and hedging: Supply and demand risk
  • The cost of ignoring volume uncertainty in hedge programs: Lessons learnt from utility hedging debacles
  • Designing optimal hedge programs including retail load, unit characteristics, and forced outages
  • The ‘meaningful uncertainty’ framework to develop utility hedging programs
    • How to produce realistic weather, load, gas and price scenarios
    • Creating a portfolio view of physical and financial exposures
    • Integrating price and volume risk modeling in a coherent framework
    • 360 degree view of portfolio risk with market, credit, liquidity and volumetric risk metrics

 

Comprehensive Case studies
  • Modeling expected costs and revenues
  • Analysis of alternative hedging instruments
  • How to assess and visualize market and weather risk factors on cash flows
  • How to adjust the hedge dynamically as a response to weather, operational and price ‘shocks’
  • Case study I: Hedging strategy for a utility in the Midwest
  • Case study II: Hedging strategy for a utility in the Northeast

Instructors

Gary Dorris, President – Ascend Analytics

Gary Dorris, Ph.D., President, Ascend Analytics has been a thought leader in energy modeling and risk analysis for 18 years. He has led the development of over a dozen resource plans and pioneered new techniques for risk based resource planning and portfolio selection.  Dr. Dorris has developed new techniques in risk management that integrate uncertainty around both the physical and financial aspects of a utilities portfolio.  His analytic innovations have extended toward the development of over a dozen software applications used by over 50 energy companies. In 2001, Dr. Dorris won distinguished recognition from the IPE for contributions to the field of energy risk management.

Carlos Blanco, Ph.D. Managing Director, Analytic Solutions, Ascend Analytics

Carlos is a financial risk management expert with over 20 years of diverse experience in the field. He has worked with some of the largest energy and commodity firms worldwide providing educational, advisory services and software solutions.

As Managing Director of Analytic Solutions, Carlos provides expertise to Ascend’s clients in the areas of analytic modeling, forecasting, optimization and simulation and also contributes to advance the software product and services to meet the evolving client needs. His role also involves communicating the business value of Ascend’s analytic solutions for energy risk management, planning and modeling developing articles, white papers and presentations.

He is the former co-founder and managing director of Black Swan Risk Advisors, a firm offering risk management advisory and educational services. As a consultant, his experience includes advising risk groups and senior management teams in oil, gas, power and mining firms on various enterprise risk management issues. He also worked as VP Risk Solutions at Financial Engineering Associates, Inc (a MSCI/BARRA Company) leading the market risk suite of products as well as the firm’s product support and professional services group. He was an active contributor in the growth and expansion of the firm from 1997 until its successful sale to BARRA in 2003.

A frequent conference speaker and writer, he has coauthored over 200 articles for Energy Risk, Commodities Now, Energy Metro Desk and others.

Carlos holds a PhD in finance from Universidad Complutense, Madrid and a Masters in International Economics and Investments from the University of Nebraska, Lincoln. He has also taught finance courses at the University of California, Berkeley, and the ABN AMRO Academy.

Location

Springhill Suites Chicago Downtown/River North
410 N Dearborn St
Chicago, IL 60654

To reserve your room, please call 1-312-644-4071
Please indicate that you are with the EUCI group to receive the group rate.

ROOM RATE:

The room rate is $229.00 single or double

ROOM BLOCK DATES:

A room block has been reserved for the nights of October 5 – 6, 2016.

RATE AVAILABLE UNTIL:

Make your reservations prior to August 5, 2016. There are a limited number of rooms available at the conference rate. Please make your reservations early.

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