Energy Transaction & Trading Fundamentals

For Bi-Lateral, OTC, Exchange and Wholesale Electricity Market Transactions

October 19-20, 2020 | Online ::

1020-energy-trading-fundamentals

This course will provide the fundamental knowledge necessary to understand these energy transaction and trading principles, how they relate to each other and what is necessary to optimize their functions.  It will start with an overview of power system structures, price drivers and regulatory oversight.  The program will then look at the types of instruments that can be used in bilateral, over-the-counter, exchange-based and wholesale electricity market transactions.  A review of hedging, with the goal of minimizing risk, will explore the strategy and tactics of these programs.  Finally, it will devote attention to risk monitoring, reporting and management oversight with an eye toward anticipating program exposures and limiting breakdowns.

The landscape of power generation and delivery is tremendously vaster and more complex than it was a generation ago.  Long gone, for the most part, are islanded utilities that command the full-scale infrastructure to generate, transmit and distribute electricity without linkage and access to the larger power universe.  Now, most utilities and power providers must engage in sophisticated energy contracting and trading transactions to serve their load efficiently, profitably and in a balanced fashion on a moment-to-moment basis.  Whether through 1) bi-lateral contracts, 2) over-the-counter (OTC) trading, 3) exchange trading or 4) wholesale electricity market transactions, utilities and power organizations must:

• Be familiar with the array of options available to them
• Understand how to properly deploy these different instruments
• Manage the financial and operational processes with these transactions, and
• Optimize the risk profile of their organizations to avoid catastrophic outcomes

Learning Outcomes

• Review power system elements in a transactional context
• Identify the regulatory and oversight bodies and their roles relating to transactions and trading
• Assess multiple energy markets and transaction platforms
• Evaluate the price drivers associated with power transactions
• Discuss energy transacting, trading and hedging elements
• Examine risk oversight, measurement and monitoring concepts
• Review case studies of trading and transacting approaches that failed
• Assess trading and transacting best practices
• Build a simple, coherent risk management model

Credits

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 1.1 CEUs for this event.

Instructional Methods  

This program will use PowerPoint Presentations and group discussions. 

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. 

Monday, October 19, 2020 – Central Time

8:45 – 9:00 a.m. :: Log In

9:00 – 9:15 a.m :: Overview and Introductions

Survey of Power System Elements in a Transactional Context

• Laying the groundwork of electricity, terms/definitions, and units
• Power system components
  • Generation
  • Transmission
  • Distribution
  • Loads
• Electricity tranches in energy markets
  • Capacity
  • Energy (+ fuel)
  • Supplemental system needs
  • Temporal dynamics
  • Impact of variable and demand side resources on dispatch of the electric commodity

Industry Structure and Regulatory Oversight

• Types of utilities
  • Vertically integrated
  • Local distribution utilities
• Market-based power entities
  • Independent power producers (IPPs)
  • Retail electricity providers (REPs)
  • Regional transmission (RTOs) and independent system operators (ISOs)
• Oversight bodies and their roles, especially relating to transactions and trading
  • Federal Energy Regulatory Commission (FERC)
  • Commodity Futures Trading Commission
  • North American Electric Reliability Corporation (NERC)
  • Nuclear Regulatory Commission (NRC)
  • State Public Service Commissions

Energy Markets and Transaction Platforms

• Transaction premise — wholesale electricity price volatility
• Transaction platforms and characteristics
  • Bi-lateral contracts
  • Over-the-counter (OTC) trades
  • Exchange trades
  • ISOs/RTOs
• Types of energy markets
  • Physical vs. financial
  • Forward vs. real time
• Liquidity
• Products
  • On-peak
  • Off-peak
  • Wrap
• Firmness viewed across the span of the marketplace
  • Firm
  • System firm
  • Unit firm
  • LD
  • Non-firm
• Cost of transmission congestion

12:30 – 1:15 p.m. :: Lunch Break

Overview of Price Drivers

• Heat rates and impact on dispatch stack and electricity prices
• Renewable offer pricing and impact on electricity prices
• Net Load impacts on dispatch clearing price
• Natural gas fuel price drivers
• Coal fuel price drivers
• Case study – Impact of Covid-19 in Electricity and Natural Gas Markets

Energy Transacting, Trading and Hedging Elements

• Energy transacting lifecycle
• Physical exposures and financial trades
• Energy transaction parties and risk profiles
  • Commercial
  • Speculators
  • Market Makers
• Trading
  • Hedging
  • Speculating
• Examining specific transactional elements
• Establishing the value portal
• Real time vs. forward markets
• Forward price curves

Differentiating Common Financial Hedging Instruments

• Market risk exposures
  • Long
  • Short
• Physical hedges
• Futures contracts
• Swaps contracts
• Options
  • Calls
  • Puts
• Sample applications

5:00 p.m. :: Day One Program Adjournment

Tuesday, October 20, 2020 – Central Time

8:45 – 9:00 a.m. :: Log In

Review of Previous Day Topics

Risk Oversight, Measurement and Monitoring Concepts

• Mark-to-market vs P/L and position management
• The mark-to-market process
• Value of transparency in public power and coop utility hedging programs
• Risk
  • Measuring and reporting risk exposures
• Limits
  • Net open position
  • Risk-based limits
• Value at Risk vs. Cashflow/Cost at Risk
• Credit risk exposures
  • Current exposure
  • Potential exposure
• Identifying the most appropriate risk metric for an organization

Hedge Strategy Design for Utilities and Others Transacting in Power

• Hedging philosophy and policy
• How should the ratepayer’s/investor’s risk appetite influence the hedging decisions?
• Balancing ‘potential’ and ‘regret’ in hedge strategy design
• Common hedging mistakes
• Case study — Alternative hedging programs
  • Pros and Cons

Weaving Together a Coherent Risk Management Approach

• Chart the organizational risk mission
• Risk functions, alignment, feedback loops
• Compliance and accountability
• Formation of Front, Middle and Back Offices
  • Assigning roles and delegating responsibilities
• Assembling best practices
• ETRM/Process and Systems
  • Trade Analytics and Execution
  • Deal Capture
  • Risk Management
  • Credit Risk Management
  • Reporting
  • Accounting
  • Controls
• Role of risk culture

12:00 p.m. :: Course Adjournment

Scott Wrigglesworth, Managing Director, Operations & Strategy, Ascend Analytics

Scott Wrigglesworth is Director of Analytics and Strategy with Ascend Analytics. Before joining the company, he spent 17 years with Dayton Power and Light and the AES Corporation.  There he focused on practical solutions in energy analytics, actionable reporting, margin modeling and portfolio optimization.   In that role, Mr. Wrigglesworth provided analytic expertise for portfolio optimization, planning, and risk management activities. These activities included merchant generation optimization, fuel procurement, wholesale hedging, retail energy, load auctions, rate case preparation, asset valuation, and commercial budget development.  Mr. Wrigglesworth teaches a course in Energy Markets at the University of Dayton from where he also earned his MBA. He holds a BA in Global Economics and International Business from Cedarville University.

 

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.

• You will receive a meeting invitation will include a link to join the meeting.
• Separate meeting invitations will be sent for the morning and afternoon sessions of the course.
  • You will need to join the appropriate meeting at the appropriate time. 
• 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 NOW FOR THIS EVENT:

Energy Transaction & Trading Fundamentals

October 19-20, 2020 | Online

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 September 18, 2020 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