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Traditionally, utilities have managed risk by erring on the side of excess: through overdesign, overcapacity, guaranteed rates of return, and fuel pass-through charges. Risks were controlled by a regulatory compact between utilities, ratepayers and regulators which essentially guarantees that there is always a plentiful, reliable source of power to end users, and a steady revenue stream back to utilities to cover associated costs. However, this relatively risk-free situation is changing fast, as the industry evolves to introduce competition.
These changes together with recent energy market turbulence have prompted the energy industry to revisit risk management structures and fundamentally change the approach to risk strategy. Driving this change are managers who have succeeded in stepping away from measuring and managing risks one at a time in order to better evaluate their firm's "risk landscape" in the aggregate. By examining risks in this holistic fashion, firms can realize enormous benefits in their capital structure, budgeting, capital allocation and other areas.
With a multidisciplinary team drawn from our energy and finance practices, NERA has been a pioneer in assisting clients to managing risk and pricing in the face of competition. We have used and developed sophisticated financial techniques to value high-risk investments or reduce risk, including applying option pricing theory. We have used these techniques to develop investment strategies for electric utilities that recognize the value of flexibility in the face of uncertainty about future fuel and construction costs. We have also worked with the issue of pricing and hedging risks related to natural disasters such as hurricanes and earthquakes.
A particularly significant area of exposure at present is acquisition and sale of electricity supply. As restructuring evolves, utilities will no longer acquire generation supply to conform with integrated resource plans, but rather will begin basing such decisions upon financial and price risk management decisions. This can create new risks arising from mismatched wholesale purchase and retail sales obligations; a significant change from how utilities have operated in the past. Increasingly, utilities are applying financial theory to optimize resource procurement and devise risk management strategies.
With extensive experience in risk analysis and risk management techniques, NERA experts are well versed in modeling, analyzing and communicating the effects of combined risks to energy companies. We typically aggregate these risks across multiple risk factors and business units, taking into account correlations and diversification effects, to measure their combined effect on performance measures such as earnings-at-risk or cash-flow-at-risk. We can also assist clients in measuring individual risk exposures on a consistent basis. Once risk has been properly assessed and measured, our energy professionals assist our clients in institutionalizing these methods as well as assist in bringing other best practice approaches to their daily operations.
Name | Title | Location | Phone | |
---|---|---|---|---|
Sandra Ringelstetter Ennis |
Chief Operating Officer
Managing Director |
Chicago | +1 312 573 2823 | sandra.ringelstetter@nera.com |
Oscar Arnedillo | Managing Director | Madrid | +34 91 521 0020 | oscar.arnedillo@nera.com |
Sean Gammons | Managing Director |
London
Berlin |
+44 20 7659 8564
+49 30 700 1506 01 |
sean.gammons@nera.com |
Kurt G. Strunk | Managing Director | New York City | +1 212 345 5035 | kurt.strunk@nera.com |
Vakhtang Kvekvetsia | Director | London | +44 20 7659 8746 | vakhtang.kvekvetsia@nera.com |
Scott J. Bloomberg | Associate Director | Washington, DC | +1 202 466 9234 | scott.bloomberg@nera.com |
Dr. Sharon Brown-Hruska | Affiliated Consultant | Washington, DC | +1 202 466 3510 | sharon.hruska.affiliate@nera.com |
Jonathan Falk | Affiliated Consultant | New York City | +1 212 345 5315 | jonathan.falk.affiliate@nera.com |
Dr. David Harrison Jr. | Affiliated Consultant | Boston | +1 617 927 4512 | david.harrison.affiliate@nera.com |
Mike King | Affiliated Consultant |
Denver
San Francisco Washington, DC |
+1 303 357 4781
+1 303 618 4915 +1 303 618 4915 |
mike.king.affiliate@nera.com |
Eugene Meehan | Affiliated Consultant | Washington, DC | +1 202 466 9287 | gene.meehan.affiliate@nera.com |
Dr. Michael Rosenzweig | Affiliated Consultant | Washington, DC | +1 202 466 9231 | michael.rosenzweig.affiliate@nera.com |
Dr. Anne E. Smith | Affiliated Consultant | Washington, DC | +1 202 466 9229 | anne.smith@nera.com |
Title | Type | Author | ||
---|---|---|---|---|
The Road to Mexico’s Self-Sufficient Energy Reforms | Published Article | Dr. Jeff D. Makholm, et al. | ||
Fixing Local vs. National Public Interest Contests Requires a Full-Court Press in Con... | Published Article | Dr. Laura T. W. Olive | ||
Prudence: Under Strain in California | Published Article | Dr. Jeff D. Makholm | ||
Gas Industry’s Version of Demand Response Cures Its “Duck Curve” | Published Article | Dr. Jeff D. Makholm | ||
El Niño’s Uneven Disruption of World’s Electricity Systems | Published Article | Dr. Jeff D. Makholm | ||
The Risk Sharing Strawman | Published Article | Dr. Jeff D. Makholm | ||
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Title | Date | |||
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Fuel up on Facts: What’s Driving Oil and Gasoline Prices? | 06 October 2022 | |||
Avoiding Consumer Confusion in the Voluntary RE Market | 15 September 2022 | |||
Introduction to Electricity Markets | 08 December 2021 | |||
Marsh US Nuclear Energy Center of Excellence Annual Risk Management Seminar | 19 September 2012 | |||
37th World Nuclear Association Annual Symposium | 12 September 2012 | |||
Balancing Public Interest and Private Investment Risk | 24 April 2012 | |||
Global Demand for Nuclear Energy and Risk Management Issues | 24 November 2010 | |||
Marsh US Nuclear Energy Center of Excellence Annual Risk Management Seminar | 22 September 2010 | |||
Oil and the Macroeconomy in a Changing World | 09 June 2010 | |||
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Title | Date | Type | ||
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NERA Experts Promoted to Director | 14 February 2023 | Press Release | ||
NERA Economic Consulting Announces Senior-Level Promotions | 28 July 2022 | Press Release | ||
NERA Experts Promoted to Associate Director, Senior Consultant, and Consultant | 23 March 2022 | Press Release | ||
NERA Experts Promoted to Managing Director and Director | 15 February 2022 | Press Release | ||
NERA Economic Consulting Announces Senior-Level Promotions | 23 February 2021 | Press Release | ||
Steadfast in Uncertain Times: How NERA Is Responding | 16 April 2020 | Press Release | ||
Veronica Irastorza Cited in "Natural Gas Intelligence" on Mexico's Outlook for Gas Su... | 23 April 2019 | Media Coverage | ||
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