risks in power exports - hydro
TRANSCRIPT
Risks In Power Exports
Report on the Consultancy Assignment
By
Nalinaksha Bhattacharyya Ph.D
Energy Export in Manitoba Hydro
1997-2006
Energy Export in Manitoba Hydro
1997-2006
PThe identification and documentation of allrisks associated with the export of electricitythrough the Power Sales and OperationsDivision.
PThe provision of recommendations regardingthe appropriate measures to monitor,quantify and report on identified risks.
PThe provision of recommendations regardingthe appropriate organization and staffing ofthe independent Middle Office.
Terms of Reference
Modeling Core Business
ManitobaLoadExports
Energy Suppliedand Sold ByManitoba Hydro
Wind EnergyPurchased byManitoba Hydro
Generatorsowned byManitoba Hydro
Manitoba Hydro
SaskatchewanIESO(Ontario)
AlbertaBilateralContracts MISO
17%79% 1% 3% 2006-2007
27%59% 1% 13% 2005-2006
PMarketAccess Risk
PCredit Risk
PForeignExchangeRisk
PForecastingRisk
POver-commitmentRisk.
Risks In Power Export
ManitobaLoadExports
Energy Suppliedand Sold ByManitoba Hydro
Wind EnergyPurchased byManitoba Hydro
Generatorsowned byManitoba Hydro
Manitoba Hydro
SaskatchewanIESO(Ontario)
AlbertaBilateralContracts MISO
17%79% 1% 3% 2006-2007
27%59% 1% 13% 2005-2006
Risks in Power Exports
Risks in Power Exports
PUnder the control of the Accounting andFinance Side of the Organization.
PShould have access to all documentationused by Power Trading
PTwo Persons< One for Credit Risk and Over Commitment Risk
– Commerce Graduate
< One for Forecasting Risk– Undergraduate in Mathematics or Statistics with
preferably a course in Forecasting.
Middle OfficeStructure and Reporting Relationships
PVirtual Sales and Purchases are speculativetransactions.
PFTRs are meant to cushion Loads againstunfavorable Marginal Congestion Charges.< Hydro is a generator and not a load.< Has long term contracts transformed Hydro from
a Generator to a Load.– More on this later.
Hedging or TradingVirtual Trading and FTRs
Hedging or Trading
Net Revenue from Hedging
Average Prices in TradingAverage Purchase Price As Percentage Of Average Selling
Price
Average Prices in TradingAverage Sales and Purchase Prices in 2006-2007
Trading to Supply OntarioNet Revenue System Hedging Product 2006-2007
Long Term Sales
Note: November Figures are not actuals. They are average of other months
Long Term SalesAverage Prices
PA number of forecasting systems< Should be one forecasting system with audit trail.
PDay to day generation and power salesdecision < Optimization program needed.
Other IssuesForecasting and Optimizing
PRisks associated with energy exports are:< Market Access Risk< Credit Risk< Foreign Exchange Risk< Forecasting Risk< Over-commitment Risk.
PCurrently Hydro is< Exporting Power < Trading in power.
– this activity should be done by a wholly ownedsubsidiary. This will make for a cleaner riskmanagement.
Summary of Recommendations
PMinimum long term commitment to sale
PSell surplus after meeting Manitoba Demandin the Day-Ahead market.
PUse Real time market to adjust temporaryshortfall/surpluses.
P Implement a companywide < Single Forecasting System < Single Companywide Optimization system for
operating decisions < Both system should have audit trails.
Summary of Recommendations
PMiddle office Under the Control of theAccounting and Finance Branch.
PTwo persons Required In middle Office< A Commerce Graduate< A Graduate In Mathematics/Statistics
– Desirable Some Course Credits in Forecasting.
Summary of Recommendations