Participate in the CCRO's RISK ORGANIZATIONS INDUSTRY SURVEY and Benefit from the Benchmarking Results

by Bob Anderson

The CCRO is inviting all energy firms that have a new or a mature risk management function, to join the CCRO members in an industry-wide survey of current organizational practices and policies.


REQUEST access to the survey today! Access is still open.

The survey is open for on-line completion by any company that contacts us at the CCRO and requests to be part of the program.  Taking the survey itself is free and easy.  CCRO members have indicated that it has only taken them a few hours to complete all the sections.  The results will be shared with participants.

Just e-mail:   bob.anderson@ccro.org now!

How to take the survey on-line

To make accurate answers easy to report, we have designed the survey to be managed by a person designated as "primary contact" at each company.  From within the survey's on-line web page, that primary contact may invite others from inside their company to establish their own log-in, and join in answering any questions on-line.  Though responses are from several people inside one firm, there is only one survey response for them all. 

HERE IS A LINK to slides that discuss taking the survey on-line...from the recent CCRO Networking Summit.


What does the survey cover?

Members of the Committee of Chief Risk Officers frequently engage in discussion on the current state of their companies risk control environment; inclusive of organization, analytics, policies, process, systems and budgets.  

During a CCRO meeting, it was recognized that an independent and unbiased peer industry survey on risk management would be a useful tool in benchmarking common industry practices.  As a result of many months of CCRO working group efforts, we now have on-line the survey ready for companies to take.  The objectives for the survey include:

  • Creating an industry report that can be leveraged by the energy risk management community in shaping their own organization’s risk management capabilities
  • Identifying gaps in industry where future CCRO groups might make recommendations for improvement

The survey covers eight areas critical to the energy risk function.  The survey sections are:

  • Introduction
  1. Demographics of Respondents
    • 14 questions
  2. Governance & Practices
    • 26 questions
  3. A High-level Look into the Metrics You Use
    • 5 questions
  4. Compensation and Incentives
    • 8 questions
  5. Risk and Compliance Reporting
    • 5 questions
  6. Information Systems
    • 9 questions
  7. Regulatory and Organization Compliance
    1. 10 questions
  8. Capital Allocation
    • 6 questions

For more information contact Bob Anderson, CCRO Executive Director.





2013 Summit Agenda - as of Monday 12/9

by Bob Anderson

I am looking forward to seeing everyone that could make it to our Summit this week, we have a great group registered now.

The live agenda for the Summit, starting Tuesday the10th, can be found at the link below.  Our CCRO meetings are very unlike a conference; our meetings are designed to be more an open discussion of current & relevant topics among peers.  In keeping with that informal structure, there are necessarily a lot of shifts to the details in the agenda in weeks prior to the event. 

However, this version appears to be very close to final now.  Please be sure to check again prior to the meeting.

LINK TO AGENDA FOR CCRO NETWORKING SUMMIT 2013



Note:
There will be a few seats available in the room for last-minute attendees, and tickets may be purchased at the door with a credit card.  I would say to anyone that would like to attend last-minute, please send me an e-mail anytime today to let me know...

Bob Anderson
281-825-4870

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CCRO conference call to discuss the upcoming "Position Limit Rule"

From The 'Next Steps for Risk and Compliance under Dodd-Frank' Working Group

Below is a mini agenda to show the topics we will be touching on during our conference call on Monday, September 23, 2013 at 10:30 (CDT) discussing the "Position limit rule".

1) Current situation re: Position Limits

2) Complications: missing information, lack of clarity, other

3) What could CCRO be uniquely qualified to do that would be constructive?

4) Agreed next steps & timeline

We look forward to your participation! Please contact Danette Kuru for any questions.



Mail: info@ccromembers.org
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CCRO 2013 Risk Networking Summit & Chief Risk Newsletter

by Bob Anderson

The CCRO will hold its 4th Annual Risk Networking Summit to help our members collaborate on dealing with the most pressing issues facing the energy, commodity and related financial sectors.  This critical Summit is viewed by many as the best industry meeting available because it allows and encourages frank and candid discussion among attendees about the issues we are facing.

Register before November 1st and receive a CCRO discount. Please email Danette Kuru for Promo Code!
Register Here


Click here for Risk Networking Summit 2013 Overview

We look forward to seeing you! Please contact Danette Kuru for any questions.



Mail: info@ccromembers.org
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Basic

Join us for our Upcoming Conference call Monday, September 23, 2013 at 10:30am CST/11:30am EST

From The 'Next Steps for Risk and Compliance under Dodd-Frank' Working Group



Join us for our upcoming conference call, Monday morning September 23, 10:30am (CDT), to discuss the upcoming Position 
Limit rule. 

Click HERE for more information on the call. 

We look forward to hearing from you.


Dial Information: ...


... continued


Risk Management 2013 Summit 

by Bob Anderson





We are currently planning the details for our next annual Summit, coming-up this December 10th & 11th.

Please CLICK HERE for a high-level overview of the agenda & timing, as well as a look at the topics that we will be addressing.  Keep in mind that as with past Summits, we will be adding to the topics based on ideas presented by our members and sponsors.  I hope this helps everyone with making the commitment to being a part of this unique annual event, which the CCRO is so proud to be hosting each year.

If you are interested in the 2013 Summit or have any questions, please contact Danette Kuru

We look forward to hearing from you.

mail: info@ccromembers.org  call: 1+ (281) 825-4870
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Join us for a special Conference call held on Monday, September 23, 2013 at 10:30am CST/11:30am EST

From The 'Next Steps for Risk and Compliance under Dodd-Frank' Working Group





The CCRO invites you to participate in a conference call, Monday morning September 23, 10:30am (CDT), to discuss the upcoming Position Limit rule. 

The objective of this call is to review timing of the proposed rule and assemble a team for future commentary. It is expected the CFTC will meet September 26 to vote on a proposed rule. When the proposal is published in the Federal Register (typically a few days after the vote), we will begin a 60-day comment period. 

The CCRO is uniquely positioned to address the differences between the standards proposed in the new rule and the statutory standard. We hope you will join our team as we focus on one or two distinctive issues regarding the Position Limit rule, drafting and submitting comments well in advance of the given due date.

If you are interested in joining this conference call or have any questions, please contact Danette Kuru

We look forward to hearing from you.

mail: danette.kuru@ccromembers.org  call: 1+ (281) 825-4870
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Cheers to our West Coast Meeting

by Bob Anderson


Thanks to all for making our West Coast Meeting a success. Your input and participation is always appreciated. 
Also, the CCRO would like to recognize and thank PG&E for hosting our 2013 San Francisco Meeting. Your leadership and involvement comes with much gratitude.

Don't Miss out on our upcoming Summit December 10th & 11th.

mail: danette.kuru@ccromembers.org  call: 1+ (281) 825-4870
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Special West Coast Meeting Update: Stephanie Green, California Public Utilities Commission

by Bob Anderson

Stephanie Green has been with the California Public Utilities Commission for five years where she has developed strong rapport and working relationship with numerous government officials, small businesses, community associations and Chambers of Commerce throughout the State of California. She came to the CPUC from the private sector industries of telecommunications and technology. Prior to joining the CPUC Stephanie was a Product Manager with AT&T and Cellular One (to become AT&T Wireless) where she led a multi-disciplinary teams in preparing products for market. In addition, Stephanie spent time at SBC (previously Ameritech and Pacific Bell) in their consumer local service division and worked as a strategy and policy consultant for KPMG, specializing in the energy and communications area. Her experience includes positions at an internet music start-up and a digital multimedia firm.

Stephanie holds a Master’s Degree in Business Administration from Northwestern University and a Bachelor of Arts from Swarthmore College. She is the mother of two outstanding young women and an active member of her church and community.


Don't Miss out on the Upcoming Special West Coast Meeting in San Francisco, CA

Register Now

... continued

Special West Coast Meeting Update Day Two: "Maximizing the Benefits of Diversity Suppliers in the Utility Context"

by Doug Deaton


"Challenges to Diversity Compliant Power Procurement in the Utility Sector"

By: Doug Deaton

Managing Partner, at Caerus Energy


Supplier Diversity has long been an important part of overall procurement strategy for utilities and municipalities over the last several years. And while general goods and services are a much easier fit for diversity compliant purchases; the complexities of credit and execution risks have made diversity compliant power procurement a much more challenging undertaking.  Not to say that there has not been successes; but challenges are abound!

Go West: The Trailblazers and General Order 156

A longtime proponent of Supplier Diversity, the California Public Utility Commission in 1988 established General Order 156, which in paraphrase states that all utilities with revenues over $25M are required to purchase up to 21.5% of all goods and services from certified minority, women, and disabled veteran owned business enterprises each year.  Every March, these companies report their overall supplier diversity annual results to the CPUC for the previous year.  And upon review of the actual supplier diversity spend in these reports over the past several years in relation to overall spending; General Order 156 has been a huge success.  Companies such as Pacific Gas & Electric, Southern California Edison, San Diego Gas & Electric, and Southern California Gas Company have achieved over 30% supplier diversity compliance on good and services in almost all procurement categories with the exception of one:  power procurement. (The author is using the term ‘power procurement’ to be include natural gas, electricity, renewable energy, etc.)

As so often is the case in the US, California was one of the trailblazers in the area of Supplier Diversity.  While California is the only state in the US that has a law, General Order 156; thirteen other states across North America have created MOU’s emulating CPUC General Order 156.  Across North America, many governmental entities, IOU’s, corporations, and regulatory bodies have recognized the importance of supplier diversity on their communities and adopted their own diversity supply programs, including power procurement.  As entities continue to adopt diversity supply objectives, including the segment of power procurement, the breath and volume of offerings by diversity suppliers will increase, representing an ever growing percentage of volumes transacted by energy companies, load serving entities, as well as commercial and industrial customers.  The rewards and challenges of managing this unique class of energy counter party, as well as meeting regulatory and corporate social responsibility objectives, will become increasingly important to today’s Chief Risk Officer. 

Supplier Diversity Power Procurement:  What’s Worked

The one segment of power procurement that all of the California IOU’s have had success is with the procurement of natural gas.  And according to the CPUC 2012 Supplier Diversity reports, California IOU’s purchased more than $500M in natural gas from diverse suppliers.  However, while $500M dollars in annual natural gas purchases for the big four utilities (PG&E, SOCAL, SCE, and SDG&E) is meaningful; it represented less than 6% of overall power procurement purchases.  And upon further investigation, it becomes apparent that the vast majority of those natural gas purchases have the same characteristics:  month-forward baseload trades at index plus a small margin with an instantaneous title transactions from the gas supplier to the DBE (Diverse Business Enterprise) to the customer at PG&E and SOCAL city gates

This realization represents two distinct market realities for DBE power procurement:  

1.) that the utilities and energy suppliers have worked very hard to create a relatively efficient DBE supplier program for natural gas; and 

2.) that for there to be legitimate value added expansion of the DBE power procurement market in California and other states, not only will it take additional effort on the part of utilities and energy suppliers; but most importantly it will require DBE marketing firms to be able to bring more to the table than their DBE certification but be able to add significant value to both sides of the value chain and most importantly, have the financial aptitude to be able to wear actual market and credit risk.

Diversity Compliant Power Procurement:  Market Realities

In 2010 the CPUC mandated that all companies that meet General Order 156 reporting requirements had to begin reporting power procurement on a line item basis in their annual Supplier Diversity reports submitted to the CPUC every March.

The DBE energy supplier market has changed significantly in the past 10 years.  In what was once a very opaque market; it was easier for DBE market participants and their suppliers to transact supplier diversity compliant natural gas and other fuels to utilities and municipalities around the country on a cost-plus basis.  However, today thanks to technology and market efficiencies there is complete transparency in the energy markets and all utilities operating in a ‘least cost/best fit’ regulatory environment; it is very difficult (if not impossible) for utilities customers to justify paying a premium for supplier diversity compliance.  Overall competitive pressures combined with new regulatory regimes such as Dodd Frank have made it very difficult for utilities to meaningfully increase their overall supplier diversity compliance through power procurement.


Moving Forward:  Where Do We Go From Here

While the mentorship and support of credible DBE counter parties is a worthwhile cause, there are some minimum requirements that should be expected of DBE market participants:
  • Track Record: It is a minimum expectation that the DBE should have experience and reference-able track record in the energy markets
  • Financials: At minimum, the DBE should meet Dodd Frank Eligible Contract Participant requirements
    • It is paramount that the DBE should be able to wear and manage credit and market risk.  As the universe of energy products offered by diversity suppliers continues to proliferate, it is imperative that the Chief Risk Officer’s organization is able to effectively understand the role of diversity supply within its organization and effectively manage the associated risks. 
  • Credible Supplier Counterparties:  DBE should have executed enabling agreements with a broad portfolio of financially stable (preferably investment grade) counter parties.

Don't Miss out on the Upcoming Special West Coast Meeting in San Francisco, CA


Register Now


... continued

Committee

Notes and Actions from the August 13th Industry Survey Meeting

From The 'CCRO Industry Survey: Risk Organizations' Working Group

Thanks all for joining; apologies for the version control confusion.


Notes and actions from today’s meeting. If anyone has any additions, clarifications or objections please reply all.


... continued

Speaker Update - Shahrokh Hessami to present Day One: Risk Management in 2020 "Special West Coast Meeting"

by Bob Anderson

"Day One: Risk Management in 2020"


Don't Miss out on the Upcoming Special West Coast Meeting in San Francisco, CA

This article's topic will be discussed Day One, followed by Day Two's 

"

Maximizing the Benefits of Diversity Suppliers in the Utility Context


Register Now


Learn More

“There are growing uncertainties that are expected to impact the way we do business today.  The environmental regulations are expected to continue and evolve at state, federal and  globally in the coming years. New environmental regulations will certainly expand the list of product types we engage and the markets we are participating in. CFTC and SEC regulations along with those of FERC and State regulatory bodies are expected to continue and reshape physical and financial markets. As a result, the risk management function certainly needs to remain flexible to address several challenges such as

1)  How to position risk practices for changes

2)  Future Analytic needs

3)  Counterparties are changing and evolving

4)  Operational issues

5)  Enterprise Risk

6)  Managing regulation changes and remaining compliance

a.  Tracking regulations

b.  Contracts

c.  Reporting

-Shahrokh Hessami



... continued

"Devastating Effect on Future of FCMs & Futures Markets?"

From The 'Credit Risk Practices with Increased Use of FCMs' Working Group

"Devastating Effect on Future of FCMs & Futures Markets?"


Don't Miss out on the Upcoming CCRO FCM Symposium

This article's topic will be discussed at the Symposium!


Register Now


Learn More

Proposed CFTC Rule Could Have a Devastating Effect on the Future of FCMs and the Futures Market:


The Commodity Futures Trading Commission proposal that FCMs set aside enough of their own money to cover customers’ collateral deficits throughout the day may end up driving clients from the market and companies out of business. The proposal is part of a series of regulatory changes designed to increase confidence in the futures industry after it suffered two of its largest failures in the last two years with the collapse of MF Global and Peregrine Financial. Under the proposal, FCMs must at all times of the day keep enough of their own proprietary money, or so-called residual interest, on hand to cover all deficits from their customers, whose positions can be in deficit prior to a margin call. The CFTC said the proposal would avoid the potential that FCMs would use end-of-day balancing to “obscure a shortfall.”


At the July 30th and 31st CCRO symposium entitled: “Clear the Decks for Dodd-Frank: A CCRO Symposium on FCM Clearing and Capital Management”, officials from the FIA and NFA, as well as representatives from three major FCMs, will be on hand to discuss this proposed regulation. You will not want to miss this engaging panel at the upcoming symposium.



Continue to full article on Bloomberg
... continued

Basic

Introducing New Member Stephanie Bird, SVP, Corporate Risk Officer of Just Energy

by Bob Anderson

CCRO Members, contributors, & Friends....


I am very happy to announce that Stephanie has recently joined the CCRO and that we are very eager to have her start getting involved in what we do and to begin to get to know you all.  Please do take a minute to welcome Stephanie on-board!

Bob Anderson

... continued


Speaker Update – NFA’s Dale Spoljaric to Present at CCRO FCM Symposium “’Clear’ the Decks for Dodd-Frank: A CCRO Symposium on FCM Clearing and Capital Management.”

From The 'CCRO Training Development Team' Working Group

Dear CCRO Member and Friends:


Register Here

Exciting new development!

Dale Spoljaric
, the managing director at the National Futures Association the Self Regultory Organization (SRO) for the futures industry, will speak at the Committee of Chief Risk Officers symposium on Futures Commission Merchant trading.

The NFA is the the Self-Regulatory Organization (SRO) for the futures industry and as its managing director Spoljaric oversees the compliance department's examination, investigation, financial surveillance, and risk management programs. Spoljaric will provide an overview of the regulatory requirements that apply to NFA members, including basic records, customer statements, customer orders, operations and activities, and many other operational matters involving FCMs. Spoljaric’s comments will directly address many legal and compliance matters of immediate concern to trading organizations. Spoljaric brings tremendous experience to his role having worked for the Chicago Mercantile Exchange and Barclays Capital in regulatory and self-regulatory roles. 

Spoljaric can also address the actions the NFA is taking as the industry's SRO in conjunction with regulators and exchanges to enhance customer protections and oversight of FCMs given the collapses at MF Global and Peregrine.

His comments are part of the CCRO’s attempt to address the issue of becoming familiar with FCMs through this two-day conference where industry speakers will discuss choosing the right FCM(s), monitoring your FCM, addressing problems that might occur with your FCM, and the regulatory environment for FCMs, including Dodd-Frank and other recent regulatory actions. Our complete agenda is posted here.

In addition to your Compliance and Legal Department’s need to attend this symposium, we believe that others in your organization should attend this symposium to learn more about transacting with FCMs:

·  commodity accounting
·  credit
·  confirmations
·  treasury
·  legal and compliance

Here’s some really good news about making this investment worthwhile: the CCRO has recently achieved accreditation with the National Association of State Boards of Accountancy for bestowing continuing professional education. Members of your organization attending our conference can earn up to 11.0 CPE credits in specialized knowledge and applications in a field of study (Beginner level, Group Live, no prior preparation required). 

Please review the agenda and let us know if we’ve missed anything. In the meantime, please make sure members of your organization have the option of attending this symposium. They can register here.


Sincerely,


Bob Anderson 

Executive Director, Committee of Chief Risk Officers




... continued

Dodd-Frank and Market Liquidity Survey

From The 'Next Steps for Risk and Compliance under Dodd-Frank' Working Group

Questions have arisen among some policy-makers about the effects of Dodd-Frank Act regulation on the liquidity of energy markets.  The CCRO has agreed to do a quick and simple survey to gauge whether members, or other natural gas market participants cooperating in this survey, have encountered adverse effects on the liquidity of the natural gas markets in which they participate.

The survey is intended to document initial market participant experience with liquidity changes in energy transactions occurring within the last six to nine months since CFTC Dodd-Frank implementation.

An adequate response to this survey will:

*  Allow the CCRO to establish the industry’s foundational knowledge of Dodd-Frank impacts on energy markets

*  Facilitate a discussion about monitoring for unintended consequences to liquidity


Given expectations for policy consideration of this matter in the near future, CCRO would greatly appreciate your taking a few minutes to answer these questions promptly.

From the Leadership Team for the Dodd Frank working group,

Click here for the Dodd-Frank and Market Liquidity Survey

Questions should be directed to:

admin@ccro.org<mailto:admin@ccro.org> or 281-825-4870

Bob Anderson

Executive Director, CCRO

281-825-4870 office

281-382-2538 cell



... continued

CCRO INQUIRY INDICATES POSSIBLE DECLINE IN NATURAL GAS MARKET LIQUIDITY

by Bob Anderson

In response to inquiries from members and policy-makers, the Committee of Chief Risk Officers (CCRO), with the assistance of Deloitte and Touche LLP, polled market participants with a small set of straightforward questions regarding market liquidity.

To date, 20 participants have responded.  Most respondents are wholesale marketer/traders, merchant generators, or natural gas producers.  Two municipal entities participated.

Overall, the survey focused on getting the “pulse” of the current natural gas markets.  The majority of respondents detected a decrease in market liquidity and a decrease in counter-parties available.  Respondents are split with regard to whether the nature of counter-parties available had shifted toward financial institutions or not.


Click here for the Dodd-Frank and Market Liquidity Survey

Questions should be directed to:

admin@ccro.org<mailto:admin@ccro.org> or 281-825-4870

Bob Anderson

Executive Director, CCRO

281-825-4870 office

281-382-2538 cell



... continued

Next steps, Objectives & Organization

From The 'CCRO Industry Survey: Risk Organizations' Working Group

Gantt chart from slides

The CCRO Risk Organizations survey working group has put forth slides drafting the objectives and timeline for the survey development, as well as organization of major topics into a structure that will facilitate development off survey questions in the weeks ahead.  


This exciting initiative of CCRO members and contributors seeks to create a new resource of benchmarking around  budgets, organizations, and current practices of risk and compliance functions within energy companies.

Proposed survey topics include seven areas of interest:

  • Organization
  • Governance and practices
  • Risk metrics
  • Compensation and incentives
  • Reporting
  • Systems
  • Compliance

The working group leadership is arranging a time & date for the next call, information will be sent to all those registered for the working group.  Check the box in your personal profile online to join this working group...
... continued


CFTC Staff to Host a Public Roundtable to Discuss Proposed Rulemaking Enhancing Protections Afforded Customers and Funds Deposited by Customers

From The 'Credit Risk Practices with Increased Use of FCMs' Working Group


01/29/2013 05:32 PM EST
 

The Commodity Futures Trading Commission (CFTC) today announced that staff will hold a public roundtable on Tuesday, February 5, 2013, from 9:30 a.m. to 5:00 p.m., to discuss the Commission’s proposed rulemaking, “Enhancing Protections Afforded Customers and Customer Funds Held by Futures Commission Merchants and Derivatives Clearing Organizations,” which was published for public comment on November 14, 2012. Comments on the proposed rulemaking must be filed with the Commission by February 15, 2013.

Washington, DC –The Commodity Futures Trading Commission (CFTC) today announced that staff will hold a public roundtable on Tuesday, February 5, 2013, from 9:30 a.m. to 5:00 p.m., to discuss the Commission’s proposed rulemaking, “Enhancing Protections Afforded Customers and Customer Funds Held by Futures Commission Merchants and Derivatives Clearing Organizations,” which was published for public comment on November 14, 2012. Comments on the proposed rulemaking must be filed with the Commission by February 15, 2013. Copies of the proposed rulemaking are available on the Commission’s website, www.cftc.gov.

The roundtable will focus on: the role of an “Examination Expert” to review Self-Regulatory Organization (SRO) examination programs; the proposed disclosures of firm specific risks and financial reporting; the proposed requirement for segregation and secured acknowledgement letters; and the proposed residual interest requirements for Futures Commission Merchants.


Continue to CFTC Announcement

... continued

CFTC Announcement

From The 'Credit Risk Practices with Increased Use of FCMs' Working Group

An important announcement regarding this proposal from the CFTC...
The Commodity Futures Trading Commission (CFTC) approved for public comment proposed new regulations, and amendments to existing regulations, to enhance protections for customers and to strengthen the safeguards surrounding the holding of money, securities and other property deposited by customers with futures commission merchants (FCMs) and derivatives clearing organizations(DCOs)....the article is provided here for convenience :




... continued

25.5 GW of coal -- 8% of U.S. coal-fired electric capacity -- slated for retirement by 2015

by Jim Pierobon

Is there enough natural gas that is findable and deliverable to plug most of the gap created by the projected closure of 25.5 gigawatts (GW) of coal-fired U.S. generating capacity between now and year-end 2015?

That is an increasingly urgent question facing U.S. utilities, power and gas marketers and regulators.

The risks of brownouts and perhaps even blackouts on weekdays challenged by extreme weather loom as a growing risk that could trigger a backlash against emissions regulations, renewable sources of electricity and competitive power markets.

The principal source of concern is the most recent report by the U.S. Energy Information Administration based on its Form EIA-860, “Annual Electric Generator Report.”

The coal-fired electricity projected to be retired over the next five years is more than four times greater than retirements executed during the preceding five-year period, a mere 6.5 GW by comparison. The estimated 9 GW of coal-fired capacity retirements expected in 2012 will likely be the largest one-year amount EVER. And that record likely won’t stand very long because 10 GW are projected to be retired in 2015.

Projected closures of coal-fired power plants in the U.S. Note the large bulges in 2012 in 2015. CREDIT: U.S. Energy Information Administration (EIA).


... continued

Pro

Metric Use Discussion at April CCRO Meeting

by Jack Yeager

Members,
Based on one of the April 27, 2012 (Jacksonville) meeting discussions, this dialog provides great context and a sense for one of the objectives that we have for our new "Metrics Committee" (click here for article re the new Committee:)

Bob A: Bob Anderson
Jack: Jack Yeager
Other speaker: Various meeting attendees

Bob A: Jack, you and I discussed the other day such a simple concept related to metrics and the insightful use of them.  Can you explain what that was?

Jack: It’s pretty simple, and I guess what strikes me, not in this group of CCRO members but with some of the people that we’ve done work with, particularly enterprise risk work. Risk managers tend to settle on a metric before they even know what question it is they’re trying to answer.  So the conversation typically starts with “We’re thinking about earnings at risk, or cash flow risk.” Now, in my experience CCRO members don’t want to calculate risk metrics just for the sake of having metrics. No, We typically calculate them because somebody has a burning question that they need to answer. 
Unfortunately, often what happens is a risk officer starts out by saying, “Here’s earnings at risk, let me tell you how it will answer your question,” as an example, right? And the person on the other side of the table is basically saying, “I don’t see how that helps me at all”. If that’s your front office, your board, your CEO, you’ve really wasted your time.    ... continued

Join: New Metrics Committee

by Bob Anderson

JOIN OUR NEW SUBCOMMITTEE ON RISK METRICS
The concept proposed is that we form the "CCRO Sub-committee on Risk Metrics" [aka the metrics committee] to bring forward new metric ideas, expand on some "TBD" metrics from the current CCRO metrics paper, support the Risk Reporting Resource, address metrics use, develop metric benchmarking ideas, and publish new editions of the metrics paper as new material comes together.

Please join in this on-line discussion now and provide your thoughts about how this new committee might work, and your interest in participating in it, ... continued

Risk Management Standards, Part 4 of 4, on Infrastructure

by Jim Pierobon

The objective of standards 25 through 27 of the CCRO's Risk Management Standards recommendations is to provide security and data integrity to properly serve natural gas and power marketers, utilities and regional transmission organizations, or RTOs.

The systems used may vary by organization to reflect differences in business objectives, markets, and products associated with a company’s energy transactions.

A proper risk infrastructure is necessary to provide accurate and timely information for decision-makers. Typically, it is a marriage of technology, business processes and communications.

Standards 25, 26 and 27 reflect these themes:

  • A risk management system must capture transaction details, and support operational requirements, risk metric calculations, and financial reporting.
  • There must be policies and controls that protect the security and integrity of the data and information within the system.
  • The risk infrastructure must provide the capability to monitor, aggregate and present relevant information on a timely basis to stakeholders.
Joining the CCRO provides member companies access to this and all previous white papers, as well as, the future content and working group projects. The Risk Management Standards paper is available here.

... continued

Risk Management Standards - Part 3 of 4 on ....

by Jim Pierobon

Finding and keeping personnel is integral to a comprehensive energy risk management framework. In this the third of a series of blog posts on the CCRO's recent white paper on Risk Management Standards, we touch on Standards 23 and 24.

Underpinning the success of the risk framework is the widespread understanding and daily usage of key risk management concepts throughout the firm. It is critical to ensure personnel are qualified and experienced. Since qualifications must develop as the firm’s risk taking activities develop, it is impossible to separate the need for qualifications from the need for on-going
education and focused training.

In a risk-aware organization, the quality of the education program is readily apparent in the consistent manner that communication and discussion of risks are undertaken. The standards address qualification and training requirements for individuals involved in
Commercial Activities, oversight of Commercial Activities and Associated Risks, and the Governing Body.

Find out more by securing your own copy of the Risk Management Standards paper here.

... continued

Risk Management Standards - Part 2 of 4 on Policies and Procedures

by Jim Pierobon

Any company looking pass a 'smell' test about its risk management standards should have a robust array of risk policies and procedures in place. In this the second of four blog posts about the CCRO's recently approved "Risk Management Standards" white paper, we dive into standards 7 through 22. ... continued

27 Risk Management Standards - Part 1 of 4

by Jim Pierobon

The CCRO’s most recent recommended best practices are a prescient addition to the energy risk management
landscape. As very low natural gas prices and rising costs for operating coal-fired power plants turn power supply
assumptions virtually upside down, regulations on power plant emissions grow more aggressive and demand for
electricity fluctuates as the economy struggles to recover, attention by senior officers to truly independent corporate
governance can prove its value with each passing quarter. ... continued

Risks of closing aging coal-fired power plants too soon

by Jim Pierobon

With the influx of new natural gas supplies from various shale formations throughout the continental U.S., the risks of
relying too much, or not enough, on natural gas to generate power to achieve targeted returns on generation assets is
front-of-mind for many risk managers and their C-suite colleagues.

AEP CEO Nicholas Atkins expressed concern about over-reliance on natural gas at a recent speech before the U.S.
Chamber of Commerce. He reminded lunch-goers of gas' price volatility. He probably has lots of company. ... continued

Stubborn coal prices vis a vis low natural gas prices

by Jim Pierobon

With the influx of new natural gas supplies from various shale formations throughout the continental U.S., the risks of relying too much, or not enough, on natural gas to generate power to achieve targeted returns on generation assets is front-of-mind for many risk managers and their C-suite colleagues. 

AEP CEO Nicholas Atkins expressed concern about over-reliance on natural gas at a recent speech before the U.S. Chamber of Commerce. He reminded lunch-goers of gas' price volatility. He probably has lots of company. ... continued

CCRO Leads Development of Risk Management Standards for Energy Markets

by Bob Anderson

As published in the Jan/Feb issue of Electric Light & Power magazine.


The Committee of Chief Risk Officers (CCRO) is leading an effort among utilities, power marketers and regional power grid operators to adopt standards that will help them manage risks that threaten the uninterrupted sale and purchase of electricity and associated financial transmission rights.

In response to the first major credit action (Order 741) by the Federal Energy Regulatory Commission (FERC) directed at organized wholesale electricity markets and related regulatory responsibilities by the Commodities Futures Trading Commission (CFTC), a working group of theCCRO on Nov. 28 drafted a white paper, “Risk Management Standards for Energy Market Participants,” and shared it with interested parties in front of a Dec. 14 compliance filing deadline. ... continued


Pro

Turning Points, Mike Prokop

by Mike Prokop

This article first appeared in the 2011 Year End issue of Energy Risk Magazine


With the use of some helpful props, CME Group’s Mike Prokop talks Pauline McCallion through a career spanning more than a quarter of a century in the world of energy trading

A visit to Mike Prokop’s office at CME Group’s Houston location is like a trip down memory lane for the energy markets, featuring paraphernalia from a 26-year career that also includes stints serving on Commodity Futures Trading Commission committees and other key industry bodies such as the Committee of Chief Risk Officers.

On his desk, he keeps a glass obelisk that was given to him by Conoco (now ConocoPhillips) to mark its first ever crude oil options trade on December 22, 1986, which was completed on the opening bell. Prokop worked on the deal as a broker, a year after he took his first job out of college in New York with Rudolf Wolff Commodity Brokers (later Rudolf Wolff Futures). ... continued


Megawatt Daily: CCRO forms group to look at ISO risk rules

From The 'Risk Management Standards' Working Group

Megawatt Daily

August 12, 2011

CCRO forms group to look at ISO risk rules

The Committee of Chief Risk Officers is forming a working group to develop standards independent system operators can use to verify market participants have adequate risk management policies.

In defining the standards, the CCRO hopes to position itself to conduct the verification process on behalf of the ISOs.

... continued