By participating in energy commodities markets throughout the world, companies are exposed to a variety of market and credit risks. However, each company has developed its own financial reporting practices, risk management techniques, and infrastructure to manage its business. The Committee of Chief Risk Officers (CCRO or the Committee) has been formed in an effort to compile risk management practices surrounding these activities. The Committee is composed of Chief Risk Officers from leading companies that are active in both physical and financial energy trading and marketing. They are committed to opening channels of communication and establishing best practices for risk management in the industry.

The impetus behind the formation of the CCRO was the recognition that the merchant energy market had developed to the point where the industry needed to revisit existing methods. We define merchant energy activities as those undertaken by companies when acting as intermediaries in the wholesale energy market to physically deliver energy and financially manage the price risk for their customers. We have attempted to provide guidance on new methods and tools to establish a strong foundation for future growth in this industry. We view this as an opportunity to establish industry practices to benefit market participants, investors, and ultimately consumers.

The CCRO effort is one element of an overall movement to address key industry issues. The industry is working in a coordinated manner to craft comprehensive solutions in areas of concern to stakeholders. The CCRO strongly supports the work by the Edison Electric Institute in developing a master netting agreement with provisions on netting, margining, and clearing. We also support the principles and objectives of the Electric Power Supply Association's Code of Ethics and encourage member companies to implement this code or augment existing codes of ethics to embody its principles.