White Papers
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Credit Reforms in Organized Wholesale Electric MarketsThe Federal Energy Regulatory Commission (FERC or the Commission) has a statutory mandate to ensure that all rates charged for the transmission or sale of electric energy in interstate commerce are just, reasonable, and not unduly discriminatory or preferential. Clear and consistent credit practices are an important element of those rates. The management of risk and credit requires a balance between protecting the markets from costly defaults and ensuring that barriers to entry for market participants are not prohibitive…
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Full Version (pdf) Please request |
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Internal Risk Reporting SummaryThe objective of this paper is to summarize participating company reporting examples from previous CCRO meetings, to provide a “one stop” resource center – vis-à-vis the new website portal – for accessing reporting examples, and to encourage more companies to contribute report examples in order to build up the database. Sensitive data and company names have been removed (where possible) from these reports.
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PMC Netting PaperAs we have discussed, attached is the final version of the Netting Subcommittee Report. Interested entities can reference it in preparing their FERC Credit NOPR comments that are due next Monday. And, as previously discussed, this paper can now be included as an attachment to the CCRO’s Filed Comments at FERC.
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Regulatory Capital for Industrial Firms: Concerns & Suggestions
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Volume 2 of 6 Governance and ControlsProvides guidance on the control infrastructure for business processes and on assuring robust governance over them.
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Volume 3 of 6 Valuation Risk MetricsDevelops methodologies and risk metrics to provide management with meaningful, consistent information about the values and risk exposures inherent in merchant energy operations.
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Volume 4 of 6 Credit Risk ManagementProvides guidance on credit risk management and efficient use of credit. This document covers the five key credit risk management functions:
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Volume 5 of 6 Risk Management DisclosuresRecommends meaningful disclosures that are responsive to stakeholders, such as investors, credit rating agencies, financial analysts, regulatory bodies, other industry associations, and the media, and that provide insight into company and industry performance.
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A Framework for a Commercial Compliance ProgramMore than ever before, investors, regulators and employees all recognize the need for effective compliance programs in today’s energy companies. This paper establishes the foundation and sets out a framework for a Commercial Compliance Program (CCP) that will help energy companies ensure that their commercial activities are being held to the highest standards while observing the spirit and letter of all applicable laws.
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Emerging Practices for Assessing Capital AdequacyThis paper lays out a risk-based capital adequacy framework that energy companies, industry analysts, and other stakeholders can use to analyze a company’s ability to meet both near-term and long-term obligations, with a particular focus on merchant energy activities. Capital adequacy is a potentially vital financial metric designed to assess a company’s short- and long-term outlook for financial health. It measures the availability of capital necessary for a company to meet both its foreseen and unforeseen obligations in the short and long term.
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Understanding ERM for UtilitiesThis paper provides an understanding of ERM and assists executives in developing and applying an ERM framework unique to the business of a regulated utility. A utility is defined as an entity that has rates that must be approved by a regulatory authority, be it local, state, regional or federal (including public power entities self-regulating governance), and tends to have extensive exposure to operative risks. The intent of this paper is to provide guidance to utilities that are implementing or improving ERM frameworks. Such frameworks are not prescriptive, one-size-fits-all endeavors. Rather, an ERM framework must balance the utility’s risks, business and regulatory structures and current risk management practices and governances.
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Best Practices for Energy Price IndicesProvides guidance on best practice attributes and processes for data submission by market participants and for index construction by index developers. The goal of this white paper is to recommend procedures that ultimately improve the transparency, accuracy, reliability, and robustness of energy market price indices thus enhancing price discovery and competition, which ultimately benefits consumers and all industry participants.
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Understanding ERM for Utilities 2007This paper provides an understanding of ERM and assists executives in developing and applying an ERM framework unique to the business of a regulated utility. A utility is defined as an entity that has rates that must be approved by a regulatory authority, be it local, state, regional or federal (including public power entities self-regulating governance), and tends to have extensive exposure to operative risks. The intent of this paper is to provide guidance to utilities that are implementing or improving ERM frameworks. Such frameworks are not prescriptive, one-size-fits-all endeavors. Rather, an ERM framework must balance the utility’s risks, business and regulatory structures and current risk management practices and governances.
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Full Version (doc) Please request |
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Guidelines On Establishing A Risk Management Framework And Policy February 2005This paper documents a framework for the major components that comprise a best practice risk policy document, and reviews a menu of provisions for each. This paper provides an independent reference providing increased confidence to company management, their board, and other stakeholders that company risk policies are both complete and in-line with best and emerging practices.
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Clarifying Enterprise Risk Management and FERC Order 2004-BThe objective of this white paper is to provide clarity to energy companies subject to FERC Order 2004-B on permissible activities of a centralized, shared risk management function (Enterprise Risk Management function or ERM). This white paper provides the CCROs guidance on best practices around ERM activities, providing some specifics of typical leading industry practices of the ERM function and demonstrating how these activities may be performed in light of FERC Order 2004-B. The goal is to increase the confidence of both the Commission and the companies it regulates how the ERM function may be operating in accordance with FERC Order 2004-B. It is also to serve as a tool that can be used by a company in discussions with the Commission on the role performed by its ERM function.
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User's Guide to the CCRO's Clearing Novation & Release AgreementTo streamline energy trading, as well as to facilitate the reduction of collateral This User’s Guide is designed to accompany the CNRA to assist users with making relevant choices on the CNRA’s Cover Sheet and to explain the various provisions and terms used throughout the CNRA.
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Enterprise Risk Management and Supporting MetricsThis white paper approaches the topic of ERM by breaking it into three broad discussion areas:
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Best Practices for Energy Price Indices Data Submission, Usage, and Confidentiality Agreement
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Measuring Financial LiquidityThe paper should be viewed as a starting point for an on-going development and
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A Framework for a Commercial Compliance ProgramMore than ever before, investors, regulators and employees all recognize the need for effective compliance programs in today’s energy companies. This paper establishes the foundation and sets out a framework for a Commercial Compliance Program (CCP) that will help energy companies ensure that their commercial activities are being held to the highest standards while observing the spirit and letter of all applicable laws.
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Understanding S&P Risk Ranking SurveyIn 2006 S&P requested input from the CCRO to appropriately revise its risk management practices survey. Subsequently, the CCRO prepared this paper in consultation with S&P, and other interested parties. This paper aides in understanding S&P’s PIM framework and the type of information that S&P would need to gather to establish insight into the specific risk management practices of an energy company. Furthermore, the paper discusses how information from the survey might be applied by S&P. Though not recommending specific lines of questioning that S&P should pursue, the paper does provide the CCRO’s summary view as to what are the most important elements to understand when assessing the effectiveness of an energy firm’s risk management capabilities. Additionally, by developing the concept of appropriate practices the paper provides much insight into the drivers for the expected divergence between the risk management approaches of different energy companies.
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Best Practices for Energy Price Indices Amendment to Master Agreement(s) to Provide for the Disclosure of Transaction Data
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Capital Adequacy ExtensionThis paper builds on the 2003 Capital Adequacy paper through a number of expansions & enhancements including:
This methodology reveals potential interim states of capital inadequacy which would go unseen under the NPV distribution approach.
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Market Clearing in the Energy IndustryThe purpose of this paper is to advance the use of financial as well as physical clearing in the energy industry by: contributing to a common understanding and definition of clearing; identifying its benefits to the market; identifying hurdles and challenges still present; and presenting recommendations that promote its appropriate application and development. The appendix provides a summary description of each of the major vendors offering clearing solutions and a side-by-side comparison of them versus desired clearing attributes.
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Understanding S&P Risk Ranking Survey: Part B PIM Framework and CCRO LinkagesA companion paper to the ERM Ranking Survey paper, this document details many linkages between the PIM framework which S&P uses for their ERM survey, and the material found in CCRO published papers. Papers previously published by the CCRO address many components of the S&P PIM framework, and often provide greater detail and robustness.
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