Our Retail Risk Management Standards Initiative
Recommended Practices for the Retail Electric and Gas Industries.
Extreme weather events in recent years such as the Polar Vortex of 2014, and the more recent “bomb cyclone” and “artic outbreak” of January 2018, have highlighted the continuing challenges faced by participants in both power and gas retail markets. More such challenges are sure to come. Consequently, members of the CCRO have pointed out that there is a real need for authoritative and independently developed standards for risk management practices at retail energy providers (REPs). All retail market participants will benefit, including REPs, their suppliers, their credit support providers, regulators, and system operators. Much like the wholesale standards published by the CCRO, these retail standards will help to advance risk management by providing participants a baseline of practices against which a specific REPs practices may be objectively benchmarked. These new REP practices will build upon the rich foundation of risk management recommendations that have been published by the CCRO over the last decade.
This initiative will serve more than just REP companies. The retail segment is very dynamic and we continue to see new REPs entering the market. This creates unique opportunities and challenges for market participants supplying, credit supporting, and regulating these REPs. This CCRO effort strives to provide a roadmap for all REPs to follow in order to distinguish themselves by demonstrating leading practices through use of these standards.
Larger energy companies with affiliated retail businesses will benefit by the integration of leading retail practices within those of a larger more diversified energy business.
Organization of our Draft Series of White Papers:
1. Preamble - Full Draft
2. The Framework for Retail Risk - Full Draft
3. Creation of Retail Risks - Full Draft, nearing publication
4. Management of Retail Risks - Early Draft
5. Governance & Oversight of Risks - Full Draft
6. Appendices - Follows series development
After reaching an ideal overall structure for this comprehensive series of papers, and completing fifteen webinars with interested CCRO members, the retail risk management group has been aggressively developing the section addressing the "Creation of Retail Risks", for power and gas retailers. This section provides an organized taxonomy of all risk types that retailers face, and a thorough discussion of them. The risk framework provided here establishes the foundation for subsequent sections and recommendations to come.
To get a sense of the scope of this full draft of section 3 "Creation of Retail Risks" it currently addresses...
CREATING MARKET RISKS FOR RETAILERS
- For example risks: price, basis, volumetric, market liquidity, shape, ISO costs, Utility costs, forecasting both long and short term, specific product risks, and more...
CREATING OPERATIVE RISKS FOR RETAILERS
- For example: Internal controls, customer on-boarding, transaction pricing, supply & delivery optimization, billed cost & revenue mgt, cash & collateral mgt, gas & power delivery, regulatory compliance, curtailments, and more...
CREATING CREDIT RISKS FOR RETAILERS
- For example: Forecasting receivables, measuring credit exposure & risk, mass market credit risk, C&I credit risk, and more...
CREATING BUSINESS RISKS FOR RETAILERS
- For example: Competitor activity risks, technological disruption risks, market design risks - federal, regional, state
CREATING CAPITAL ADEQUACY RISKS FOR RETAILERS
- Intro to adequacy for economic value and liquidity, cash conversion cycle risks, settlement process and liquidity risks, and more...
Join With Us Now and Get Involved
CCRO white papers are the shared work of the CCRO member companies. You are invited to join the CCRO companies involved in this project, including Retail Energy Providers of all sizes, and their wholesale suppliers to help formulate, codify, and learn about the best practices that are needed to operate successfully in this industry. We are always seeking additional participants that have:
- Strong aspirations for their company’s retail risk management
- Interest in sharing their knowledge while developing these industry standards
- A desire to be recognized as supporting this initiative
Membership cost is a function of size. Contact us for more information: firstname.lastname@example.org
Some of the topics the CCRO will be addressing include:
- The Current Environment Regarding Risks and Risk Management Priorities in Retail Energy
- Unique Circumstances and Complications Faced by Retail Entities, their Suppliers, and their Creditors
- Retail Commodity Markets and Associated Risks
- Retail Products; Architecture and Associated Risks
- Modeling of Risk in Retail
- Understanding Sources of Retail ‘Business Risk’
- The Role of Pricing in the Creation of Risks
- Regulator Requirements and the Creation of Regulatory Risks
- Systems and Technology
- Risk Management Instruments: Alternative Methodologies for Retail Products
- Company Forecasting and its Role in Effective Risk Management
- The Use of Exogenous Forecasts and Effective Risk Management
- Capital Requirements and Risk Management
- General Policies and Procedures for Risk Management
- Risk Management Policies & Procedures Specific to Retail
- Corporate Governance for Risk Management
- Qualifications & Training for Effective Risk Management
Some of the lead companies and people providing analysis review include:
Clean Choice Energy
Joe Pokalsky (Sr. Editor)
Frank Caliva (Sr. Editor)
Alliance Risk Group
and many more that have contributed...see paper preamble section for list