Monday Jun 24, 2013
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Philadelphia, Pennsylvania - USA
Data Informed´s Marketing Analytics and Customer Engagement provides marketing, sales, and customer support managers with the information they need to create an effective data-driven customer strategy. more...
Monday May 20, 2013
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Stowe, Vermont - USA
Legal Essentials for Utility Executives: May 19 to 25, 2013 and October 6 to 12, 2013 This rigorous, two-week course will provide electric utility executives with the legal foundation to more fully understand the utility regulatory framework, the role of more...
PDF Commodity Solutions (“Post Dodd Frank”) recognizes this new regulatory environment presents the prospect of uncertainty, confusion and concern. To date, lawyers have focused on “what and “when” – with no clarity on either point.
PDF Commodity Solutions is focused on “how” and “why” – how does a firm structure and effectuate controls on the participant and classification requirements for energy, utility and agricultural firms.
The “how” focuses on the path of decisions between a trader picking up the phone and being able to assure that a transaction has been executed legally under Dodd Frank.
The implementation “why” focuses on the lowest latency, highest reliability way of implementing the “how” within your business model. The PDF team has the experience and skill to avoid building gold plate where iron will do but the knowledge to be able to communicate with front office, mid office, back office, heads of desk and C-suite members to assure what is done is appropriate to your firm’s needs
Thomas J. Lord is the President of PDF Commodity Solutions LLC and is an executive with over 35 years of experience in the commodity industry in US and international markets. Most recently, he has led the Dodd Frank Title VII practice for PricewaterhouseCoopers in the energy market developing compliance strategies, corporate transaction and governance policies, procedures and operating controls as well as risk management system integration and deployment. Work in this area included Dodd Frank assessments, gap analysis of client compliance efforts as well as complete implementations of Dodd Frank operational controls process flows and creation of compliance manual materials. He has led several efforts to design, develop and deploy client based risk management IT solutions utilizing a blend of off-the shelf, custom and client developed software.
Prior to joining PwC, he provided subject matter expertise to design multiple models to implement energy compliance product launch responding to CFTC, CME and FERC regulations and oversight activities for a leading supplier of compliance software to the financial and anti-money laundering market space. He led product effectuation for multiple client proof of concept engagements and client solution development, while acting as subject matter expert for pilot project resulting in execution of global implementation for major global energy firm – primary client contact for business process and business mapping during implementation. This trade surveillance system was developed for the same firm that provided a similar trade surveillance data model to the CFTC.
He has also served as project director for Teknecon Energy Risk Advisors LLC’s effort in revising the governance structure of the electricity market for the government of Colombia. Additional Teknecon work included strategic advising to board level management of U.S. investor-owned utilities in such areas as asset deployment, corporate investment in development of energy trading capabilities, acquisition of trading company due diligence (both buyer and seller), and compensation structuring concerns. He also acted as an advisor and educator for client staff analysis of complex structured power transactions and asset based contracts.
Previously, he served as Vice President for Morgan Stanley Capital Group, Inc., where he performed all physical gas trading activities for a desk with daily volumes occasionally exceeding 1.25 Bcf.day. Trading locations included much of the continental United States.
He has educated physical traders and marketers about futures and OTC instruments, linked trading and hedging strategies, and integrated trading activities with risk management activities. He developed reporting and accounting requirements for management, and formalized a derivative-linked marketing strategy.
Mr. Lord holds a J.D. degree from the University of Denver in Denver, Colorado. He also holds a B.S. in mechanical engineering and a B.A. in government and public policy from Cornell University in Ithaca, New York. He has completed graduate studies towards a Master degree in mineral economics from the Colorado School of Mines.
Thomas Lord, President
PDF Commodity Solutions, LLC
P.O. Box 535
Green Mountain Falls, CO 80819
The Dodd Frank has been the primary focus for many of us has been in utility and energy industry. But there are other changes in the world of regulation and it would be helpful to compare what is happening in three areas: The US, the European Union ("EU") and Canada. In some ways, Dodd Frank may be the straightest forward of the group.
During the Commodity Futures Trading Commission ("CFTC") hearing on the final rule on the 'further definition of swap', many topics were discussed. The volumetric options ability to be included in the forwards exclusion was considered a good thing as were several other items.v However, there were several little "Easter eggs"
Working with energy and agricultural firms on Dodd-Frank Title VII for the last two years, I have encountered many misconceptions, misperceptions and assumptions about the impacts of Dodd Frank on their business. One in particular is the potentially significant impact of Title VII on acquisitions in the future. The impacts come from three areas -- transactional activity, reporting obligations and position limits. I will discuss each in order.
The latest rush is to create the smart grid. It is good that the impetus is governmental funds because there is a long term problem for the smart grid from a real option basis. The problem is that any corporate or individual investment in demand control/demand reduction has greater benefit to the rest of the grid than it does to the person making the investment.
Recently, an author published a paper declaiming that renewable energy was a risk - I agree for completely different reasons than were expressed in that article. The problem with the renewable markets - as opposed to carbon markets - is that they depend on an artificial monopoly market. What do I mean?
The introduction of VaR (Value at Risk) to utility risk management was a quantum leap in the efficacy of commodity risk control in the late 1990s. It removed the subjective "prices can’t do this" risk management with a quantifiable set of metrics that provided greater analysis and precision in the utility processes. But it came at a cost.
Today's popular whipping boy in energy markets is hedge funds. They are getting a bad rap, is it deserved? The NYMEX study released March 8 acts to exonerate hedge funds from implications they impact prices, but I must disagree in certain areas.
The energy market likes to see itself as central to the economy -- and it is. However, the front month volatility of NYMEX natural gas contracts has been over 70% recently and the intraday volatility can exceed 200%. When does this risk become unacceptable to businesses and they vote with their feet?
There was an old wine ad that makes a lot of sense for the developing nations. The revision should be "We will build no grid before its time". Taking the example from the wireless world of building a grid without a hard backbone may help power development immensely in the developing world.
The existing 5x16 electricity contract will never allow the creation of an open, liquid trading market; it just doesn't transfer risk reasonably. It is simple, it does wonders for generators but it can't get us where we want to go. There are three flaws that need to be addressed.
I published an article in EnergyPulse November of last year regarding stable electricity markets. The same analysis applies to natural gas - there are fundamental changes in the natural gas market structure that is amplifying the swings in market prices and shortening the oversupply/undersupply swings.
On May 27th of this year, EnergyPulse published my article on the reasons infrastructure investment lags in the electricity industry. Yesterday, the country saw the risks of infrastructure disinvestments. The critical thing is to implement the correct solution.
On the heels of the much ballyhooed California market manipulation
crisis, the ISOs are now addressing the problem of localized market dominance. The issue is a real one, but the easy solutions may carry their own concerns.
There is much discussion about the failure of the restructuring process and the inability of regulators to see the forest for the trees. The alternative has been to turn the process back to "the industry experts" who know better. The industry experts didn’t know better, they just had an advantage of different economic drivers.
The restructuring of the electricity market was a process overseen by the consultants and the traders. The regulators did the best they could with the knowledge they had. The problem is that they did not foresee the consequences. I would like to offer one small corner of the problem that they did not consider.
Recently, Volatility Managers made public a white paper written for the Center for Advancement of Energy Markets Energy Infrastructure, Investment and Incentives Forum (Forum). The goal of this analysis was to provide regulators and market participants with a common framework in which to examine the role of the regulator.
Much has been made about the downfall of energy trading and the retrenchment of energy utilities. The reality is that commodity pricing will not leave the natural gas and electricity markets. Therefore, the biggest hurdle will be managing the transformation of the senior management governance of the utility industry.
Natural Gas has taken off on another of its not so infrequent excursions into the stratosphere of pricing. Depending on the commentator, prices are either going to revert to $3.50 or go to $10 in the next three hours. What does the energy consumer do now? Hedge – but learn from California.
The current natural gas price regime allows the producing a marvelous opportunity. Rather than focusing on Value at Risk (VaR) or Earnings at Risk (EaR), Volatility Managers suggests that producers look at two very different parameters – Cash Flow at Risk (CFaR) and Investment at Risk (IaR).
The latest tempest in the energy market is the perceived lack of infrastructure investment. The solutions – including those in SMD – point out the basic dichotomy of cost of service regulation and open market price action. Regulators make lousy traders.
Site based generation and demand side management may be considered regressive taxes on the grid. One of the social issues to be faced in the future if renewable become more prevalent is how to reconcile their presence with low-income user’s needs. This issue has not been addressed.
One of the impacts of the new focus on credit in the energy business has been the increasing call for margin or collateral by transaction counterparties. (For the rest of this article I will use “margin” and “collateral” interchangeably) This has a significant impact on working capital requirements, corporate cash flow and corporate EPS.
The end use community – and the producing community – in the energy business have been ill served by the consulting community. The strategic advice has all too frequently been based on the viewpoint of the market, not the company. This has to change.
Many non-trading entities have corporate policy statements that make dynamic portfolio management an unauthorized activity. Whether this is a correct corporate decision is debatable and much has been written about the advisability of dynamic portfolio hedging. What is not debatable is that existing risk management software systems may not correlate to corporate policies.
Renewable energy resources are a concept that is very appealing to me. Personally, I feel that any effort to reduce environmental impacts is a “Good Thing”. Now that I have disclosed my bias, let me change direction and say that most renewable resource economics analysis sounds like a policy statement, rather than a business plan, to me.
The curious reality behind creation of a stable electricity market is the solution of a real option issue unlike any other commodity market. It is common knowledge that the absence of storage in electricity has profound impacts on the structure of the electricity market but what is its implication in market design.