Energy Risk Management: A Primer for the Utility Industry

This book presents a clear, concise introduction to the basics of risk assessment, from identification to evaluation to management of risk. This book addresses the needs of managers and boards, giving readers an understanding of the risks energy companies and utilities face, and how to manage those risks. Energy Risk Management includes an extensive glossary of 100+ pages in which key terms and phrases used in energy trading and securities transactions are defined and cross-notated, an invaluable reference source unto itself.Topics covered include: The Need for Risk Management, Core Risks, Risks Within the Business, and Regulation & the Government.TABLE OF CONTENTSForeword xiiiPreface xvIntroduction xviiNEED FOR RISK MANAGEMENTChapter 1: Utilities and Energy Companies Need Risk Management 1THE BASICSChapter 2: Dealing with Risk: Terminology and Techniques 7Chapter 3: Common Risks and Misconceptions 17Chapter 4: Risk Management Starts at the Top 21Chapter 5: Shifting Risk with Derivatives: The Building Blocks 27Chapter 6: Basis 51CORE RISKSChapter 7: Energy Price Risk 65Chapter 8: Weather Risk 87OTHER MARKET RISKSChapter 9: Foreign Exchange 115Chapter 10: Interest Rates 127Chapter 11: Equity Risk 143Chapter 12: Credit Risk 155Chapter 13: Advantages and Disadvantages of Various Trading Venues 177RISKS WITHIN THE BUSINESSChapter 14: Operational Risk 185Chapter 15: Fraud 195REGULATION AND GOVERNMENTChapter 16: Regulation and Government 249Chapter 17: Regulatory Risk 257EXPERIMENTAL ECONOMICSChapter 18: Improving Energy Risk Management with Experimental Economics 267APPENDICES:Appendix A: Important Contracts 279Appendix B: Common Risk Terminology and Important Measures 289Appendix C: Glossary 299