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Your power supply portfolio and the role of hedging.

Publication: Management Quarterly
Publication Date: 22-MAR-04
Format: Online - approximately 1335 words
Delivery: Immediate Online Access

Article Excerpt
Last quarter I wrote about "What is Energy Risk Management and Who Needs It?" Now I will address the largest risk of a cooperative power supplier-managing the power supply portfolio. If you are responsible for securing any part of your power supply today or in the future, then you are a power...

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...supplier.

Similar to your personal investment portfolio, a power supply portfolio is a collection of transactions designed to meet a specific objective.

Your personal investment portfolio may include cash, bonds, stocks, mutual funds, and real estate. Hopefully, your personal investment plan is based on your personal tolerance towards risk (high risk or low risk investments) and is managed to meet your long-term financial objectives (family needs, college for kids, retirement!).

A power supply portfolio may include purchase power agreements, transmission, generation plants, and fuel to run the plants. Your power supply plan should be based on your cooperative's tolerance towards risk and should be managed to meet its short and long-term power supply objectives.

A power supply portfolio Should be designed to balance the hourly supply needs of a cooperatives load obligations. It's a matter of matching hourly supply with hourly demand. This can be done in...

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