We advise clients on risk management strategies related to procurement, on the design of risk management programs, and assess the gas procurement practices of utilities. We provide expert testimony before state regulators regarding appropriate policies for evaluating utility hedging programs and on the reasonableness of gas supply, transportation, and storage contracts.
The Brattle Group reviewed the hedging policies and practices of a large U.S. gas utility and recommended that the utility improve its volatility measurement techniques and move toward a prospective volatility metric that would better anticipate changing market conditions. We recommended changes to the monitoring report for the utility’s Risk Management Committee (RMC) to allow the RMC to monitor exposure of unhedged positions and to present a more accurate profile of likely option exercises and expected annual gas costs. We identified limitations of the utility’s existing risk management program resulting from restrictive hedge acceleration rules and option budget constraints.
For a major Southwestern electric utility, The Brattle Group conducted a comprehensive review of gas procurement and contracting practices over a four-year period. All aspects of procurement were reviewed, including gas supply, transportation and storage contracts, as well as operational balancing agreements. We presented testimony describing why the utility’s procurement practices were appropriate and also suggested appropriate policies for evaluating a utility’s gas hedging program.
The Brattle Group has assisted clients with the development of short and long run plans to minimize financial exposure to the price volatility of oil and gasoline. These engagements have included economic analyses of current and future market trends and construction of price forecasts, strategies to hedge exposure to price volatility with standard financial instruments, inventory management strategies, and procurement strategies to avoid market squeezes and distortions.
Members of The Brattle Group testified on behalf of interstate pipelines and local distribution companies on the measurement of business risk in regulatory proceedings to determine allowed rate of return. We analyzed the competitive environment in which the companies operated and evaluated how competition impacted business risk.
On behalf of an Alaskan gas utility, The Brattle Group presented testimony on the reasonableness of the price terms in a long-term gas supply agreement. We showed that the price terms were appropriate given supply conditions in the local gas market and the need for reliable gas supplies.