We are an industry leader in energy risk management and valuation. Our economic experts have in-depth knowledge of the electric power, natural gas, and petroleum industries in the U.S. and abroad. Our work includes management consulting, expert testimony in regulatory proceedings, and litigation support on issues including design and pricing of retail services; procurement policies for electric and gas utilities; and energy trading, contract valuation, and risk management disputes. Clients include electric and gas utilities worldwide as well as trade and industry associations, such as Edison Electric Institute (EEI) and the Electric Power Research Institute (EPRI).
The Brattle Group has developed for EPRI a suite of software tools for valuation and risk management known as the Energy Book System (EBS). The EBS provides participants in the energy industry with capabilities for valuation of structured and vanilla wholesale energy contracts; for portfolio risk measurement; for portfolio risk analysis, including extensive capabilities for simulation of hedging costs and policies; and for valuation and management of physical generation resources, with common but complex features such as start costs, non-linear heat rate curves, and embedded retirement options.
- We assessed the financial risks of energy company portfolios consisting of production facilities, purchase/sale contracts, and obligations to retail customers. Our work addressed market price risks, volumetric risk, and operational risk. We quantified the underlying risk exposures and recommended potential hedging programs to reduce overall risk to our customers.
- Several principals designed scenario-based risk assessment methods and developed software for an electric utility to manage power procurement decision-making and risk reporting. We presented our work to senior management, state regulators, and consumer advocates.
- We have measured the portfolio risk of U.S. electric utility companies with renewable and fossil generation, including evaluating exposures to power prices, fuel prices, retail loads, renewables, and fossil performance. We have also developed forward price curves and volatility term structures for underlying risks.
- We have advised electric utility companies in their solicitations and evaluations of bids received in response to option-type power purchase RFPs. Engagements have involved development of models for evaluating option-type bids, formulation of bid selection strategy, and development of forward price and volatility curves.
- Members of The Brattle Group have advised power companies in connection with the valuation of generation assets in anticipation of acquisition or divestiture, including evaluation of potential investment projects and improvements that could affect the value of those assets, such as life extension or environmental upgrades.
- We developed fuel purchase portfolio strategies for a client in the Midwest and valued specific purchase agreements for coal, natural gas, and uranium. Particular attention was given to the effect on value of non-price terms such as minimum takes, renewal options, evergreen provisions, and other terms that limit or provide flexibility to respond to unanticipated events.
- For EPRI, we developed the Generation Asset Manager (GAM) software product for valuation and management of fossil and nuclear generation resources. GAM uses option pricing theory and methods to capture the market value of generation flexibilities, such as dispatch and retirement, in the presence of power and fuel market volatility. GAM also provides capabilities for project evaluation and capital budgeting.
- The Brattle Group advised an electric utility engaged in a major capacity planning decision in which the central issue was whether to delay or abandon a nuclear construction program.
- We have developed forecasts of wholesale electric prices and associated uncertainty based on historical data, forward contract prices of power, and projections from large-scale market simulation models. We have also developed forecasts of natural gas prices and associated uncertainty based on forward and option prices.
- Several principals have forecasted market prices and revenues for generation assets shifted from regulated to competitive wholesale markets. Our studies have facilitated planning decisions, such as whether to divest or retain generation, and have been used as the basis for quantifying stranded costs associated with restructuring in regulatory hearings.
- We have prepared technical reports describing how to model the volatility of power and fuel prices in light of pronounced seasonality, reversion, and potential for spikes. We have assisted clients in applying these methods to estimate forward price curves and volatility term structures.
- We advised several clients in the electric utility industry in connection with the design, pricing, and risk management of provider of last resort (POLR) and similar retail transition services as part of industry restructuring. We developed analytic means of designing and pricing POLR services that take into account the probable customer switching that would arise in response to the particular POLR design.
- Members of The Brattle Group developed white papers for the Edison Electric Institute on the impact of default and POLR obligations on the development of competitive retail power markets and the risks of incumbent electricity utility companies.
- We prepared testimony on behalf of a New York utility in connection with its Price Protection Program. The testimony addressed the risk and cost of capital for an electric utility that had sold its generation but continued to have retail service obligations.
- The Brattle Group provided expert testimony in federal regulatory proceedings on the relationship between spot and forward electric prices during the Western markets energy crisis of 2000-2001.
- For a large utility, we conducted a comprehensive review of the prudence of gas procurement and contracting practices of a major electric utility, including gas hedging transactions. We submitted testimony before state regulators explaining why our client’s procurement practices were appropriate in light of the uncertainty in the gas requirements.
- We prepared testimony for a natural gas utility regarding a proposed risk management program and deferred cost recovery plan. Our testimony identified a framework for appropriate regulation of gas utility hedging programs.
Managing Price Risk for Merchant Renewable Investments: Role of Market Interactions and Dynamics on Effective Hedging Strategies
Published by The Brattle Group, Inc.
The whitepaper examines how wind generators could use standard electric and gas forward contracts to hedge its revenue to reduce risk over mid- to long-term horizons.
Published in Law360
Hedge Timing: There’s No Magic in Dollar Cost Averaging
Published in Public Utilities Fortnightly
Dodd Frank Compliance for Oil and Gas Companies
February 6, 2012
Julia E. Sullivan, Cary Oswald, and Romkaew P. Broehm
Published in Oil & Gas Monitor
Cleaning Up Spark Spreads: How Plant Owners Can Reduce Risk Through Carbon Markets
Published by The Brattle Group, Inc.
FASB Accounting Rules and Implications for Natural Gas Purchase Agreements
February 7, 2011
Bente Villadsen and Fiona Wang
Prepared for American Clean Skies Foundation
Managing Natural Gas Price Volatility: Principles and Practices Across the Industry
Prepared for the American Clean Skies Foundation
Utility Supply Portfolio Diversity Requirements
Published in The Electricity Journal