Electricity Futures

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EricL

We are a growing Energy Firm in the Midwest. Currently, we buy our electricity wholesale. I noticed we can save a bit by transitioning into futures to hedge the changing rates and lower our costs. We buy 10-20 million kWh a month.

What's the best place to start looking into information for this? We were thinking of this doing this internally, but no one at the firm has the experience of futures trading. Are there books/training on the PJM Energy Market? Or should we contact a professional trader that specializes in electricity?

All answers are appreciated and if anyone wants to discuss more in detail, be free to pm me.
 
Quote from EricL:

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What's the best place to start looking into information for this? We were thinking of this doing this internally, but no one at the firm has the experience of futures trading. Are there books/training on the PJM Energy Market? [/B]
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the best place to start looking into information is

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learn enron
 
One firm that specializes in this type of thing is Pace Global, which was acquired by Siemens in 2012.

I had some preliminary conversations with them when I bought natural gas for a manufacturing company. We didn't move forward with a project because by then gas was beginning its long slide lower and spot and simple forward purchase contracts were good enough for our moderate needs.

Electricity is a whole different animal and if you don't have in-house expertise, you'll probably want to bring someone in. I know consultants are expensive, but if you manage the process wisely, you can gain some valuable knowledge - including whether you really need them - while they're in the prospecting and project proposal phase, i.e. before you've spent a dime.
 
Quote from Brighton:

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I had some preliminary conversations with them when I bought natural gas for a manufacturing company. We didn't move forward with a project because by then gas was beginning its long slide lower and spot and simple forward purchase contracts were good enough for our moderate needs.
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Yeah I think I realized that I'm not too experienced in future trading just yet so I think I might go about contacting someone else.

We are currently buying forward contracts for half year rates, but we have experienced slight loss because of the shifting tariffs.
 
Best to hire a professional. I cannot think of a market with more idiosyncracies and closely held knowledge than power.

Also, make sure you have the capital for the financially cleared ICE and Nymex swap products.
 
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