Features Item : Weather Hedging -
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Published on: 7/20/2001
Last Visited: 7/20/2001
Jim Clarkson , president of Resource Supply Management in Atlanta , GA , specializes in energy procurement for commercial , institutional , and industrial companies.Risk management is now a serious part of an energy manager's job , observes Clarkson.
In the past , we changed light bulbs and replaced chillers ; now we must address energy prices , and temperature volatility contributes to cost in a big way..Market action was not even a factor when most energy managers entered the field , but utility restructuring has pushed them into direct contact with the frenetic , and nerve-racking , ups and downs caused by the interplay of supply and demand on a daily basis.
The greatest weakness of most energy managers is not knowing how to manage energy price risk , continues Clarkson , but those who do have a handle on price hedging are apt to ignore the weather risk..Keeping an eye on the trends , Clarkson keeps his clients out of financial trouble by advising them on the finer points of hedging.Electricity is now marketed in a commodity exchange atmosphere.Financial tools used to manage the price uncertainty of other commodities are now being developed and used to diminish electricity price risk.Weather derivatives are important solutions in the matrix..
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