Oregon border; the other on delivery at the Palo Verde generating plant in Arizona. NYMEX hopes to have the contracts in place by the fourth quarter of this year.
R. Patrick Thompson, NYMEX president, says the decision to trade two contracts is necessary "given the rapid evolution currently occurring in western electricity markets in light of deregulation." Two contracts will provide better price reference and risk management, according to Thompson.
The NYMEX board is still working on the final details, but will soon submit its proposal to the Commodity Futures Trading Commission for final approval. NYMEX vice chairman Vincent Viola, chairman of NYMEX's electricity advisory committee, observes: "This is probably the most complicated contract the exchange has ever put together."
Principal terms for both contracts are identical:
s Contract Unit: 736 megawatt-hours (Mwh), delivered over a monthly period.
s Delivery Rate: 2 megawatts throughout every hour of the delivery period, amendable by mutual agreement.