Retail Risk-Based Pricing

Deck: 

A new approach to rate design.

Fortnightly Magazine - March 2004
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As energy markets have evolved in the late 1990s away from cost-based transactions to competitive market-based transactions, the exposure to market risks for the variable cost of supply has substantially increased.1 Reflected in these market risks are the diminishing reserves for North American gas supply, which has created conditions of extreme volatility in gas supply. The added market risk is compounded by the sensitivity of some retail load customers to weather conditions. Through integrating load and price uncertainty, risk-based pricing (RBP) determines the true cost of service and provides a more comprehensive approach to developing retail rates in today's energy markets.2

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