The Evolving Management of Power Procurement

The management of power procurement continues to evolve. In the early days of deregulation, the forward curves were relatively low priced and gently sloped up as term increased. Beginning in 2005, volatility increased in the winter with a tight supply/demand balance of natural gas that was exacerbated with the arrival of Hurricanes “Katrina” and “Rita”. Volatility begot emotion which triggered panic and bad decisions. As cooler minds prevailed and addressed the new circumstances, the managing of risk matured into the separation of wholesale power into its component curves, namely heat rate and natural gas.