Jeff Walker

CFTC EEMAC Meeting – Panel IIMay 7, 2020
2

Electric Generation Fuel Fact Pattern

2. Forward

Hedge

Natural Gas

or Fuel Oil

Price Risk

With

Derivative

Contracts

1. Forecast Four

Years of Electric

Load & Model

“Anticipated

Requirements”

of Generation

Fuel(s)

3. Buy the

“Unfilled”

Natural Gas

or Fuel Oil

Day‐Ahead

to Generate

Electricity

4. Deliver

Electricity to

Load On‐

Demand &

Sell at Rate

Tariff

Cash

Commodity

“P”

Cash

Commodity

“S”

“Referenced

Contract(s)”

🔒$
3

Unfilled Anticipated Requirements

2. Forward

Hedge

Natural Gas

or Fuel Oil

Price Risk

With

Derivative

Contracts

1. Forecast Four

Years of Electric

Load & Model

“Anticipated

Requirements”

of Generation

Fuel(s)

3. Buy the

“Unfilled”

Natural Gas

or Fuel Oil

Day‐Ahead

to Generate

Electricity

4. Deliver

Electricity to

Load On‐

Demand &

Sell at Rate

Tariff

Cash

Commodity

“P”

Cash

Commodity

“S”

“Referenced

Contract(s)”

🔒$

NO CROSS‐COMMIDITY HEDGING

Good News: This “Unfilled,” Matched‐Commodity Fact Pattern is Enumerated
4

Unpriced Anticipated Requirements

2. Forward

Hedge

Natural Gas

or Fuel Oil

Price Risk

With

Derivative

Contracts

1. Forecast

Four Years of

Electric Load &

Model

“Anticipated

Requirements”

of Generation

Fuel(s)

3. A Forward

Unpriced

Purchase of

Fuel(s) to

Secure a

Reliable

Physical

Flow

4. Schedule

Day‐Ahead

Priced

Natural Gas

or Fuel Oil to

Generate

Electricity

Cash Commodity “P”

Cash

Commodity

“S”

“Referenced

Contract(s)”

5. Deliver

Electricity to

Load On‐

Demand &

Sell it at

Rate Tariff

Needed: Unfilled OR Unpriced Anticipated Requirements

• Define “Unfilled” Accordingly, or

• Extend the Exemption

🔒$
5

Cross‐Commodity Hedges

2. Forward

Hedge Cash

Commodity

“P” With

Crude

Derivate

Contracts

1. Forecast

Four Years of

Electric Load &

Model

“Anticipated

Requirements”

of Generation

Fuel(s)

3. A Forward

Unpriced

Purchase of

Fuel Oil to

Secure a

Reliable

Physical

Flow

4. Schedule

Day‐Ahead

Priced Fuel

Oil to

Generate

Electricity

Cash Commodity “P”

Cash

Commodity

“S”

“Referenced

Contract(s)”

5. Deliver

Electricity to

Load On‐

Demand &

Sell it at

Rate Tariff

Needed: In the Scope of (a)(5) Cross‐Commodity Hedges, Include

(a)(10) Unfilled [or Unpriced] Anticipated Requirements

Cross‐Commodity Enumerated Hedging is When the Referenced Contract’s Underlying

Commodity Differs from Cash Commodity “P” Below

🔒$
6

Some Bilateral Electric TransactionsSimilar to Fuel Hedging• The Asks Are Identical

‒ Unfilled [or Unpriced] Anticipated Requirements‒ Cross Commodity Scope Incudes Anticipated Requirements

Use Natural Gas

DerivativeContracts to

Hedge Forward

Electric Energy

Price Exposures

Forward Months’

Unpriced Wholesale

ElectricTransactions• Lock in Conversion

of Natural Gas to

Electric Energy

• Satisfy Capacity

ReliabilityRequirements

Daily ElectricEnergy Delivered

is Priced Directly

to Natural Gas

Daily Indices

🔒$
7

Beyond Enumerated Hedging• Commercial End‐User Compliance Requirements

‒ Below Position Limits

‒ Exceeding Position Limits

• Not‐for‐Profit Energy Utility Exemption Concept

‒ Request for Comments
Jeff Walker

CFTC EEMAC Meeting – Panel II

May 7, 2020