Energy Risk Management Consultant Services

The vendor is required to provide independent validation and enhancement of its wholesale energy risk management (wholesale ERM) framework in the areas of power supply risk management, natural gas risk management and battery energy storage system ("BESS") risk management, including alignment with the current industry best practices with the highest standards in today’s utility landscape.
- Power supply risk management independent validation
1. Strategic recommendations: 
•    Compare power supply risk management and cash flow at risk (CFAR) framework against industry best practices and make recommendations for improvement and clarity.
2. Technical model review: 
•    Perform a rigorous validation of the existing CFAR mathematical models. 
•    This includes a review of the production cost model variables and parameters used to calculate the expected cash flow and the 5% and 95% confidence interval, including monte simulations, volatility assumptions, and correlation factors between energy market prices and load variability. 
•    Make recommendations to department model assumptions and parameters in refreshing the annual CFAR updates, with the goal of empowering department staff to independently continue performing subsequent updates.
- Natural gas risk management validation
1. Hedging program effectiveness: 
•    Review the draft natural gas risk management program update. 
•    Evaluate the existing financial and physical hedging strategies against current market liquidity. 
•    Evaluate department natural gas resource portfolio and make strategic recommendations to mitigate price uncertainties for minimum “burn” requirements and potential exposure during peak summer and winter events.
2. Natural gas risk management model: 
•    Develop a risk management model that best fits department energy resource and natural gas portfolios. 
•    Include both mathematical model and narratives and program details that department staff will be able to maintain going forward. 
•    The model must incorporate daily variability, pipeline constraints, market liquidity, and stress-cases scenarios such as extreme weather and supply disruptions.
- Battery energy storage system (BESS) risk management
•    Develop department BESS risk management model and program including but not limited to BESS-specific value at risk (VAR) analysis model, degradation modeling, cycling limits, warranty constraints, operational constraints, considering energy arbitrage, energy price volatility, BESS life-cycle performance, and any other BESS risk characteristics. 
•    Include both mathematical model and narratives and program details that department staff will be able to maintain going forward.