Tangible results based on
@Risk applications
Dr.Ionut Purica
Advisiry Centre for Energy and
Environment
One @Risk tangible result - topics
• Risk assessment for power market
exposure of power companies
• Using @Risk
• Provision for risk assessment in the
Commercial Power Grid Code of Romania
Transelectrica - Over Time
2002/
3
Growth
2010 +
Conservativ
e Transfer
Risk
Risk
Management
Philosophy
O
O
O
O
Low risk / full
coverage
Moderate
deductibles
Insurance Co.
controls costs
Competitive
risk transfer
costs
Aggressiv
e
Risk Finance
Risk Retention
O
O
O
O
Outsourcing
O
Balance short /
long-term goals
Implement TCOR O
consulting
O
Increased cash O
flow
O
Higher
deductibles /
SIRs
Controls costs
Lower premiums
Captive
Integrated
Integrated risk risk
programme Captive
O
O
feasibility
Allocations
O
SIR feasibility & funding
Loss forecasting
O
O
Total cost of risk
consulting
O
Education and
training
Basic Services -- Placement / Administration
O
Consulting
Tasks
Risk assesment of Transelectrica
Revenues
13,000,000.0
US$
12,000,000.0
11,000,000.0
10,000,000.0
9,000,000.0
8,000,000.0
1
3
5
Tariff
7 9 11 13 15 17 19 21 23 25 27
5.00
4.00
3.00
2.00
1.00
0.00
160000
Transe
3400000
3200000
120000
100000
3000000
MWh
le i/M W h
140000
Energie Transportata
lectrica
2800000
2600000
80000
1
2400000
2200000
1
3
5
7
9 11 13 15 17 19 21 23 25 27
7
13
19
months
months
lei/MWh
Lei/US$
35000
33000
le i
31000
29000
27000
25000
1
3
5
7
9 11 13 15 17 19 21 23 25 27
months
US$/MWh
25
U S $ /M W h
months
Market risk exposure
Distribution for lei/US$
PROBABILITY
0.110
0.088
0.066
US$/MWh(Cell AF20) to US$/MWh(Cell DS20)
0.044
74.60
0.022
65.72
0.000
0.800 0.850 0.900 0.950 1.000 1.050 1.100 1.150 1.200
Transe
PROBABILITY
0.130
lectrica
0.104
47.95
0.078
39.06
0.052
30.18
0.026
Cell
0.000
0.700 0.755 0.810 0.865 0.920 0.975 1.030 1.085 1.140 1.195 1.250
Distribution for mil.lei
0.110
PROBABILITY
56.83
IN 10^-1
Distribution for MWh
0.088
0.066
0.044
0.022
0.000
0.50 0.61 0.72 0.83 0.94 1.06 1.17 1.28 1.39 1.50
=Mean,+1/-1SD
=+95%,-5
Increasing incertitude
lei/MWh/lei/US$(Cell AF22) to lei/MWh/lei/US$(Cell
DS22)
108.86
IN 10^-1
92.18
75.50
58.82
42.13
25.45
Cell
=Mean,+1/-1SD
=+95%,-5%
Risk exposure
Exposure % of tariff
Interval of analysis
2001-2002
exposure 2003
exposure 2004
cca.6%
cca.7%
Tangible result
• ANRE, the Power Regulatory Agency, has
introduced a special article (3.7) in the
Power Grid Code asking for a risk
exposure evaluation of power companies
• A risk component may be approved in the
price of power as a source of finance for
company risk mitiggation measures
Thank you Palisade !
Dr.I.Purica
+40745 167781
puricai@yahoo.com