The procurement management of municipal utilities involves the task of stepwise coverage of a forecasted 15 minute or half hour based demand curve at certain percentages for particular future points in time. These demand curves are exposed to uncertainty, depending on contracts with clients. This uncertainty needs to be considered in the decisions of what products to buy to cover the demand. The easiest way to do this is to buy a flexible supply contract that permits energy to be sourced depending on current demand. Such full supply contracts have been generally popular and agreed on with a long-term horizon. However, the price of the energy that is sourced in these contracts is fairly high. Structured power procurement and efficient portfolio management can considerably reduce the costs.
In the future, coverage of the demand by trading in the free market will not only be reasonable but inevitable. Today, the European Power Exchange (EEX) in Leipzig shows considerable turnover: their prices for spot and futures trading may be used by power traders as reliable reference for the still dominant OTC trades. The standardization of derivatives, such as EEX futures with respect to delivery period (month, quarter, year), allows for reasonable market valuation of more complex products, although this is still in a rudimentary phase compared to the financial markets. The introduction of options on base futures is the most recent extension in this area.
However, future prices for EEX products show considerable fluctuation. Therefore, future price uncertainty as well as the numerous opportunities to buy and sell at later points in time and rebalance the procurement portfolio need to be taken into account in today's portfolio decisions.
Decision Trees' DT@Portfolio optimization module provides optimal portfolio management decisions based on
DT@Portfolio provides optimized daily decisions on the management of power or gas procurment portfolios that are well hedged against unexpected future price movements. Considerably lower procurement costs will result.