2nd Princeton Workshop on
Price Risk and the Future of the
Bendheim Center for Finance
Department of Operations Research and Financial Engineering
Friday October 10, 2003
In the last few years, observers of the energy markets went from the excitement of a booming sector at the cutting edge of innovation and research, to the depressing state of a shrinking industrial sector struggling for survival and deserted by disgruntled investors fleeing to safer heavens.
The initial efforts at electric deregulation in the United States have generally been viewed as a failure or, at best, inconclusive. Deregulation was promoted as a direct route to lower, fairer and more understandable prices. Instead, it is generally acknowledged that after deregulation, retail prices often went up, small consumers had less pricing leverage than larger consumers, and pricing structures and industry rules were incomprehensible other than to a small minority of market participants. Finally, corruption, unprecedented price volatility, and service disruptions ensued after deregulation. The state of California was the first state in the nation to enact electric power restructuring. We know now that its original competitive market design did not work, and this failure continues to cast doubt over the status of electric power deregulation across the United States and all over the world. The initial momentum in favor of deregulation has been reversed in many states who have cited the California debacle as the main reason for the delay, or the termination, of their plans to open their electric power markets to competition. But deregulation is here to stay for there is no way to turn back time and to restore the vertically integrated monopolies of the early nineties. Moreover, despite the failure of the California experiment and the dire predicaments in which most energy companies are finding themselves, the Federal Energy Regulatory Commission is still committed to opening electricity markets. Indeed the FERC continues to push for new policies and new market designs.
The purpose of the workshop is to bring together policy makers, regulators, business representatives, consumer advocates and academicians to address these issues in an independent setting.
Paul Addis &
Paul M. Wythes ’55 Professor of Engineering and Finance
Bendheim Center for Finance
Princeton, NJ 08544
tel: (6090 258 2310
fax: (609) 258 3791
There will be no registration fee. The workshop is sponsored by:
To register for the workshop:
8:30-8:50am - Coffee
8:50-9:00am - Welcome, Opening Remarks
9:00-10:00 am – Keynote Speaker: Vernon L. Smith (George Mason University, 2002 Nobel Price Laureate in Economics)
“Electricity Market Success Requires Deregulation Down to the End-User Outlet Plug”
10:15am –12:15pm -– Panel #1: The Structure of the Electricity Markets - Past, Present and Future - and the Resulting Implications for Market Participants
Chair: Pete Cartwright, Founder and CEO of Calpine Co.
· The California experience and its implications for the future
· Is timely national retail electric deregulation feasible or must we wait for state by state action?
· Can resident and small commercial consumers benefit from retail deregulation
· Could retail electricity deregulation lead to non-discriminatory electric consumption reductions?
· David Freeman, Chairman of the California Power Utility (CPU).
· Jimmy Glotfelty,(*) Senior Policy Advisor of the DoE Secretary.
· Nettie Hoge, Executive Director, TURN.
· James Sweeney, Professor, Stanford University;
· Robert Willig, Woodrow Wilson School, Princeton University
12:30-1:50pm – Lunch
2:00- 3:20pm – Panel #2: Energy Trading & Risk Management
· In retrospect, did electric trading have a positive impact on the electric markets?
· Why have so many merchant generators failed financially?
· How should energy trading companies be organized and capitalized in the future?
· Paul Addis, Louis Dreyfus Energy.
· Dan Gates, Moody's
· Vince Kaminski, Reliant
3:40- 5:00pm – Panel #3: Capital Intensive Investments in the Electric Market
Chair: Joe Fichera, Saber Partners.
· Can portfolio risk in the electric markets be adequately quantified?
· Can long dated merchant portfolio financial risk be adequately controlled?
· How should merchant generation be financed in the future?
· Rene Carmona, Princeton University.
· Adebayo Ogunlesi Chief Global Banking, Credit Suisse First Boston (CSFB)
· Richard P. O’Neil, Chief Economic Advisor, FERC