HOUSTON, July 26, 2013 /PRNewswire/ -- Participants in the desert southwest power markets soon will get the chance to be protected against weather extremes, using dual-trigger options tied to Powerdex, a popular price benchmark used throughout the West in deal structuring, settlement, rate cases and valuation.
Since 2002, Powerdex has published the only true hourly price index, consisting of real-time, hour-ahead and balance-of-the-day transactions in the wholesale power markets. The independent resource is catching on with entities moving towards net metering and demand response programs.
The Powerdex Hourly Indexes are used by such entities as the nation's largest power marketer, the Bonneville Power Administration, for energy and generation imbalance settlement; by multi-state utility PacifiCorp in modeling, resource planning and rate cases; by the NASDAQ OMX as a proxy for liquidated damages; by the California ISO for market monitoring, and by the Northwest Power Pool for reserve sharing calculations.
Powerdex publishes hourly indexes for nine points in the West: Mid-Columbia, COB, NOB, NP-15, SP-15, Palo Verde, Four Corners, Mead and Mona. Wholesale electricity indexes once had only two timeframes -- for the dark hours of the night and for the daytime -- both traded on a "day-ahead" basis.
Since then, the power industry has been morphing to provide more renewable resources in utilities' portfolios, making the hourly index invaluable for variable power generation such as wind. "Everyone knows wind won't blow at the same force for all 16 hours of a day-ahead, on-peak schedule," said Bobette Riner, Powerdex president. "This gives those generators more flexibility in their contracts."
Wind developers can use Powerdex not only as a price signal to obtain financing to develop a wind farm, but also to settle by the hour with their counterparties. "We really loved it when one wind developer in Washington used our data to negotiate land leases with ranchers," Riner added. "That's not something we would have dreamed of when we developed the index methodology."
Powerdex and the international company creating the option products reached an agreement this week. The company, which will be named at a later date, plans to roll out similar hedging products in other portions of the West.