The information presented in this seminar does not exist in a book or in any other training program.
Understand how transactions are executed in each of the 8 different types of power markets, how these markets interact with each other, and how power marketers and traders make money.
Learn how to execute physical and financial power transactions, PPAs, tolling, and heat rate deals. You will also learn how these bilateral transactions interact with the ISO day-ahead energy auctions, LMP, ISO virtual transactions, Incs, Decs, UTCs, and FTR/CRRs.
The seminar also addresses some of the standard techniques used in energy/power trading, how traders can get an edge, how to trade around assets, and how energy/power marketers can make money by buying under-valued options from their customers and suppliers.
Prerequisites and Advance Preparation
This online training program requires a basic knowledge of the U.S. electric power industry. Important background information will be provided.
Access Time
The on-demand training presentations are available for a total of 45 days from the time any one of the training presentations is first viewed. After 30 days, your access to the on-demand presentations will expire. However, the PDF formatted training program slides and other documents you receive are yours to keep.
Course Content
Session 1: Introduction to Energy & Electricity Commodity Markets
71 minutes - Available Now.
What You Will Learn
- The structure, function and terminology of spot, cash, and forward natural gas, oil, and electricity commodity markets, and what energy derivatives are.
- The three different types of forward energy markets (futures, financial over-the-counter & physical) and how these markets relate to each other including the differences between physical and financial natural gas and power.
- An overview of the large and private ICE OTC over-the-counter electronic energy market and the importance of liquidity.
- How forward financial markets reduce risk and add value for energy consumers, producers and electric generators.
- An overview of the large and private ICE OTC over-the-counter electronic trading platform, the importance of liquidity, and what "clearing a trade" means with the CME Clearinghouse and ICE CLEAR.
- The difference between brokers, FCMs, traders, dealers, market-makers, marketers, power marketers, and wholesale energy merchants, and how they make their money.
- The meaning of "bid/offer spread" and other transaction terminology.
- The difference between price and "basis" risk.
- Why the hedging needs of energy producers and end-use consumers are different from those of energy marketers, oil refiners and gas/coal fired electric generators.
- The difference between price and spread hedgers.
- What liquidity risk is, and why it is a critical issue for energy markets and traders.
- The structure, function and terminology of spot, cash & forward natural gas, oil and electricity markets, and what energy derivatives are.
Session 2: Day Ahead Energy Auctions, LMP, and ISO Virtual Power Transactions
82 minutes - Available Now.
What You Will Learn
- A clear explanation of how the ISO/RTO day-ahead two-settlement energy auctions work.
- How an ISO functions as a non-profit semi-firm clearinghouse.
- Real world adjustments and generator restrictions that have turned ISO auctions into a semi-competitive/semi-administrative market.
- What Locational Marginal Pricing ( "LMP" or "LBMP" ) is and how it is used.
- The difference between Day-Ahead LMP, Hour-Ahead LMP, and Real-Time LMP and how these three markets relate to each other.
- What generator offer price caps and the generation "stack" are, and some of the obligations created when generators receive capacity or resource adequacy payments.
- The definition of the terms operating reserve allocation, accounting true-ups, uplift/make whole payments, and Extended LMP.
- Virtual/Convergence Bidding, Incs/Decs, and Dart swaps.
- What the terms LSE, QSE, SC, and FTR/CRR/TCC mean, and why they are important.
- A brief overview of FTRs/CRRs/TCCs/TRs (Hint: They are the same financial product with different names.)
Session 3: How to Buy and Sell Physical Power with Bilateral Contracts and PPAs
90 minutes - Available Now.
What You Will Learn
- What the difference is between a bilateral power contract and a power purchase agreement ("PPA").
- Why physical energy transactions are mostly a game of virtual contractual promises with no need for warehouses or inventory.
- How simultaneous virtual title transfer works and when payment is due.
- The meaning of financially firm, "LD", interruptible, unit contingent, system firm, full requirements, and where to view the contract language of the various industry-accepted master sales & purchase agreements.
- How to move physical power using OASIS and NERC tags, wheeling, pancaking rates, and why companies often move physical power financially causing it to ‘jump’ between regions.
- The important difference between physical power flows, the scheduled transmission path, and the commodity ownership chain, and why power transactions often having nothing to do with the flow of electricity on the grid.
- What "sellers choice" and "buyers choice" are, and how transaction "daisy chains" form at virtual trading hubs.
- Why many physical bilateral power transactions never go to delivery and instead are “booked-out” and settled in cash.
Session 4: How Bilateral Power and PPA Transactions Are Done Within the ISO World of Energy Auctions and LMP
90 minutes - Available Now.
What You Will Learn
- How to transport physical power financially causing it to ‘jump’ between regions which can help renewable energy reach new PPA customers.
- How commodity swaps, CFDs, and financial futures contracts can be combined with ISO energy auctions to give a company "the best of both worlds" when buying, selling, and moving power.
- A detailed listing of all the costs components contained within a competitive end-user price including supply cost, LMP spreads, HV and LV NITS (HV & LV TAC in California), UCAP, Resource Adequacy, FRACMOO (California), and the five different ancillary service charges.
- What "Basis Risk" is and how a company can hedge this risk financially using an ICE, trading desk, or ISO financial product.
- What FTRs, CRRs, and TCCs are; how they help an ISO reduce transmission congestion; how these products can hedge risk; and how they can cause transaction losses for a power marketer.
- Why most bilateral power transactions with an ISO/RTO footprint are purely financial, and why generators, LSEs, QSEs, and SCs, often self-schedule.
- What Fix-for-Floating swaps, Dart swaps, and financial futures contracts are.
- Why a power marketer often has to underprice risk to get a deal done.
Session 5: Introduction to Heat Rates, Spark Spreads, Tolling Deals, PPAs, and Heat Rate Linked Power Transactions
153 minutes - Available Now.
What You Will Learn
- What operating and market-implied heat rates are, and how they are expressed.
- The difference between a generating plant's operating heat rate and its economic or conversion heat rate.
- How to correctly convert coal, oil and natural gas prices to equivalent electric power prices.
- How to correctly calculate fuel quantities. (For example, how many MMBtus per day of natural gas is required to serve a 50 MW on-peak power deal?)
- What spark spreads and dark spreads are.
- The basics of a spark spread trade, and why merchant generating assets are call options on the spot spark spread.
- What the difference is between a tolling arrangement, power purchase agreement, and heat rate deal.
- What forward and reverse "tolling deals" are, and what can go wrong.
- How heat-rate-linked power transactions can hedge a generator's cross-commodity risk.
- How heat rate deals can be combined with natural gas futures, options, and swaps to manage electricity risk and structure profitable transactions.
- How a heat-rate-linked power transaction and Henry Hub natural gas futures contracts can be combined to hedge electricity price risk. (Example #1)
- How a heat-rate-linked power transaction can be used to sell solar electricity tied to natural gas prices under a multi-year power purchase agreement, and how to financially convert this natural gas determined revenue stream to a fixed sales price for project financing purposes. (Example #2)
- How a heat rate transaction and natural gas financial option can be combined to offer a customer a price cap on physical electricity, thereby virtually mimicking one of the benefits of owning a physical electric generation asset. (Example #3).
Session 6: Introduction to Energy Trading and How to Trade Around Energy Assets
95 minutes - Available Now.
What You Will Learn
- Some common types of energy and electricity trading, why traders specialize, and the different ways energy traders can get an "edge" on the competition.
- What the rationale, concepts and mechanics are for asymmetrical payouts, basis trading, spread trading, and trading around assets.
- How different types of energy, electricity, and asset-based trading can be summarized in a single three-dimensional graph.
- Why merchant energy and electric power assets such as firm transmission capacity, storage, processing, and generating plants are valuable call options on spreads, and how access to these assets gives energy traders a significant advantage.
- What asset “optionality” and "trading around assets" mean.
- What the terms "Contango" and "Backwardation" mean, and how the energy “carry trade” works.
- A simple rule that will guide your daily decision on whether to use or idle an asset such as firm transmission capacity, energy storage, gas processing, or natural gas/coal electric generating plants.
- A detailed example of how to hedge and trade around firm transmission capacity. This example can be easily adapted to optimizing the income of energy storage, processing, and electric generation assets.
Session 7: How Energy Marketers Make Money Buying Under-Priced Options From Their Customers and Suppliers
135 minutes - Available Now.
What You Will Learn
- How an energy marketer can make over $100,000 of profit on a single transaction.
- A brief overview of puts, calls, and basic option terminology.
- What a cash-settled European-style "swing" option is, and how it works.
- How to calculate annualized volatility, and why there can be a significant risk in the physical energy and electricity markets.
- Why energy/electricity buyers and sellers often undervalue energy options and leave money on the table through lost opportunity.
- How energy marketers can make money from commercial players who misprice risk.
- A detailed example of a structured energy transaction where an energy marketer creates a customer price cap, and why customer price caps can be difficult to sell.
- How an energy marketer can buy valuable put and call options at discounted prices from energy customers, producers, and electric generators. (Two detailed examples).
- The money-making possibilities of extendible transactions with a detailed example.
Course Provider
Mr John Adamiak,
President ,
PGS Energy TrainingJohn Adamiak is President and Founder of PGS Energy Training and an expert in energy derivatives and electric power markets. Mr. Adamiak is a well-known and highly effective seminar presenter who has over 20 years experience in the natural gas and electric power industries. His background includes 15 years as a seminar instructor, 9 years of energy transaction experience, and 6 years of strategic planning and venture capital activities. John's academic background includes an M.B.A. degree from Carnegie Mellon University.
Who Should Attend
This training program will benefit a wide variety of organizations in the electric power, financial and energy industries. Professionals from energy/power marketers, energy producers, traders, utilities, energy marketers, industrial companies, electric generators, and municipals will gain valuable insights, as will natural gas, oil and electric power executives, traders, marketers, (sales, purchasing & risk management professionals), accountants, economists, trading support staff, auditors, attorneys, government regulators, rate specialists, plant operators, engineers and corporate planners.
