You Can Fool Mother Nature. Presented by Judy Pokorny Chief Risk Officer 2004 Enterprise Risk Management Symposium. Weather Events Significantly Impact the Bottom Line of Natural Gas and Electric Utilities.
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Presented by Judy Pokorny
Chief Risk Officer
2004 Enterprise Risk Management Symposium
“We believe weather explains 10% of gas utility stock movement.” A.G. Edwards Gas Utilities Quarterly Review, January 7, 2004
“Outlook for 2004 and Beyond. In the short term, our financial results will be affected by a number of factors, including weather conditions, …”,Exelon Corporation 2003 Annual Report, MD&A
Certain costs fit the definition “variable”
These costs are divided by 20-30 year weather statistics
Most variable costs are difficult to manage
Rate cases are infrequent
In Midwest, the trend has been warmer in winter
Questions to consider
What is the sensitivity of the firm to weather ?
What is the volatility of weather ?
Can the firm withstand an extreme event?
Are there internal mitigants?
1.File rate case frequently
2. Weather normalization clause
3. Offer fixed cost distribution product