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Understanding Cash Trading: Roles, Responsibilities, and Market Dynamics

Cash trading is the practice of buying and selling the actual physical product underlying a futures contract, essential for utilities and market participants. It involves balancing loads and resources while netting positions, thereby influencing market stability and pricing. Utilities and marketers engage in cash trading to fill existing positions, optimize resources, and ensure reliability, while end-users, particularly non-utility generators, balance between hedging and speculation. Key factors such as weather, outages, and market volatility shape trading strategies in this dynamic landscape.

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Understanding Cash Trading: Roles, Responsibilities, and Market Dynamics

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  1. Cash Trading

  2. Cash Trading -- What is it? - The actual physical product on which a futures contract is based. - Ultimately the balancing of Loads and Resources and netting of positions. - Physical responsibilities/Short-term.

  3. Cash Trading -- Who? UTILITIES MARKETERS Load/Resource Balance Less control over “position” Lotta Hedge / Little Spec Greater control over position Lotta Spec / Little Hedge END USERS NON-UTILITY GEN Mostly Hedge, but larger EUs do spec (DSIs) Hedge and Spec

  4. Cash Trading -- Why? UTILITIES MARKETERS Fill Existing Positions Spec Trade Optimize Positions Market Maker (Some) Meet Load and Reserves Optimize Resources Reliability END USERS NON-UTILITY GEN Meet Load Fill Existing Postiions Spec Trade Optimize Positions

  5. Cash Trading -- Driving Factors - Weather - Outages (Unit, Transmission) - Hydro - Gas

  6. Cash Trading -- Day in the Life -- NW Canada Montana 50 MW Long 100 MW Short Northwest MID-C Busbar -- 200 MW Long 500 MW Short NET Position: 650 Short NOB COB 100 MW Long 200 MW Short Southern Cal Northern Cal 100 MW Short 100 MW Short

  7. Midway 125 MW Short Cash Trading -- Day in the Life -- SW Mona 25 MW Long Mead 230 NP15 75 MW Long 100 MW Short NET Position: Short 450 Four Corners 345 100 MW Long SP15 200 MW Long Palo Verde 500 625 MW Short

  8. Mid-C Prices

  9. Cash Trading -- Future Issues • Pools vs. Control Areas • Liquidity • Volatility

  10. California Cash Trading Victor

  11. California

  12. Load Position Summary Services Cash CAISO Trades

  13. CALIFORNIA TRANSMISSION SUMMARY COB MEAD NOB PALO VERDE PATH 15 PATH 26

  14. Daily Trading NP15 Price = $40 Path15 Position = <400> ZP26 Path 26 SP15 Price = $32 Position = 200

  15. Daily Trading Cob Price = $17.3 NP15 Price = $21.3 Path15 Position = <400> ZP26 Path 26 SP15 Palo Verde Price = $20.7 Price = $21.6 Position = 200

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