xcel energy services big data challenges€¦ · xcel energy inc. is a major u.s. electric and...

23
Cary Oswald Managing Director, Risk Strategy & Control Xcel Energy Services Big Data Challenges

Upload: others

Post on 24-Jul-2020

1 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

Cary Oswald

Managing Director, Risk Strategy & Control

Xcel Energy Services Big Data Challenges

Page 2: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

2

Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota, New Mexico, North Dakota, South Dakota, Texas and Wisconsin.

● Electricity Customers: 3.4M

● Gas Customers: 1.9M

Page 3: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

3

Prolonged Recession

Losing market share

Increased regulation

Budgetary pressures

Grow the business ABC Company (+14.14%)

Page 4: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

4

Government Response to Recession

Congress passes Dodd-Frank Wall Street Reform Act - 2010

Regulates OTC Energy Derivatives

Increased oversight from Commodity Futures Trading Commission (CFTC)

CFTC regulates OTC energy commodities (previously exempt)

CFTC more focused on market manipulation

Page 5: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

5

Dodd-Frank Act Impacts: All financial swaps must be reported and cleared with few exceptions

Market participants classified:

Swap dealers – Banks

Major swap participants

Non SP/MSP – “End Users”

Swap Data Repository – “SDR”

OTC Swaps between End Users must be reported within 48 hours but not cleared

Know Your Counterparty - requires additional transaction related elements to be created and captured

Page 6: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

6

Dodd-Frank Act Impacts (continued): SDRs created to report to CFTC. Market participants send/receive data

to SDRs, not CFTC

CFTC increased market monitoring activities due to transaction transparency

Federal Energy Regulatory Commission (FERC) increased market surveillance activity in response to Dodd-Frank Act

FERC Fines - Pending Regulatory Findings

● Barclays Bank $435M (fine pending)

● Deutsch Bank $1.5 M (fined)

● Gila River $2.5M (fined)

Page 7: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

7

Market Driven Response to Recession:

Grow market share

Leverage good credit ratings to transact more volume

Participate in new markets and products

Long term MISO Financial Transaction Rights (FTRs)

Page 8: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

8

Financial Transmission Rights (FTR): Created to hedge day-ahead congestion in organized electric market

A financial transaction between one physical delivery point (A) versus another delivery point (B)

Settles on day-ahead price between the two points

Purchase the difference between point “A” and “B” in auction

Prices can and do go negative

No secondary market, therefore likely to hold to maturity

Risk is greatly increased

Page 9: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

9

Long Term FTR Product: New risk metric must be developed

Up to one year in duration

No secondary market/liquidity

Traditional risk metrics such as Value-at-Risk assume short term liquidation – usually 1 to 3 days

Risk metric must be based on Monte Carlo simulation of all individual locations included in portfolio

Historical settled prices

Over 1,000 simulations

Create distributions of outcomes to assess spread risks

Page 10: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

10

Business Challenge: Data

Calculate product risks combined with overall portfolio risks

Large data sets

Example:

MISO FTR Market: 2,000 Unique pricing nodes

8,000 Potential monthly FTR paths

8,760 hours in a year with hourly prices for each node

Page 11: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

11

Business Challenge: Data Movement

Dodd-Frank Act requires movement of data from market participants to SDRs and then back to market participants

Additional attributes assigned at transaction execution and when data sent to/from SDR

Data storage requirement increased to five years past final settlement date

Page 12: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

12

Business Challenge: Analytics

Calculation of risk metric for long term FTRs

2 years hourly historical price data (8760 x 24 x 2)

1,000 simulations

Mean (expected return)

Risk distribution

Page 13: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

13

Business Challenge: Implementation

Dodd-Frank Act reporting for End Users is

Report “transitional swaps” July 2010 – August 2013

48 hour reporting requirement for post August 19, 2013 transactions

MISO Annual FTR Auction first round -

August 19, 2013

April 17, 2013

4/17/13 8/19/13

Page 14: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

14

Leverage SAS Relationship

What product and services exist to meet Dodd-Frank compliance requirements?

Partnered with SAS on their new Dodd-Frank module for their BookRunner Risk Management platform

New version for existing BookRunner product

Required joint design work, project scope and testing

Page 15: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

15

DODD FRANK COMPLIANCE

FUNCTIONAL OVERVIEW

Page 16: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

16

Leverage SAS Relationship (continued)

How to leverage existing SAS infrastructure to meet long term FTR risk metric?

Developed prototype using base SAS

Working with SAS consultants to transition prototype into existing SAS infrastructure

● SAS BookRunner v.11

● SAS BookRunner Dimensions

Page 17: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

17

SAS Solution: Dodd-Frank Act

Created business design document for Dodd-Frank module 4th Quarter 2012

Testing of solution February/March

Deploy Phase I Solution March 25, 2013

Ability to report historical transactions achieved April 8, 2013

CFTC postponed compliance 5pm EST on April 9, 2013

Page 18: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

18

SAS Solution: Long Term FTRs

Prototype developed and used February/March 2013

Evaluated bid package for April 17, 2013 auction

Approved 10.1MWh portfolio with net credit outlay of $2.0M

April 2013 began project to replace prototype for on-going risk metric calculations

May 2013 expected completion

Risk metric calculated within risk dimensions for existing and new portfolios

Page 19: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

19

Calculate the EAR based on distribution of portfolio revenue outcomes

EAR = 95th percentile negative change from original MTM

EAR limit will be a separate portfolio risk metric in addition

to VaR

Hours of simulation required for each portfolio

Example of PnL Distribution

EAR

MTM - Dayzer

(P5 – mean)

Earnings-At-Risk (EAR)

Page 20: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

20

Future Business Opportunities

CFTC Trade Surveillance Monitoring

Exponential increase in data:

“Real time” vs. “day-ahead”

Physical and financial markets

Virtual transactions

FTR transactions

Hourly positions over thousands of locations

Algorithms needed to monitor trader activity

Page 21: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

21

Future Business Opportunities (continued)

CFTC Trade Surveillance Monitoring

CFTC analyzing trades on next-day basis to act quickly against manipulative traders

Expectation that market participants police their trading floor and have necessary trade surveillance systems in place

Preliminary discussions with SAS

● Expect to issue RFP in late 2013

Page 22: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,

22

DODD FRANK COMPLIANCE

PRODUCT ROADMAP - OVERVIEW

Page 23: Xcel Energy Services Big Data Challenges€¦ · Xcel Energy Inc. is a major U.S. electric and natural gas company, providing energy to customers in Colorado, Michigan, Minnesota,