Issue
Our client, an unregulated utility company owning gas and coal powered generating units and contracts serving municipal and cooperative customers, had recently acquired its assets from another market participant. The client decided to implement an ETRM system to support management of its merchant activities of its new portfolio of assets including deal capture, inventory valuation, risk and credit management, through final settlement.
Particularly challenging in this engagement was the client’s methods for managing its coal and gas inventories. Previous attempts to structure a similar methodology in a previous version of the ETRM system for its regulated affiliate with other firms several years earlier were unsuccessful requiring the client’s affiliate to rely heavily on Excel spreadsheets.
Solution
MidDel began the engagement by providing a Proof of Concept of the Allegro Horizon ETRM system to the client to demonstrate the ability of the system to capture and manage all front to back activities required in its day-to-day and monthly processes. MidDel then began working closely with the client to produce project management documents including a Project Charter, Functional Requirements Design documents, Project Plan and Test Scripts to facilitate project management, define scope and facilitate user testing.
MidDel consultants were then tasked with configuring the system using native functionality to the extent possible and providing customization where needed, such as extending the system’s capabilities to manage and value the coal and gas inventories based on the client’s unique methodologies. Functionality was configured and, in some cases, slightly customized for trade entry, price capture, confirmations, portfolio valuation and VaR, credit management and margining, and Back Office settlement and invoicing. Significant effort was also directed to configuring user security, alerts and SOX compliance.
Result
MidDel and the client’s team overcame multiple challenges on this project, including working remotely during the pandemic and managing multiple scope changes. The final product allowed the client to eliminate a multitude of manual processes across Front, Middle and Back Offices, previously performed in Excel spreadsheets. Considerable effort was aimed at capturing and valuing the client’s gas and coal inventories using its unique methodology for Front Office management of its commodity positions. Results of its trading and scheduling activities then seamlessly flow through to Credit and Risk valuations as well as accrual and invoicing processes with little to no reliance on spreadsheets.
MidDel consultants worked closely with internal and external audit groups to implement a robust user security configuration and many alerts to help identify and prevent issues that may have otherwise created a SOX violation. MidDel also left the client with ample documentation and job aids to allow them to configure new counterparties, products, price indices and scheduling locations without further assistance from outside consultants.
