Retail-Centric Energy Strategy Evaluation

Issue

The client, a large North American power company with a presence in over twenty states, wanted to pursue a retail-centric strategy and consolidate its wholesale and retail system landscape:

• Integration between wholesale and retail was weak, especially in risk monitoring.
• That gap made it hard to communicate the strategy's benefits to the financial community.
• Fragmented systems limited the client's ability to align architecture to its future portfolio.

Solution

MidDel's senior team ran an eight-week top-down analysis and delivered a costed roadmap:

• Reviewed architecture, data flows, requirements, and dependencies across wholesale and retail.
• Found data spread across seven-plus systems, analytics unable to model the combined portfolio, and an unsupported wholesale-centric ETRM.
• Recommended consolidating to one repository, upgrading risk analytics, and replacing the ETRM.

Result

Projected roughly $900,000/yr in cost avoidance, up to $15 million in bad-debt reduction, and about $MM’s/yr less hedging by recognizing cross-portfolio correlation.

One version of the truth would let management evaluate integrated risk and adapt to retail acquisitions and market expansion.

By following our recommended solution, the client would have one version of truth that would enable them to better facilitate integrated reporting as well as allow management to more effectively evaluate the risk exposure of their integrated business. The solution would also make our client more adaptable to retail acquisitions and market expansion by eliminating redundant data storage.

It is estimated that the improvement will save the client over $900,000 per year in cost avoidance in regard to system license, maintenance fee, vendor support, and headcount. It is estimated the client would save up to $15 million in bad debt expense reduction by having timely enterprise-wide credit risk analytics. Furthermore, our client could expect to recognize correlation across portfolios effectively reducing their hedges by $MM’s per year which reduces the amount of collateral they post and in return increases ROI.

Key Takeaways

• Fragmented data caps your risk intelligence. Because required data sat across more than seven systems, the client could not see its combined wholesale-retail exposure - consolidating to one repository was projected to save $900,000 a year and, by revealing cross-portfolio correlation, cut hedging by $MM’s per year.
• Integrated portfolios demand integrated analytics. Recognizing correlation across wholesale and retail books reduces collateral posted and raises ROI - a strategic payoff any multi-line energy company pursuing a retail strategy should quantify before it commits.

Ready to do the same?

Cannot see your combined wholesale and retail risk in one place? MidDel consolidates the data and analytics that reveal correlation - and free up collateral. Let's talk.

For more case studies highlighting our work, please go to: Current Case Studies