End-User Tariff Protection

As part of a mix of services to manage demand, many utilities offer their large commercial and industrial (“C&I”) consumers “curtailable” service tariffs that offer reduced rates. In exchange for these favorable rates load must be reduced during periods of high demand or high temperature. Failure to curtail demand results in dramatically increased rates that reflect the increased cost of supply during the curtailment period.

Large users like the reduced rates but may not be comfortable with the added risk of curtailment or penalty pricing.

ACE Power Products can work with regulated utilities and deregulated subsidiaries to custom design insurance products that allow large C&I customers to transfer risk beyond expected curtailment hours for a premium equal to a small percentage of the expected savings from the reduced rates. This insurance allows the customer to realize savings during normal summers and lock-in the maximum amount of penalties sustained during abnormally hot summers. Each policy written by ACE is custom underwritten to the specific rules and history of the tariff.

ACE Power Products can also structure the program as insurance of the utility’s own hedge instrument. This approach has the benefit of allowing the utility to market both the reduced rate tariff and the penalty hedge at the same time. The utility may insure all of the exposure under the hedge or participate in the risk along with ACE USA.

Finally, under a curtailable tariff not only does the C&I customer have the risk of high power rates, the utility has the risk of both reduced rates and reduced demand during abnormally cool summers. ACE Power Products can discuss a concurrent weather hedge to protect the utility’s revenue stream from its curtailable tariffs through the LoadBacker product line.

To learn more about these customized solutions call us directly at 1 800 356 2827 or call your insurance broker.