Rural Electric Cooperative Systems

While deregulation is likely to bring cost-saving and revenue-enhancing opportunities, it also brings great unpredictability.

One of the major issues facing today's energy provider is the strict obligation to provide power to the residential, industrial and commercial end users, while physical sources of supply are not 100 percent reliable. There are various options for mitigating these exposures from maintaining surplus supply to interruptible programs, but these alternatives can be expensive and are often not practical if attempting to mitigate a large exposure, for example protecting a forced outage of up to 2000 megawatts.

Also, the implications of supply shortcomings in the market are more extreme than they were three years ago, as market price volatility has increased dramatically.

ACE PowerBacker^SM assists cooperatives in limiting exposure to these uncertain events. For a fixed premium, cooperatives can transfer, in part, the financial effects of untimely forced outages and other physical events that leave cooperatives exposed to market prices.

Product Features

• Provides protection against spot market pricing for replacement power in the event of a generation outage or derate. ACE USA will pay the difference between the insured price (strike) defined in the policy and cost of replacement power.

• The covered generation asset can be a single unit, a group of units or a complete system.

• The insured price can be established based upon a market price index, actual replacement cost or other defined measures of loss (e.g., capacity payments).

• The insured event can include an additional payout trigger for extreme weather events, to allow for additional coverage when extreme temperatures result in lower tolerance to forced outages and high spot market prices.

• Policy terms available for monthly, seasonal or for multi-year periods.

Advantages

• ACE Power Products has the financial wherewithal to deal with enterprisewide risk.

• Flexible coverage options including multi-year transactions are available.

• Purchasers can buy precisely the amount and type of coverage needed.

• ACE Power Products offers an experienced underwriting staff that has the expertise to design a product specific to client needs.

• Stabilized earnings, mitigated exposures, and safeguarded profit margins will allow clients to focus more energy on growing core revenue.