Gas Market Entry

Over an 8 month period we supported ESB Customer Supply (now ESB Electric Ireland) in their preparations for commencing purchasing and hedging of NBP gas to back entry into gas retailing in Ireland.

ESB needed to establish robust capabilities and processes for management of wholesale market exposures and trading risks resulting from the entry into gas retailing. The objective was to create an interim setup which was fit-for-purpose for a limited initial market entry as well as a route map for transition to a more refined environment, consistent with full market entry.

This work included:

  • Assistance¬†with the development of a hedging strategy able to accommodate the considerable uncertainty which existed with respect to customer numbers/sales during the market entry phase and adapt to revised forecasts;
  • Specification of risk metrics and control framework required to support both the initial market entry phase and subsequent steady state operations;
  • Development of a prototype model capable of analysing the Margin-at-Risk for alternative hedging strategies, supporting the client with evaluating the level of risk capital required to support the market entry phase and producing recommended risk metrics for initial management reporting purposes;
  • Modelling and quantification of the risks associated with daily balancing requirements in the NBP market;
  • Support in developing an overall map of the main systems and models needed for initial and full entry to the gas retail market including new gas demand/load forecast capabilities data to enable effective risk management and minimise the cost of sourcing;
  • Providing a route map setting out priorities for the period up to the launch in early 2011.

This engagement arose as a result of a competitive tendering process conducted by the client, and was undertaken in collaboration with Capgemini.