The European Perspective

This presentation gives the European perspective on energy trading and risk. Electricity markets are becoming increasingly competitive, with transactions being based more and more on prices set by market forces rather than regulation. In vertically integrated utilities, customers experienced stable rates determined by regulators based on the utility's cost of providing electricity. Risks associated with rising fuel prices, unexpected changes in demand, etc., have been managed through excess capacity, cost-of-service regulation, fuel-adjustment clauses, and careful reviews. The regulatory structure encouraged utilities to invest heavily in capacity and measures to ensure reliability.