The utility industry is in a state of flux. Utility companies that can stay abreast of complex market changes now, stand to build and maintain a significant competitive advantage as the industry continues to evolve. Hybrid Consulting Group can help in this capacity. Given the current environment of deregulation, it is increasingly important to price both financial and physical assets correctly using a ground up approach.

A Ground Up Approach
   Hybrid Consulting Group has large proprietary databases and advanced statistical models, which form the foundation for a suite of tools to model all aspects of demand, supply, and transmission for an individual utility, region, or the entire grid. This ground up approach is a prerequisite to fully understanding the nature of electricity prices, and for the valuation of all financial and physical assets which depend upon this market.

  
Click on the image above to see an overview of Hybrid Commodities Practice, ground up
approach to modeling the joint distribution of prices for interconnected regional power markets.

   Hybrid Consulting Group has developed an innovative analytic engine to price a variety of contingent claims on power. This engine captures the salient features of power price dynamics in ways that techniques commonly employed in financial market applications cannot. It can also be employed to measure and manage risk exposure. The analytic methods we employ are flexible, so we can price a variety of power contingent claims, including traditional options and forwards, as well as complex physical supply contracts that embed volumetric components, including swing options and full requirements deals. In addition, they can be used to value physical generation assets.

     HYBRID CONSULTING GROUP, LTD.
     Foward Curve Software
     
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   The Hybrid approach recognizes that traditional modeling techniques based on the direct modeling of the price process are impractical for electricity; the non-storability of power and the potential for outages of major generation and transmission assets cause prices to behave in ways that cannot be captured using traditional asset valuation tools. Instead, Hybrid Consulting Group exploits observable power market fundamentals to develop price and risk management tools for utilities and power market traders. Power prices are driven by a combination of demand factors (especially weather that drives load) and supply factors (capacity availability and fuel prices). The behavior of these driving variables can be accurately captured and forecasted using Hybrid's advanced modeling techniques. Moreover, it is possible to quantify the complex relationship between prices and these driving variables. The end result is a pricing model which can capture the salient features of power price dynamics, including seasonality, stationarity, and susceptibility to large price spikes.