Regulatory VaR

Tentative agenda for the Research Lunch meeting on Wednesday, August 2nd at
11:30 am:

Objective: Develop a methodology and a model for estimating risks of the EES
Regulatory portfolio.

Discussion Items:

1. Elements of the Regulatory portfolio

- Transmission and Distribution (T&D) Positions
- Bundled Tariffs (full utility tariffs that are in place prior to
deregulation)
- Competitive Transition Charges (CTC) Positions
- Diversification between the three risk elements

2. Risk drivers in each bucket (Scott Stoness of EES to provide more detail)

- T&D: interest rates
- Bundled Tariffs: regulatory decisions, power prices, interest rates,
inflation
- CTC: power prices, fuel prices, generation valuation, generation stack,
regulatory decisions

3. Position aggregation parameters (Scott Stoness of EES to provide
suggestions)

- by NERC Region
- by state
- by utility
- by utility tariff

4. Model environment

- Excel
- GRMS/RisktRAC
- Other

5. VaR Parameters

- correlations
- factor loadings (1-factor model?)
- other

6. EES specific issues

- The size of CTC positions is impacted by the roll-off date, which is
subject to change due to a number of factors (jump diffusion?)
- T&D and Bundled Tariffs do not move daily, but rather once every 2-3 years
(event driven?)

Thanks, Vlady.

PS: Shirley, could you please make the lunch arrangements accordingly.