Risk Analysis & Regulatory Compliance Flashcards
7 cards from real CEP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Analysis & Regulatory Compliance flashcards as text
A company uses a 'collar' strategy in energy procurement. What does this accomplish?
Answer: Sets both a price floor and a price ceiling, limiting exposure on both sides
A collar involves buying a cap (ceiling) and selling a floor, which bounds the buyer's effective price range on both the upside and downside.
Under EPA's Clean Air Act Section 111(d), what primary obligation does it create for energy procurement professionals?
Answer: Awareness that carbon emission regulations may affect the cost and availability of fossil fuel-based supply
Section 111(d) authorizes EPA to regulate greenhouse gas emissions from existing power plants, potentially affecting fossil fuel procurement costs and supply availability.
Which scenario best illustrates 'load shape risk' in electricity procurement?
Answer: Actual hourly consumption patterns differ significantly from the contracted block supply profile
Load shape risk arises when a customer's actual usage profile (hourly variation) differs from the flat or block-shaped supply contracted, creating imbalance costs.
What is the role of a 'credit support annex' (CSA) in an ISDA Master Agreement for energy transactions?
Answer: It establishes collateral posting obligations to manage mark-to-market credit exposure
A CSA under an ISDA Master Agreement governs the exchange of collateral (margin) between counterparties based on the mark-to-market value of open derivative positions.
In a restructured electricity market, what is an 'Incremental Cost' or 'Locational Marginal Price' (LMP) designed to reflect?
Answer: The cost of delivering one additional megawatt-hour to a specific location, including energy, congestion, and losses
LMP reflects the real-time marginal cost of supplying electricity at a specific node, incorporating energy cost, transmission congestion, and line losses.
A risk manager calculates a 'stress test' for an energy portfolio by simulating a 30% price spike. What does this test assess?
Answer: Portfolio resilience under extreme but plausible adverse scenarios beyond VaR
Stress testing evaluates how an energy portfolio would perform under severe market conditions that fall outside typical statistical models like VaR.
Which federal regulation requires large electricity consumers in wholesale markets to register as 'end-use customers' and comply with market behavior rules?
Answer: FERC Order 745
FERC Order 745 requires demand response resources to be compensated at the LMP when they reduce consumption and are cost-effective, affecting large end-users participating in wholesale markets.