In response to the financial crisis of 2008, which severely disrupted credit markets, the US Federal Energy Regulatory Commission (FERC) introduced two new orders—Orders 741 and 741-A—to strengthen credit practices among participants in the organized wholesale electricity market and reduce potential disruptions in the flow of power.
The orders will have significant impact on utility companies including regional transmission organizations (RTOs), independent systems operators (ISOs) and market participants, affecting their businesses, organizational processes, systems, tools and people. These companies are now faced with the challenge of implementing organizational change to bolster their risk management practices and meet the requirements in seven areas outlined by the new FERC rules. While seemingly a herculean task, utility companies that succeed in implementing the required changes can potentially transform their risk management practices into value-enhancing capabilities, gaining a competitive edge over other players.
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