Forward Markets for Energy
Valuation of a Terminated Forward Power Contract
In a dispute between a major power generator and an investor-owned utility, CFP’s Dr. Fenn, working with the law firm of Simpson Thacher, offered testimony regarding the valuation of a large forward power contract that had been lawfully terminated. The difference between the two sides’ valuations was in the tens of millions of dollars.
Over the course of a one week arbitration in Los Angeles, CA, Dr. Fenn testified for nearly a full day before retired federal judge John Martin. Dr. Fenn offered testimony on the distinction between price-takers and market-makers in forward energy markets, the price-impact of large trades, and the relationship between trading activity and price volatility. Following arbitration the parties entered into a confidential settlement.