Energy Prop Shop Exit Opportunities

They are an out growth of Dean and Co investment and a strong shop in the FTR/virtual space. They have a very academic approach to trading, akin to consulting given their origins--not your typical power trading shop. They have a very restrictive non-compete that essentially bars you from any trading gigs for a a year or two if you leave, and many graduates of the analyst program go back to school (MBA/PhD) if they do jump.

One of the bigger and more "corporate" trading shops. Used to do very large volume in FTR's and Virtuals, but due to pending FERC proceedings regarding their virtual trading activity, as well as ongoing issues with PJM FTR underfunding, they have been forced to cut back on a lot of trading activity. A lot of people are leaving. They mostly and almost exclusively hire recent graduates right out of top tier schools and try to keep them around for a while. I've heard salaries for analysts are typically in the 80's with a 20-30k bonus. Very team-oriented environment, where collaboration to develop trade strategies is more important than individual trading. Have also heard exit opportunities are slim. My company has gotten a bunch of resumes from them recently.

I work at XO Energy. We are a financial marketer that trades FTR's, UTC's, and virtuals in PJM, MISO, NYISO, ERCOT, and CAISO. We are also very active in promoting the benefits of financial participants in the marketplace through providing liquidity, helping price convergence, and providing competition to help deter market power.

The particular case I was referring to is FERC Docket No. EL12-8-000 (Google 20120309-el12-8-000.ashx from pjm's website). Essentially, DC Energy was transacting Internal Bilateral Transactions (IBT's) between their affiliates that enabled them to offset balancing operating reserve (deviation) charges from virtual trading activity. When a participant trades an increment offer or decrement bid, they are charged an hourly rate per MWh transacted. These MWh can be offset if a participant also has an IBT (for each MWh injected into the grid with an INC is offset by a MWh that is purchased with an IBT). This then negates the associated charges, as the deviation is netted out to 0 MWh. PJM ruled that this can no longer be allowed, since DC was not actually purchasing or selling physical MW, and was between their own affiliates. PJM is attempting to back-charge DC for all of the MWh that "should not have been" netted out, which is a pretty substantial amount. For this reason, as well as others in the PJM market, is why I believe they cut back, or seized operations in the virtual markets. I could be wrong on that, but I'sm pretty certain that'ss true. Google DC Energy Internal Bilateral Transaction or something and I'sm sure you can find out a lot about it.

The reason why the whole thing is kind of BS is that PJM still allows utilities to engage in this practice, and is pretty much being discriminatory against financial participants. Utilities can engage in IBT'ss in order to offset these deviations, even if they are not being used to transact physical power. Therefore, they are able to avoid many charges that they should in fact be held accountable for, since physical load and generation are the primary reasons for the deviation charges to occur.

Another reason for the decline in business is because of PJM'ss FTR Underfunding issues (google it). Payouts to companies that own FTR'ss now average 60-70%, down from the average of about 95%.This is due mostly because of congestion patterns in Western PJM, as the constraints between PJM and MISO are having a negative impact on the system. The underfunding means that if a company was supposed to receive $1 million from FTR revenue, they are really only paid about $600,000. It is a huge issue in PJM, and has caused MANY participants to discontinue their business in FTR's.

Hope that helps.

I am looking to hire a Up To trader