Energy Risk Editor's letter: All change ahead

While our August issue, as usual, covers a wide variety of energy markets and topics – carbon, power, oil, technology and credit for example – one major theme has emerged as common across all these areas. It seems a central question being asked in most markets currently is whether companies are ready for the enormous changes expected to hit them soon.

Are energy companies ready for the new market environment being shaped by monumental regulation such as Dodd-Frank, Mifid II and the Market Abuse Directive?

Are their IT systems ready to handle increased reporting requirements, is the credit function ready to cope with all the changes related to clearing and are companies in the US ready for carbon trading?

Although change has long been the one constant in energy markets, the present levels of change are surely both unprecedented and unique. In theory, change as a result of regulation – that is, manufactured change as opposed to change due to fundamental vagaries – should be easier to prepare for. But in fact it is proving harder due to the lack of certainty surrounding some of the most basic tenets of the current regulatory overhaul.

If you need to keep up to date with the very latest on regulation, the risk.net website provides a wealth of information, with posts on the most recent regulatory developments, along with reaction and analysis.

Regardless of the final form of any regulation, an important trend emerging now is the move towards standardisation – both of contracts, in the case of the carbon markets for example, and standardisation of data, across all departments. This process, as it rolls across the energy complex, will be a huge aid in helping the commodity markets mature.

These topics are explored in Ready to report? and Setting the standards by Pauline McCallion.

Also, in our special report on energy trading and risk management (ETRM) technology, Ned Molloy looks at whether energy risk managers should get more involved with ETRM purchasing decisions.