Cinergy Corp. said that it has joined in the formation of an energy industry committee made up of chief risk officers who will identify best practices in risk management. Companies participating in the Committee of CROs, which was formed late last month, said the organization was made necessary by the rapid growth and increasing financial pressures in the merchant energy industry in the United States (see NGI, June 3).

Cinergy will be represented on the Committee of CROs by Gary Lavey, vice president and chief risk officer of Cinergy Services. Other members of the committee are American Electric Power, Constellation Energy, Duke Energy, Mirant, Tractebel North American and TXU.

The group said it will seek to develop commonly understood and accepted risk management procedures for the energy merchant business, following the expansion of wholesale competition in the natural gas and electricity markets. The committee is also expected to develop proposals for standardization in areas such as risk management metrics, credit practices and disclosure.

“The formation of the Committee of CROs comes at a critical time for the energy markets,” said R. Foster Duncan, CFO of Cinergy. “Our stakeholders in the financial and regulatory communities are seeking greater clarity about the energy merchant business, and the development of common standards for risk management can play a significant role in responding to their needs.

“A key element in the work of the committee is to define more specific valuation techniques and metrics so that capital at risk can be more accurately quantified for energy marketing and trading. Standardizing these processes will result in greater transparency and confidence in the marketplace.”

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