LG&E Energy Marketing (LEM), a subsidiary of LG&EEnergy, has introduced risk management products designed to manageweather-related risk.

The risk management products will enable users to better manageuncertainty they face from volatility in weather patterns overtime. LEM will provide utilities and other customers with energyprices that are linked to weather conditions within their region.These prices will fluctuate within a previously defined range basedon weather statistics, such as temperatures or cooling and heatingdegree-days.

“While we obviously cannot change the weather, we can help ourcustomers manage weather risk and reduce volatility in theirfinancial performance,” said Paul Brundage, Senior Vice President,Product Management. “.[W]e expect this market to grow significantlyas more customers realize how valuable a customizedweather-protection product can be to their bottom line.”

A gas utility experiencing a milder-than-normal winter may seeits sales volumes decline dramatically. Using LEM’s weatherprotection product to manage volatility, the utility would be ableto maintain revenue levels consistent with a previously-definedrange of weather conditions.

LG&E Energy Marketing also is offering products thatfinancially settle based on weather statistics. These products arenot directly tied to an energy commodity but instead providefinancial risk management tools, the value of which are solelydependent upon published weather statistics. LEM also is exploringrisk management products based on precipitation statistics andpatterns.

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