Risk Management Lessons From the Polar Vortex

Were you hoping to pack away your memories of this past winter’s Polar Vortex, along with your bulky sweaters and snow pants? Not so fast! Its effects offer some important lessons on Risk Management — one of the two dedicated educational tracks featured at DRI2014 on May 20 in Atlanta.2-1 Drive SNOW Pic

Matt Simmons, Vice President of Risk Management and Chief Risk Officer at electricity company PPL Corp., discussed the event with the Wall Street Journal, calling it “a black swan event, relatively low probability, but high impact,” that went beyond the industry-standard stress-testing parameters.

Among its effects on utilities providers:

  • Many gas plants across the region couldn’t cope with the cold weather
  • Some plants were unable to convert to backup fuels
  • Gas transmission pipelines stopped working due to compressor problems
  • Frozen coal piles at coal plants, and
  • Scarcity of electricity due to inoperable generators, at a time of record demand.

So what lessons were learned? Simmons points to improving communication with suppliers, diversifying fuel sources, performing extreme-event stress tests in addition to normal testing, and preparing for peak periods in both summer andwinter.

For more, make sure to hit all our Risk Management track sessions: our expert keynote addresspanel discussion, pre-lunch roundtable discussion, and afternoon work group!


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