The genesis of this paper was a discussion between Pace and NRRI personnel early in 2008 on the status of hedging by gas and electric utilities.  Both parties agree that opportunities exist for improvements in both utility and commission practices and policies, as they relate to hedging.  Pace offered to draft a paper that outlines its views on hedging.  These views derive from the extensive experiences of Pace assisting different utility clients in undertaking hedging programs.  NRRI reviewed early drafts of the paper and offered a number of comments and suggestions.  Later revisions reflect many of these comments, but not all of them.  NRRI, for this reason as well as others, does not endorse all the arguments and other content in the paper.  Notwithstanding this caveat, NRRI strongly encourages state commissions and other interested parties to read this paper and contemplate the ideas contained in it.  The paper touches on a topic of considerable importance to state commissions.  It also presents ideas, some of which are innovative, that deserve the attention of state commissions for their potential to serve customers and the public interest.  The hope of NRRI is that the paper will advance the dialogue on a topic that will continue to challenge state commissions in the years ahead.

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