Pasadena Water and Power
Energy and Credit Risk Policy Update
For Water & Power Department
City Council
October 28, 2025
Item #1
Pasadena Water and Power
Purpose of the Policy
“The Energy and Credit Risk
Management Policy (“Policy”) details
the key control structures and policies
utilized to manage risks associated with
PWP’s power supply portfolio. It
establishes prudent risk management
processes based on sound utility risk
management principles, while ensuring
adherence to financial requirements set
forth by the City Council as well as all
pertinent legal requirements
2 Pasadena Water and Power
Why was it established?
3 • Risk Control: Ensure prudent management of
energy market and credit risks.
• Financial & Legal Compliance: Align with City
Council financial policies and regulatory
requirements.
• Operational Clarity: Define roles, responsibilities,
and transaction limits.
• Rate Stability: Support stable and competitive
retail electric rates.
• No Speculation: Prohibit speculative trading;
focus on load-serving needs.
• Portfolio Optimization: Balance cost, reliability,
and risk in energy procurement.
• Transparency & Oversight: Regular reporting to
oversight committees for accountability.
Pasadena Water and Power
Risk Governance Structure
City
Council
Municipal
Services
CommitteeCity
Manager
General
Manager
Energy and Credit Risk Management
Committee (RMC)
Front Office
(Energy Trading)
Middle Office
(Risk Management)
Back Office
(Settlements)
Pasadena Water and Power
Revision Background
5 Last adopted PWP’s Risk Policy in 2018
Discussed Policy and background at MSC 2024
Reviewed internally & benchmarked with other utilities and consulting expertise
Needed refresh/ review of:
• Outdated/obsolete information
• Compliance with current regulatory conditions
• Transaction authority and limits
• Authorized energy markets and associated products
Pasadena Water and Power
Main Policy Updates
6 Prior Revised
Mission Statement dated language
Dated Resolutions since 2019
Glossary section based on era use
Mission Statement & values
Latest Resolutions through FY 2025
Revised to reflect updated definitions
Contract and Credit sleeving
language description not clear
Limited only with approved
counterparties, but not as the
intermediary
All Transactions with approved
counterparties with enabling
agreements
Stand alone contract or long form
confirmation
System Emergency (limited) Market Emergency in addition to System Emergency (limited)
Transaction Authorization and Limits for
General Manager and Assistant GM
Extended lead time for both trading
authorities
Pasadena Water and Power
Trading Limits and Authorizations
7 Real Time
Schedulers
Pre-
Schedulers
Energy
Trading
Manager
Assistant
General
Manager
Power Supply
General
Manager
General
Manager
with City
Manager’s
Approval
Type Purchases to meet load, covered sales and hedges depending on role Term ≤ 1 Day ≤ 1 Week ≤ 1 Month ≤ 3 Months ≤ 1 Year > 1 Year ≤ 3 Years
Lead
Time ≤ 1 Day ≤ 1 Week ≤ 1 Month ≤ 3 Months ≤ 1 Year ≤ 2 Years Total
Volume Up to 100% -115% of estimated requirement depending on role Counterparty
Credit From pre-approved counterparty credit list
Pasadena Water and Power
Staff Recommendation
City Council adopt the revised Energy
and Credit Risk Management Policy
(“Policy”) for Pasadena Water and Power
(“PWP”) wholesale energy transactions.
8