Dearborn, Mich.-based CMS Energy is setting up a weather derivatives desk, which will be based in Houston. The energy company recently hired Aaron Studwell, a meteorologist at Reliant Energy, to develop trading strategies and research weather patterns. Studwell said he will be in charge of trading and plans to hire an additional trader--it currently only has one--when volumes pick up. "This is going to be a graduated effort. We want to be a player in this market and provide something more to our customers," Studwell said.
CMS is not looking to be a market maker, but rather use the desk as an internal trading arm for risk protection, beginning with hedging its own corporate exposure and then slowly moving into weather origination deals involving gas and power, according to Studwell. The origination deals will be offered to the company's customers. "We want to let our customers know that we have helped them hedge their prices and we also want to manage their volume risk," Studwell said.
Mike Pass, meteorologist at Reliant, was promoted to fill Studwell's position in Houston, according to Studwell. He did not return calls.