Enron plans to add a tradable precipitation index to its EnronOnline trading system within a month. Bjarne Scheildrop, director of Nordic weather trading in Oslo, said it is adding the index because of demand from energy companies in the region.
Energy companies and investors will be able to trade contracts, which pay out if a predetermined strike is reached, in the same way as heating and cooling degree-day contracts. Scheildrop said the contracts will typically cover a company's risk for a season or a specific week. He added 100% of the electricity in Norway and 50% of the electricity in Sweden is generated by hydroelectric facilities and is therefore heavily dependent on rainfall. Enron did not add the product sooner because it needed to collect data and choose which locations to include in the index. It has settled on 25 weather stations in Norway and Sweden.