ETRM System Assessment: Deciding Before the System Fails
Every morning, the traders on one energy desk opened their screens and saw the previous day’s profit and loss. The figures were one full business day old. The trading system had not failed – it could no longer keep up with the business.
This was the situation at a US based company that trades natural gas, power, crude oil, and renewables. Its energy trading and risk management (ETRM) system still worked, but staff kept adding manual workarounds, and the relationship with the software vendor was getting worse.
Leadership had three options: keep the system, upgrade it, or replace it. They asked capSpire to run an ETRM system assessment and answer the question with evidence.
Four trading desks and a growing list of manual workarounds
The company trades physical and financial energy through four desks: natural gas, power, crude oil, and renewables. The renewables desk handles products such as renewable energy certificates, renewable identification numbers, low carbon fuel standard credits, and biofuels.
Behind the desks, a middle and back-office team supports the trading. Its work includes gas scheduling, power scheduling with the organizations that run regional power grids, crude oil shipping, risk reporting, trade confirmations, credit management, settlement of payments, and invoicing.
capSpire has worked with the company since 2017. This project began when leadership decided that doing nothing now cost more than changing.
Four problems that created one large risk
The company ran an older version of its main ETRM software as the central record of all trades. 4 problems had grown around it.
- The gas desk worked outside the system. The team tried to set up pipeline rates and fees in the software and could not. The vendor confirmed they would need to upgrade, which is not always the best answer. Hence the desk used manual processes for work the system was bought to do. This cost time and created audit risk.
- Daily results arrived a day late. The system’s end-of-day settlement prices, forward marks, were published one business day late. Each morning, the desk saw yesterday’s numbers instead of end of day figures. Traders had no timely view of risk when they needed it most.
- Power trading suffered unplanned downtime. The power desk relied on a third-party platform to manage bids and billing. That platform installed large software updates, sometimes without advance notice. The result was crashes and trading downtime that nobody could plan for.
- The vendor relationship weakened. The client was concerned about support quality, slow responses, and rising cost. The version the client used was also no longer a priority in the vendor’s development plans.
Underneath all 4 was one design problem. The ETRM system, the enterprise resource planning system, the power bidding platform, the risk analytics tool, and several outside data feeds all worked separately. Reporting across commodities needed heavy spreadsheet work, and large reports ran slowly. Nobody had one view of risk or profit and loss across the four desks.
How the ETRM system assessment tested 8 platforms in 6 weeks
capSpire delivered a fixed fee assessment over 6 weeks. 6 people worked on it: a project lead for power and natural gas, a crude oil specialist, a technical specialist, a senior consultant, a research specialist, and a partner who handled escalations.
The goal was not to confirm a decision already made. It was to decide, using evidence and scoring, whether to keep, upgrade, or replace the system. The work had 4 phases.
1. Align. The team reviewed how the current system was set up. It then agreed goals and success measures with leadership, including the chief financial officer.
2. Engage. The team met all four desks and the middle and back office. It documented each workflow, from recording trades to invoicing, and listed every system connection and reporting need.
3. Assess. capSpire scored 8 platforms on 10 measures. These included how well each platform supports each commodity, physical trading and scheduling, credit and payments, the vendor’s track record, ability to grow, support quality, and total cost of ownership.
Vendors gave structured demonstrations within 1 month: 4 on site and 3 remote. 3 platforms were removed early. 1 focused on refined fuels and did not fit gas or power. 1 cost too much and needed heavy internal support. 1 needed extensive custom work and had inconsistent support.
4. Review. capSpire delivered a final report with its recommendations, alongside a data management plan from its Digital Group.
Keep, upgrade, or replace: a clear recommendation for each option
Leadership did not receive a list of options to compare alone. Each option received a clear recommendation, backed by scores and risk ratings.
Keep the current version: Halt. Its product limits and rising support costs did not justify continuing. Waiting also carried risks: the company could not enter new markets, users stayed unhappy, and the vendor would not support this version long term.
Upgrade to the vendor’s newer version: Pause. The newer version is a much better product and fixes the gas problems. However the concerns about support and responsiveness would probably continue. The investment was also large, so capSpire advised comparing other vendors first.
Move to a hybrid setup, with different systems for different desks: Proceed. This was the main recommendation. Specialist vendors build products designed for specific commodities, with stronger support than the current vendor. Each desk can then use the platform that suits its needs, instead of accepting one vendor’s compromises.
capSpire recommended a request for proposal (RFP), in which vendors submit written offers, sent to a shortlist of leading specialists. The newer version from the current vendor could be included for comparison. The power bidding and billing platform needed its own RFP, covering platforms that can also work as a standalone power trading system.
What the vendor scorecard showed
The current vendor’s newer version had the highest overall score, 24.2 out of 30, because it covers many functions. It also had the lowest support score of any platform. This is why capSpire advised testing the market first.
Among the specialists, one had the highest support score, 3.75 out of 5, and led on gas and crude oil shipping. Another was strongest for power, scoring 4.5 out of 5. A third offered the best combined crude oil and gas fit, at lower total cost, with a flexible model for building features together with the client.
Two platforms were rated Risk Level 3 and effectively ruled out. Their physical trading features were still immature, and they relied too much on building features together with the client. The scores replaced a subjective debate with a documented comparison that leadership could act on.
Moving reporting from spreadsheets to a shared data platform
Choosing a new ETRM system solves only part of the problem if reporting still runs on spreadsheets. At the same time, capSpire’s Digital, Data & AI team designed a cloud data architecture featuring a bronze, silver, gold medallion layered on the clients existing Lakehouse. It uses capSpire’s digital solution, our own framework for risk analytics, process reporting, and tactical operational reporting.
The recommendation was to expand the client’s existing cloud data platform so it becomes the central data layer for all ETRM systems. The current risk analytics and reporting tool stays for the near to medium term.
This gives the client a way to stop relying on spreadsheets and to bring together risk and profit and loss data from all commodities. It also builds a data foundation that works whichever ETRM systems the client chooses.
The assessment gave the client a vendor scorecard, a risk framework, a table of recommendations for each option, an implementation plan, and a data architecture plan. The client began its request for proposal process with the evidence to choose systems for the next 10 years.
Get Started with capSpire
Our ETRM system assessments pair commodity specialists who have worked on trading desks with technical architects who have built these systems. Our advice reflects both daily trading needs and the real cost of implementation.
If your current platform is limiting your business, or you are comparing an upgrade with a replacement, we can help you decide using evidence.
Kayne Coulter
Managing Director, Advisory – North America