EDF does trading too. It's part of the business, in the world as it is today. It just requires risk management and doing only what you actually understand.

In the long run, we're all dead. John Maynard Keynes

That's the part with the biggest cash flow. The error was not to set aside enough collateral.

Also, as long as Constellation operates in "liberalised" energy markets (US, UK), they have to have an energy trading section.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith

In these discussions I always like to quote from the standard textbooks of the field. For instance, to get anywhere near a job dealing with derivatives you have to convince people that you have read Hull's Options, Futures and Other Derivatives. I built a diary around an extended quotation from it called This Should Never Have Happened. There I quoted from the Lessons for Financial Institutions. But there are also Lessons for nonfinancial corporations:

• Make sure you fully understand the trades that you are doing
  
• Make sure a hedger does not become a speculator
  
• Be cautious about making the treasury department a profit centre
  

And lessons for all users of derivatives

• Define risk limits
  
• Take the Risk Limits Seriously
  
• Do not assume you can outguess the market
  
• Do not underestimate the benefits of diversification
  
• Carry out scenario analysis and stress tests
  

The issue is that if a competitor eschews all these sensible practices they can undercut you and drive you out of business the old-fashioned way before they go out of business in a bang of their derivative portfolio. So once one competitor starts flouting risk standards, the whole sector goes to the dogs, and normally it then becomes a question of who is better capitalised when the shit hits the fan.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith