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NPRR638 (Seasonality) Back-Cast Results CWG/MCWG Suresh Pabbisetty, ERP, CQF, CSQA. ERCOT Public

NPRR638 (Seasonality) Back-Cast Results CWG/MCWG Suresh Pabbisetty, ERP, CQF, CSQA. ERCOT Public October 3, 2014. Background. Background:

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NPRR638 (Seasonality) Back-Cast Results CWG/MCWG Suresh Pabbisetty, ERP, CQF, CSQA. ERCOT Public

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  1. NPRR638 (Seasonality) Back-Cast Results CWG/MCWG Suresh Pabbisetty, ERP, CQF, CSQA. ERCOT Public October 3, 2014

  2. Background • Background: • At its September 17, 2014 meeting, CWG/MCWG requested analysis to estimate the impact of using the maximum, instead of the average, of recent statements to compute RTLE and DALE. ERCOT Public

  3. Back-Casting Model Model Assumptions: • Prices do not reflect replacement of historic price caps with current price caps which is in the NPRR. • Model does not include the look-back of rolling averages over previous 40 days as proposed in the draft NPRR. This increases volatility of back-cast values. • Model uses standard M1 extrapolation value. This will tend to understate back-tested credit exposure values. • Prices do not include ORDC price adders. ERCOT Public

  4. Back-Casting Prototype Results – DAM Price Spread DAM price spread was calculated as the difference between DAM Price Estimate based on proposed methodology and actual DAM Settlement Point Prices. ERCOT Public

  5. Back-Casting Prototype Results – RTM Price Spread RTM price spread was calculated as the difference between the RTM price estimate based on NPRR 638 and actual RTM Settlement Point Prices. Summer prices are higher under NPRR 638. ERCOT Public

  6. Back-Casting Prototype Results – RTLE comparison Seasonality RTLE using average statement amount compared to max. Notes: Data points represent one day per month only. ERCOT Public

  7. Back-Casting Prototype Results – RTLE comparison RTLE based on NPRR638 methodology compared with RTLE based on current Protocol calculations. Notes: Data points represent one day per month only. ERCOT Public

  8. Back-Casting Prototype Results – DALE comparison Seasonality DALE using average statement amount compared to max. Notes: Data points represent one day per month only. ERCOT Public

  9. Back casting Prototype Results - Summary • DAM and RTM spreads: • DAM and RTM prices are materially higher during summer peaks • DAM and RTM spreads generally follow seasonal patterns • Methodology does not account for unexpected price spikes • RTLE comparison: • Proposed methodology RTLE (Real-Time Liability Extrapolated) is higher during summer months and generally lower during non-summer months. • Aggregated RTLE based on NPRR638 methodology appears more volatile than current methodology due to differential in lookbacks which is under review. • Based on earlier back-testing, RTLE increases in the aggregate for a majority of Counter-Parties (decreases primarily for generators). ERCOT Public

  10. Questions ERCOT Public

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