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NPRR 484/554 – Revisions to Congestion Revenue Rights Credit Calculations and Payments Market Call

NPRR 484/554 – Revisions to Congestion Revenue Rights Credit Calculations and Payments Market Call ERCOT Public July 31, 2013. NPRR 484/554 – Overview. NPRR 484/554 substantially changes the exposure calculations and payment processes for CRRs . Highlights:

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NPRR 484/554 – Revisions to Congestion Revenue Rights Credit Calculations and Payments Market Call

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  1. NPRR 484/554 – Revisions to Congestion Revenue Rights Credit Calculations and Payments Market Call ERCOT Public July 31, 2013

  2. NPRR 484/554 – Overview NPRR 484/554 substantially changes the exposure calculations and payment processes for CRRs. • Highlights: • CRR Auction Credit Requirement (ACR) for obligations valued at maximum of bid price, most recent auction price, or path-specific P99 adder • FCE for PTP Obligations based on net portfolio obligation MWs at the minimum of P100 portfolio-weighted adders or most recent portfolio-weighted auction clearing price • FCE for PTP Options and FGRs based on net portfolio options/FGRs at P99 path-specific adder • Invoice exposures beyond current and prompt months will be collateralized rather than invoiced until operating month becomes prompt month • Provision for “State Change Adder” adjustment for both auction and future exposures to reflect changes in path conditions ERCOT Public

  3. NPRR 484/554 – Calculations Summary FCE o = FCEOBL o + FCEOPT o + FCEFGR o + DIEOBL o + DIEOPT o + DIEFGR o • FCE = Future Credit Exposure based on Mark to Market valuation • FCEOBL = Future Credit Exposure for PTP Obligations • FCEOPT = Future Credit Exposure for PTP Options • FCEFGR = Future Credit Exposure for Flowgate Rights • DIE = Deferred Invoice Exposure to cover exposure due to deferred invoicing of purchased or sold CRR Awards • DIEOBL = Deferred Invoice Exposure for PTP Obligations • DIEOPT = Deferred Invoice Exposure for PTP Options • DIEFGR = Deferred Invoice Exposure for Flowgate Rights ERCOT Public

  4. NPRR 484/554 – Calculations Summary continued.. • FCEOBL • Based on monthly portfolios of PTP Obligations (group of PTP Obligation awards owned for the operating month) • Each PTP Obligation award is valued based on 30-day historical rolling average DAM Settlement Point prices. • Portfolio value for a given operating day is the aggregated value of its PTP Obligation awards. • Portfolio-Weighted Adder (PWA) • Percentile of volume-weighted value of portfolio per MWhbased on historical DAM prices • Portfolio-Weighted Auction Clearing Price (PWACP) • Volume-weighted value of portfolio per MWH based on most recent Auction Clearing Prices • Portfolio exposure is highest risk (highest negative value) of PWA and PWACP. ERCOT Public

  5. NPRR 484/554 – Calculations Summary continued… • FCEOPT / FCEFGR • Based on monthly portfolios of PTP Options (group of PTP Option awards owned for the operating month) • Exposure calculated only for remaining days of current and prompt operating months • Path-Specific Adder (Aci99) • Value per MWh is calculated based on 99th percentile confidence interval of 30-day historical rolling average DAM Settlement Point prices • Each PTP Option award value is Aci99 * MWH • Portfolio value is aggregated value of its PTP Option awards • Currently there are no active FGRs ERCOT Public

  6. NPRR 484/554 – Credit Reports • Report Templates • Sample report templates for FCE Summary and FCE Detail reports posted as part of meeting materials for this call. • Any queries regarding them can be sent to ercotcredit@ercot.com. ERCOT Public

  7. NPRR 484/554 – Implementation Plan Implementation is planned to occur in phases • to bring potential benefits to the market as soon as feasible • to avoid conflicts with other major initiatives (e.g. settlements system rewrite) • PHASE 1A:  • Path-specific adders (Aci99) in CRR credit lock calculations (Protocol Sections 7.5.3,  7.5.5.3) • FCEOBL calculations based on PWA and PWACP (Protocol Section, 16.11.4.5) • FCEOPT / FCEFGR calculations based on Path Specific Adder (Aci99) (Protocol Section, 16.11.4.5, No FGRs active) • FCEOBL Summary Report (Protocol Sections 16.11.4.7) • FCEOPT Summary Report (Protocol Sections 16.11.4.7) • FCEFGR Summary Report (Protocol Sections 16.11.4.7, No FGRs active) Note: Any functionality that cannot be implemented due to system / timeline limitations will be deferred to later phases; ERCOT will provide updates on the progress of implementation. ERCOT Public

  8. NPRR 484/554 Implementation Plan continued.. • PHASE 1B: FCE Detail Reports • FCEOBL Detail Report (Protocol Sections 16.11.4.7) • FCEOPT Detail Report (Protocol Sections 16.11.4.7) • FCEFGR Detail Report (Protocol Sections 16.11.4.7, No FGRs active). • Portion of PWA functionality; • Specific historic DAM settled prices for source – sink pairings can be excluded from the calculation if deemed no longer relevant following TAC review and ERCOT Board approval • Any functionality deferred from Phase 1A (excluding PHASE 2 functionality) due to system / timeline limitations. • PHASE 2: • Deferred Invoice Responsibility (Protocol Sections 7.8, 9.8, 9.9, 9.9.1, 9.9.2) • Deferred Invoice Exposure Calculations (Protocol Section 16.11.4.5) ERCOT Public

  9. NPRR 484/554 – Transition / Go-Live Plan • Participation • ERCOT needs about 5 volunteer Market Participants who can fully shadow the calculations and have resources to verify ERCOT’s calculation results. • Soft Go-Live and Market Testing • Planned for week of September 30, 2013 or October 7, 2013. • ERCOT runs existing and new NPRR 484/554 FCE calculations in parallel with the active CRR ownership as of the business date. • NPRR 484/554 FCE Summary reports generated and provided to volunteer Market Participants offline by email (reports cannot be accessed using digital certificates during the transition period). • Existing FCE Summary Reports will continue to be available on the MIS Certified area during transition period. • Volunteer Market Participants perform these calculations and verify if they match with those of ERCOT. ERCOT Public

  10. NPRR 484/554 – Transition / Go-Live Plan continued.. • Cut-Over and Hard Go-Live • Cutover planned on Sunday, October 20, 2013. • Existing FCE Calculations and FCE Summary Reports are effective until the business date of October 20, 2013. • NPRR 484/554-based FCE Calculations and FCE Summary Reports are effective starting with the business date of Monday, October 21, 2013. • Existing FCE Summary Reports will be turned off and NPRR 484/554 based FCE Summary reports are available on MIS Certified area starting from October 21, 2013. • Market Participants should note that NPRR 484/554 calculations exposure may have an effect on the ACLs for CRR and DAM ERCOT Public

  11. NPRR 484/554 – Milestones and Timeline ERCOT Public

  12. NPRR 484/554 – Market Training ERCOT will be holding three market training sessions on NPRR484/554 as per the following schedule Note: ERCOT requests all the Market Participants to attend this training. ERCOT Public

  13. NPRR 484/554 Questions ? ERCOT Public

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