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Update to the Credit Formulas and Detail Whitepaper David Maggio WMS March 5, 2014

Update to the Credit Formulas and Detail Whitepaper David Maggio WMS March 5, 2014. Background.

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Update to the Credit Formulas and Detail Whitepaper David Maggio WMS March 5, 2014

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  1. Update to the Credit Formulas and Detail Whitepaper David Maggio WMS March 5, 2014

  2. Background • The Other Binding Document (OBD) “Credit Formulas and Detail Whitepaper for the Day-Ahead Market and Congestion Revenue Rights Auction” was initially developed to provide additional details for credit calculations that were described more generally in the Nodal Protocols • Nodal Protocol Revision Request (NPRR) 484 modified the methodology for determining credit requirements for the Congestion Revenue Right (CRR) Auctions and put the detailed equations directly into Protocol • During the NPRR process, the OBD was not updated to reflect the NPRR 484 changes • Additionally, ERCOT staff also discovered two Day-Ahead Market (DAM) parameter settings that are not correctly captured in the OBD

  3. Proposed Revisions for CRR Auctions • Now that the specific credit equations are in the Nodal Protocols, ERCOT is proposing that the CRR section (section 8) be removed from the OBD • This will avoid issues that arise from having the same equations contained in two separate documents • The OBD title would also be changed to reflect that it now only covers the DAM • This revision will eliminate the existing conflict and will reduce the likelihood of language conflicts in the future

  4. Proposed Revisions for DAM • In section 2.2 of the OBD, a 95% factor is changed to 90% in order to be consistent with Protocol Section 4.4.10(6)(b)(i)(B) • “Credit exposure will be increased by the product of the quantity of the offer multiplied by the 90th percentile of any positive hourly difference of Real-Time Settlement Point Price and DASPP over the previous 30 days for the hour multiplied by “e3.”” • In sections 4.1.1 and 5.1.1, the Point-to-Point (PTP) discount factor is changed from 80% to 90% to reflect the change that was made during the most recent annual review of the parameter values (occurred in December of 2013) • ERCOT is reviewing the possibility of combining this OBD with the document “Procedures for Setting Nodal DAM Credit Requirement Parameters” to reduce future misalignment issues

  5. Next Steps • Revisions to the OBD require approval by TAC • ERCOT staff wanted to share these proposals with WMS prior to discussing the OBD at TAC • Additional information about credit calculations for the CRR Auction can be found in: • Protocol Section 7.5.5.3, Auction Process • Protocol Section 16.11.4.5, Determination of the Counter-Party Future Credit Exposure • NPRR484/NPRR554 FAQs v1.0

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