1 / 8

Day Ahead Market Credit Requirements NPRR

Day Ahead Market Credit Requirements NPRR. WMS January 20, 2010. Current ERCOT Day Ahead Market Design. One of the main benefits of the nodal market design is the ability to hedge load and supply in the Day Ahead Market (DAM). The benefits are: Less volatility Increased liquidity

maree
Download Presentation

Day Ahead Market Credit Requirements NPRR

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Day Ahead Market Credit Requirements NPRR WMS January 20, 2010

  2. Current ERCOT Day Ahead Market Design • One of the main benefits of the nodal market design is the ability to hedge load and supply in the Day Ahead Market (DAM). The benefits are: • Less volatility • Increased liquidity • Better market price signals • Greater efficiencies in the wholesale market • Current DAM collateral is based on independent evaluations of bids and offers, and not the probable net exposure of bids and offers likely to be settled.

  3. Day Ahead Market Concerns • Since existing DAM collateralization formulas are based on bid and offer values instead of DAM clearing amounts, increased working capital is required. These working capital requirements may limit the ability of MPs to manage their risk by participating in the ERCOT DAM and may increase consumer costs to finance the excess capital requirements. • Notwithstanding the direct impact of reduced MP participation in the DAM and higher costs to consumers, lower MP participation in the DAM may create inefficiencies and additional volatility in the DAM. In addition to the negative impact on the DAM, excluding MPs from the DAM will increase default risk in real time.

  4. The Solution • MCWG has met numerous times with ERCOT & MPs to help develop a solution that: • Reasonably correlate the benefits of participating in the DAM without exposing other parties to unreasonable risks • Provides credit for QSEs that are using the DAM as an appropriate hedging and risk management tool • Focuses only on the DAM requirements at this phase (Protocols 4.4.10) • Utilizes the current system structure • Is Implementable before nodal go-live • High priority and urgent timeline • Luminant has filed NPRRxxx to reflect the consensus discussion at MCWG • NPRR includes variables to be discussed at future MCWG & WMS meetings • NPRR will be considered at the Jan/Feb PRS meetings

  5. DAM Mechanics as Proposed in the NPRR • For bids to buy energy, the NPRR collateralizes bids which are likely to be struck at a price level at which bids have recently cleared instead of the bid amount. • Offers to sell energy which are likely to be accepted will result in an exposure reduction of the QSE’s available credit based on the settlement point price over the previous month, instead of the amount of the offer.

  6. Current Protocols: For each DAM Energy Bid : the bid quantity X bid price NPRR: If the bid price ≤ 0, bid exposure is zero If the bid price > 0, then utilize the cth percentile of Day Ahead SPP over the previous 30 days and: a) If the bid ≤ the cth percentile, the bid exposure is zero. b) If the bid > the cth percentile (in the money), the bid exposure is computed as the lesser of dth percentile of Day Ahead Settlement Point Price (SPP) or the bid price (never less than zero) Example: dth percentile for previous 30 days is $58 at the SPP Bid 1 Bid 2 Bid 3 Current exposure amount – bid price $40 $60 $500 NPRR Exposure Amount (per NPRR) $ 0 $58 $ 58 DAM Bids

  7. DAM Energy Only Offers • Current Protocols: • For each DAM Energy Only Offer : • the offer quantity X (95th percentile of the hourly difference between Real-Time and DAM SPP over the previous 30 days for that hour) • NPRR: • Offer price ≤ ath percentile of Day Ahead SPP over the previous 30 days, credit exposure will be reduced (when SPP is positive) or increased (when SPP is negative) by quantity offer times bth percentile of Day Ahead SPP over the previous 30 days • Offer price >ath percentile of Day Ahead SPP over the previous 30 days, credit exposure will be zero • Example: bth percentile for previous 30 days is $58 • Offer 1 Offer 2 Offer 3 • Current exposure amount – Offer price $40 $60 $500 • NPRR Exposure Amount (per NPRR) $-58 $ 0 $ 0

  8. DAM Three- Part Energy Offers • Current Protocols: • For each DAM Energy Offer : • the offer quantity X (95th percentile of the hourly difference between Real-Time and DAM SPP over the previous 30 days for that hour) • NPRR: • Offer price ≤ yth percentile of Day Ahead SPP over the previous 30 days, credit exposure will be reduced (when SPP is positive) or increased (when SPP is negative) by quantity offer times zth percentile of Day Ahead SPP over the previous 30 days • Offer price > yth percentile of Day Ahead SPP over the previous 30 days, credit exposure will be zero • Example: zth percentile for previous 30 days is $58 • Offer 1 Offer 2 Offer 3 • Current exposure amount – Offer price $40 $60 $500 • NPRR Exposure Amount (per NPRR) $-58 $ 0 $ 0

More Related