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Credit Management NPRR 484/554

Credit Management NPRR 484/554. Legal Disclaimers and Admonitions. PROTOCOL DISCLAIMER

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Credit Management NPRR 484/554

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  1. Credit Management NPRR 484/554

  2. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and is not intended to be a substitute for the ERCOT Nodal Protocols (available at http://nodal.ercot.com/protocols/index.html), as amended from time to time. If any conflict exits between this presentation and the ERCOT Nodal Protocols, the ERCOT Nodal Protocols shall control in all respects. ANTITRUST ADMONITION ERCOT strictly prohibits market participants and their employees, who are participating in ERCOT activities, from using their participation in ERCOT activities as a forum for engaging in practices or communications that violate antitrust laws. The ERCOT Board has approved Guidelines for Members of ERCOT Committees, subcommittees, and working Groups to be reviewed and followed by each market participants attending ERCOT meetings. If you have not received a copy of these Guidelines, please take one now, review it at this time, and remember your ongoing obligation to comply with all applicable laws, including antitrust laws.

  3. Workshop objectives Gain an understanding of… • Credit Changes related to implementation of NPRR 484/554 • High Level FCE Calculations • Credit Report Templates • Implementation Phases • Phase 1a Transition / Go-Live Plan and Key Dates

  4. Workshop outline • Introduction • NPRR 484/554 Overview • Total Potential Exposure - TPES & TPEA • NPRR 484/554 Credit Calculations • Future Credit Exposure - FCE • Future Credit Exposure for CRR Point to Point Obligations – FCEOBL • Future Credit Exposure for CRR Point to Point Options – FCEOPT • Future Credit Exposure for CRR Flow gate Rights – FCEFGR • Calculations Template • Credit Report Templates • FCEOBL Summary Report • FCEOPT Summary Report • FCEOBL Details Report • FCEOPT Details Report • Implementation Phases • Phase 1a Transition / Go-Live Plan & Key Dates • Q & A

  5. NPRR 484 • NPRR 484 :Revisions to Congestion Revenue Rights Credit Calculations and Payments • Description: This Nodal Protocol Revision Request (NPRR) replaces the Congestion Revenue Right (CRR) Auction credit calculations with path-specific exposure calculations based on Day-Ahead Market (DAM) clearing prices over a rolling period and revises the Future Credit Exposure (FCE) calculations for CRR Account Holders; which results in a modification to the payment schedule for CRRs. • On 3/19/13, the ERCOT Board approved NPRR484 as recommended by TAC in the 2/7/13 TAC Report.

  6. NPRR 554 • NPRR 554 :Clarification of Future Credit Exposure Calculation • This Nodal Protocol Revision Request (NPRR) clarifies certain language in Section 16.11.4.5 that was introduced by NPRR484, Revisions to Congestion Revenue Rights Credit Calculations and Payments. In particular, this NPRR proposes (1) revisions to the Future Credit Exposure (FCE) calculation to explicitly recognize deferred Invoice-related exposure separate from mark-to-market exposure; (2) modification of certain variables and subscripts that would otherwise appear to require calculation of certain portfolio-level values based on path-specific inputs; and (3) various administrative revisions. These changes are intended to be consistent with, and in furtherance of, the purposes of NPRR 484. • Scheduled for Board approval at the upcoming BoD meeting .

  7. NPRR 484/554 - Overview • CRR Auction Credit Requirement (ACR) for obligations valued at maximum of bid price, most recent auction clearing 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

  8. Credit Calculations

  9. Credit Calculations - Summary

  10. Credit Calculations - Summary

  11. Credit Calculations – FCE Overview 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 Flow Gate 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 Flow Gate Rights

  12. Credit Calculations – FCEOBL Overview • FCEOBL • Based on Monthly Portfolios of PTP Obligations(group of PTP Obligation Awards owned by Counterparty for the operating month) • Each PTP Obligation award is valued based on 30 day historical rolling average DAM Settlement Point Prices. • Portfolio value w.r.t to given operating day is aggregated value of its PTP Obligation awards. • Portfolio Weighted Adder (PWA) • Percentile of volume weighted value of portfolio per MWH based 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 –ve value) of PWA and PWACP.

  13. Credit Calculations – FCEOPT / FCEFGR Overview • FCEOPT / FCEFGR • Based on Monthly Portfolios of PTP Options(group of PTP Option Awards owned by Counterparty 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

  14. Credit Calculations – NPRR 484/554 Calculations Template • A semi-automatic template for NPRR 484/554 Calculations provided, this template has its own limitations and data dependencies. DISCLAIMER : This template is created for demonstration and training purposes of NPRR 484/554 calculations which is highly dependent on data entered, and is not intended to be a substitute for the ERCOT Protocols or Other Binding Documents (available at http://www.ercot.com/mktrules/). Should a conflict exist between this document and the ERCOT Protocols or an Other Binding Document, the ERCOT Protocols or Other Binding Document shall control.

  15. Credit Report Templates(Templates spreadsheet provided)

  16. Implementation Phases

  17. 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 (i.e. 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 SummaryReport (Protocol Sections 16.11.4.7) • FCEFGR SummaryReport (Protocol Sections 16.11.4.7, No FGRs active) Note: Any functionality that cannot be implemented due to system / timeline limitations will be deferred later phases; ERCOT will provide updates on the progress of implementation.

  18. NPRR 484/554 – Implementation Plan • 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)

  19. Contact Information

  20. ERCOT Credit Staff • Zaldy Zapanta • PHN: 512 225 7015 • Maruthi Gaddam • PHN: 512 275 7441 • Julio Dovalina • PHN: 512 225 7412 • Suresh Pabbisetty • PHN: 512 225 7244 • Vanessa Spells • PHN: 512 225 7014 • Please send any credit inquiries to: • ERCOTcredit@ercot.com

  21. Questions?

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