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Credit Management NPRR 484/554

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Page 1: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

Credit Management NPRR 484/554

Page 2: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

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.

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Page 3: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

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

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Page 4: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

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

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Page 5: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

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.

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Page 6: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

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 .

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Page 7: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

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

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Page 8: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

Credit Calculations

Page 9: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

Credit Calculations - Summary

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EALq = Max[(IELq during the first 40-days + DALEq), (Max{RTLE during the previous 40-days} + DALEq), (RTLFq + DALEq)] + Max[RTLCNSq,Max{URTAq during previous 40-days}] + OUTq + PULq

TPEA=

Max [0, MCE, Max(0, (EALQ + CRRA*EALA))]

EALa = Max[Max[RTLCNSa, Max{URTAa during previous 40-days}] + OUTa + PULa

TPES=

Max [0,((1-CRRA)*EALA)] + Max [0, FCEA] + IA

FCEa

IEL = DEL x Max[0.2, RTEFL] x RTAEP x (M1+M2)IEL = DEG x Max[0.2, RTEFG] x RTAEP x (M1+M2)IEL = DEL x Max[0.1, RTEFL] x RTAEP x (M1+M2) + DEG x Max[0.1, RTEFG] RTAEP x (M1+M2)

DALE = Average of CP level total of DAM Statements of QSEs by operating date * M1

RTLE = Average of CP level total of RTM Initial Statements of QSEs by operating date * M1

URTA = Average of CP level total of RTM Initial Statements of QSEs by operating date * M2

RTLF = 7 days Sum of CP level total of RTM Estimates of QSEs by operating date * 150%

OUT = OIA + UFTA + UDAA + CARD

RTLCNS = Sum of CP level total of RTM Estimates of QSEs by operating date for all RTM completed and not settled operating days

PUL = Estimated Potential Uplift for the CP for QSEs

OIA = CP level sum of (Invoice Amount - Payment Amount)

of all Invoices of all QSEs

UFTA = Average of CP level total of RTM Final Statements of QSEs by operating date * 57 + Average of CP level total of RTM True-Up Statements of QSEs by operating

date * 180

UDAA = Sum of CP level total of DAM Estimates of QSEs by operating date for all DAM completed and not settled

operating days

CARD = CP Level Estimated Credit of CRR Auction Revenue

Distribution

URTA = Average of CP level total of RTM Initial Statements of CRRAHs by operating date * M2

OUT = OIA + UFTA + UDAA

RTLCNS = Sum of CP level total of RTM Estimates of CRRAHs by operating date for all RTM completed and not settled operating days

PUL = Estimated Potential Uplift for the CP for CRRAHs

OIA = CP level sum of (Invoice Amount - Payment Amount) of all Invoices of all CRRAHs

UFTA = Average of CP level total of RTM Final Statements of CRRAHs by operating date * 57 +

Average of CP level total of RTM True-Up Statements of CRRAHs by operating date * 180

UDAA = Sum of CP level total of DAM Estimates of CRRAHs by operating date for all DAM

completed and not settled operating days

Credit Exposure Calculations Summary

Page 10: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

Credit Calculations - Summary

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FCEOBL o = ∑m [(∑h ∑j, k NAOBLMW m, h, (j, k), o ) * (-Min(0,PWA ci100, m, o, PWACP m, o)) + SEAOBL m, o]

FCE = FCEOBL o + FCEOPT o + FCEFGR o +

DIEOBL o + DIEOPT o+ DIEFGR o

FCE Calculation Summary

DIEOBL o = ∑m ∑h ∑j, k

[(FPOBLMW m, h, (j, k), o * POBLACP m, h, (j, k), o) – (FSOBLMW m, h, (j, k), o * SOBLACP m, h, (j, k), o)]

O= Owner / Counter-Partym = Operating Monthh = Operating Hourk = Sink Settlement Pointj = Source Settlement Pointf = Flow Gate RightS = Stage Change Adder

SEAOBL m, o = ∑h ∑j, k

[(FPOBLMW m, h, (j, k), o – FSOBLMW m, h, (j, k), o ) * S m, h, (j, k)]

DIEOPT o = ∑m ∑h ∑j, k

[(FPOPTMW m, h, (j, k), o * POPTACP m, h, (j, k), o) - (FSOPTMWm, h, (j, k), o * SOPTACP m, h, (j, k), o)]

DIEFGR o = ∑m ∑h ∑f

[(FPFGRMW m, h, f, o * PFGRACP m, h, f, o) - (FSFGRMW m, h, f, o * SFGRACP m, h, f, o)]

FCEOPT o = - ∑m ∑h ∑j, k [(NAOPTMW m, h, (j, k), o) * Max(0,A ci99, ctou, (j, k))]

FCEFGR o =- ∑m ∑h ∑f [(NAFGRMW m, h, f, o) * Max(0,A ci99, ctou, f)]

Page 11: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

Credit Calculations – FCE Overview

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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

Page 12: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

Credit Calculations – FCEOBL Overview

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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.

Page 13: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

Credit Calculations – FCEOPT / FCEFGR Overview

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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

Page 14: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

Credit Calculations – NPRR 484/554 Calculations Template

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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.

Page 15: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

Credit Report Templates(Templates spreadsheet provided)

Page 16: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

Implementation Phases

Page 17: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

NPRR 484/554 – Implementation Plan

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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 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 later phases; ERCOT will provide updates on the progress of implementation.

Page 18: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

NPRR 484/554 – Implementation Plan

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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)

Page 19: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

Contact Information

Page 20: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

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:» [email protected]

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Page 21: Credit Management NPRR 484/554. Legal Disclaimers and Admonitions PROTOCOL DISCLAIMER This presentation provides a general overview of NPRR 484/554 and

Questions?