module 2: congestion revenue rightsslide 14 allocation of crrs pre-assigned crrs (pcrrs) •...

Module 2: Congestion Revenue

Rights

Slide 2

Module Objectives: Congestion Revenue Rights

Upon completion of this module,

learners will be able to:

• Describe the Congestion Revenue

Rights (CRRs) Settlement process

• Identify the settlement charges and

payments associated with the CRR

Auction

• Explain how CRR Auction Revenues

are disbursed.

Day 1

Course Introduction 9:00 A

Congestion Revenue

Day-Ahead Market

9:30 A

Rights

1:00 P

Slide 3

Purpose of Congestion Revenue Rights

• Financial instruments

• Hedge against

congestion costs

• Financial Investment

• Payment or charge when

Grid is congested

Congestion Revenue Rights

A CRR is not a right to

deliver physical energy

Slide 4

Types of Congestion Revenue Rights

Point-to-Point Congestion

Revenue Rights

Congestion Revenue Rights

Flowgate Rights (FGRs)

Slide 5

Types of Congestion Revenue Rights

• Defined between source and

sink Settlement Points

• Two Instruments:

• Point-to-Point Options

• Point-to-Point Obligations

• Settlement based on difference

between sink and source

Settlement Point Prices

Point-to-Point Congestion

Revenue Rights

Congestion Revenue Rights

Slide 6

Types of Congestion Revenue Rights

Point-to-Point Congestion

Revenue Rights

Point-to-Point Options

• Can only result in a payment

Point-to-Point Obligation

• Can result in a payment or charge

Congestion Revenue Rights

Slide 7

Point-to-Point (PTP) Options

Source A

Sink B

Source C

$5/MWh

$10/MWh

$15/MWh

Congestion Revenue Rights

Option AB Payment = $5.00

Option CB Payment = $0.00 ?

Slide 8

Point-to-Point (PTP) Obligations

Source A

Sink B

Source C

$5/MWh

$10/MWh

$15/MWh

Congestion Revenue Rights

Obligation AB Payment = $5.00

Obligation CB Payment = -$5.00 ?

Slide 9

Types of Congestion Revenue Rights

Flowgate Rights (FGRs)

• Defined for a specific Flowgate

• Flowgate is directional network

element or bundle of network

elements

Congestion Revenue Rights

A Flowgate Right can

only result in a payment

Slide 10

Flowgate Rights (FGRs)

Types of Congestion Revenue Rights

• Settlement based on Shadow

Price of Flowgate

• Shadow Price is marginal cost to

relieve a MW of congestion on a

Flowgate.

Congestion Revenue Rights

Slide 11

Congestion Revenue Rights

Three ways of acquiring CRRs:

• CRR Auction

• Allocation (Special Case)

• Bilateral Trades

Auction

Allocation

Trade

CRRs

Congestion Revenue Rights

CRRs are allocated, traded or auctioned in:

• One month strips

• Time-of-Use Blocks

Mon. Tues. Wed. Thurs. Fri. Sat. Sun.

Off-Peak (0100 – 0600)

Off-Peak (2300 – 2400)

Peak Weekday (0700 – 2200) Peak Weekend

(0700-2200)

Slide 12

Slide 13

CRR Auction

• Monthly and Semi-Annual Auctions

• Single-round simultaneous auction

• Based on Network Operations Model

Congestion Revenue Rights

Slide 14

Allocation of CRRs

Pre-Assigned CRRs (PCRRs)

• Allocated to Non-Opt-In Entities (NOIEs)

• Based on long-term supply contracts

• Cost based on Auction clearing price

Congestion Revenue Rights

Slide 15

Trading CRRs Bilaterally

• PTP Options

• PTP Obligations

• Flowgate Rights

• Characteristics remain unchanged

• Both parties must meet credit requirements.

Congestion Revenue Rights

Slide 15

CRR Settlements

Three Settlement Processes

• CRR Auction Settlement

• CRR Settlement

• CRR Balancing Account

Congestion Revenue Rights

Slide 16

Slide 17

CRR Auction

CRR Auction

Revenue

Distribution

Charges and Payments for CRRs

Slide 18

Auction Settlements: Outcomes

Charge to CRR Account Holder for Awarded Bid in the CRR Auction

Outcome

#2

Outcome

#3

Outcome

#1

Payment to CRR Account Holder for

Awarded Offer in the CRR Auction

Charge to NOIE for Allocated CRRs

Slide 19

Auction Settlements: Charge of an Awarded Bid

• CRRAH5 bids to buy a Peak WD block of 10

MWs of PTP Options in a Monthly Auction

• Sets a Not-to-Exceed Price of $10/MW

Trigger

#1

CRR

ID Source Sink MW Price

Time

Of

Use

Buy

or

Sell

Hedge

Type Start Date End Date

54321 RN1 LZ1 10 10 Peak

WD Buy OPT 07/01/2013 07/31/2013

Monthly Auction

Slide 20

Auction Settlements: Charge of an Awarded Bid

• ERCOT executes Auction Process Trigger

#1 • Auction clears CRRAH5’s PTP Options at

Clearing Price of $2/MW

• Clearing Price less than Not-to-Exceed Price

and Bid is Awarded

Slide 21

Auction Settlements: Charge of an Awarded Bid

• CRRAH5 bought:

• 10 MWs

• Peak WD (5x16) block of PTP Options

• Price of $2/MW

• 352 hr in July 2013

Trigger

#1

Outcome

#1

• For one hour:

(Price) * (Quantity)

($2/MW) * (10 MW) = $20

• For Entire Block:

$20 * 352 = $7040

Slide 22

OPTPAMT crrh, (j, k), a = OPTPR (j, k), a * OPTP crrh, (j, k), a

Auction Settlements: Charge of an Awarded Bid

crrh CRR Account Holder

j Source

k Sink

a CRR Auction

f FGR

PTP Option Purchase Amount

Option Price

Option Purchase

CRR Auction

Revenue

Distribution

Charges and Payments for CRRs

Slide 23

OBLPAMT crrh, (j, k), a = OBLPR (j, k), a * OBLP crrh, (j, k), a

Obligation Price

Obligation Purchase

Auction Settlements: Charge of an Awarded Bid

crrh CRR Account Holder

j Source

k Sink

a CRR Auction

f FGR

PTP Obligation Purchase Amount CRR Auction

Revenue

Distribution

Charges and Payments for CRRs

Slide 24

Auction Settlements: Outcomes

Charge to CRR Account Holder for Awarded Bid in the CRR Auction

Outcome

#2

Outcome

#3

Outcome

#1

Payment to CRR Account Holder for

Awarded Offer in the CRR Auction

Charge to NOIE for Allocated CRRs

Slide 25

Auction Settlements: Payment of an Awarded Offer

• CRRAH3 offers a Peak WD block of 5 MWs of

PTP Obligations in a Monthly Auction

• Sets Minimum Reservation Price At $8/MW

Trigger

#2

CRR

ID Source Sink MW Price

Time

Of

Use

Buy

or

Sell

Hedge

Type Start Date End Date

12345 RN4 LZ3 5 8 Peak

WD Sell OBL 07/01/2012 07/31/2012

Monthly Auction

Slide 26

Auction Settlements: Payment of an Awarded Offer

• ERCOT executes Auction Process Trigger

#2 • Auction clears CRRAH3’s PTP Obligation at

Clearing Price of $8/MW

• Clearing Price meets CRRAH3’s Minimum

Reservation Price and Offer is Awarded

Slide 27

Auction Settlements: Payment of an Awarded Offer

• CRRAH3 sold:

• 5 MWs

• Peak WD (5x16) block of PTP Obligations

• Price of $8/MW

• 336 hr in July 2012

Trigger

#2

Outcome

#1

• For one hour:

(-1) * (Price) * (Quantity)

(-1) * ($8/MW) * (5 MWs) = -$40

• For Entire Block:

-$40 * 336 = -$13440

Slide 28

Auction Settlements: Payment of an Awarded Offer

OBLSAMT crrh, (j, k), a = (-1) * OBLPR (j, k), a * OBLS crrh, (j, k), a

crrh CRR Account Holder

j Source

k Sink

a CRR Auction

f FGR

Obligation Price

Obligation Sale

PTP Obligation Sale Amount CRR Auction

Revenue

Distribution

Charges and Payments for CRRs

Slide 29

Auction Settlements: Payment of an Awarded Offer

OPTSAMT crrh, (j, k), a = (-1) * OPTPR (j, k), a * OPTS crrh, (j, k), a

PTP Option Sale Amount

crrh CRR Account Holder

j Source

k Sink

a CRR Auction

f FGR

Option Price

Option Sale

CRR Auction

Revenue

Distribution

Charges and Payments for CRRs

Slide 30

Auction Settlements: Outcomes

Charge to CRR Account Holder for Awarded Bid in the CRR Auction

Outcome

#2

Outcome

#3

Outcome

#1

Payment to CRR Account Holder for

Awarded Offer in the CRR Auction

Charge to NOIE for Allocated CRRs

Slide 31

Auction Settlements: Charge for an Allocated CRR

• CRRAH4 (QSE4) nominates CAPACITY

option of CRRs

Trigger

#3

PCRR Pricing Factors

Slide 32

CRR

ID Source Sink MW

Time

Of

Use

PCRR

Type

Hedge

Type Start Date End Date

14916 RN4 LZ2 15 Peak

WD Capacity OPT 07/01/2013 07/31/2013

Auction Settlements: Charge for an Allocated CRR

Trigger

#3

• CRRAH4 nominates CAPACITY option of CRRs

• CRRAH4 nominates for 15 MWs of PTP Options

• CRR Account Holder / NOIE has a Coal

Resource

Monthly Auction

Slide 33

Auction Settlements: Charge for an Allocated CRR

• ERCOT executes PCRR Allocation Process

• Allocation Process awards PCRRs

• ERCOT executes Auction Process

• Auction Process sets price of awarded PCRRs

Trigger

#3

• Auction sets Clearing Price at $10/MW

• NOIE is charged for its allocation

Slide 34

Auction Settlements: Charge for an Allocated CRR

• CRRAH4 was allocated:

• 15 MWs

• Peak WD (5x16) block of PTP Options

• Price of $10/MW

• Pricing Factor of 10% for Coal

Trigger

#3

Outcome

#3

• For one hour:

• For Entire Block:

$15 * 352 = $5280

[(Price) * (Quantity)] * (Pricing Factor)

[($10/MW) * (15 MW)] * (10%) = $15

Slide 35

PCRROPTAMT crrh, (j, k), a, tech = PCRROPTF tech * OPTPR (j, k), a *

PCRROPT crrh, (j, k), a, tech

PCRR Option

pricing Factor Option Price

PCRR PTP

Option quantity

Auction Settlements: Charge for an Allocated PCRR

PCRR PTP Option Amount

crrh CRR Account Holder

j Source

k Sink

a CRR Auction

f FGR

tech Resource Technology

CRR Auction

Revenue

Distribution

Charges and Payments for CRRs

Slide 36

PCRROBLAMT crrh, (j, k), a, tech = PCRROBLF tech * OBLPR (j, k), a *

PCRROBL crrh, (j, k), a, tech

Auction Settlements: Charge for an Allocated PCRR

crrh CRR Account Holder

j Source

k Sink

a CRR Auction

f FGR

tech Resource Technology

PCRR PTP Obligation Amount

If the Price is greater than Zero, then:

PCRR Obligation

pricing Factor Obligation Price

PCRR PTP

Obligation quantity

CRR Auction

Revenue

Distribution

Charges and Payments for CRRs

Slide 37

PCRROBLAMT crrh, (j, k), a, tech = OBLPR (j, k), a *

PCRROBL crrh, (j, k), a, tech

Auction Settlements: Charge for an Allocated PCRR

PCRR PTP Obligation Amount

Obligation Price

PCRR PTP

Obligation quantity

If the Price is less than Zero, then:

crrh CRR Account Holder

j Source

k Sink

a CRR Auction

f FGR

tech Resource Technology

CRR Auction

Revenue

Distribution

Charges and Payments for CRRs

Slide 38

Auction Settlements: Charge for an Allocated CRR

• CRRAH4 (QSE4) nominates REFUND

option of CRRs

Trigger

#3

CRRAH4 receives the PCRRs at no cost.

Slide 39

CRR Auction

CRR Auction

Revenue

Distribution

Charges and Payments for CRRs

Slide 40

CRR Auction Settlement

Pay to QSEs

representing Load

CRR Auction Net

Receipts

+

PCRR Revenues

Distribution occurs once a month.

Auction Settlements: CRR Auction Revenues

Slide 41

Auction Settlements: CRR Auction Revenues

Collection & Distribution of CRR Auction Revenues

Charges for

Awarded

CRR Bids

(same Zone)

Payments for

Awarded

CRR Offers

(same Zone)

Charges for

Awarded

CRR Bids

(different Zones)

Payments for

Awarded

CRR Offers

(different Zones)

Slide 42

Auction Settlements: CRR Auction Revenues

• CRR Sale Amount Totals for Zone 1: -$25,000

• $0 for FGRs

• -$15,000 for Options

• -$10,000 for Obligations

• CRR Purchase Amount Totals for Zone 1: $50,000

• $0 for FGRs

• $30,000 for Options

• $20,000 for Obligations

Trigger

Outcome

Sum of Sales and Purchases

-$15,000 + -$10,000 + $30,000 + $20,000 = $25,000

Total Revenue

Slide 43

Auction Settlements: CRR Auction Revenues

CRRZREV z,a =

( OBLSAMTcrrh,(j,k),z,a,h +

OPTSAMTcrrh,(j,k),z,a,h + FGRSAMTcrrh,f,z,a,h +

OBLPAMT crrh,(j,k),z,a,h +

OPTPAMTcrrh,(j,k),z,a,h + FGRPAMTcrrh,f,z,a,h )

h

j

k

crrh

j

k

crrh

crrh

f

j

k

crrh

j

k

crrh

crrh

f

crrh CRR Account Holder

j Source

k Sink

a CRR Auction

f FGR

z Congestion Zone

h Hour

CRR Zonal Revenue CRR Auction

Revenue

Distribution

Charges and Payments for CRRs

Slide 44

Auction Settlements: CRR Auction Revenues

• CRR Sale Amount Totals inter-Zone: -$13,000

• -$0 for FGRs

• -$8,000 for Options

• -$5,000 for Obligations

• CRR Purchase Amount Totals inter-Zone: $40,000

• $0 for FGRs

• $30,000 for Options

• $10,000 for Obligations

Trigger

Outcome

Sum of Sales and Purchases

-$8,000 + -$5,000 + $30,000 + $10,000 = $27,000

Total Revenue

Slide 45

Auction Settlements: CRR Auction Revenues

CRRNZREV a =

( OBLSAMTcrrh,(j,k),a,h +

OPTSAMTcrrh,(j,k),a,h + FGRSAMT crrh,f,a,h +

OBLPAMT crrh,(j,k),a,h +

OPTPAMTcrrh,(j,k),a,h + FGRPAMT crrh,f,a,h)

h

j

k

crrh

j

k

crrh

crrh

f

j

k

crrh

j

k

crrh

crrh

f

crrh CRR Account Holder

j Source

k Sink

a CRR Auction

f FGR

h Hour

CRR Non-Zonal Revenue CRR Auction

Revenue

Distribution

Charges and Payments for CRRs

Slide 46

Auction Settlements: CRR Auction Revenues

Collection & Distribution of CRR Auction Revenues

Slide 47

Auction Settlements: CRR Auction Revenues

• PCRR Purchase Amount Totals for Zone 1:

$12,000

• $10,000 for Options

• $2,000 for Obligations

Trigger

Outcome

Sum of Purchases

$10,000 + $2,000 = $12,000

Total Revenue

Slide 48

PCRRZREV z, a =

( PCRROBLAMT crrh,(j,k),z,a,tech,h +

PCRROPTAMT crrh,(j,k),z,a,tech,h )

Auction Settlements: PCRR Auction Revenues

tech

j

k

crrh

h

tech

j

k

crrh

PCRR Zonal Revenue

crrh CRR Account Holder

j Source

k Sink

a CRR Auction

f FGR

tech Resource Technology

h Hour

z Congestion Zone

CRR Auction

Revenue

Distribution

Charges and Payments for CRRs

Slide 49

Auction Settlements: CRR Auction Revenues

• PCRR Purchase Amount Totals inter-Zone:

$8,000

• $6,500 for Options

• $1,500 for Obligations

Trigger

Outcome

$6,500 + $1,500 = $8,000

Sum of Purchases

Total Revenue

Slide 50

Auction Settlements: PCRR Auction Revenues

PCRRNZREV a =

( PCRROBLAMT crrh,(j,k),a,tech,h +

PCRROPTAMT crrh,(j,k),a,tech,h)

tech

j

k

crrh

h

tech

j

k

crrh

PCRR Non-Zonal Revenue

crrh CRR Account Holder

j Source

k Sink

a CRR Auction

f FGR

tech Resource Technology

h Hour

CRR Auction

Revenue

Distribution

Charges and Payments for CRRs

Slide 51

CRR Auction Revenue Disbursement

The CRR Auction Revenue Disbursement

(CARD) invoice will pay the net Auction

revenues to QSEs who represent Load

Disbursement based on:

• Monthly Load Ratio Share

• Zonal and Non-Zonal

• ERCOT Peak load interval

CARD CRR Auction

Revenue

Distribution

Charges and Payments for CRRs

Slide 52

CRR Auction Revenue Disbursement

Zonal Revenue Disbursement

Slide 53

CRR Auction Revenue Disbursement

• Zone 1 Amount Totals: $37,000

• $25,000 for Options, Obligations, FGRs

• $12,000 for PCRRs

• QSE4’s LRS = 10%

• Zonal peak load interval for month

• LRS at peak interval

Trigger

Outcome

(Sum of Revenue) * (Monthly Load Ratio Share Zonal)

-1 * ($25,000 + $12,000) * 0.1 = -$3,700

CRR Monthly Revenue

Slide 54

CRR Auction Revenue Disbursement

LACMRZAMT z, q = (-1) * (CRRZREV z, a + PCRRZREV z, a) * MLRSZ z, q a

z A 2003 ERCOT CMZ.

a CRR Auction

q A QSE

Monthly Load Ratio

Share Zonal

Load-Allocated CRR Monthly Revenue

Zonal Amount

CRR Auction

Revenue

Distribution

Charges and Payments for CRRs

Slide 55

CRR Auction Revenue Disbursement

Non-Zonal Revenue Disbursement

Slide 56

CRR Auction Revenue Disbursement

• Inter-Zone Amount Totals: $35,000

• $27,000 for Options, Obligations, FGRs

• $8,000 for PCRRs

• QSE4’s LRS = 20%

• ERCOT peak load interval for month

• LRS at peak interval

Trigger

Outcome

(Sum of Revenue) * (Monthly Load Ratio Share)

-1 * ($27,000 + $8,000) * 0.2 = -$7,000

CRR Monthly Revenue

Slide 57

CRR Auction Revenue Disbursement

LACMRNZAMT q = (-1) * (CRRNZREV a + PCRRNZREV a) * MLRS q a

Load-Allocated CRR Monthly Revenue

Non-Zonal Amount

a CRR Auction

q A QSE

Monthly Load

Ratio Share

CRR Auction

Revenue

Distribution

Charges and Payments for CRRs

Slide 58

Module Summary

$ Describe the Congestion Revenue

Rights (CRRs) Settlement process

$ Identify the settlement charges and

payments associated with the CRR

Auction

$ Explain how CRR Auction Revenues

are disbursed

Day 1

Course Introduction 9:00 A

Congestion Revenue

Day-Ahead Market

9:30 A

Rights

1:00 P