http://nodal.ercot.com 1 coms/settlements/credit weekly update may 21, 2010

http://nodal.ercot.com 1

COMS/Settlements/Credit

Weekly Update

May 21, 2010


Antitrust Admonition

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 the 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 Participant attending ERCOT meetings. If you have not received a copy of these Guidelines, copies are available at the Client Relations desk. Please remember your ongoing obligation to comply with all applicable laws, including the antitrust laws.

DISCLAIMER

All presentations and materials submitted by Market Participants or any other Entity to ERCOT staff for this meeting are received and posted with the acknowledgement that the information will be considered public in accordance with the ERCOT Websites Content Management Operating Procedure.


Agenda

• Anti-trust Admonition

• Standing Reports and Updates– Operating Day Settlement Reports– Week in Review/General Reminders– Next Week’s Activities

• Environment Report– Known Issues

• Credit

• Question and Answers / General Discussion

ERCOT asks that Market Participants log into the WebEx session using their company name and then their name. This will allow ERCOT to take roll-call offline


DAM Settlement Overview for May 14

Statement and Invoice Overview

• 214 Statements/Invoices posted to QSEs

• 49 Statements/Invoices posted to CRRAHs

• 48 QSEs received Statements/Invoices for $0

CRR Overview

• There were CRR Derations

• CRR Owners were fully funded (i.e. there were no Short Fall Charges)

General Reminders/Updates

• Submit any questions/issues about statements, invoices, extracts or calculations to [email protected]

Operating Date 05/14/2010 DAM Settlement Totals

Day Ahead Energy

Day Ahead Energy Sales -$25,012,073.39

Day Ahead Energy Purchases $28,094,433.83

PTP Obligation Bought in the DAM $666,857.89

Day Ahead Congestion Rent $3,749,218.33

Day Ahead Make Whole

Day Ahead Make Whole Payments -$84,792.99

Day Ahead Make Whole Charge $84,793.01

Day Ahead Ancillary Services

Non-Spin Reserve Payment -$220,764.48

Non-Spin Service Charge $220,764.51

Regulation Down Payment -$123,334.78

Regulation Down Charge $123,334.85

Responsive Reserve Payment -$458,054.87

Responsive Reserve Charge $458,054.63

Regulation Up Payment -$197,875.44

Regulation Up Charge $197,875.49

Day Ahead CRR

Day Ahead Obligation -$698,952.41

Day Ahead Obligation with Refunds $0.00

Day Ahead Option -$780,192.80

Day Ahead Option with Refunds $0.00

Short Fall Charges to CRR Owners $0.00

Balancing Account Credit $2,270,073.12


DAM Settlement Overview for May 19

Statement and Invoice Overview

• 204 Statements/Invoices posted to QSEs

• 49 Statements/Invoices posted to CRRAHs

• 45 QSEs received Statements/Invoices for $0

CRR Overview

• There were CRR Derations

• CRR Owners were fully funded (i.e. there were no Short Fall Charges)

General Reminders/Updates


Operating Date 05/19/2010 DAM Settlement Totals

Day Ahead Energy

Day Ahead Energy Sales -$16,279,795.10

Day Ahead Energy Purchases $18,938,835.67

PTP Obligation Bought in the DAM $70,211.68

Day Ahead Congestion Rent $2,707,495.92

Day Ahead Make Whole

Day Ahead Make Whole Payments -$269,094.66

Day Ahead Make Whole Charge $269,094.82

Day Ahead Ancillary Services

Non-Spin Reserve Payment -$196,359.74

Non-Spin Service Charge $196,359.74

Regulation Down Payment -$470,255.28

Regulation Down Charge $470,255.09

Responsive Reserve Payment -$424,045.18

Responsive Reserve Charge $424,045.18

Regulation Up Payment -$205,278.17

Regulation Up Charge $205,278.38

Day Ahead CRR

Day Ahead Obligation -$258,749.15

Day Ahead Obligation with Refunds $0.00

Day Ahead Option -$301,326.81

Day Ahead Option with Refunds $0.00

Short Fall Charges to CRR Owners $0.00

Balancing Account Credit $2,147,419.96


RTM Settlement Overview for May 5

Statement Overview

• 201 Statements posted to QSEs

• 4 Statements posted to CRRAHs

• 20 QSEs received Statements for $0

Charge Type Overview

• RUC Clawback was high to due to large number of RUC Commitments, RTSPPs at $2499 and resources not following RUC Instructions

• High Base Point Deviation charges due to high prices and resources not following base points (still on Zonal Control)

General Reminders


Real-Time Energy Imbalance $29,746,716.14

Block Load Transfer Resource $0.00

Real-Time DCTIE import $0.00

Real-Time DCTIE export $0.00

Real-Time Congestion Payment or Charge $34,635.04

Real-Time PTP Obligation -$1,052,763.48

Real-Time Revenue Neutrality Allocation -$25,008,243.27

Base Point Deviation Charge $24,364,387.74

Base-Point Deviation Payment -$24,364,387.37

Real-Time Option w ith Refund $0.00

Real-Time Option -$3,720,344.53

Real-Time CRR Ow ners Shortfall Charges $0.00

Black Start Service Payment -$17,793.36

Black Start Service Charge $17,793.42

RMR Standby Payment -$37,591.68

RMR Energy Payment -$143,052.81

RMR Adjustment Charge $1,671,116.19

RMR Unexcused Misconduct Charge $0.00

RMR Service Charge -$1,490,471.62

SASM Reg Dow n Payment $0.00

Reg Dow n Failure to Provide Charge $0.00

Real Time Reg Dow n Adjustment Charge -$0.03

SASM Non-Spin Payment -$742.60

Non-Spin Failure to Provide Charge $0.00

Real Time Non-Spin Adjustment Charge $742.38

SASM Reg Up Payment $0.00

Reg Up Failure to Provide Charge $0.00

Real Time Reg-Up Adjustment Charge $0.10

SASM Responsive Reserve Payment $0.00

Responsive Reserve Failure to Provide Charge $0.00

Real Time Responsive Reserve Adjustment Charge -$0.02

RUC Claw back Charge $32,226,146.24

RUC Claw back Payment -$32,226,146.33

RUC Decommitment Payment $0.00

RUC Decommitment Charge $0.00

RUC Make-Whole Payment -$235.72

RUC Capacity-Short $235.64

RUC Make-Whole Uplif t Charge $0.04

ERCOT System Administration Charge $366,262.25

QSE Nodal Surcharge Fee $142,237.14

Base Point Deviation

Operating Date 05/05/2010 RTM Settlement Totals

Real Time Energy

Real-Time CRR

RMR

Real-Time Ancillary Services

RUC

Black Start

Administrative Fees


RTM Settlement Overview for May 7

Statement Overview

• 212 Statements posted to QSEs

• 3 Statements posted to CRRAHs

• 27 QSEs received Statements for $0

General Reminders


Real-Time Energy Imbalance $73,910.64

Block Load Transfer Resource $0.00

Real-Time DCTIE import -$14,009.72

Real-Time DCTIE export $0.00

Real-Time Congestion Payment or Charge $670.74

Real-Time PTP Obligation -$555.43

Real-Time Revenue Neutrality Allocation -$157,206.98

Base Point Deviation Charge $13,762,795.24

Base-Point Deviation Payment -$13,762,795.55

Real-Time Option w ith Refund $0.00

Real-Time Option -$10,399.13

Real-Time CRR Ow ners Shortfall Charges $0.00

Black Start Service Payment -$17,793.36

Black Start Service Charge $17,793.26

RMR Standby Payment -$37,591.68

RMR Energy Payment $0.00

RMR Adjustment Charge $0.00

RMR Unexcused Misconduct Charge $0.00

Day-Ahead energy revenues total for RMR units -$14,877.60

RMR Service Charge $130,304.07

SASM Reg Dow n Payment -$1,000.00

Reg Dow n Failure to Provide Charge $0.00

Real Time Reg Dow n Adjustment Charge $999.75

SASM Non-Spin Payment $0.00

Non-Spin Failure to Provide Charge $0.00

Real Time Non-Spin Adjustment Charge -$0.07

SASM Reg Up Payment -$2,000.50

Reg Up Failure to Provide Charge $0.00

Real Time Reg-Up Adjustment Charge $2,000.26

SASM Responsive Reserve Payment -$2,800.00

Responsive Reserve Failure to Provide Charge $0.00

Real Time Responsive Reserve Adjustment Charge $2,799.89

RUC Claw back Charge $2,888,589.98

RUC Claw back Payment -$2,888,590.22

RUC Decommitment Payment $0.00

RUC Decommitment Charge $0.00

RUC Make-Whole Payment -$37,908.88

RUC Capacity-Short $37,908.35

RUC Make-Whole Uplift Charge $0.22

ERCOT System Administration Charge $382,076.86

QSE Nodal Surcharge Fee $148,146.69

RUC

Black Start

Administrative Fees

Operating Date 05/07/2010 RTM Settlement Totals

Real Time Energy

Real-Time CRR

RMR

Real-Time Ancillary Services

Base Point Deviation

Week in Review

• Real Time Invoices Posted on 5-20 contain several unsupported Operating Dates– Supported Operating Dates in the Invoice

• 4-30-10 RTM Initial Settlement• 5-5-10 RTM Initial Settlement

– Unsupported Operating Dates in the Invoice• 5-1-10 RTM Initial Settlement• 5-2-10 RTM Initial Settlement• 5-3-10 RTM Initial Settlement• 5-4-10 RTM Initial Settlement

• 291 Total Invoices were posted– 242 were issued to QSEs– 49 were issued to CRRAHs



Next Week’s Activities

• Next week we move to 5 operating days per week• Tuesday through Saturday operating dates will be settled• This schedule will be maintained throughout Market Trials• Operating Days for next week that will be settled

– 5/25 – 5/26 – 5/27 – 5/28 – 5/29

• RTM Final Settlements Start Next week– 5/5 RTM Final Statement will post on Tuesday, May 25

• For Market Trials, Final Statements will post on Operating Day + 20

Environment Report-Known Issues

COMS New Known Issues• SUO (Start Up Offer) Bill determinant used in RUC Make-Whole is not being calculated

correctly when the offer submitted to the DAM is updated before the adjustment period.• All Hydro generation resources were set up as IRRs (Intermittent Renewable Resource).

This has been resolved, but for Operating Dates 4-21 through 5-12, the Base Point Deviation Charge for Hydros will have used the IRR formula.

COMS Closed Issues• RTRMPR bill determinant was not published in Settlements Extracts for operating dates

4-21, 4-23, 4-28 and 4-30. The issue has been resolved and the bill determinant will be available in the RTMMODE extracts for Operating day 5-5 going forward. Without this bill determinant, QSEs will be unable to shadow the Real Time Energy Imbalance Charge/Payment at Resource Nodes

Reminder: ERCOT will post known issues every Friday to the readiness center at: http://nodal.ercot.com/readiness/markettrials/coms/index.html



Credit and Treasury

Weekly Update

May 21, 2010

Week in Review

• A challenging week – kick off for CMM coincided with running both the CRR auction and DAM

• Focus this week was on a) mechanics (report posting, ACLs sent and received, etc) , b) understanding Credit Reports and c) ensuring adequate credit limits for the CRR Auction and DAM run this week

Successes:– ERCOT posted most Credit Reports twice a day, except

• FCE Detail Reports and AIL Detail Report – see known issue• FCE Summary Reports posted once a day

– Sent ACLs for the CRR auction and the DAM each day• ERCOT adjusted ACLs or credit limits as needed to ensure adequate

credit limits while the market began getting familiar with the Credit Reports• There were no negative impacts to CRR auction or the DAM as a result of

credit limits


Week in Review

Challenge:– ERCOT and the market are seeing large credit exposures in the early

Credit Reports• Research is ongoing and information will be provided as it becomes available.

– So far, ERCOT has identified two significant factors impacting credit

exposure: volume of activity in the Real Time market and price of energy in the Real Time market.


Large credit exposures (TPE)

• Volume: If your entity represents load, then ERCOT systems require that all of your load requirements be met. In Nodal, load requirements can be met through

a) Energy Trades,

b) the Day Ahead Market (DAM),

c) Generation Resources that your QSE represents or through the

d) Real Time (RT) market



IMPORTANT: If you are not meeting your requirements in Market Trials 5 through

a) Energy Trade purchases,

b) the DAM or

c) your own Resources, then

d) your entire load requirement is being met in the RT market.

• From the review we have done so far, most of the volume (particularly on days that the DAM is not run) is being met through the RT market. The liability for this volume is being captured in the Aggregate Incremental Liability (AIL) component of the Total Potential Exposure (TPE) calculation.

• Analysis is ongoing to determine what other factors may be impacting credit exposure



Solutions: – Determine your strategy for meeting your load requirements and

begin using other features (Energy Trades or DAM) to meet your load requirements.

– In the meantime, please send “e-collateral” to meet your TPE requirements and provide sufficient credit for your anticipated activity in the CRR auction and/or DAM (as it is currently configured-without NPRR 206).



• Pricing: – Another significant factor we are seeing is that some of the pricing

in the RT market is very high (in some cases, over $1,000 average per day).

– Mainly this is occurring when SCED runs out of offer curves and must dispatch proxy curves (which are priced at the system-wide offer cap).

– High RT prices are compounding the impact of significant volume in RT.




Example

Zonal ZonalERCOT

Volume

% of Total Vol

ERCOT Price

ERCOT Exposure per day

Total load Bilateral 900 BES 100 100 50 5,000$ Total 1,000 100 10% 5,000$

Nodal - indicative "steady state" Nodal ERCOT volume

ERCOT price

ERCOT Exposure

Total load Energy Trades 500 Generation Resources your QSE represents 100 Day Ahead Market 300 300 45 13,500$ Real Time Market 100 100 50 5,000 Total 1,000 400 40% 18,500$

Nodal - 1st week MT5 Nodal ERCOT volume

ERCOT price

ERCOT Exposure

Total load Energy Trades Generation Resources your QSE represents Day Ahead Market 100 100 45 4,500$ Real Time Market 900 900 1,000 900,000 Total 1,000 1,000 100% 904,500$


• The AIL Detail Report will help you understand what is driving this exposure.

– We are working to get this report fixed as quickly as possible and make it available to you. We will give you an update next week on timing.

• Note: The exposure calculation is estimating liability (similar to how the Zonal

calculations work) as it is incurred for your organization and reflects

– your overall activity in the ERCOT Nodal market and• Including both historical and estimated prospective liability• Prospective liability is estimated based on recent historical liability

– market dynamics in market trials.

• You should be seeing much of this activity translated to RT statements

and invoices over the next few weeks.



• Reminder: The purpose of the market trials is to gain a strong working knowledge of how the Nodal market will work.

• This is the first time many of these functions have been linked to understand the overall financial picture, so it will likely take a few weeks to master this new information.

• We believe that ultimately the Credit Reports will be very helpful to Counter-Parties in providing an overall picture of their activity in the ERCOT market.


Large credit exposure (TPE)

• Please work with ERCOT to confirm that calculations reflect your activity appropriately.– We would like to have at least 3-5 CPs from each market segment

positively confirm that a) their market activity is accurately reflected and

b) that the calculations are per the Nodal Protocols

– If the Credit Reports are capturing data incorrectly, it will be fixed.

• We will provide additional information as it becomes available. Please send any questions to [email protected].


Next week

• ERCOT– Credit Reports - Continue to see data gaps fill in– High exposures

• ERCOT expects that high exposures will continue to be experienced over the next several weeks while ERCOT and Counter-Parties work through understanding the factors driving exposure

– Until CPs change their market behavior, high RT volumes and RT prices will likely continue

– As historical activity is projected forward (e.g. if high prices have been experienced recently, the calculations assume prices will be high in the future)

– As CRR inventory from the June CRR Auction is included in the calculation– As market activity continues to be volatile as CPs learn to work with it

• ERCOT will work with CPs to understand activity and expects that exposure will level out as activity normalizes


Next week

• ERCOT (continued)– Will continue to analyze root causes of high exposure calculations

and will update CPs as information is available– Will continue to override ACL as needed for at least another week

• Once data stabilizes and AIL report is available, will discontinue override (probably mid-June – will update next Friday)

• Will not send collateral calls next week

– Will begin doing credit approvals of CRR Bilateral Trades


Next Week

• Counter-Parties– Access your Credit Reports

• Review the calculations to confirm they reflect their MT5 activity

• Ensure your ACL is adequate for your intended CRR and DAM activity

– If CPs wish to have a higher limit, they should send “e-collateral”

– CPs should begin using more realistic estimates in their market activity to produce more realistic exposure calculations

• If you have questions, please send them to [email protected]


Next Week - Schedule of activity

Meeting Title (optional)Date

Business day Activity to consider ACL deliveredDeadline for "e-

collateral"

Monday, May 24th DAM for OD 5/25 Friday evening Friday 3:00 pm CST

Tuesday, May 25th DAM for OD 5/26 Monday evening Monday, noon CST

Wednesday, May 26th

DAM for OD 5/27 and if CRR Auction Invoice is available Tues, the ACL reserved for CRR Auction will be available for DAM on Wed morning Tuesday evening Tuesday noon CST

Thursday, May 27th

DAM for OD 5/28 and if ACL reserved for CRR Auction was not released earlier, it will be available for DAM on Thursday morning Wednesday evening Wednesday noon CST

Friday, May 28st DAM for OD 5/29 Thursday evening Thursday noon CST

Credit FAQs

Q:Our ACL Summary report shows a different credit limit/collateral held from what we have requested. Can you please explain the difference?

A: ERCOT Credit reviews the ACLs for each CP on a daily basis before send the credit limits to CRR and DAM. Credit adjusts a CP’s ACL as needed to ensure that the CP will have sufficient credit to participate in both the CRR and DAM auctions. Currently, Credit uses the following rules to adjust the ACL based on the following conditions:

– If TPE > Total Credit Limit (TCL), then TCL is increased by TPE * 1.5

– If TPE is between 80%-100% of TCL, then TCL is increased by TCL *1.5

– If CP sends a request for a credit limit, then TCL is increased to requested limit (provided requested limit is more than TPE; otherwise, the first two rules apply

– Credit will continue to follow this practice in the next few weeks to give CPs sufficient time to get familiar with the Nodal credit process and be able to actively manage their credit limits.


Credit FAQs

• Q:It seems strange that our credit report is showing a very high TPE. Is there something wrong? If not, what is driving the TPE at this point?– See discussion in slides 4-9

• Q:It seems the AIL is driving our total exposure. When will the AIL report become available?

A: . We will give you an update next week on timing.

• Q:If we requested for an adjustment in our credit limit, when will this be reflected in our credit reports? Why are we seeing two versions of each report in the MIS?

A: Adjustments to credit limits will be reflected in the reports posted in the evenings. Currently, we are posting reports twice daily each day:

1) each morning no later than 12 noon; and 2) evenings (excluding FCE Summary Reports). Those with known issues are not posted.


Credit FAQs

• Where can I find the Weight Factors being used for the Future Credit Exposure (FCE) calculation? – These will be posted on the MIS next week; however the values are

as mentioned below:

• Where can I find the X and Y values being used in the Auction Clearing Price Exposure (ACPE) calculation?– These will be posted on the MIS next week; however the values are

as mentioned below: X = $1.50 and Y = $1.00


Today Five Day Last Month ACP

CM, CM+1 10% 20% 45% 25%

CM + 2 & beyond

4% 8% 20% 68%

Credit FAQs

• If I have sufficient ACL for both CRR Auction and DAM, do I need to reserve credit in the CRR system for each auction to participate in that auction?– Yes. The CRR system will use the minimum of the amount you

reserve in the CRR system or 90% of the ACL provided from the CMM system to the CRR system. If you do not reserve credit in the CRR system, you will not be able participate in the auction.


Known Issues


Exposure calculation issue– For CPs having credits in ADTE (from Real Time Market)

• ADTE is incorrectly reflecting a “0” value rather than a credit value, overstating TPE exposure ISSUE HAS BEEN RESOLVED AND WORK AROUND IS NO LONGER NEEDED

Reports not available at this time– FCE detail reports will not be posted due to large volume of data (several hundreds

of pages per report)– AIL detail report will not be posted due to data issue on report (calculated AIL in TPE

is correct)

Minor report display issue– FCE Summary Reports – section subtotals are incorrect (however, totals at the top

of the section and calculated values used in TPE are correct) – display issue only

Appendix – Materials from May 7 Market Call


Available Credit Limit (ACL) – Workflow

• Available Credit Limit

32

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