Obligation Bids in CRR Auctions - PowerPoint Presentation

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Obligation Bids in CRR Auctions

Vicki Scott

Credit Work Group

ERCOT Public

February 15, 2017Slide2

Credit Requirements for CRR Auctions

Credit requirements for buying or selling CRR’s in a CRR auction are spelled out in Protocol 7.5.5.2 Auction process:

A Counter-Party must first enter a credit limit for each auction in order to buy CRRs in that auction; it is not necessary to enter a credit limit in order to sell CRR’s that, if awarded, result in a payment to the seller.After an Auction bid window closes, the CRR system will evaluate each Counter-Party’s total portfolio value (i.e., will combine all of their AHs’ bids and offers into one portfolio), and form a budget record for the engine if the total value is greater than the locked credit; it will then evaluate each Account Holder who submitted credit, and form a budget record if the total portfolio value exceeds the AH submitted credit for the auction.An Account Holder who does not lock credit cannot get a budget constraint; only his Counter-Party can get a budget constraint in that situation.Only Account Holders and Counter-Partys who have a budget record sent to the engine can get a budget constraint.A budget record is treated by the optimization the same as other limiting resources (binding constraints are network model (lines and transformers), generic (non-thermals), and budget).

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Portfolio Pre-Screening Credit Exposure for Bids and Offers

OBL Buy Bids incur credit exposure and include the path specific adders as part of the risk calculation

OBL Sell Offers – at a negative offer price – incur credit exposure but do not use path specific addersOPT Buy Bids incur credit exposure but do not use path specific addersOPT Sell Offers – at any offer price – do not incur any credit exposureBid ‘stacks’ introduced in NPRR357 are still evaluated with the implementation of NPRR484 (same product, different price and/or MW per bid)Reference material:www.ercot.com/mktinfo/crr

NPRR357 NPRR430 FAQs v1.1

NPRR484 and 554 FAQs v1.0

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Portfolio Credit Exposure for Obligations

OBL

buy bidsOnly type of bid or offer that uses ACI99 and ACPACI99 = historical settlement price in DAM from most recent 3 yearsACP = historical auction clearing prices for similar months OBL Buy Bid = [hours * max(0, Bid Price)  –  hours * min(0, ACI99, ACP)]  *  aggregated MW Bid    Note: “aggregated MW Bid” is the sum of MW in the bid stack as per NPRR357 Ex:  OBL buy bid from HB_NORTH to LZ_NORTH for PeakWD for Mar 2017

    ACI99 = -.23

    ACP = .35

    Bid MW = 45MW

    Bid Price = -.03

    Hours = 368

                OBL bid exposure     =     [368 * max(0, -.03) – 368 * min(0,-.23, .35)] * 45                                                  =     [ (368 * 0) – (368 * -.23)] * 45                                                  =     [ 0 – (-84.64) ] * 45                                                  =    84.64 * 45                                                  =    3808.80 OBL sell offers only has credit exposure if the offer price is negative OBL sell offer =  min(bid price, 0) * -1 * hours * aggregated MW Bid    Note: “aggregated MW Bid” is the sum of MW in the bid stack as per NPRR357

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Portfolio Credit Exposure for Options

OPT buy bids

 OPT Buy Bid =  bid price  *  hours * aggregated MW Bid    Note: “aggregated MW Bid” is the sum of MW in the bid stack as per NPRR357 OPT sell offers have no exposure 5Slide6

Portfolio

Pre-Screening ACI99

CRR System receives ACI99 and ACP values twice for each auction:“Target Date” -> 5 days before Lock Date (aka, first Bid Close date) These values only include the OBL paths for the existing baseload for the auction.After Bid Close for final round These values only include the OBL paths for the new OBL buy bids in the auction (i.e., if a bid is same product as an existing baseload CRR, its path is not republished). 6Slide7

Credit Requirements for CRR Auctions

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Questions