Credit; CRR; Settlements

Tue, Apr 27, 2021 05:03 PM

M-A042721-01 Implementation of Adjustments to the Potential Uplift (PUL) Component of Total Potential Exposure (TPE)


NOTICE DATE:  April 27, 2021

NOTICE TYPE:  M-A042721-01 Financial/Credit

SHORT DESCRIPTION:  Implementation of Adjustments to the Potential Uplift (PUL) Component of Total Potential Exposure (TPE)

INTENDED AUDIENCE:  ERCOT Counter-Parties

DAY AFFECTED:  April 29, 2021

LONG DESCRIPTION: Counter-Parties must maintain Financial Security or an Unsecured Credit Limit at an amount that equals or exceeds its Total Potential Exposure (TPE). The Potential Uplift (PUL) component of TPE contemplates including one year’s worth of expected Default Uplift Invoices in the TPE calculation.

ERCOT Protocol Section 9.19.1(4) limits ERCOT to billing a total of $2.5 million dollars every 30 days using the Default Uplift Invoice process. ERCOT intends to issue Default Uplift Invoices that collectively total no more than $2.5 million each month. At this rate, ERCOT expects to uplift approximately $30 million within the next 12 months.

Accordingly, on April 29, 2021, ERCOT will adjust the PUL component of TPE to account for one year's worth of expected Default Uplift Invoices. The adjustment to PUL will be made in two steps. The initial adjustment, totaling $15 million in the aggregate, will be made on April 29, 2021. The remaining $15 million adjustment to PUL will be made on May 17, 2021.

Each Counter-Party will be responsible for its share of PUL based on its pro- rata share of maximum MWhs that the Qualified Scheduling Entities (QSEs) or Congestion Revenue Right (CRR) Account Holders assigned to the Counter-Party contributed to its maximum MWh activity in the month prior to the month in which the short-pays being collected occurred. Because the short pays that are being uplifted for the foreseeable future occurred in February 2021, ERCOT will use January 2021 MWh activity to apportion responsibility for Default Uplift Invoices. Each Counter-Party's pro-rata share of maximum MWhs has been posted to its Market Information System (MIS) Certified Area.

ERCOT Protocol Section 16.11.4.1(3), gives ERCOT discretion to deviate from the standard TPE calculation if ERCOT determines that it “does not adequately match the financial risk created by that Counter-Party’s activities.” Additionally, per ERCOT Protocol Section 16.11.7(2), ERCOT has the authority to request Financial Security up to the maximum of the determined TPE for a terminating Market Participant, and may then draw against that Financial Security to satisfy payment obligations on any subsequently-issued Default Uplift Invoices. Please be advised that for a Counter-Party that accrued an obligation to pay a Default Uplift Ratio Share and chooses to terminate its Standard Form Market Participant Agreement (SFA), ERCOT will set that Counter-Party’s TPE up to a maximum of the entire amount of the Counter-Party’s Default Uplift Ratio Share.

ACTION REQUIRED: Counter-Parties should ensure that posted Financial Security amounts are sufficient to cover TPE as adjusted for PUL and expected levels of Market activity. 

CONTACT:  If you have any questions, please contact your ERCOT Account Manager. You may also call the general ERCOT Client Services phone number at (512) 248-3900 or contact ERCOT Client Services via email at ClientServices@ercot.com.

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