To recommend approval of NPRR459 as amended by the 7/9/12 ERCOT comments with a recommended priority of 2012 and rank of 135; and an interim manual implementation of NPRR459 with an effective date of August 1, 2012.
To recommend approval of NPRR459 and the proposed Other Binding Document, Procedure for Setting Forward Risk Multiplier, as amended by the 6/18/12 NRG comments and as revised by PRS and to forward to TAC.
In order to help manage the seasonal nature of the ERCOT market, this Nodal Protocol Revision Request (NPRR) adds a seasonal adjustment factor to raise and lower collateral requirements throughout the year.
In addition, this NPRR also recommends that ERCOT only review the last 40 days of history instead of the last 60 days when determining credit requirements.
With the Public Utility Commission of Texas (PUCT) considering increases to the System-Wide Offer Cap (SWCAP) to support Resource adequacy, collateral requirements will need to be reconsidered in parallel. While energy prices and gas prices are typically highly correlated, during shortage pricing conditions the correlation breaks down as energy prices are no longer based on underlying fuel costs. However, they may be more likely to occur on a seasonal basis, so the proposals in this NPRR should help to mitigate the increased risk in the market.
Together, these changes should help to fix the under-collateralization going into a potential shortage pricing event and the over-collateralization following the event.