November 27, 2012

NPRR322, Real-Time PTP Option Modeling

Implementation Overview

2November 27, 2012

NPRR322 Overview

• NPRR322 replaces the CRR Offer transaction with PTP Obligation Bid with Links to an Option (PTPLO). This is used only by Non-Opt-In Entities. There are two main differences:– CRR Offers, since they represent PTP options, are modeled as

directional flows in the DAM; PTPLOs are modeled as PTP obligations in the DAM, but settled as PTP options in Settlements (to the extent they are awarded)

– CRR Offers have no credit validation; PTPLOs do.• NPRR322 will be implemented starting with the December 6, 2012,

DAM for Operating Day December 7.

3November 27, 2012

NPRR322 – Market Manager

• PTPLOs require the same inputs from QSEs as CRR Offers, so the XML specification for the API is not changing

• The Market Manager labels are changing to reference PTPLOs

4November 27, 2012

NPRR322 – Credit Validation

• MMS credit validation is being applied to PTPLOs:

Credit Exposure for PTPLO = Max ($0, 0.2(BidQty*BidPrice)) if qualify for CRR offset; otherwise, BidQty*BidPrice

• Both PTP Obligation bids and PTPLOs potentially qualify for CRR offsets– MMS tracks how many CRR MWs have been used as an offset– First come, first serve

•If PTP Obligation bids on that path are entered first, then they will get the offset vs. a PTPLO that is entered later

5

NPRR322 - Reports

• One post-DAM report is changing: – DAM PTP Obligation and Option Results by Settlement Point ->

DAM PTP Obligation Results by Settlement Point (NP4-194-CD)• Removes the columns regarding non-awarded CRR Offers. PTPLO

data will roll up with regular PTP Obligation bids.• Two 61-day reports are changing:

– 61-day Settlement Point Data in DAM- CRR Offers -> change to 61-day Settlement Point Data in DAM - PTP Obligation with Links to an Option (NP3-983)

– 61-day Settlement Point Data in DAM- CRR Awards -> change to 61-day Settlement Point Data in DAM - PTP Obligation with Links to an Option Awards (NP3-984)

– For both, references to CRR Offer within the column names will be removed (e.g., CRR Offer MW -> MW)

November 27, 2012

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NPRR322 - Reports

• One report is being removed: – Real-Time Point-to-Point Option Price Report (NP7-807-CD)

November 27, 2012

7

NPRR 322 Overview

• All PTP Options and PTP Options with Refund will be settled in the Day-Ahead Market

• NOIES can purchase a PTP Obligation with links to a PTP Option in the DAM – Must have same source and sink pair– MWs on obligation must be less than or equal to the MWs on the option– If price difference is negative, the NOIE QSE will not be paid in Day-Ahead

• The PTP Obligation will settle in Real Time as the positive difference between the sink and source settlement point prices

– If price difference is negative, the NOIE QSE will not be charged in Real Time

• Removing Real Time PTP Option and Real Time PTP Option with Refund CRR settlements

• CRR Settlement changes affect ALL CRRAHs. (see slide 8)

• Changes to DAM and RTM settlements and CRR Shortfall calculation potentially affect all QSEs and CRRAHs

November 27, 2012

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NPRR322 – Settlements

Settlement impacts include the discontinuation of the following calculations:

Day Ahead Market Settlements:•DAOPT•DAOPTR•DAMRTOPTPR•DAMRTOPTHVPR•DAMRTOPTDA, DAMRTOPTHV, DAMRTOPTTP, DAMRTOPTAMT, DAMRTOPTAMTOTOT, DAMRTOPTAMTTOT•DAMRTOPTRDA, DAMRTOPTRHV, DAMRTOPTRTP, DAMRTOPTRAMT, DAMRTOPTRAMTOTOT, DAMRTOPTRAMTTOT

Real Time Market Settlements•RTOPT•RTOPTR•RTOPTHVPR•RTOPTDA, RTOPTHV, RTOPTTP, RTOPTAMT, RTOPTAMTOTOT, RTOPTAMTTOT•RTOPTRDA, RTOPTRHV, RTOPTRTP, RTOPTRAMT, RTOPTRAMTOTOT, RTOPTRAMTTOT

Balancing Account Settlements:•DACRRSR, DACRRSRTAMT, DACRRSRTAMTOTOT, DACRRSRTAMTTOT•CRRCRRSRT, RTCRRSAMT•RTCRRSAMTMTOT, DACRRSAMTRS, DACRRRAMT

November 27, 2012

9

NPRR322 – Settlements

•All PTP Options and Options with Refunds purchased in the Auction will settle in the Day Ahead Market

– DAOPT and DAOPTR no longer needed

7.9.1.2 Payments for PTP Options Settled in DAMWhere:The target payment:DAOPTTP o, (j, k) = DAOPTPR (j, k) * OPT o, (j, k)The derated amount:DAOPTDA o, (j, k) = OPTDRPR (j, k) * OPT o, (j, k)The hedge value:DAOPTHV o, (j, k) = DAOPTHVPR (j, k) * OPT o, (j, k)

7.9.1.6 Payments for PTP Options with Refund Settled in DAMThe target payment:DAOPTRTP o, (j, k) = DAOPTPR (j, k) * Min (OPTR o, (j, k), OPTRACT o, (j, k))The derated amount:DAOPTRDA o, (j, k) = OPTDRPR (j, k) * Min (OPTR o, (j, k), OPTRACT o, (j, k))The hedge value:DAOPTRHV o, (j, k) = DAOPTHVPR (j, k) * Min (OPTR o, (j, k), OPTRACT o, (j, k))

November 27, 2012

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NPRR322 – Settlements

•NOIE may purchase PTP Obligation and link to an Option = RTOBLLO

4.6.3 Settlement for PTP Obligations Bought in DAM

(3) ERCOT shall charge a QSE for a cleared PTP Obligation bid with Links to an Option the positive difference in the DAM Settlement Point Prices between the sink Settlement Point and the source Settlement Point. The charge to each QSE for a given Operating Hour of its cleared PTP Obligation bid with Links to an Option with each pair of source and sink Settlement Points is calculated as follows:

DARTOBLLOAMT q, (j, k) = Max (0, DAOBLPR (j, k)) * RTOBLLO q, (j, k)

Where:RTOBLLO q, (j, k) = (RTOBLLOOFR q, (j, k), crrid, crrofferid - DAOPTAW q, (j, k), crrid, crrofferid)

•Revenue from PTP Obligation with link to Option purchases will flow into Congestion Rent

7.9.3.1 DAM Congestion Rent

(2) The DAM congestion rent for a given Operating Hour is calculated as follows:

DACONGRENT = DAESAMTTOT + RMRDAEREVTOT + DAEPAMTTOT + DARTOBLAMTTOT + DARTOBLLOAMTTOT

November 27, 2012

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NPRR322 – Settlements

• Settlement of PTP Obligations with links to Options

7.9.2.1 Payments and Charges for PTP Obligations Settled in Real-Time

(1) ERCOT shall pay the Qualified Scheduling Entity (QSE) of each cleared PTP Obligation with links to an Option the positive difference in Real-Time Settlement Point Prices between the sink Settlement Point and the source Settlement Point. The payment to each QSE for a given Operating Hour of its cleared PTP Obligation with links to an Option with each pair of source and sink Settlement Points is calculated as follows:

RTOBLLOAMT q, (j, k) = (-1) * MAX(0, RTOBLPR (j, k)) * RTOBLLO q, (j, k)

• Payments for PTP Obligations with links to Options will flow into Real-Time Revenue Neutrality

6.6.10 Real-Time Revenue Neutrality Allocation

(2) The Real-Time Revenue Neutrality Allocation for each QSE for a given 15-minute Settlement Interval is calculated as follows:

LARTRNAMT q = (-1) * (RTEIAMTTOT + BLTRAMTTOT + RTDCIMPAMTTOT + RTDCEXPAMTTOT + RTCCAMTTOT + RMRDAESRTVTOT + RTOBLAMTTOT / 4 + RTOBLLOAMTTOT / 4) * LRS q

November 27, 2012