Congestion Revenue Rights · 2020-07-17 · This presentation provides a general overview of the...
Transcript of Congestion Revenue Rights · 2020-07-17 · This presentation provides a general overview of the...
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ERCOT MARKET EDUCATION
Congestion Revenue Rights
2020_05 CRR
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This presentation provides a general overview of the Texas
Nodal Market and is not intended to be a substitute for the
ERCOT Protocols, as amended from time to time. If any
conflict exists between this presentation and the ERCOT
Protocols, the ERCOT Protocols shall control in all respects.
For more information, please visit:
http://www.ercot.com/mktrules/nprotocols/
Protocol Disclaimer
Legal Disclaimers and Admonitions
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WebEx Training Tips
• Windows
• Buttons
Attendance
Questions / Chat
Housekeeping
Please enable video
& audio capabilities
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• Identify the requirements to participate in the CRR market
• Explain various CRR market processes
• Describe possible financial outcomes of CRRs in the
ERCOT markets
Upon completion of this course, you will be able to:
Course Objectives
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Modules in this course include:
Course Modules
Fundamentals of Congestion Revenue Rights1
2 CRR Auction & Allocation Processes
3 Trading of CRRs
4 Day-Ahead Market Point-to-Point Obligations
5 Credit Limits
6 CRR Settlements
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Module 1
Fundamentals of
Congestion Revenue Rights
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• Explain the nature of congestion cost exposure
• Describe the products available for hedging Day-Ahead
Market congestion
• Describe the product available for hedging Real-time Market
congestion
Upon completion of this module, learners will be able to:
Module Objectives
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Congestion Cost exposure
Congestion Costs
Resource Node A
$30/MWh
$30/MWh
$30/MWh
Hub
Load Zone
$40/MWh
$50/MWh
Price separation across
the grid exposes buyers
and sellers of energy to
Congestion Costs
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• Financial instruments
• Payment or charge to owner when
Transmission Grid is congested in
Day-Ahead Market
Congestion Revenue Rights (CRRs):
Congestion Revenue Rights
A CRR is not a right to
deliver physical energy
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• Financial Hedge
• Financial Investment
CRRs may be used as:
Congestion Revenue Rights
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• Price certainty - Locking in the cost of congestion at the
cost of purchasing the CRR
As a Financial Hedge for …
Congestion Revenue Rights
Price Separation between two Settlement Points
Dif
fere
nce
Hour
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CRR may be purchased on a speculative basis:
As a Financial Investment …
Congestion Revenue Rights
Congestion Rent > Purchase Price
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• Designated point of injection (source)
and point of withdrawal (sink)
• Settlement based on difference
between sink and source Settlement
Point Prices
• Two Instruments:
• Point-to-Point Options
• Point-to-Point Obligations
Types of Congestion Revenue Rights
Congestion Revenue Rights
Point-to-Point Congestion
Revenue Rights
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Provide a hedge that can only result in a payment
Point-to-Point Options
Congestion Revenue Rights
Source A
Sink B
Source C
$5/MWh
$10/MWh
$15/MWh
Option AB Payment = $5.00
Option CB Payment = $0.00
?
?
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Provide a hedge that may result in a payment or a charge
Point-to-Point Obligations
Congestion Revenue Rights
Source A
Sink B
Source C
$5/MWh
Obligation AB Payment = $5.00
Obligation CB Charge = $5.00
$10/MWh
$15/MWh
?
?
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• CRR Auction
• Allocation (Special Cases)
• Bilateral Trades
Three ways of acquiring CRRs:
Congestion Revenue Rights
CRRs
Auction
Allocation
Trade
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Registration and qualification:
• CRR Account Holder Application and
Standard Form Agreement
• Provide bank account information
• Demonstrate the capability to perform
the functions of an Account Holder
• Satisfy ERCOT’s creditworthiness
requirements
CRR Account Holder
Congestion Revenue Rights
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Day-Ahead Congestion HedgingExample
Hedging Congestion Costs
• 5MW DAM Energy Purchase at Load Zone
• 5MW PTP Option from Resource Node A to Load Zone
Resource Node B
Load Zone(sink)
Resource Node A(source)
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Day-Ahead Congestion HedgingExample
Hedging Congestion Costs
Resource Node B
$20/MWh$20/MWh
$20/MWh
Energy Purchase PTP Option Payment Net Day-Ahead Cost
$100 $0 $100
Load Zone(sink)
Resource Node A(source)
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Day-Ahead Congestion HedgingExample
Hedging Congestion Costs
Resource Node B
$20/MWh$25/MWh
$30/MWh
Energy Purchase PTP Option Payment Net Day-Ahead Cost
$125 $25 $100
Load Zone(sink)
Resource Node A(source)
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Day-Ahead Congestion HedgingExample
Hedging Congestion Costs
Resource Node B
$20/MWh$25/MWh
$30/MWh
Energy Purchase PTP Option Payment Net Day-Ahead Cost
$125 $25 $100
Load Zone(sink)
Resource Node A(source)
Don’t forget – there was a
cost to buy the PTP Option
in the CRR Auction.
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Real-Time Congestion HedgingExample
Hedging Congestion Costs
• 5MW Trade Energy Purchase at Resource Node A
• 5MW Load at Load Zone
Resource Node A
Resource Node B
$??/MWh$??/MWh
$??/MWh
Load Zone
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Real-Time Congestion HedgingExample
Hedging Congestion Costs
Resource Node A
Resource Node B
$30/MWh$30/MWh
$30/MWh
Load Zone
Payment at
Resource Node A
Charge at
Load Zone
Real-time Congestion
Exposure
$150 $150 $0
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Real-Time Congestion HedgingExample
Hedging Congestion Costs
Resource Node A
Resource Node B
$30/MWh$40/MWh
$45/MWh
Load Zone
Payment at
Resource Node A
Charge at
Load Zone
Real-time Congestion
Exposure
$150 $200 $50
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• Financial instruments
• Payment or charge to owner when
Transmission Grid is congested in
Real-Time
Day Ahead Market PTP Obligations:
Day Ahead Market PTP Obligations
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• Financial Hedge
• Financial Investment
DAM PTP Obligations may be used as:
Day Ahead Market PTP Obligations
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• Price certainty - Locking in the costs of Real-time
congestion at Day-Ahead Market prices
As a Financial Hedge for…
Day Ahead Market PTP Obligations
Price Separation between two Settlement Points
Dif
fere
nce
Hour
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DAM PTP Obligations may also be purchased on a
speculative basis:
As a Financial Investment …
Day Ahead Market PTP Obligations
Real-time value > Purchase Price
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• Purchased at DAM price spread
• Settled at Real-Time price spread
Day-Ahead Market PTP Obligations
Day Ahead Market PTP Obligations
Source A
Sink B
PTPObligation
Only QSEs may participatein the Day-Ahead Market
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Registration and qualification:
• QSE Application and Standard Form
Agreement
• Provide bank account information
• Demonstrate the capability to perform the
functions of a QSE
• Meet communications requirements
• Satisfy ERCOT’s creditworthiness
requirements
Qualified Scheduling Entity
Day Ahead Market PTP Obligations
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Day Ahead Market PTP ObligationsExample
Day Ahead Market PTP Obligations
QSE charge in Day Ahead Market = $25
QSE payment in Real Time = $50 ?
?
$20/MWh $25/MWhDAM Prices:
$30/MWh $40/MWhReal-Time Prices:
Load ZoneSource Sink
Resource Node A
5 MWPTP Obligation
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Real-Time Congestion HedgingExample
Hedging Congestion Costs
• 5MW Trade Energy Purchase at Resource Node A
• 5MW Load at Load Zone
• 5MW DAM PTP Obligation Resource Node A to Load Zone
Resource Node A
Resource Node B
$30/MWh$40/MWh
$45/MWh
Load Zone
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Real-Time Congestion HedgingExample
Hedging Congestion Costs
Payment at
Resource Node A
Charge at
Load Zone
Payment for
PTP Obligation
Real-time
Net Cost
$150 $200 $50 $0
Resource Node A
Resource Node B
$30/MWh$40/MWh
$45/MWh
Load Zone
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• Congestion cost exposure in the ERCOT markets
• Financial instruments available for hedging congestion
costs in the ERCOT markets
In this module, you’ve learned about:
Module Summary
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Module 2
CRR Auction & Allocation Process
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• Describe the role of the CRR Network Model in the CRR
Auction
• Explain the impact of Pre-Assigned CRRs (PCRRs) on the
CRR Auction
• Identify the inputs of the CRR Auction Process
• Describe the CRR Auction Process
• Identify the outputs of the CRR Auction
Upon completion of this module, learners will be able to:
Module Objectives
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Congestion Revenue Rights Life Cycle
• Bids to Buy
• Offers to Sell
CRR Auction
• PCRRs to NOIEs
• Prior to the CRR Auction
Allocation
• Daily Settlement of CRRs
Day-Ahead Market
Auctions are held
monthly and
semi-annually.
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• Monthly Auction
• Long-Term Auction Sequence
• Six successive auctions
• Six-month periods
• One auction each month
Auctions take place twice per month:
Availability of Congestion Revenue Rights
*Exact dates on CRR Activity Calendar - http://www.ercot.com/mktinfo/crr
Jan-June
July-Dec
Jan-June
July-Dec
Jan-June
July-Dec
July-Dec
Jan-June
July-Dec
Jan-June
July-Dec
Jan-June
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• 90% in Monthly Auction
• Less in Long-Term Auctions
• 70% for Sequence 1
• 55% for Sequence 2
• 40% for Sequence 3
• 30% for Sequence 4
• 20% for Sequence 5
• 10% for Sequence 6
Available Capacity
Availability of Congestion Revenue Rights
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Availability of 2021 Congestion Revenue Rights
January to June 2021 July to December 20210%
100%
10%
20%
30%
40%
55%
70%
90%
Sep-2018
Feb-2019
Jul-2019
Dec-2019
May-2020
Oct-2020
Dec-2
020
Jan-2
021
Feb-2
021
Mar-
2021
Apr-
2021
May-2
021
Mar-2019
Aug-2019
Jan-2020
Jun-2020
Nov-2020
Apr-2021
Jun-2
021
Jul-2021
Aug-2
021
Sep-2
021
Oct-
2021
Nov-
2021
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Reflects characteristics of
ERCOT Transmission System
• Topology
• Equipment Ratings
• Other Operational Limits
ERCOT’s System Capacity is determined from the
Network Operations Model
Modeling for Congestion Revenue Rights
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• Derived from Network Operations Model
• Represents the transmission capacity for each month
CRR Network Model
Modeling for Congestion Revenue Rights
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• Transmission facilities expected to be in-service for the
specified month
• Significant outages
• Dynamic Ratings
• Monitored Elements
• Contingencies
• Settlement Points
CRR Network Model will reflect:
Modeling for Congestion Revenue Rights
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• CRR Auction Process
• PCRR Allocation to NOIEs
ERCOT uses the CRR Network Model in:
Modeling for Congestion Revenue Rights
ERCOT posts Models on MIS:
• 10 business days before
Monthly Auction
• 20 business days before
Long-Term Auction
Sequence
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• Allocated to Non-Opt-In Entities (NOIEs)
based on their annual nominations
• Based on the long-term supply contracts
of NOIEs
• Cost is a percentage of the CRR Auction
clearing price
Pre-Assigned CRRs (PCRRs)
PCRR Allocation
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Goal:
• Confirms that the transmission system can support an
awarded set of CRRs during normal system conditions
Process
• DC power-flow model
• Used during Allocation
• Used during the Day-Ahead Market
Simultaneous Feasibility Test
PCRR Allocation
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PCRR Allocation
Possible Transmission Capacity
Available for Allocation
Possible Transmission Capacity
Available Prior to the Auction
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CRR Auction Process
CRR Auction
Bids
Offers
CRR Model
Allocated PCRRs
Previously Awarded CRRs
Credit Limits
CRR Auction
EngineData Transmitted Daily• Credit• Settlements
Auction Results• Postings• Settlements
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Bids – willingness to buy CRRs
Indicate:
• Not-to-Exceed Price
• Maximum MWs of CRR
Inputs
CRR Auction
Bids
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Bids
CRR Auction
AccountHolder
Source Sink MW PriceTime
OfUse
Buyor
Sell
Hedge Type
Start DateEnd Date
CRRAH1 RN1 LZ4 10 10PeakWD
Buy OBL 07/01/2014 07/31/2014
CRRAH1 RN2 LZ4 10 10PeakWD
Buy OBL 07/01/2014 07/31/2014
CRRAH1 LZ5 RN3 10 10PeakWD
Buy OBL 07/01/2014 07/31/2014
CRRAH1 Hub1 LZ2 10 10PeakWD
Buy OBL 07/01/2014 07/31/2014
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• Time-of-Use Blocks
• One month strips
CRRs are auctioned or allocated in:
CRR Auction
Mon Tues Wed Thurs Fri Sat Sun
Off-Peak (0100 – 0600)
Peak Weekday (0700 – 2200)Peak Weekend
(0700 – 2200)
Off-Peak (2200 – 0000)
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Treated as single bid across all three Time-of-Use blocks
7x24 Block Bids in Monthly Auctions
CRR Auction
If… Then…
Bid Price ≥ 7x24 Block Bid awarded
Bid Price < 7x24 Block Bid not awarded
Weighted average (by hour)
of all three time-of-use
clearing prices
Weighted average (by hour)
of all three time-of-use
clearing prices
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CRR Account Holder enters 7X24 bid for
CRR from Source A to Sink BExample
CRR Auction
• Bid Price = $6
• Month of February has total of
672 hours, including
• 224 Off Peak hours
• 128 Peak Weekend hours
• 320 Peak Weekday hours
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The three time-of-use Clearing Prices for
CRR A-B are:Example
CRR Auction
• $2 Off Peak
• $3 Peak Weekend
• $8 Peak Weekday
Weighted average price for the three time-of-use periods is
(224x$2 + 128x$3 + 320x$8) / 672 = $5.048
Bid price was $6, so
7x24 Bid is awarded
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No 7x24 Block Bids in Long Term Auction Sequences
CRR Auction
Monthly Auction
Peak WD
Peak WE
Off-Peak
Peak WD
Peak WE
Off-Peak
Long-Term Auction
TOU blocks
Optimized
Simultaneously
TOU blocks
Optimized
Independently
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• Minimum Bid Price for PTP Options
• Currently $0.01/MW/hour
• Reviewed by TAC annually
• Auction Fee for PTP Options that clear
below Minimum Bid Price
• Difference between clearing price
and minimum price
• Works out to total price of
$0.01/MW/hour
Minimum Bid Price and Auction Fees
CRR Auction
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Inputs
CRR Auction
Bids
Offers
Offers - willingness to sell CRRs
Indicate:
• Minimum Reservation Price
• Available quantity in MW
Only the Owner of Record
can offer a CRR
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Offers
CRR Auction
CRR ID
AccountHolder
Source Sink MW PriceTime
OfUse
Buyor
Sell
Hedge Type
Start DateEnd Date
12345 CRRAH1 RN1 LZ4 10 10PeakWD
Sell OBL 07/01/2014 07/31/2014
67890 CRRAH1 RN2 LZ4 20 50PeakWD
Sell OPT 07/01/2014 07/31/2014
23456 CRRAH1 LZ5 RN3 50 25PeakWD
Sell OBL 07/01/2014 07/31/2014
78901 CRRAH1 Hub1 LZ2 15 10PeakWD
Sell OBL 07/01/2014 07/31/2014
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CRR Auction Process
CRR Auction
Bids
Offers
CRR Model
Allocated PCRRs
Previously Awarded CRRs
Credit Limits
Constraints managed by ERCOT
• Total Transmission Capacity
• Transmission Capacity already
“owned”
• Credit limit acts as budget constraint
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Clearing Process
CRR Auction
Bids
Offers
CRR Model
Allocated PCRRs
Previously Awarded CRRs
Credit Limits
CRR Auction
EngineData Transmitted Daily• Credit• Settlements
Auction Results• Postings• Settlements
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• Single-round, simultaneous auction
• Objective
• Maximize net auction revenue
Bid-Based Value
Offer-Based Cost
• Subject to applicable constraints
Transmission System limits
Credit limits
Clearing Process
CRR Auction
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Break into 8 CRR Account Holder
Teams (AH1 to AH8)Scenario
CRR Auction Clearing Process
• Participate in a Long-Term Auction Sequence• Sequence 3: 40% of Available Capacity• Net Available Capacity: 10%
• Purchase Peak Weekday Options (April 2022)• RN1 to LZ1: 30 MW Net Available Capacity (AH1 to AH3)• RN2 to LZ1: 30 MW Net Available Capacity (AH4 to AH5)• RN3 to LZ1: 30 MW Net Available Capacity (AH6 to AH8)
• Determine Option Bid MW and Price• Price Limit: Bid Price ≥ $0.01• Bid Limit: 2 Bids per CRRAH• Credit Limit: 20 MW Total• Historical auction data will be provided• Instructor will clear the auction
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Outputs
CRR Auction
Data Transmitted Daily• Credit• Settlements
Bids
Offers
CRR Model
Allocated PCRRs
Previously Awarded CRRs
Credit Limits
CRR Auction
Engine
Auction Results• MIS Postings• Settlements
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MIS Postings
CRR Auction
General Auction Results
• Identities of Awarded CRR Account Holders
• Awarded CRRs by Source-Sink, TOU, MWs, Clearing
Prices, Effective Dates
• Binding Constraints
All auction bids and offers
• Without identifying CRR Account Holders
Specific CRR Account Holder Information
• Awarded Bids and Offers
• Unique IDs for awarded CRRs
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CRR Auction – Transmission Capacity
Possible Transmission Capacity
Available Prior to Auction
Possible Transmission Capacity
Available After the Auction
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• The role of the Network Model in CRR Auctions
• Impacts of Pre-Assigned CRRs on CRR Auctions
• Inputs and outputs of the CRR Auction Process
• The CRR Auction Process
In this module, you’ve learned about:
Module Summary
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Module 3
Trading of Congestion Revenue Rights
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• Identify which CRRs are tradable
• Describe the process of registering CRR trades with
ERCOT
• Describe the ERCOT requirements to trade CRRs
Upon completion of this module, learners will be able to:
Module Objectives
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Congestion Revenue Rights Life Cycle
• Bids to Buy
• Offers to Sell
• Bilateral Transaction
• CRR Account Holders
CRR Trades
• Bids to Buy
• Offers to Sell
CRR Auction
• PCRRs to NOIEs
• Prior to the CRR Auction
Allocation
• Daily Settlement of CRRs
Day-Ahead Market
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Tradable Congestion Revenue Rights
Type of CRR Tradable
PTP Options
PTP Obligations
PTP Options w/ Refund
PTP Obligations w/ Refund
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CRR Account Holder Jane wants to
trade a CRR:Example
Parameters for Trading Congestion Revenue Rights
CRR ID
Account Holder
Source Sink MW Start Date End DateTime
OfUse
Hedge Type
54321 Jane RN1 LZ4 10 07/01/2020 07/31/2020 Peak WD OBL
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What fields may be modified?Example
Parameters for Trading Congestion Revenue Rights
CRR Account Holder Jane cannot modify:
• Source
• Sink
• Time-of-Use Block
• Hedge Type
CRR Account Holder Jane can modify:
• MWs of CRRs
• Effective Days of CRR
CRR ID
Account Holder
Source Sink MW Start Date End DateTime
OfUse
Hedge Type
54321 Jane RN1 LZ4 10 07/01/2020 07/31/2020 Peak WD OBL
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Jane may offer the CRR for trade in two
different ways:Example
Parameters for Trading Congestion Revenue Rights (cont)
CRR ID
Account Holder
Source Sink MW Start Date End DateTime
OfUse
Hedge Type
54321 Jane RN1 LZ4 3 07/13/2020 07/17/2020 Peak WD OBL
1
CRR ID
Account Holder
Source Sink MW Start Date End DateTime
OfUse
Hedge Type
54321 Jane RN1 LZ4 2 07/01/2020 07/31/2020 Peak WD OBL
2
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• Sell a CRR in a trade
• Buy a CRR in a trade
CRR Account Holders may indicate willingness to:
Posting Offers and Bids for Trades
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CRR Account Holder JillExample
Trading of Congestion Revenue Rights
• Sees Jane’s offers
• Contacts Jane to trade for Offer #1
CRR ID
Account Holder
Source Sink MW Start Date End DateTime
OfUse
Hedge Type
54321 Jane RN1 LZ4 3 07/13/2020 07/17/2020 Peak WD OBL
1
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• Selling party reports the trade to ERCOT
• Buying party confirms the trade through ERCOT
CRR Account Holders:
Trading of Congestion Revenue Rights
Selling CRR AH Buying CRR AH
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• Checks Account Holders’ Available Credit Limits
• Financially settles with new CRR owner
ERCOT
Trading of Congestion Revenue Rights
Buying CRR AHSelling CRR AH
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Traded CRR reflects:Example
Settlements of Traded Congestion Revenue Rights
• New Account Holder
• New CRR ID
CRR ID
Account Holder
Source Sink MW Start DateEnd Date
TimeOf
Use
Hedge Type
56789 Jill RN1 LZ4 3 07/13/2020 07/17/2020 Peak WD OBL
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• Which CRRs are tradable
• The process of registering CRR trades with ERCOT
• The ERCOT requirements to trade CRRs
In this module, you’ve learned about:
Module Summary
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Module 4
Day-Ahead Market
Point-to-Point Obligations
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• Identify how to acquire PTP Obligations in the DAM
• Explain the differences between DAM PTP Obligations and
CRRs acquired in the Auction
Upon completion of this module, learners will be able to:
Module Objectives
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Congestion Revenue Rights Life Cycle
• Bids to Buy
• Offers to Sell
• Settlement of DAM PTP Obligations
Real-TimeOperations
• Bilateral Transaction
• CRR Account Holders
CRR Trades
• Bids to Buy
• Offers to Sell
CRR Auction
• PCRRs to NOIEs
• Prior to the CRR Auction
Allocation
• Daily Settlement of CRRs
Day-Ahead Market
• Buy DAM PTP Obligations
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Transmission Capacity in Day-Ahead Market
Possible Transmission
Capacity Available After
the Auction
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Transmission Capacity in Day-Ahead Market
Possible Transmission
Capacity Available for
Day-Ahead Market
Day-Ahead Market:
• CRRs purchased in Auction
are settled in DAM
• Settlement of CRRs “frees
up” available network
capacity for the DAM
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Point-to-Point Obligations – The bigger picture
PTP Obligation (CRR) DAM PTP Obligation
How acquired: Auction / Allocation DAM
Who Purchases: CRR Account Holder QSE
Tradable: Yes No
How Purchased: TOU Blocks Hourly
Initial Investment: Auction clearing priceDay-Ahead SPPs
(Sink – Source)*
Target Payout:Day-Ahead SPPs
(Sink – Source)
Real-Time SPPs
(Sink – Source)
* Other DAM charges may apply
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Point-to-Point Obligations – The bigger picture
CRR Auction Day-Ahead Market Real-Time
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Inputs for Award of PTP Obligations
Day-Ahead Market Point-to-Point Obligations
Day-Ahead
Market
PTP Obligation
Bids
Energy Bids
and Offers
Credit Limits
Day-Ahead
Network Model
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• Submitted for any two Settlement Points
• Includes:
• MW Quantity
• (Sink – Source) price buyer is willing to pay
DAM PTP Obligation Bid
Day-Ahead Market Point-to-Point Obligations
Source
Settlement
Point
Sink
Settlement
Point
PTP
Obligation
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DAM Pricing and Awards
• MIS Postings
• Settlements
• Credit
Day-Ahead Market Results
Day-Ahead Market Point-to-Point Obligations
Day-Ahead
Market
PTP Obligation
Bids
Energy Bids
and Offers
Credit Limits
Day-Ahead
Network Model
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• How to acquire PTP Obligations in the Day-Ahead Market
• How PTP Obligations in the Day-Ahead are different from
and similar to CRRs acquired in the Auction
In this module, you’ve learned about:
Module Summary
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Module 5
Credit Limits
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• Recognize how a company establishes available credit
• Explain the process of allocating credit for a CRR Auction
• Describe how credit is utilized in the CRR Auction
• Recognize how credit is shared between QSEs and
CRR Account Holders
Upon completion of this module, learners will be able to:
Module Objectives
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• Entity that is also a QSE and/or a CRR Account Holder
• Responsible for managing Available Credit
Introducing ... The Counter-Party
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Available Credit
Credit
ExposureCredit
Exposure
+ 10%
MarkupUnsecured
Credit
Secured
Collateral
Available
CreditCounter-Party posts
Secured Collateral to
make credit available to
its QSEs and CRR
Account Holders
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CRR Auction Inputs
Available Credit
Bids
Offers
CRR Model
Allocated PCRRs
Previously Awarded CRRs
Credit Limits
CRR Auction
Engine
Credit limit acts as budget constraint
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Available Credit
Credit
Exposure
+ 10%
MarkupExposure for
QSEs + 10%Unsecured
Credit
Secured
Collateral
Available
Credit
Satisfied by
Secured Collateral and
Unsecured Credit
Exposure for
CRRs + 10%
Satisfied only by
Secured Collateral
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ERCOT Calculates Counter-Party’s Available Credit Limit
for CRR Auction (ACLC)
CRR Auction Credit Limit
Exposure for
QSEs + 10%
Secured
Collateral
Available
Credit
Exposure for
CRRs + 10%
Counter-Party allocates
up to 100% to CRR
Account Holder(s)
Secured Collateral
consumed by QSE
Available
Credit
Limit
(ACLC)
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• ERCOT calculates ACLC for Counter-Party
• Counter-Party must set a Credit Limit for the
Auction for their CRR Account Holder to
participate
Budget Constraint in CRR Auction
Utilizing Available Credit
ACLC
CP Credit
Limit
Counter-Party must lock
credit by close of the Bid
Window for the CRR Auction
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• Counter-Party must set a Credit Limit for the
Auction for their CRR Account Holder to
participate
• CRR Account Holder may assign a self-imposed
Credit Limit
Budget Constraint in CRR Auction
Utilizing Available Credit
CP Credit
Limit
ACLC
Auction
LimitCRR AH
Self-Imposed
The Counter-Party credit limit
determines how much credit
is locked for the auction.
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• Counter-Party must lock credit separately for
each Auction in the sequence
• Counter-Party must lock credit separately for
each Time-of-Use (TOU)
Special Rules for Long-Term Auction Sequence
Utilizing Available Credit
CP Credit
Limit
ACLC
Auction
LimitCRR AH
Self-Imposed
For credit-lock deadlines,
refer to CRR Activity
Calendar on ercot.com
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Credit is consumed as follows:
• PTP Options Bids: Volume * Bid price
• PTP Obligation Offers: Volume * Min (0, Offer price)
• PTP Obligation Bids: Volume * (Bid price + Path-Specific Adders)
Credit Consumption in CRR Auction
Utilizing Available Credit
CP Credit
Limit
ACLC
Auction
LimitCRR AH
Self-Imposed
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• Calculated for each source/sink pair
• Three year look-back
Path-Specific DAM-Based Adder for PTP Obligation Bids
Utilizing Available Credit
ci99 = 99th percentile
Confidence Interval-$
14
-$1
2
-$1
0
-$8
-$6
-$4
-$2
$0
$2
$4
$6
$8
$10
Oc
cu
rren
ces
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Auction PTP Obligation Credit Requirement (AOBLCR)
Utilizing Available Credit
AOBLCR = BOBLMW * (Max(0, BPOBL) − Min(0, Aci99, EACP))
Where
BOBLMW = (Potentially) Awarded PTP Obligation
BPOBL = Bid Price for PTP Obligation
EACP = Effective Auction Clearing Price (most recent)
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• Like credit constraint except calculated with
Bid Volumes rather than Awarded Volumes
• If exposure < CP Credit Limit, then Limit is ignored
• If exposure < Self-Imposed Credit Limit, then Limit is ignored
Credit Pre-Screening for CRR Auction
Utilizing Available Credit
CP Credit
Limit
ACLC
Auction
LimitCRR AH
Self-Imposed
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CRR Account Holder sets a self-imposed credit
limit of $50,000 and submits bids for a Monthly
CRR Auction
Scenario 1
Utilizing Available Credit
• 100 MW PTP Options from A to B
• $1000 Bid Price
Auction awards them 50MW @ $20
What happened?
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CRR Account Holder sets a self-imposed credit
limit of $18,000 and submits bids for a Monthly
CRR Auction
Scenario 2
Utilizing Available Credit
• 100 MW PTP Obligations from D to C
• $180 Bid Price
Auction awards them 90MW @ -$20
What happened?
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CRR Account Holder 1 & CRR Account Holder 2
are part of the same Counter-Party. What would
happen if they both self-imposed a credit limit
for a CRR Auction?
Bonus
Scenario
Utilizing Available Credit
Counter-
Party
Credit
LimitCRR AH1
CRR AH2 Counter-
Party
Credit
Limit
CRR AH1 CRR AH2
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The Rest of the Credit Picture
Counter
Party
CRR
Account
HolderQSE
Maintains Secured
Collateral with ERCOT
Day-Ahead
Market
Credit Limit
CRR
Auction
Credit Limit
Available credit is shared
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ERCOT Calculates Counter-Party’s Available Credit Limit
for DAM (ACLD)
Day-Ahead Market Credit Limit
Exposure for
QSEs + 10%Unsecured
Credit
Secured
Collateral
Available
Credit
Limit
Exposure for
CRRs + 10%
(ACLD)
Credit locked
for Auction
ACLD
QSE gets ACLD as
DAM Credit Limit
QSE gets ACLD as
DAM Credit Limit
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Buying PTP Obligations in DAM?
Credit Limits
Day-Ahead
Market
PTP Obligation
Bids
Energy Bids
and Offers
Credit Limits
Day-Ahead
Network Model
Credit limit acts as budget constraint
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• How a company establishes available credit
• The process of allocating credit for a CRR Auction
• How credit is utilized in the CRR Auction
• How credit is shared between QSEs and
CRR Account Holders
In this module, you’ve learned about:
Summary
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Module 6
CRR Settlements
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• Identify the settlements associated with buying, owning and
selling CRRs
• Describe the flow of money in the CRR Auction and for
settlements of CRRs in the Day-Ahead Market
• Explain how ERCOT uses the CRR Balancing Account
• Identify the settlements associated with buying PTP
Obligations in DAM
• Describe the flow of money for DAM PTP Obligations
Upon completion of this module, learners will be able to:
Module Objectives
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Three Settlement Processes
• CRR Auction Settlement
• Day-Ahead Market
• Settlement of CRRs
• Shortfall Charges
• CRR Balancing Account
CRR Settlements
Financial Impacts: Allocation, Auction & Bilateral Trades
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CRR Auction Settlement Timeline
CRR Auction Settlement
Auction Completed Day 1* Day 3** Day 4**
Auction Invoice
PaymentsDue to ERCOT
PaymentsDue to CRR Account Holders
Auction Results
Day 2**
** Bank Business Day
*** ERCOT Business Day and Bank Business Day
* ERCOT Business Day
Day 5***
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Charges and Payments for CRR
Auction
CRR Auction Settlements
CRR
Auction
Settlement
Charge for awarded CRR Bid
= (Price) * (CRRs) * (TOU Hours)
Payment for awarded CRR Offer
= (-1) * (Price) * (CRRs) * (TOU Hours)
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CRR Auction Settlements
CRR
Auction
Settlement
CRRAH1 is awarded on a PTP Option bid:
• 20 MWs
• Peak WD (5x16)
• Price of $5/MW
• 320 hr in February
• For one hour:
(Price) * (CRRs)
($5/MW) * (20 MW) = $100
• For entire TOU block:
$100 * 320 = $32,000
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Collection of Auction Revenues
CRR Auction Money Flow
• PCRR Revenues
• Charges for
Awarded CRR Bids
Payments
for
Awarded
CRR
Offers
• Payments for
Awarded CRR
Offers
• Payments for
Awarded CRR
Bids
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• Revenues from Intra-Zonal*
CRRs are distributed by
Zonal Load Ratio Share
• Revenues from Inter-Zonal*
CRRs are distributed by
ERCOT-wide Load Ratio
Share
Distribution of Auction Revenues
CRR Auction Money Flow
Paid to QSEs
representing Load
Distribution occurs
once a month.
*Based on 2003 Congestion Management Zones
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CRRs Settled in the Day-Ahead
Day-Ahead Settlement of CRRs – Money Flow
Calculated hourly
Payment due to CRR
Account Holders
(Target Payment)
• Charges for Cleared DAM Energy Bids
• Charges for Cleared DAM PTP Obligation Bids
• Payments for Cleared DAM Energy Offers
• Payments for Cleared DAM PTP Obligation Bids
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QuantityPrice
Payment for CRRs Settled in Day-Ahead
QuantityPrice
Target Payment
( )*( )
Payment
to CRR
Owners
Quantity: MW of CRRs owned on path
Price: DASPPsink − DASPPsource
Per hour
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Payment for CRRs Settled in Day-Ahead
QuantityPricePrice Quantity( )*( )
Payment
to CRR
Owners
Per hour
• Only results in a payment
• If price is negative, there is no charge
PTP Options
Target Payment
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Payment for CRRs Settled in Day-Ahead
Payment
to CRR
Owners
$16
CRR Account Holder owns 2 MWs of PTP
Options between Source A and Sink B.
A B$12 / MWh $20 / MWh
$8/MWh 2MW( )*( ) Per hour
PTP Options
= ?QuantityPrice
Target Payment
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Payment for CRRs Settled in Day-Ahead
Payment
to CRR
Owners
• Results in a payment or charge
PTP Obligations
Price Quantity( )*( ) Per hour
Target Payment
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CRR payments may be derated if:
• Transmission elements are oversold
• The Target Payment is a positive value
• CRR sink is a Resource Node
Reduced CRR Payments
Payment for CRRs Settled in Day-Ahead
Payment
to CRR
Owners
Sink kSource j
Resource
Node
Any
Settlement
Point
CRR
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• Developed daily
• Reflects forecasted transmission
system for the next day
• Updated with scheduled outages and
forecasted system conditions
Deration of CRRs
Payment for CRRs Settled in Day-Ahead
Day-Ahead Network
Operations Model
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Deration of CRRs
Payment for CRRs Settled in Day-Ahead
Day-Ahead Simultaneous Feasibility Test
During Day-Ahead Market
Day-Ahead Network
Operations Model
• Executed daily
• Verifies feasibility
of CRRs sold in
Auction
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Deration of CRRs
Payment for CRRs Settled in Day-Ahead
Day-Ahead Simultaneous Feasibility Test
Transmission elements not oversold
• CRRs receive Target Payment
Transmission elements oversold
• CRRs may receive reduced payment
Day-Ahead Network
Operations Model
During Day-Ahead Market
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Payment for CRRs Settled in Day-Ahead
Resource Node
Constraint
Minimal impact
Minimal deration
Constraint
Resource Node
Significant impact
Significant deration
Deration of CRRs is based on impact of
Resource Node on constraints
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• Derated Amount limits pricing games for CRR
at Resource Node
• Hedge Value maintains value of CRR as Hedge
Maximum Resource Price at sink
Minimum Resource Price at source
Derated Amount and Hedge Value
Payment for CRRs Settled in Day-Ahead
RESOURCE TYPE MAXRESPR k MINRESPR j
Nuclear $15/MWh -$20/MWh
Simple Cycle > 90MW FIP*14 FIP*10
Combined Cycle > 90MW FIP*9 FIP*5
Wind $0 -$35/MWh
PhotoVoltaic (Solar) $0 -$10/MWh
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Hedge Value Price
Payment for CRRs Settled in Day-Ahead
HV PRICE = Max (0, MAXRESPR sink – MINRESPR source)
Source SinkCRR
HV PRICE = Max (0, MAXRESPR sink – DASPP source)
Source SinkCRR
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Payment for CRRs Settled in Day-Ahead
Payment
to CRR
Owners
Target Payment < Hedge Value
CRR Owner receives Target Payment
Hedge Value < Target Payment
CRR Owner receives Hedge Value or
Derated Amount, whichever is greater
Hedge V
alu
e
Targ
et P
aym
ent
Hedge V
alu
e
Targ
et P
aym
ent
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Day-Ahead Market Congestion Rent
Day-Ahead Settlement of CRRs – Money Flow
Payment due to CRR
Account Holders
(Target Payment)
• Charges for Cleared DAM Energy Bids
• Charges for Cleared DAM PTP Obligation Bids
• Payments for Cleared DAM Energy Offers
• Payments for Cleared DAM PTP Obligation Bids
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Day-Ahead Market Congestion Rent
Day-Ahead Settlement of CRRs – Money Flow
Payment due to CRR
Account Holders
(Target Payment)
• Charges for Cleared DAM Energy Bids
• Charges for Cleared DAM PTP Obligation Bids
• Payments for Cleared DAM Energy Offers
• Payments for Cleared DAM PTP Obligation Bids
Some hours there is more
Congestion Rent
collected than needed to
pay CRR Owners
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Day-Ahead Market Congestion Rent
Day-Ahead Settlement of CRRs – Money Flow
Payment due to CRR
Account Holders
(Target Payment)
• Charges for Cleared DAM Energy Bids
• Charges for Cleared DAM PTP Obligation Bids
• Payments for Cleared DAM Energy Offers
• Payments for Cleared DAM PTP Obligation Bids
Occurs hourly
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Day-Ahead Market Congestion Rent
Day-Ahead Settlement of CRRs – Money Flow
Payment due to CRR
Account Holders
(Target Payment)
• Charges for Cleared DAM Energy Bids
• Charges for Cleared DAM PTP Obligation Bids
• Payments for Cleared DAM Energy Offers
• Payments for Cleared DAM PTP Obligation Bids
Some hours there is not
enough Congestion Rent
to pay CRR Owners
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Shortfall Charge for CRRs Settled in Day-Ahead - Activity
Short-pay
to CRR
Owners
Hour Ending 1300
Total CRR Target Payment $20 Million
Congestion Rent Collected $19 Million
CRR Shortfall for the hour $1 Million
CRR Owner’s Target Payment $2 Million
CRR Owner’s Share of Total Payment 0.1
CRR Owner’s Shortfall Charge $100,000
( )CRR Owner
Target
Payment
Total CRR
Target Payments
for hour/*( )Total CRR
Shortfall
Shortfall
Charge =
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CRR Balancing Account Fund
CRR Rolling Balancing Account
Payment due to
CRR Account Holders
Pay to QSEs
representing Load
Monthly
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Payment due to
CRR Account Holders
CRR Rolling Balancing Account
Monthly
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Payment due to
CRR Account Holders
CRR Rolling Balancing Account
Monthly
X
may remain
short paid
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QuantityPrice
Charge for DAM PTP Obligation Bids
PTP Obligations Bought in the Day-Ahead Market
Charge to
QSE in
DAM
QuantityPrice( )*( )
Quantity: MW of PTP Obligations awarded on path
Price: DASPPsink − DASPPsource
Per hour
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PTP Obligations Settled in the Day-Ahead Market
Cleared PTP Obligation Bids in the Day-Ahead Market
Payment due to CRR
Account Holders
(Target Payment)
• Charges for Cleared DAM Energy Bids
• Charges for Cleared DAM PTP Obligation Bids
• Payments for Cleared DAM Energy Offers
• Payments for Cleared DAM PTP Obligation Bids
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Price Quantity
Payment for DAM PTP Obligations
PTP Obligations Bought in the Day-Ahead Market
Payment
to QSE in
Real-Time
QuantityPrice( )*( )
Quantity: MW of DAM PTP Obligations owned on path
Per hour
Price: RTSPPsink − RTSPPsource( )/ 4
4
1iΣ=
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• Settlements associated with CRRs
• The flow of money related to CRRs in the ERCOT Markets
• The CRR Balancing Account
• Settlements associated with DAM PTP Obligations
• The flow of money related to DAM PTP Obligations
In this module, you’ve learned about:
Module Summary
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Course Conclusion
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• Requirements to participate in the CRR market
• CRR Market processes
• Possible financial outcomes of CRRs in the ERCOT
markets
In this course, you’ve learned about:
Course Summary
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Scan this QR code to take the course survey!
https://www.surveymonkey.com/r/ERCOTILT
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ERCOT Protocols
http://www.ercot.com/mktrules/nprotocols/
ERCOT Account Management Services
ERCOT Market Education
http://www.ercot.com/services/training/
ERCOT Market Education Contact
Additional Resources