February, 2012 ERCOT Public ERCOT CRR Update Matt Mereness ERCOT Manager Day-Ahead Market and CRR Auction

February, 2012

ERCOT Public

ERCOT CRR Update

Matt MerenessERCOT Manager Day-Ahead Market and CRR Auction

2

Agenda

Recap of Annual CRR Auction and Lessons Learned

CRR Next Steps in 2012ERCOT Tactical / Short-termERCOT/Market Strategic Discussions (and consider priority)

Appendix of detailed PCRR/CRR examples

Deferred- 2012 CRR Market Notice discussion

February, 2012 ERCOT Public

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Recap of Annual CRR Auction for 2012/2013


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Execution times of Annual CRR Auction

2012 Annual Auction (55% of system capacity)• 60 hours for final run of Peak WD

• 14 hours for final run of Peak WE

• 7.5 hours for final run of Peak Off-Peak

2013 Annual Auction (15% of system capacity)• 194 hours for final run of Peak WD*

• 50 hours for final run of Peak WE

• 36 hours for final run of Peak Off-Peak

Issue/Risk– Execution time took 8-days for one component of auction


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NOMCR and Outage Metrics

Posted 72 models for auction (3TOU x 12 months x 2 years)

2012 Annual Auction (55% of system capacity)• Snapshot taken 8/17/2011• NOMCRs:

• 526 NOMCRs part of model build• 490 Approved status (for Testing or Production) • 36 Other status (Received, Resubmitted, Submitted, Add’l data required)

• Outages- 18 Outages part of model build• Used 8 in model build

2013 Annual Auction (15% of system capacity)• Snapshot taken 6/28/2011• NOMCRs:

• 725 NOMCRs part of model build• 674 Approved status (for Testing or Production) • 51 Other status (Received, Resubmitted, Submitted, Add’l data required)

• Outages- 8 Outages part of model build• Used 1 in model build

Question, how were long-term planned changes in model build, such as CREZ lines in annual model?


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Annual CRR Auction for 2012/2013

Lessons Learned :– Both years of Auction published on time (completed execution between Oct31- Nov16)– Lessons learned:

• Credit- Significant market credit hold of $1.6 billion for 3 weeks, so team looking for feedback to propose changes to timing and sequence to alleviate coinciding credit collateral posting (next bullet).

• Sequence/timing- Considering with market changes to execute 2-year auction in separate bid and credit windows for each year to relieve market credit and improve analysis of results.

• Technical- 2013 PeakWeekDay auction executed for 194 hours, so evaluating performance improvement options for next year’s auction (software, servers, configuration).

• Bid Limit of 200,000- Market was oversubscribed for 2012 so looking at options whether to consider no changes, or to consider alternative minimum bids prices, reduce maximum bids per CRRAH in first round, or curtailment of least value bids prior to running auctions.


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Agenda


CRR Next Steps in 2012ERCOT Tactical / Short-termERCOT/Market Strategic Discussions (and consider priority)

Appendix of Examples


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CRR Next Steps in 2012

ERCOT Tactical / Short-term– Implementation of NPRR395 (credit posting), NPRR357/430 (credit screening)– Market requests such as CRR Model Build paper, PCRR and CRR Offers in Auction– Consider CRR Calendar and Protocol changes to separate 2-year Annual Auction– Improve system performance of 2013 PeakWeekDay Auction

ERCOT/Market Strategic Discussions (and consider priority)– Options around 200,000 Bid Limit – CRR Payment Schedule options– Rolling Auction options and approaches


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Agenda


CRR Next Steps in 2012ERCOT Tactical / Short-term Model Build Process (slides + whitepaper) PCRR and CRR Offers in Auction (slides + Appendix) Separate 2-year Annual Auction Improve system performance for Annual Auction

ERCOT/Market Strategic Discussions (and consider priority) Next Steps for 2012 Market Notices


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CRR Model Build Process

CRR Team will support the CRR Model Build Process as an “Other Binding Document”

Current draft for market consideration posted with this presentation

Summary of processCIM snapshot from current production model

Apply NOMCRs to create model for Outage Evaluation

Perform Study to determine most constraining day of month (outages)

That day of month becomes model build date to build:

Using current CIM model

Applying all approved NOMCRs leading up to that date (future model)

Applying Outages

Topology Processor creates model file to pre-process for CRR

CRR Engineer applies all other supporting data- Forecasted Temps, LDF, etc

Model uploaded into CRR system and posted to market

Multi-month models are same as monthly methods repeated into future months


11 ERCOT PublicFebruary, 2012

2013 Annual Auction (15% of system capacity)• Operations Model = 6/28/2011 (18 months before Jan 1, 2013)• NOMCRs = 725 in-flight (most future NOMCR = 6/1/2012)• Outages = 8 Outages in model build study, used 1 in model build across months

2012 Annual Auction (55% of system capacity)• Operations Model = 8/17/2011 (4 months before Jan 1, 2012)• NOMCRs = 526 in-flight (most future NOMCR = 7/11/2012) • Outages = 18 Outages in model build study, used 8 in model build

Question- Were long-term planned changes in model build, such as CREZ lines?

Answer is “No”, but there was at least one CREZ line with a NOMCR that was accepted (Scurry South – Dermott 345 kv double circuit).

ERCOT has studied amount of change in accuracy of dates of future improvements and excluded them from consideration in 1-2 years in future (see next slide for example)

CRR Model Build for Annual Auctions


CRR Model Build- Sample of Changes in Energization Dates

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PCRR and CRR Offer Explanation

Reminder that Network Model is scaled for auction at:

Year 2 – Scaled to 15% of ratings/capacity

Year 1 – Scaled to 55% of ratings/capacity

Monthly – Scaled to 90% of ratings/capacity

For any PCRRs or previously awarded CRRs:

For Year2 and Year1 the ownership is scaled-down to represent the “base CRR” capacity on the scaled-down model that affects how much more capacity can be sold. No scaling down in monthly auction.

For Allocated PCRRs, the CRRAH has the option to:

- Hold the PCRRs and pay for their value in the CRR Auction (at discount)

or

- Offer their PCRRs into the market

These offers can be up to 100% of their MW value, even if it exceeds the scaled-down model, and potentially be fully cleared and transferred to another CRRAH (since this is a transfer of ownership, not incremental capacity on the network model).


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PCRR and CRR Offer Explanation

Detailed examples in the appendix, but a high level annual auction example:

100MW line with 80MW PCRR ownership for Year1- 55% Auction

Offer from CRRAH NOIE to sell 80MW PCRR

Bid from CRRAHX at high price to buy 100MW


Bus A Bus B

55MW capacity = 100 MW rating (100x55%) less 44MW CRR baseload (80x55%)11 MW for sale from ERCOT

100 MW bid 100MW line

80 MW offer

Assuming high bid price from CRRAHX:CRRAHX = Clears the 80MW (offer) + 11MW (system) = 91MWCRRAHNOIE = Sells all 80MW, 0 Remaining

Note in monthly auction, the 91MW ownership is scaled down to 90% to become CRR baseload, just as PCRR was.

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Separate 2-year Annual Auction

Annual Auction processes and systems are already separated in terms of:

Credit lock, Modeling, Bid window, Auction solutions

ERCOT proposal to consider separating credit/bid/auction windows for each year to relieve market credit and improve analysis of results.


Year 1

Year 2Oct/Nov

All credit/bids/auctions in flight simultaneously

Year 1

Year 2

Oct/Nov

Year 2 credit/ bids/auctions

Nov/Dec

Year 1 credit/ bids/auctions

Current

Proposed

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Improve System Performance

2013 Annual Auction (15% of system capacity)• 194 hours for final run of Peak WD

Risk– Execution time took 8-days for one Time-of-Use auction segment, and thus time for a re-execution due to credit or solution issue is limited.

Mitigation plan- ERCOT in process of re-executing 194 hr run on upgraded platform to benchmark Linux technology and newer Nexant code. Testing progress.


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Agenda


CRR Next Steps in 2012ERCOT Tactical / Short-termERCOT/Market Strategic Discussions (and consider priority)– Options around 200,000 Bid Limit – CRR Payment Schedule options– Rolling Auction options and approaches

Appendix of Examples


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Options around 200,000 Bid Limit

Bid trending of all auctions since go live

Exceeded 200,000 bid limit two times resulting in Round 2



Options for consideration

Auction for the auction- ERCOT to conduct an auction/allocation for the bid capacity

Questions to consider regarding timing, involvement of money

Complexity of more people, processes, timing

Additional chance for “self-reduction of bids”

If 200k exceeded, introduce an additional day for self-reduction by CRRAHs of known over-subscribed amount before invoking the low bid limit quantity

Increase minimum Option bid price

Reserve bid capacity for higher value bids, but no guarantee of <200k limit

Remove credit constraint in CRR Clearing engine

Allows P-Q Curves (example up to 10 segments)

Curve counts as single bid, estimate would consolidate 30-50% of bids

Forced ranking of 200,000 bids

Take all option bids, rank by price, and curtail down to 200,000 limit

ERCOT and Vendor will continue to test 200,000 threshold

Options around 200,000 Bid Limit


Options for consideration

Part of NPRR357 was concept of paying for CRRs only in the prompt month

Revisiting of collateral requirements of CRR ownership

No comments from CRR team on payment schedule or collateral

Could be considered in context of current annual auction

Could be considered with rolling auction

In response to some questions about credit default processes during auction, Protocols 7.5.5.3 (1)(b) ERCOT may review preliminary CRR Auction results to ensure that post auction collateral

requirements are satisfied for all CRR Account Holders participating in the CRR Auction. If it is practicable to rerun the applicable CRR Auction, and the post CRR Auction collateral requirements for a Counter-Party are not satisfied, ERCOT:(i) Shall promptly notify the Counter-Party of the amount by which its Financial Security must be increased and allow it until 1500 on the next Bank Business Day from the date on which ERCOT delivered Notification to increase the Financial Security. (ii) If sufficient Financial Security is not received by 1500 on the next Bank Business Day, ERCOT shall void all of the Counter-Party’s bids and offers in the CRR Auction and rerun the CRR Auction without that Counter-Party’s activity.

CRR Payment Schedule


Open discussion to gather options and priorities for market rolling auction

Tenor/horizon of auctions (shorter/longer)

Percentage of capacity auctioned each annual, month, or other period

Potentially minimize model builds with transition from monthly to seasonal periods

Example, utilize seasons for Annual and Quarterly

Monthly would only be offered at granularity in prompt month

Is there a target to sell every period in year at monthly frequency, or quarterly?

CRR Rolling Auction Concepts

Execute monthly for each month (once)?Execute 3 future quarters/seasons, on quarterly basis?Release up to X% per season?


Questions?

Any comments on tactical or strategic issues and priorities?


APPENDIX of EXAMPLES

Treatment of Baseload in the CRR Allocations & Auctions

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CRR Allocation/Auction Process

Annual PCRR Allocation Annual PCRR Allocation (For Year 2012 and (For Year 2012 and

2013)2013)

Monthly True-up Monthly True-up Allocation (In Year 2012)Allocation (In Year 2012)

Annual Auction Annual Auction (For Year 2012 and (For Year 2012 and

2013)2013)

Monthly Auction Monthly Auction (In Year 2012)(In Year 2012)

Annual PCRR Allocation Annual PCRR Allocation (For Year (For Year 20142014))

Annual Auction Annual Auction (For Year 2013 and (For Year 2013 and

2014)2014)

Monthly True-up Monthly True-up Allocation (In Year 2013)Allocation (In Year 2013)

Monthly Auction Monthly Auction (In Year 2013)(In Year 2013)


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Constraint Factor & Baseloading Factor

Annual/MonthlyAnnual/Monthly Allocation/AuctionAllocation/Auction Constraint Constraint FactorFactor

Baseloading Baseloading FactorFactor

AnnualAnnual

Allocation

Year 1

100% 100%

Year 2

100% 100%

Auction

Year 1

55% 55%

Year 2

15% 15%

MonthlyMonthlyAllocation 100% 100%

Auction 90% 100%


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PCRR Treatment in Annual Auction for Year 2012

In the Annual PCRR Allocation for year 2012, Market Participant MP1 requested 20 MW obligation with the path A->B, PeakWeekDay, for January 2012 and was fully allocated.

In the Annual Auction, MP1 is holding 20 MW obligation and offering 5 MW for sale @$0.1/MWh

Market Participant MP2 is bidding 90 MW obligation to buy with the path A->B @$0.25/MWh.

The base load held by MP1 is scaled to 55%*20=11 MW, and the transmission capacity of A->B is scaled down to 55%*100=55 MW.

Bus A Bus B

100 MW rating

20 MW


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PCRR Treatment in Annual Auction for Year 2012 (continued)

Bus A Bus B

55 MW rating

11 MW

The auction is to sell the 55% of remaining transmission capacity, which is 55%*(100-20) = 44 MW.

After the auction is run, 5 MW is sold by MP1 49 MW is awarded to MP2

The final CRR ownership: CRR1: 15 MW owned by MP1 CRR2: 49 MW owned by MP2


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PCRR Treatment in Annual Auction for Year 2012 (continued)

Bus A Bus B

55 MW rating

11 MW

The power flow on line A->B is ScaledPCRRMW+ AwardedBidMW- SoldOfferMW=55%*20 + 49 – 5 = 55 MW. Therefore A->B is binding. Clearing price of path A->B is $0.25/MWh


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Monthly (True-up) Allocation in Year 2012

Bus A Bus B

100 MW rating

15 MW

The base load is 15+49=64MW and the basdloading factor is 100% (no scaling).

The line rating is 100 MW and the constraint factor is 100% (no scaling).

The power flow on the line A->B is 64 MW.

49 MW

The baseloading factor is 100% (no scaling), and therefore the base load is 15+49=64MW.

The constraint factor is 100% (no scaling), and therefore the line rating is 100*100%=100 MW.

The initial power flow on the line A->B is 64 MW.


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Monthly Auction in Year 2012

Bus A Bus B

90 MW rating

15 MW

The baseloading factor is 100% (no scaling), and therefore the base load is 15+49 = 64 MW.

The constraint factor is 90% , and therefore The line rating is 100*90% = 90 MW.

The power flow on the line A->B is 64 MW. The remaining transmission capacity is 90-64 = 26

MW.

49 MW


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In the Annual PCRR Allocation for 2013 as the year 2, Market Participant MP1 is requesting 100 MW obligation with the path A->B, PeakWeekDay, in January 2013 and gets fully awarded.

Bus A Bus B

100 MW rating

100 MW

PCRR Treatment in Annual Auction for Year 2013 as Y2


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In the Annual Auction, MP1 is holding 100 MW obligation and offering 80 MW for sale @$0.1/MWh

Market Participant MP2 is bidding 190 MW obligation to buy with the path A->B @$0.25/MWh.

The base load held by MP1 is scaled to 15%*100 = 15 MW, and the transmission capacity of A->B is scaled down to 15%*100 =15 MW.

PCRR Treatment in Annual Auction for Year 2013 as Y2 (continued)


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Bus A Bus B

15 MW rating

15MW

The auction is to sell the 15% of remaining transmission capacity, which is 15%*(100-100) = 0 MW.

After the auction is run, 80 MW is sold by MP1 80 MW is awarded to MP2

The final CRR ownership: CRR1: 20 MW owned by MP1 CRR2: 80 MW owned by MP2



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Bus A Bus B

15 MW rating

15 MW

The power flow on line A->B isScaledPCRR+AwardedBidMW-SoldOfferMW=15%*100 + 80 – 80 = 15 MW. Therefore A->B is binding. Clearing price of path A->B is $0.25/MWh



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Bus A Bus B

55 MW rating

11 MW




In September 2012, the Annual PCRR Allocation is to only allocate PCRR for year 2014, and there is NO annual PCRR allocation for year 2013.

In the Annual Auction for year 2013 as the year 1, the baseloading factor is 55% (scaling), and therefore the base load is 20*55%+80*55%=11+44=55 MW.

The constraint factor is 55%, and therefore the line rating is 55*100%=55 MW.


44 MW


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Suppose MP3 is willing to buy obligation bid 120 MW @ $0.8/MWh. Suppose MP1 and MP2 are offering 20 MW @0.1$/MWh and 80 MW@

0.25$/MWh for sale respectively. The final solution:

MP1 sold 20 MW MP2 sold 80 MW MP3 bought 100 MW

The final CRR ownership: CRR1: 20 - 20 = 0 MW CRR2: 80 - 80 = 0 MW CRR3: 100 MW

Bus A Bus B

55 MW rating

11 MW

44 MW



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Bus A Bus B

90 MW rating

The baseloading factor is 100% (no scaling), and therefore the base load (from MP3) is 100 MW.

The constraint factor is 90% , and therefore the line rating is 100*90% = 90 MW.

The initial power flow on the line A->B is 100 MW, and the line’s rating will be extended to 100 MW in order to achieve the feasible solution.

100 MW

Monthly Auction in Year 2013


Documents

February, 2012 ERCOT Public ERCOT CRR Update Matt Mereness ERCOT Manager Day-Ahead Market and CRR Auction