PRS Report

NPRR Number / 458 / NPRR Title / Establishment of ERCOT’s Central Counterparty Role
Timeline / Normal / Action / Tabled
Date of Decision / April 19, 2012
Proposed Effective Date / To be determined.
Priority and Rank Assigned / To be determined.
Nodal Protocol Sections Requiring Revision / 1.2, Functions of ERCOT
2.1, Definitions
4.4.7.1, Self-Arranged Ancillary Services Quantities
4.4.7.1.1, Negative Self-Arranged Ancillary Service Quantities
4.6.4, Settlement of Ancillary Services Procured in the DAM
6.5.7.5, Ancillary Services Capacity Monitor
22A, Standard Form Market Participant Agreement
22B, Standard Form Reliability Must-Run Agreement
22D, Standard Form Black Start Agreement
22F, Standard Form Synchronous Condenser Agreement
Market Guide Section(s) Requiring Revision / None.
Revision Description / This Nodal Protocol Revision Request (NPRR) establishes ERCOT as the central counterparty to all transactions in the ERCOT market, except those involving bilateral trades or self-arranged services. The changes introduced by this NPRR do not alter ERCOT’s functions as the Independent System Operator for the ERCOT Region. Rather, the changes are being proposed to establish mutuality between ERCOT and buyers and sellers in the ERCOT markets. The mutuality established by the proposed changes is intended to facilitate ERCOT’s ability to effectuate set-off in bankruptcy proceedings related to a Market Participant default. This, in turn, is intended to mitigate uplift to Market Participants that may result from monies owed to ERCOT that may not otherwise be recovered in such bankruptcy proceedings due to a lack of mutuality. Consistent with the establishment of ERCOT as the central counterparty, the NPRR deletes all references to ERCOT acting “as agent for” or “on behalf of” a Qualified Scheduling Entity (QSE) when it purchases energy or Ancillary Services.
Reason for Revision / Making ERCOT the central counterparty to all transactions in its markets enhances ERCOT’s ability, in the event of a Market Participant bankruptcy, to offset the amount of the Market Participant’s debt to ERCOT by any amount ERCOT owes the Market Participant, thereby reducing the amount of the debt that would otherwise be uplifted to the market.
Credit Impacts / To be determined.
Procedural History / On 4/4/12, NPRR458and the associated Impact Analysis were posted.
On 4/19/12, PRS considered NPRR458.
PRS Decision / On 4/19/12, PRS unanimously voted to table NPRR458 and refer the issue to WMS. All Market Segments were present for the vote.
Summary of PRS Discussion / On 4/19/12, concerns were raised in reference to ERCOT being the central counterparty thereby having physical ownership ofMWs and Ancillary Services in the ERCOT market. Participants agreed that further discussion is needed by the Credit Work Group (Credit WG) to ensure that the Commodity Futures Trading Commission (CFTC) requirements are being met.
Business Case
Business Case / 1 / This NPRR will enhance ERCOT’s ability to net any amount owed to a Market Participant with the amount of the Market Participant’s debt to ERCOT, thus reducing default risk.
2
3
4
5
Sponsor
Name / Nathan Bigbee, Chad Seely
E-mail Address / ,
Company / ERCOT
Phone Number / 512-225-7093, 512-225-7035
Cell Number
Market Segment / Not applicable.
Market Rules Staff Contact
Name / Sonja B. Mingo
E-Mail Address /
Phone Number / 512-248-6463
Comments Received
Comment Author / Comment Summary
None.
Proposed Protocol Language Revision

1.2Functions of ERCOT

(1)ERCOT is the Independent Organization certified by the Public Utility Commission of Texas (PUCT) for the ERCOT Region. The major functions of ERCOT, as the Independent Organization, are to:

(a)Ensure access to the ERCOT Transmission Grid and Ddistribution Ssystems for all buyers and sellers of electricity on nondiscriminatory terms;

(b)Ensure the reliability and adequacy of the ERCOT Transmission Grid;

(c)Ensure that information relating to a Customer’s choice of Retail Electric Provider (REP) in Texas is conveyed in a timely manner to the persons who need that information; and

(d)Ensure that electricity production and delivery are accurately accounted for among the All-Inclusive Generation Resources and wholesale buyers and sellers, and Transmission Service Providers (TSPs) and Distribution Service Providers (DSPs), in the ERCOT Region.

(2)ERCOT is the Control Area Operator (CAO) for the ERCOT interconnection and performs all Control Area functions as defined in the Operating Guides and the North American Electric Reliability Corporation (NERC) policies.

(3)ERCOT procures Ancillary Services to ensure the reliability of the ERCOT System.

(4)ERCOT is the central counterparty for all transactions settled by ERCOT pursuant to these Protocols and is deemed to be the sole buyer to each seller, and the sole seller to each buyer, of all energy, Ancillary Services, Reliability Unit Commitments (RUC), emergency response service, and other products or services for which ERCOT may pay or charge a Market Participant, except for those products or services procured through bilateral transactions between Market Participants and those products or services that are self-arranged by Market Participants.

(35)ERCOT is the PUCT-appointed Program Administrator of the Renewable Energy Credits Program.

(46)These Protocols are intended to implement the above-described functions. In the exercise of its sole discretion under these Protocols, ERCOT shall act in a reasonable, nondiscriminatory manner.

(57)In exercising any functions related to deployment of energy or Ancillary Service as described in these Protocols, ERCOT acts only as an agent on behalf of the various Market Participants in fulfilling these duties, subject to the settlement process in these Protocols. All references in these Protocols to provision, procurement, purchase, deployment, or Dispatch of energy or Ancillary Service or any other similar action must be interpreted to mean that ERCOT is taking such action on behalf of Market Participants as an agent. Nothing in these Protocols may be construed as causing ERCOT to take title to any energy or Ancillary Service or to cause TSPs, DSPs, or Resources to transfer any control of their fFacilities to ERCOT. In the exercise of its sole discretion under these Protocols, ERCOT shall act in a reasonable, nondiscriminatory manner.

(68)ERCOT may not profit financially from its activities as the Independent Organization in the ERCOT Region. ERCOT may not use its discretion in the procurement of Ancillary Service capacity or deployment of energy to influence, set or control prices.

2.1DEFINITIONS

Settlement Quality Meter Data

Data that has been edited, validated, and is appropriate for the ERCOT Settlement agent to use for Settlement and billing purposes.

4.4.7.1Self-Arranged Ancillary Service Quantities

(1)A QSE may self-arrange all or a portion thereof, but not to exceed, the Ancillary Service Obligation allocated to it by ERCOT. If a QSE elects to self-arrange Ancillary Service capacity, then ERCOT shall not pay the QSE for the Self-Arranged Ancillary Service Quantities for the portion that meets its Ancillary Service Obligation.

(2)The QSE must indicate before 1000 in the Day-Ahead the Self-Arranged Ancillary Service Quantities,by service, so ERCOT can determine how much Ancillary Service capacity, by service, needs to be obtained through the DAM.

(3)At or after 1000 in the Day-Ahead, a QSE may not change its Self-Arranged Ancillary Service Quantities unless ERCOT opens a Supplemental Ancillary Service Market (SASM).

(4)Before 1430 in the Day-Ahead,all Self-Arranged Ancillary Service Quantities must be represented by physical capacity, either by Generation Resources or Load Resources, or backed by Ancillary Service Trades.

(5)When a QSE chooses to self-arrange all or a portion of its Ancillary Service Obligations, it commits to the following conditions:

(a)The QSE may self-arrange Regulation Up Service (Reg-Up), Regulation Down Service (Reg-Down), Responsive Reserve (RRS) Service, and Non-Spinning Reserve (Non-Spin);

(b)The QSE may provide all or part of its Self-Arranged Ancillary Service Quantity from one or more Resources it represents;

(c)The QSE may provide all or a part of its Self-Arranged Ancillary Service Quantity through an Ancillary Service Trade;

(d)The additional Self-Arranged Ancillary Service Quantity specified by the QSE in response to a SASM notice by ERCOT to obtain additional Ancillary Services in the Adjustment Period cannot be more than the additional Ancillary Service amount allocated by ERCOT to that QSE, as stated in the SASM notice, and cannot be changed once committed to ERCOT; and

(e)If a QSE does not self-arrange all of its Ancillary Service Obligation, ERCOT shall procure the remaining amount of theat QSE’s Ancillary Service Obligation for the QSE.

(f)For self-arranged RRS Service, the QSE shall indicate the quantity of the service that is provided from:

(i)Generation Resources;

(ii)Controllable Load Resources; and

(iii)Load Resources controlled by high-set under-frequency relays.

4.4.7.1.1Negative Self-Arranged Ancillary Service Quantities

(1)A QSE may submit a negative Self-Arranged Ancillary Service Quantity in the DAM. ERCOT shall procure, on behalf of the QSE, all negative Self-Arranged Ancillary Service Quantities submitted by a QSE.

(2)Procurements by ERCOT on behalf of QSEs that submitted of negative Self-Arranged Ancillary Service Quantities by ERCOT shall be settled in the same manner as Ancillary Service Obligations that are not self-arranged and according to the charges defined in Section 4.6.4.2, Charges for Ancillary Services Procurement in the DAM, and Section 6.7, Real-Time Settlement Calculations for the Ancillary Services.

(3)A QSE may not submit a negative Self-Arranged Ancillary Service Quantity in the DAM that is less than -500 MW per Ancillary Service. For negative self-arranged RRS, the QSE shall not specify Controllable Load Resources and Load Resources controlled by high-set under-frequency relays. For compliance purposes, a QSE may not submit a negative Self-Arranged Ancillary Service Quantity in the DAM that is greater in magnitude than the absolute value of the net sales of its Ancillary Service Trades per Ancillary Service.

4.6.4Settlement of Ancillary Services Procured in the DAM

ERCOT shall pay each QSE providing Ancillary Services procured in the DAM the amount of Ancillary Service Capacity in MW procured from the QSE multiplied by the MCPC for the Ancillary Service provided, expressed in $/MW. Each QSE shall pay for its share of each Ancillary Service procured by ERCOT on behalf of the QSE through in the DAM.

6.5.7.5Ancillary Services Capacity Monitor

(1)ERCOT shall calculate the following every ten seconds and provide Real-Time summaries to ERCOT Operators and all Market Participants using ICCP, giving updates of calculations every ten seconds, and posting on the MIS Public Area, giving updates of calculations every five minutes, which show the Real-Time total system amount of:

(a)RRS capacity from Generation Resources;

(b)RRS capacity from Load Resources excluding Controllable Load Resources;

(c)RRS capacity from Controllable Load Resources;

(d)Non-Spin available from On-Line Generation Resources with Energy Offer Curves;

(e)Non-Spin available from undeployed Load Resources;

(f)Non-Spin available from Off-Line Generation Resources;

(g)Non-Spin available from Resources with Output Schedules;

(h)Undeployed Reg-Up and undeployed Reg-Down;

(i)Available capacity with Energy Offer Curves in the ERCOT System that can be used to increase Base Points in SCED;

(j)Available capacity with Energy Offer Curves in the ERCOT System that can be used to decrease Base Points in SCED;

(k)Available capacity without Energy Offer Curves in the ERCOT System that can be used to increase Base Points in SCED;

(l)Available capacity without Energy Offer Curves in the ERCOT System that can be used to decrease Base Points in SCED; and

(m)The ERCOT-wide Physical Responsive Capability (PRC) calculated as follows:

PRC1 =Min(Max((RDF*HSL – Actual Net Telemetered Output)i , 0.0) , 0.2*RDF*HSLi)

PRC2 =((Hydro-synchronous condenser output)i as qualified by item (6) of Operating Guide Section 2.3.1.2, Additional Operational Details for Responsive Reserve Providers))

PRC3 =(RRS MW supplied from Load Resources)i

PRC =PRC1 + PRC2+ PRC3

The above variables are defined as follows:

Variable / Unit / Description
PRC1 / MW / Generation On-Line greater than 0 MW
PRC2 / MW / Hydro-synchronous condenser output
PRC3 / MW / RRS supplied from Load Resources
PRC / MW / Physical Responsive Capability
RDF / The currently approvedReserve Discount Factor

(2)Each QSE shall operate Resources providing Ancillary Service capacity to meet its obligations. If a QSE experiences temporary conditions where its total obligation for providing Ancillary Service cannot be met on the QSE’s Resources, then the QSE may add additional capability from other Resources that it represents. It adds that capability by changing the Resource Status and updating the Ancillary Service Schedules and Ancillary Services Resource Responsibility of the affected Resources and notifying ERCOT under Section 6.4.8.1, Evaluation and Maintenance of Ancillary Service Capacity Sufficiency. If the QSE is unable to meet its total obligations to provide committed Ancillary Services capacity, the QSE shall notify ERCOT immediately of the expected duration of the QSE’s inability to meet its obligations. ERCOT shall determine whether replacement Ancillary Services will be procured on behalf of the affected QSE to account for the QSE’s shortfall according to Section 6.4.8.1.

Section 22

Attachment A: Standard Form Market Participant Agreement

Standard Form Market Participant Agreement

Between

Participant

and

Electric Reliability Council of Texas, Inc.

This Market Participant Agreement (“Agreement”), effective as of the______day of ______,______(“Effective Date”), is entered into by and between [Participant], a [State of Registration and Entity Type] (“Participant”) and Electric Reliability Council of Texas, Inc., a Texas non-profit corporation (“ERCOT”).

Recitals

WHEREAS:

  1. As defined in the ERCOT Protocols, Participant is a (check all that apply):

Load Serving Entity (LSE)

Qualified Scheduling Entity (QSE)

Transmission Service Provider (TSP)

Distribution Service Provider (DSP)

Congestion Revenue Right (CRR) Account Holder

Resource Entity

Renewable Energy Credit (REC) Account Holder

  1. ERCOT is the Independent Organization certified under PURA §39.151 for the ERCOT Region; and

C. The Parties enter into this Agreement in order to establish the terms and conditions by which ERCOT and Participant will discharge their respective duties and responsibilities under the ERCOT Protocols.

Agreements

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, ERCOT and Participant (the “Parties”) hereby agree as follows:

Section 1. Notice.

All notices required to be given under this Agreement shall be in writing, and shall be deemed delivered three (3) days after being deposited in the U.S. mail, first class postage prepaid, registered (or certified) mail, return receipt requested, addressed to the other Party at the address specified in this Agreement or shall be deemed delivered on the day of receipt if sent in another manner requiring a signed receipt, such as courier delivery or overnight delivery service. Either Party may change its address for such notices by delivering to the other Party a written notice referring specifically to this Agreement. Notices required under the ERCOT Protocols shall be in accordance with the applicable Section of the ERCOT Protocols.

If to ERCOT:

Electric Reliability Council of Texas, Inc.

Attn: Legal Department

7620 Metro Center Drive

Austin, Texas78744-1654

Telephone: (512) 225-7000

Facsimile: (512) 225-7079

If to Participant:

[Participant Name]

[Contact Person/Dept.]

[Street Address]

[City, State Zip]

[Telephone]

[Facsimile]

Section 2. Definitions.

A.Unless herein defined, all definitions and acronyms found in the ERCOT Protocols shall be incorporated by reference into this Agreement.

B.“ERCOT Protocols” shall mean the document adopted by ERCOT, including any attachments or exhibits referenced in that document, as amended from time to time, that contains the scheduling, operating, planning, reliability, and settlement (including customer registration) policies, rules, guidelines, procedures, standards, and criteria of ERCOT. For the purposes of determining responsibilities and rights at a given time, the ERCOT Protocols, as amended in accordance with the change procedure(s) described in the ERCOT Protocols, in effect at the time of the performance or non-performance of an action, shall govern with respect to that action.

Section 3. Term and Termination.

  1. Term. The initial term ("Initial Term") of this Agreement shall commence on the Effective Date and continue until the last day of the month which is twelve (12) months from the Effective Date. After the Initial Term, this Agreement shall automatically renew for one-year terms (a "Renewal Term") unless the standard form of this Agreement contained in the ERCOT Protocols has been modified by a change to the ERCOT Protocols. If the standard form of this Agreement has been so modified, then this Agreement will terminate upon the effective date of the replacement agreement This Agreement may also be terminated during the Initial Term or the then-current Renewal Term in accordance with this Agreement.
  2. Termination by Participant. Participant may, at its option, terminate this Agreement:

(1) iImmediately upon the failure of ERCOT to continue to be certified by the PUCT as the Independent Organization under PURA §39.151 without the immediate certification of another Independent Organization under PURA §39.151;

(2) iIf the “REC Account Holder” box is checked in Section A. of the Recitals section of this Agreement, Participant may, at its option, terminate this Agreement immediately if the PUCT ceases to certify ERCOT as the eEntity approved by the PUCT (“Program Administrator”) for carrying out the administrative responsibilities related to the Renewable Energy Credit Program as set forth in PUC Substantive Rule 25.173(g) without the immediate certification of another Program Administrator under PURA §39.151; or

(3)fFor any other reason at any time upon thirty days written notice to ERCOT.

C.Effect of Termination and Survival of Terms. If this Agreement is terminated by a Party pursuant to the terms hereof, the rights and obligations of the Parties hereunder shall terminate, except that the rights and obligations of the Parties that have accrued under this Agreement prior to the date of termination shall survive.