NOTICE_LEGAL_NOTIFICATIONS Archives

Notice_Legal_Notifications

NOTICE_LEGAL_NOTIFICATIONS@LISTS.ERCOT.COM

Options: Use Forum View

Use Monospaced Font
Show HTML Part by Default
Show All Mail Headers

Message: [<< First] [< Prev] [Next >] [Last >>]
Topic: [<< First] [< Prev] [Next >] [Last >>]
Author: [<< First] [< Prev] [Next >] [Last >>]

Print Reply
Subject:
From:
ERCOT Client Services <[log in to unmask]>
Date:
Fri, 8 Sep 2017 18:45:35 +0000
Content-Type:
multipart/alternative
Parts/Attachments:
text/plain (15 kB) , text/html (20 kB)
***** EXTERNAL email. Please be cautious and evaluate before you click on links, open attachments, or provide credentials. *****

NOTICE DATE:  September 8, 2017
NOTICE TYPE:  M-A090817-01 Legal
SHORT DESCRIPTION:  Resolution of ADR Proceedings between ERCOT and North Maple Energy LLC (ADR No. 2017-NME-01)
INTENDED AUDIENCE:  Market Participants
DAYS AFFECTED:  January 28, 30-31, 2017, February 2-3, 2017
LONG DESCRIPTION:  Upon ERCOT's determination of the disposition of an Alternative Dispute Resolution (ADR) proceeding, ERCOT Protocol Section 20.9 requires ERCOT to issue a Market Notice providing a brief description of the relevant facts, a list of the parties involved in the dispute, and ERCOT's disposition of the proceeding and reasoning in support thereof.
Parties: ERCOT and North Maple Energy LLC
Relevant Facts:
North Maple Energy LLC (NME) submitted Point-to-Point (PTP) Obligation bids in the Day-Ahead Market (DAM) for Operating Days (ODs) January 30 and 31, 2017, with "Not-to-Exceed" (NTE) bid prices ranging from approximately $0.20 to $50.00.[1] Per ERCOT Protocol Section 4.4.6, a NTE bid price represents the "maximum price that the bidder is willing to pay" for a particular PTP Obligation in the DAM.
In the DAM for ODs January 30 and 31, 2017, ERCOT awarded NME 258 PTP Obligations that were charged to NME at prices that exceeded its submitted NTE bid prices. PTP Obligations were awarded to NME in this manner due to a then-existing design aspect of the DAM optimization engine. More specifically, prior to the implementation of Nodal Protocol Revision Requests (NPRRs) 827 and 833 (discussed below), the DAM optimization engine functioned in a manner such that, if a contingency de-energized a Settlement Point where a source or sink for a PTP Obligation bid existed, and that contingency resulted in a binding constraint where the other Settlement Point (source or sink) had a non-trivial Shift Factor to the constraint, then a PTP Obligation bid could clear in the DAM optimization engine at a price spread that was different than the price spread calculated from the published DAM Settlement Point Prices (SPPs). Because PTP Obligations are charged to Market Participants using SPPs, these contingencies could result in occasions where the charge to a Market Participant for a PTP Obligation was higher than the submitted NTE bid price.
NME was charged for the PTP Obligations in conformance with ERCOT Protocol Section 4.6.3, Settlement of PTP Obligations Bought in the DAM, which requires that "ERCOT shall pay or charge a QSE for a cleared PTP Obligation bid the difference in the DAM Settlement Point Prices between the sink Settlement Point and the source Settlement Point." Although ERCOT applied this Protocol correctly when charging NME for the PTP Obligations at issue, the resulting charges were well above the NTE bid prices NME had stated it was "willing to pay." More specifically, although NME submitted PTP Obligation bids where the sum of its NTE bid prices multiplied by the bid quantity totaled approximately $13,228.36 for the two ODs at issue in its ADR filing, NME was charged $2,111,747.69 in the DAM for PTP Obligations for those ODs.[2]
As a consequence of the $2M+ DAM charge to NME for these PTP Obligation bids on the ODs at issue, NME was required to post additional collateral to cover Total Potential Exposure (TPE), which it did not do within the time period required by ERCOT Protocols. Accordingly, NME's Standard Form Agreement (SFA) with ERCOT was terminated on February 7, 2017, and NME was precluded from further participation in the ERCOT market. The Congestion Revenue Rights (CRRs) NME held for February 8 - 28, 2017 were voided, and the remainder of NME's CRRs were repossessed by ERCOT and sold in a one-time auction.
On March 31, 2017, NME submitted its request for ADR to ERCOT, asserting that ERCOT improperly awarded NME PTP Obligations for ODs January 30 and 31, 2017 that were above NME's submitted NTE bid prices. In this ADR, NME seeks relief in the amount of $1,225,957.99 and also requests reinstatement of its registration as a Market Participant with ERCOT. With respect to the amount requested, NME seeks $1,123,548.79 as a refund for what it states were "erroneously" awarded PTP Obligations for ODs January 30 and 31, 2017.[3] NME also seeks $102,409.20 in compensation for its CRRs for February 8 - 28, 2017, which were voided as a result of the termination of its SFA with ERCOT.
ERCOT's Disposition/Reasoning:
ERCOT has determined that the appropriate disposition of this ADR proceeding is to approve, in part, NME's request for relief. As discussed in further detail below, ERCOT will be issuing a payment of $1,106,561.15 to NME. Pursuant to ERCOT Protocol Section 20.1(1), a Market Participant may seek relief through the ADR process by making a claim that "ERCOT has violated or misinterpreted any law," including an ERCOT Protocol.  In this matter, for the reasons stated below, ERCOT misinterpreted certain ERCOT Protocols when it charged NME for PTP Obligations at prices that exceeded NME's stated NTE bid prices.
When a contingency caused the DAM optimization engine to clear NME's PTP Obligation bids in the manner described above, it resulted in a conflict between two ERCOT Protocols.[4] More specifically, ERCOT was unable to enforce ERCOT Protocol Section 4.6.3, which mandates how QSEs are paid or charged for cleared PTP Obligations, without coming into conflict with ERCOT Protocol Section 4.4.6, which permitted NME to set a maximum price that it was "willing to pay" for PTP Obligations. In this case, ERCOT's enforcement of Section 4.6.3 resulted in a charge to NME in the DAM of over $2M for awarded PTP Obligations, even though NME, as permitted by Section 4.4.6, had submitted bids representing that it was only "willing to pay" just over $13K for those PTP Obligations.
When two or more ERCOT Protocols conflict (either on their face or, as here, in a particular application), they must be interpreted and harmonized in a manner that, when possible, gives effect to every provision and does not lead to unreasonable or absurd results. Here, the language in Section 4.4.6, which describes the PTP Obligation NTE bid price as the "maximum price that the bidder is willing to pay," must be given effect so that this Protocol language is not rendered mere surplusage. It is apparent that the language in Section 4.4.6, which requires Market Participants to submit bids with "Not-to-Exceed" prices, was intended to be a mechanism that would allow a Market Participant to limit its liability in the DAM for awarded PTP Obligations to the sum of its NTE bid prices.
In this unique case, however, the clearing of PTP Obligation bids in the DAM optimization engine in the particular manner described above-which was not itself contrary to any ERCOT Protocol-coupled with ERCOT later charging NME for cleared PTP Obligations bids in conformance with ERCOT Protocol Section 4.6.3, led to a particular result that was contrary to ERCOT Protocol Section 4.4.6, because it exposed NME to charges in the DAM well above the NTE bid prices it stated it was "willing to pay."  Given these specific facts, ERCOT has concluded that it should not have enforced the Protocols in a manner that resulted in charges to NME in the DAM that exceeded NME's stated NTE bid prices.
Accordingly, ERCOT is approving NME's ADR to the extent NME asserts it was an unreasonable interpretation of the ERCOT Protocols to award and charge NME for PTP Obligations in excess of its stated NTE bid prices. ERCOT, however, is not awarding NME the full relief it requests. NME's request for relief seeks only to have ERCOT "unwind" awarded PTP Obligations that resulted in a net charge to NME after Settlement in Real-Time (i.e., to unwind only those PTP Obligation awards where NME was charged more in the DAM for the PTP Obligation than the PTP Obligation ultimately paid out in Real Time). To be consistent with the reasoning set forth above, however, the appropriate resolution of this matter requires unwinding PTP Obligation awards to NME that were charged in the DAM at prices that exceeded the NTE bid price-even in those cases where NME received a net payment after Settlement in Real-Time.  Accordingly, ERCOT is granting NME relief that puts NME back in the position it would have been had it never been awarded any PTP Obligations over stated NTE bid prices, for both the ODs it put at issue as well as ODs surrounding those days.[5] ERCOT finds it relevant that NME received a net payment of $118,264.91 for awarded PTP Obligations on ODs January 28, 2017 and February 2 and 3, 2017. On these three ODs, PTP Obligations were awarded to NME at prices above the NTE bid prices-that is, they were awarded in the same manner NME complains of in this ADR with respect to January 30 and 31, 2017-but those PTP Obligations ultimately paid out in Real-Time in a manner that resulted in a net payment to NME after Settlement in Real-Time.  It would not be proper for NME to obtain a full refund for the charges it incurred on January 30 and 31, 2017, while also retaining the benefit of the payment it received on these other ODs. Rather, all PTP Obligations awarded above the NTE bid price on these ODs are being reversed, regardless of whether they resulted in a net payment or charge to NME.  Accordingly, the refund amount to NME for PTP Obligations awarded above the NTE bid price on January 30 and 31, 2017, $1,123,690.62, is being offset by $118,264.91, the net payment NME received for ODs January 28, 2017, and February 2 and 3, 2017. This results in a total refund amount of $1,005,425.71 related to the improperly awarded PTP Obligations.[6]
With respect to NME's request for reimbursement for its CRRs from February 8 - 28, 2017 that were voided when its SFA with ERCOT was terminated, ERCOT agrees that NME is entitled to this relief. The PTP Obligation charges for ODs January 30 and 31, 2017 ultimately triggered revocation of NME's SFA with ERCOT. To the extent ERCOT has concluded those charges were unreasonable under the specific facts presented here, NME should not have had its registration revoked or its CRRs voided. Accordingly, ERCOT will provide relief to NME in the amount of $101,135.44 to account for the value of the voided CRRs. When combined with the net refund for the PTP Obligation charges above, this results in a total payment to NME of $1,106,561.15.
Finally, NME is immediately eligible to re-register as an ERCOT Market Participant.
Pursuant to ERCOT Protocol Section 20.10.1(2), ERCOT will make the adjustment required to resolve this ADR Proceeding through two separate ADR invoices (one for January 2017, and one for February 2017), which will be issued to all affected Market Participants. The NME payment associated with activity in January 2017 and February 2017 will be uplifted on the basis of the Monthly Load Ratio Shares (MLRS) applicable to the months of January 2017 and February 2017 respectively.
This Market Notice serves to conclude the ADR proceedings between ERCOT and NME.
Further Information:
Nodal Protocol Revision Request (NPRR) 827, Disallow PTP Obligation Bid Award where Clearing Price exceeds bid price by $0.25/MW per hour, was approved by the ERCOT Board on June 13, 2017, and implemented later that month. NPRR 827 revised ERCOT Protocols such that currently ERCOT may not award PTP Obligations in the DAM when the corresponding clearing price is greater than the NTE bid price for a PTP Obligation by $0.25/MW per hour. ERCOT has implemented this NPRR by introducing a manual work-around prior to DAM Settlement.
Further, NPRR833, Modify PTP Obligation Bid Clearing Change, was approved by the ERCOT Board on August 8, 2017, and will be implemented at a future date that is to be determined. Once implemented, the protocol revision will provide a long-term solution to this issue by altering the DAM optimization engine such that PTP Obligations will not be awarded if the DAM clearing price for the PTP Obligation is greater than the PTP Obligation NTE bid price plus $0.01/MW per hour.
Finally, ERCOT notes that this ADR raises the question of whether other potential conflicts can exist in the ERCOT Protocols when internal operational issues (such as the operation of the DAM optimization engine in this case) result in "not to exceed" or "willing to pay" language in the Protocols not being given its intended effect. To the extent such potential conflicts could have impacts on the efficient operation of the ERCOT market, it is an issue that may be worth further discussion in the stakeholder process.
CONTACT:  If you have any questions, please contact your ERCOT Account Manager. You may also call the general ERCOT Client Services phone number at (512) 248-3900 or contact ERCOT Client Services via email at [log in to unmask]
If you are receiving email from an ERCOT distribution list that you no longer wish to receive, please follow this link in order to unsubscribe from this list: http://lists.ercot.com.
________________________________________
[1] Per ERCOT Protocols Section 4.4.6(1), PTP Obligation Bids, a "Point-to-Point (PTP) Obligation bid is a bid that specifies the source and sink, a range of hours, and a maximum price that the bidder is willing to pay ("Not-to-Exceed Price")."
[2] In Real-Time Settlement, these PTP Obligations paid out $988,057.07, resulting in a net impact (i.e., charge) to NME of $1,123,690.62.
[3] On the ODs at issue, NME was awarded PTP Obligations over its NTE Bid Price for a number of source/sink combinations.  However, in its ADR filing NME seeks to "unwind" only those awards for one source/sink combination (Rerock All/Hovey_Unit 1). That particular path constituted the majority of the awarded PTP Obligations, and the other paths were charged in the DAM at prices no more than $4 over the NTE bid price (as compared to the Rerock All/Hovey_Unit 1 path, which was charged in the DAM at prices up to $2,160.28 over the NTE bid price).
[4] ERCOT's operation of the DAM optimization engine in a manner that-prior to the June 2017 implementation of NPRR827-cleared PTP Obligations bids that were later charged in the DAM at Settlement Prices above the NTE bid prices, due to contingencies present when clearing the bids, was not contrary to any ERCOT Protocol, because there was no ERCOT Protocol that specifically barred ERCOT from clearing PTP Obligation bids in the manner described herein.
[5] Although NME did not cite any ODs other than January 30 and 31, 2017 in its ADR filing, granting NME relief based on only those two days would not properly represent the net monetary impact it sustained in January and February 2017 due to being charged in the DAM for PTP Obligations above the NTE bid price, because NME received a net payment on January 28, 2017 and February 2 and 3, 2017 due to PTP Obligations it was awarded above the NTE bid price.
[6] As mentioned above, NME was awarded PTP Obligations over its NTE Bid Price for a number of different source/sink combinations on the ODs at issue, but NME seeks to "unwind" only those awards for one source/sink combination (Rerock All/Hovey_Unit 1).  In resolving this ADR, however, ERCOT is "unwinding" every PTP Obligation award to NME that was over the NTE bid price during ODs January 28, 30, and 31, 2017 and February 2 and 3, 2017. These five ODs are the only days in 2017 when NME was charged for PTP Obligations above NTE bid prices.   ERCOT is doing this for two reasons: (1) resolution in this manner is most consistent with NME's assertion that it was contrary to ERCOT Protocols to charge it for any PTP Obligations in the DAM at prices above the NTE Bid Price, and (2) resolution in this manner results in the smallest monetary impact to other Market Participants.





mm



ATOM RSS1 RSS2