NOTICE DATE:  February 13, 2009
NOTICE TYPE:  M-B012009-02 Settlements
SHORT DESCRIPTION:   Miscellaneous Debit and Uplift Invoice
INTENDED AUDIENCE:  QSE Financial Personnel
DAYS AFFECTED:  Settlement Statements post February 16, 2009, Invoices post February 19, 2009, Invoices due February 26, 2009
LONG DESCRIPTION:
Miscellaneous Debit:  On Monday, February 16, 2009, QSEs who were short-paid as a result of the defaults will receive an Initial Settlement Statement for Operating Day 02/05/2009 that includes a Miscellaneous Debit to recover Late Fees associated with the summer 2008 defaults since insufficient payments were received from defaulting entities to pay the Late Fees. The charge will recover Late Fees that were previously paid out to QSEs as Late Fee credits, as well as Late Fees that remain outstanding.  Funds collected through the Miscellaneous Debit will be applied to the short-paid principal balances as part of the uplift process.  Please refer to the calendar in the attached (.pdf) file for corresponding invoice and payment dates.
Uplift:  The ERCOT Region experienced several "Mass Drop" scenarios as a result of defaulting Qualified Scheduling Entities ("defaulting QSEs") in the summer of 2008. The defaulting QSEs include Pre-Buy Electric, LLC, National Power Company Inc., Hwy 3 MHP LLC, Sure Electric LLC dba Riverway Power Company and Leach Energy Trading LLC.  In each instance, the defaulting QSEs engaged in financial transactions with ERCOT and owe monies to ERCOT as a result of those transactions.
Paragraph 5 of Section 9.4.4, Partial Payments, of the ERCOT Protocols provides:
One hundred eighty (180) days following a short-pay occurrence, if sufficient funds continue to be unavailable for ERCOT to pay all amounts in full (excluding interest or Late Fees) to short-paid Entities, and the short-paying Entity is not in compliance with a payment plan designed to enable ERCOT to pay all amounts in full (excluding interest or Late Fees) to short-paid Entities, the total short-pay amount, less the total payments expected from a payment plan, will be collected from the QSEs representing LSEs, on a Load Ratio Share basis, using the Load Ratio Share for the calendar month three (3) months prior to the date on which the Invoice is issued, and paid to the QSEs that were previously short-paid.  ERCOT will cease charging Late Fees to the default Entity when the conditions initiating Uplift are met.  Any uplifted short-payment amount greater than two and one half million dollars ($2,500,000) shall be scheduled such that two and one half million dollars ($2,500,000) is charged on each set of invoices until the total short-payment amount is uplifted.  Short-pay Invoices shall be issued at least thirty (30) days apart from each other.  Payments will be due on the date specified on the short-pay Invoice.  Any short and late payments will be handled pursuant to Section 9.4.4, Partial Payments and 9.4.6, Late Fees, respectively.  (emphasis added)
Currently, the defaulting QSEs do not have payment plans and are, therefore, "not in compliance with a payment plan designed to enable ERCOT to pay all amounts in full to short-paid Entities."  Consequently, pursuant to the ERCOT Protocols, ERCOT began last month the process of uplifting to QSEs representing LSEs the principal amount remaining on the defaulting QSEs' obligations to ERCOT.
On Thursday, February 19, 2009, ERCOT will send invoices totaling $1,661,186.82 to QSEs representing LSEs based on their Load Ratio Share ("LRS") in November 2008.  This total amount represents the uplift of short-payments by defaulting QSEs for Invoices due 6/21/08 - 07/12/08.  This is the second uplift associated with the summer 2008 defaults.  Funds received from the uplift will be combined with a) funds currently held by ERCOT from credits, and b) funds recovered from the Miscellaneous Debit discussed above, to repay short-paid Entities $2,243,772.84.  The Table in the attached (.pdf file) provides a breakdown of these summary totals by each defaulting QSE.
 PLEASE NOTE:  The Invoice for this uplift will not be posted on the website as the regular weekly invoices are.  The Invoice will be delivered by e-mail to your Authorized Representative, with a copy to your credit contact.
The payment due date will be five (5) Business Days after the Invoice date (i.e. February 26, 2009).  ERCOT intends to distribute the funds to previously short-paid entities on February 27, 2009.
If necessary and as they arise, ERCOT will uplift any additional unpaid amounts owed by the defaulting QSEs which may arise from Resettlements. Pursuant to the ERCOT Protocols, ERCOT will calculate those uplifts (if necessary) using the LRS for the calendar month three months prior to the date on which ERCOT issues the Invoice.  As ERCOT receives monies associated with the outstanding debt, ERCOT will apply these monies to the principal amount due from the defaulting QSEs and, in turn, distribute the monies received to previously short-paid entities.
ACTION REQUIRED:  Payment will be due February 26, 2009, five (5) Business Days after the Invoice date.
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 e-mail at [log in to unmask]<mailto:[log in to unmask]>.
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