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NOTICE DATE:  May 6, 2019

NOTICE TYPE:  M-A050619-01 Financial/Credit

SHORT DESCRIPTION:  Implementation Details for NPRR519, NPRR620, NPRR660, and NPRR741

INTENDED AUDIENCE:  ERCOT Counter-Parties

DAY AFFECTED:  June 2, 2019

LONG DESCRIPTION:  On June 2, 2019, Protocol language related to Nodal Protocol Revision Request (NPRR) 519, Exemption of ERS-Only QSEs from Collateral and Capitalization Requirements, NPRR620, Collateral Requirements for Counter-Parties with No Load or Generation, and NPRR741, Clarification to TPE and EAL Credit Exposure Calculations, will be implemented. As described below, several credit-related reports will be changed as a result of the implementation of these NPRRs and to reflect NPRR660, Remove CRR State Change Adder, which became effective March 1, 2015.

NPRR519 exempts those Qualified Scheduling Entities (QSEs) that represent only Emergency Response Service (ERS) Resources and that do not participate in the Day-Ahead Market (DAM), Real-Time Market (RTM) and Congestion Revenue Right (CRR) market ("ERS-only QSEs") from the collateral and financial statement reporting requirements in Section 16.11, Financial Security for Counter-Parties, and from each of the various requirements in Section 16.16, Additional Counter-Party Qualification Requirements, including those relating to capitalization, certification, and the verification of a risk management framework.

NPRR620 revises the calculation of credit exposure for Counter-Parties that represent neither Load nor generation by adjusting the M1 factor for forward exposure risk to reflect the fact that these Counter-Parties do not have Mass Transition risk, reducing the 40-day "look back" period for certain exposure components to 20 days and specifying a Minimum Current Exposure (MCE) for these Counter-Parties that is also used as the Initial Estimated Liability (IEL).

NPRR660 deletes references to the State Change Adder component of the Congestion Revenue Right (CRR) Obligation credit calculation.  Removal of the State Change Adder is proposed since there is no benchmark by which eligible CRR Obligation paths could be identified or the value of the State Change adjustment quantified.

NPRR741 simplifies equations for Estimated Aggregate Liability (EAL) and moves Potential Uplift (PUL) to Total Potential Exposure Any (TPEA). Also, it eliminates the Congestion Revenue Rights Activity (CRRA) flag to simplify the Total Potential Exposure (TPE) equation.  In addition, it revises Minimum Current Exposure (MCE) formula to reduce the amount of collateral required to be posted by a Counter-Party when the Counter-Party is credit positive in the Day-Ahead Market (DAM).

Corresponding changes to credit-related reports are listed below:

Available Credit Limit (ACL) Summary Report (EMIL ID FNC-470-SG, Report Id 11173):

*         Changed column title of "CPIA" to "Independent Amount" for clarity

*         Changed reference to "Pre-payment" to "Flexible Account" in Pre-payment Transactions Summary section

Total Potential Exposure (TPE) Summary Report (EMIL ID NP16-664-SG, Report Id 11174):

*         Removed CRRA flag and EALA columns in TPES Summary section

*         Changed column title of "CPIA" to "Independent Amount" for clarity

*         Added the following columns in TPEA Summary section: 1) Trader Only Activity; 2) EALT; and 3) PUL

*         Removed CRRA flag column in TPEA Summary section

Estimated Aggregate Liability (EAL) Summary Report (EMIL ID NP16-665-SG, Report Id 13003):

*         Added summary section EALT (EAL for Counter-Party not representing either Load or Generation)

*         Changed EAL component headings to reference entity type (added "Q" to EAL component names for Counter-Party representing either Load or Generation; and "T" for Counter-Party not representing either Load or Generation)

*         Changed presentation of MAXRTLEQ and DALE in the EAL summary section to display the product of 1) RFAF and MAXRTLEQ and 2) DFAF and DALE instead of presenting separately

*         Removed EAL components not applicable to CRRAHs in the EALA (EAL for CRRAHs) summary section

Estimated Aggregate Liability (EAL) Detail Report (EMIL ID NP16-669-SG, Report Id 11179):

*         Added summary section EALT (EAL for Counter-Party not representing either Load or Generation)

*         Changed EAL component headings to reference entity type (added "Q" to EAL component names for Counter-Party representing either Load or Generation; and "T" for Counter-Party not representing either Load or Generation)

*         Changed presentation of MAXRTLEQ and DALE in the EAL summary section to display the product of 1) RFAF and MAXRTLEQ and 2) DFAF and DALE instead of presenting separately

*         Added RFAF and DFAF columns in the RTLE section to display historical RFAF and DFAF factors used for each day during the look-back period

*         Removed EAL components not applicable to CRRAHs in the EALA (EAL for CRRAHs) summary section

*         Removed RTLE, URTA, DALE Details for all CRRAHs, RTLCNS Details for all CRRAHs,  RTM Initial Statements Average Amount Details for all CRRAHs, RTM Final Statements Average Amount Details for all CRRAHs, RTM True-Up Statements Average Amount Details for all CRRAHs sections not applicable to CRRAHs

*         Removed unadjusted RT liability amount in RTLCNS section to display marked-up or marked-down effective amount

Minimum Current Exposure (MCE) Summary Report (EMIL ID NP16-678-SG, Report Id 13092):

*         Moved the summary row from bottom to above details of Operating Date data

*         Added IMCE column

Future Credit Exposure for CRR PTP Obligations (FCEOBL) Summary Report (EMIL ID NP16-681-SG, Report Id 13106):

*         Removed State Change Adder Exposure column



ADDITIONAL INFORMATION:  Pursuant to Nodal Protocol Section 21.6, Nodal Protocol Revision Implementation, ERCOT is required to provide notice as soon as practicable, but no later than ten days prior to implementation.

NPRR519<http://www.ercot.com/mktrules/issues/NPRR519>, NPRR620<http://www.ercot.com/mktrules/issues/NPRR620>, NPRR660<http://www.ercot.com/mktrules/issues/NPRR660>, and NPRR741<http://www.ercot.com/mktrules/issues/NPRR741> and associated documents can be found on the ERCOT website.

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]<mailto:[log in to unmask]>.

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