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NOTICE DATE: December 17, 2021

NOTICE TYPE: M-A121721-01 - Settlements

SHORT DESCRIPTION: Implementation of NPRR 1103 - Securitization PURA Subchapter M Default Charges and Timelines for Securitization Default Charge Escrow Deposits and Securitization Default Charges

INTENDED AUDIENCE: Market Participants

DAYS AFFECTED: December 17, 2021

LONG DESCRIPTION: On December 16, 2021, the Public Utility Commission of Texas (PUCT) approved Nodal Protocol Revision Request (NPRR) 1103, Securitization PURA Subchapter M Default Charges. Phase 1 of NPRR 1103 became effective on December 17, 2021. Phase 2 of NPRR 1103 (i.e., grey-boxed language) will become effective upon system implementation.

ERCOT highlights the following information regarding the implementation of NPRR1103:

NPRR1103 requires Counter-Parties (CPs) to, at all times, maintain Securitization Default Charge escrow deposits at or above the amount of the CP’s Securitization Default Charge Credit Exposure (SDCCE).
Each CP is required to maintain any required Securitization Default Charge escrow deposit in a form acceptable to ERCOT, specifically cash or an unconditional, irrevocable letter of credit naming Texas Electric Market Stabilization Funding M LLC (TEMSFM) as the beneficiary.

Timeline for Securitization Default Charge Escrow Deposits

ERCOT will email each CP its initial escrow deposit amount on or before December 20, 2021.
The deadline for CPs to remit initial escrow deposits to ERCOT is 1500 on January 3, 2022. Failure to provide ERCOT with the requisite initial escrow deposit will result in a demand by ERCOT to provide such escrow deposit (similar to a collateral call). Failure to provide ERCOT with the requisite escrow deposit by 1500 on the second Bank Business Day following the demand is a Late Payment and will constitute an event of “Payment Breach” under the ERCOT Protocols.

Calculation of Securitization Default Charge Escrow Deposits

Escrow deposit requirements are computed using the Securitization Default Charge Maximum MWh Activity (SDCMMA) in the most recent month for which Initial Settlement data is available. For initial escrow deposit requirements, this will be activity in November 2021. CPs can access their Maximum MWh Activity report for November 2021 in their respective MIS Certified Areas on December 20, 2021.
Escrow deposit requirements and Invoices utilize the Total Securitization Default Charge Monthly Amount (TSDCMA). The initial TSDCMA is $3,713,235. At least annually, ERCOT is required to evaluate the TSDCMA to determine if it should be modified. If ERCOT modifies the TSDCMA, it will issue a Market Notice notifying Market Participants of the change no later than 15 days before the beginning of the month in which the new TSDCMA will be used to calculate Securitization Default Charges. See ERCOT Protocol Section 26.2.

Standard Form Letter of Credit to Satisfy Securitization Default Charge Credit Requirements

If a CP utilizes a letter of credit to meet the Securitization Default Charge escrow deposit requirement, it must use the standard form letter of credit for satisfying Securitization Default Charge credit requirements, which can be found under “Financial Security Documents” at https://www.ercot.com/services/rq/credit.
Information regarding banking/wiring instructions applicable to Securitization Default Charges is located in the MIS Secure Area under the “Requested Information” folder.

Invoicing of Securitization Default Charges

Securitization Default Charge Invoice amounts are computed using Maximum MWh Activity in the most recent month for which Final Settlement data is available. For initial Securitization Default Charge Invoices, this will be activity in October 2021. CPs can access their Maximum MWh Activity reports for October 2021 in their respective MIS Certified Areas on December 29, 2021.
Initial miscellaneous Invoices for Securitization Default Charges will be posted on January 11, 2022, the seventh Business Day of the month. See ERCOT Protocol Section 26.3.
Payments for initial Securitization Default Charge invoices will be due by 1700 on January 19, 2022, i.e., by 1700 on the fifth Bank Business Day after the Miscellaneous 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 email at [log in to unmask].

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