ERCOT Issues with Futures Prices and Potential Exposure Calculations
ERCOT encountered issues with misaligned systems affecting the calculation of Estimated Aggregate Liability (EAL), Minimum Current Exposure (MCE), and Total Potential Exposure (TPE) due to discrepancies in electricity futures prices. These discrepancies were identified and resolved by ERCOT to ensure accurate financial security requirements for market participants. Another system-related issue impacted the calculation of load volumes, requiring the use of historical data to estimate credit limits for certain market activities. The errors were promptly addressed, and corrective measures were implemented to mitigate future occurrences.
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Market Notices CWG / MCWG ERCOT Public November 17, 2020
Issue Identified for Futures Prices used in Forward Adjustment Factors ERCOT has identified a misalignment between ERCOT and Intercontinental Exchange (ICE) systems that impacted the calculation of the Estimated Aggregate Liability (EAL) and Minimum Current Exposure (MCE) components of Total Potential Exposure (TPE) for October 16 - 19, 2020. TPE determines the amount of Financial Security a Counter-Party (CP) must provide related to its market activity. Per Protocol Section 16.11.4.3.3, Forward Adjustment Factors, EAL and MCE are adjusted by forward adjustment factors that are based on the ratios of electricity futures prices to historical average ERCOT Real-Time and Day-Ahead prices. The factors as reflected in the calculation are Real-Time Forward Adjustment Factor (RFAF) and Day-Ahead Forward Adjustment Factor (DFAF). Due to the misalignment, ERCOT did not receive updated electricity futures prices from ICE for October 16 - 19, 2020. Therefore, in accordance with Section 16.11.4.3.3, ERCOT used the most recently available futures prices (i.e., prices for October 14, 2020) in RFAF and DFAF calculations for October 16 - 19, 2020. This issue was resolved on October 19, 2020, and did not trigger any requests for additional Financial Security or result in any breach or default scenarios. 2 PUBLIC
Issue Identified for Futures Prices used in Forward Adjustment Factors Business Date RFAF using most recent ICE prices RFAF used in calculation DFAF using most recent ICE prices DFAF used in calculation 10/16/20 0.85 0.81 0.86 0.78 10/17/20 0.92 0.77 0.94 0.79 10/18/20 0.92 0.78 0.94 0.80 10/19/20 0.91 0.78 0.93 0.80 3 PUBLIC
Total Potential Exposure (TPE) calculations affected by system On October 23, 2020, ERCOT identified a system issue related to the calculation of estimated Load volumes for Operating Day (OD) October 23, 2020, which impacted Estimated Aggregate Liability (EAL) values contained in credit reports generated on October 24, 2020. ERCOT has determined that historical Load Ratio Share (LRS) was not used to estimate Load volume for OD October 23, 2020. ERCOT must calculate Available Credit Limits for CRR Auctions (ACLC) and the Day-Ahead Market (ACLD). See ERCOT Protocol Section 16.11.4.6(1). LRS data is used in the Real-Time Liability Completed and Not Settled (RTCLNS) and Real-Time Liability Forward (RTLF) components of Total Potential Exposure (TPE). If all or part of ACLC and/or ACLD cannot be estimated with current data, then the most recently available values shall be used to determine the Counter-Party s ACLC and/or ACLD. See ERCOT Protocol Section 16.11.4.6(1)(c). Due to the system issue, ERCOT estimated Counter-Party Load volumes for OD October 23, 2020, with LRS values from October 22, 2020. Please be advised that these estimated values for OD October 23, 2020, will continue to appear in RTLCNS and RTLF credit reports until October 28, 2020, and October 30, 2020, respectively. Using 10/22 LRS data in OD 10/23 RTM Estimated Load did not impact TPE overall. ERCOT has determined the issue was due to an error occurring in an upgrade of a database that is used by CMM. ERCOT identified and fixed the specific underlying issue, and the change was migrated and deployed to production on November 12, 2020. 4 PUBLIC
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