Understanding ERCOT Resettlement Threshold for Market Corrections

Resettlement Threshold WMS January 11, 2017

Resettlement Threshold Background In November ERCOT staff detected a material increase in DAM Make- Whole payments subsequent to the implementation of NPRR 617, Energy Offer Flexibility, on June 22, 2016. It was determined that the increase resulted from a mismatch between Startup and Minimum Energy Costs used by the Day-Ahead Market clearing engine and those used for Day-Ahead Make-Whole payments. 2 PUBLIC

Resettlement Threshold Upon discovering the issue, ERCOT analyzed all impacted Operating Days and determined that no days met the 2% threshold for Resettlement of the Day-Ahead Market per Protocol Section 9.2.5(2). A Market Notice was issued to this effect and the issue was reviewed at the December 1, 2016 TAC. TAC requested review of appropriateness of the 2% threshold value by WMS and COPS. 3 PUBLIC

Resettlement Threshold Applicable Protocol language (DAM): 9.2.5 DAM Resettlement Statement (1) ERCOT shall issue DAM Resettlement Statements for a given DAM if the ERCOT Board finds that the DAM Locational Marginal Prices (LMPs), Market Clearing Prices for Capacity (MCPCs), or Settlement Point Prices are significantly affected by a software or data error under Section 4.5.3, Communicating DAM Results. ERCOT shall also produce DAM Resettlement Statements required by resolution of Settlement and Billing disputes. (2) ERCOT shall issue a DAM Resettlement Statement for a given DAM due to error in data other than prices when the total of all errors in data other than prices results in an impact greater than 2% of the total payments due to ERCOT for the DAM, excluding bilateral transactions. ERCOT shall issue DAM Resettlement Statements as soon as possible to correct the errors. ERCOT shall review this percentage on an annual basis. Upon the review, ERCOT may make a recommendation to revise this percentage under Section 21, Revision Request Process. (3) ERCOT shall issue a DAM Resettlement Statement for an Operating Day if an error in the DAM Settlement, which does not otherwise meet the Protocol requirements for resettlement as specified in paragraphs (1) and (2) above, will prevent ERCOT from achieving revenue neutrality. (4) A DAM Resettlement Statement must reflect differences to financial records generated on the previous Settlement Statement for the given DAM. 4 PUBLIC

Resettlement Threshold Applicable Protocol language (RTM): 9.5.6 RTM Resettlement Statement (1) ERCOT shall issue a RTM Resettlement Statement using corrected Settlement data due to resolution of disputes and correction of data errors. Any resettlement occurring after an RTM True-Up Statement has been issued must meet the same Interval Data Recorder (IDR) Meter Data Threshold requirements defined in Section 9.5.8, RTM True-Up Statement, and is subject to the same limitations for filing a dispute. Despite the preceding sentence, the ERCOT Board may, in its discretion, direct ERCOT to run a resettlement of any Operating Day, at any time, to address unusual circumstances. (2) ERCOT shall issue a RTM Resettlement Statement for a given Operating Day due to data error in data other than prices when the total of all errors in data other than prices results in an impact greater than 2% of the total payments due to ERCOT for the RTM for the Operating Day, excluding bilateral transactions. ERCOT shall issue RTM Resettlement Statements as soon as possible to correct the errors. ERCOT shall review this percentage on an annual basis. Upon the review, ERCOT may make a recommendation to revise this percentage under Section 21, Revision Request Process. 5 PUBLIC

Resettlement Threshold DAM total charges and threshold values Daily Average of DAM Charges due to ERCOT Row Labels Average of CHARGES Average of 2.00% Average of 1.00% Average of 0.50% Average of 0.25% 2011 7,055,904 141,118 2012 4,286,346 85,727 2013 5,414,302 108,286 2014 6,459,144 129,183 2015 4,544,621 90,892 2016 5,236,966 104,739 70,559 42,863 54,143 64,591 45,446 52,370 35,280 21,432 27,072 32,296 22,723 26,185 17,640 10,716 13,536 16,148 11,362 13,092 Daily Exposure due to % threshold Average 5,499,547 109,991 54,995 27,498 13,749 6 PUBLIC

Resettlement Threshold Size of 2016 DAM Make-Whole issue relative to DAM charges Issue was in the system for 146 days, of which 57 had a data error. Total overpayments were ~.20% of DAM charges. Breakdown of the 146 days No issue 0.00% - 0.25% 0.25% - 0.50% 0.50% - 1.00% 1.00% - 1.50% 1.50% - 2.00% 2.00% and above 89 19 17 11 6 4 0 7 PUBLIC

Resettlement Threshold Please note that ERCOT staff have drafted an NPRR that removes the data error classification; ie errors would be categorized as either due to prices or all other errors. All other things equal, the resettlement frequency for RTM may be expected to be less than DAM because of Final and True-Up settlements. ERCOT believes that a DAM threshold based on aggregate market activity is appropriate. 8 PUBLIC

Resettlement Threshold Questions 9 PUBLIC