|
|
|
|
|
Texas TDUs: Retail Electric Provider Capital Requirements Should Be Raised, If There Are Additional Risks in Market
The capital requirements of Texas retail electric providers should be increased if changes to the ERCOT market, specifically higher system-wide offer caps, impose increased risks on REPs, several transmission and distribution utilities told the Public Utility Commission of Texas.
Filing the comments jointly were AEP Texas Central, AEP Texas North, CenterPoint Energy Houston Electric, and Texas-New Mexico Power.
"The Joint DSP Commenters support a process for the Commission to require enhanced capital requirements from Retail Electric Providers ('REPs') in order to strengthen the collateral positions of REPs so that losses to the market are less likely," the TDUs said.
"Thus, if there are additional risks to the REPs, then the Commission should increase the capital requirements in order to protect the customers from the increased risks," the TDUs said.
"However, the Commission should consider the risks of REPs in a holistic manner," the TDUs added. "If the increase in the system-wide offer cap increases the risk to the REPs, there could be an offsetting lowering of risks due to a shortened settlement timeline. Thus, the Commission should consider all of the modifications to the risks of the REPs in establishing the capital requirements for those entities," the TDUs said.
Given increases in the ERCOT price caps, the TDUs also said that the capital requirements for a Provider of Last Resort (POLR) should be addressed for a mass transition. "After a mass transition, the POLR has additional customers and load to serve with little or no advanced notice, which increases the risks of that provider that will most likely be at higher rates anticipated during a shortage scenario. The POLR also has an increased need for collateral for the transition charges of the DSPs [distribution service providers]. Due to these increased risks to the POLR, the Commission should increase the credit requirements of the POLR due to a mass transition," the TDUs said.
Reliant Energy Retail Services LLC, however, said that changes to the REP and POLR collateral requirements are not required at this time.
"Reliant contends that Commission action is not required at this time to mitigate collateral requirements as a result of increases to the System Wide Offer Cap (SWOC). ERCOT implemented a new set of credit exposure requirements with the implementation of the nodal market and stakeholders have been closely evaluating the performance of those requirements ever since."
"ERCOT staff and stakeholders have been challenged to design credit requirements which accurately represent the true credit risk prevalent in the market. The current practice of relying on historical data is backwards-looking and extrapolates historical risks forward in a way that tends to over-collateralize market participants. The result is an inefficient utilization of capital that market participants could use for more productive purposes such as investing in their businesses. ERCOT staff and stakeholders have recently begun to consider credit exposure calculation methodologies which evaluate future credit risk based on forecasted system conditions. Reliant supports this effort and will be an active participant in these future stakeholder proceedings," Reliant said.
"As part of a reduction of the settlement timeline, Reliant believes there is an opportunity to evaluate credit calculation parameters which have significant impacts to the exposure calculations. One such parameter is the M1 multiplier used in the calculation of Real-Time Liability Extrapolated in section 16.11.4.3 of the Nodal Protocols. The M1 parameter is currently set to 20 and is multiplied by the average amount due from the most recent 14 days of initial settlements. The M1 multiplier is intended to represent the risk of a REP default where 20 is the estimated number of days for ERCOT to complete the execution of a mass transition event including time to allow for cure of collateral calls and breach issuance. Reliant recommends that ERCOT and stakeholders review the mass transition process to better understand the potential duration of a mass transition event and inform an evaluation of the current M1 parameter value," Reliant said.
"Reliant is supportive of the Commission setting the appropriate financial, technical, and managerial requirements for retail electric providers serving or planning to serve customers in Texas in order to ensure that customer protections are appropriate and the competitive market remains vibrant. The existing REP certification rule adequately meets these objectives and need not be modified," Reliant said.
Reliant further said that existing rule provisions provide an important safeguard to ensure that REPs designated to provide POLR service can continue to provide service during and after a mass transition, "thus making amendments to a POLR's capital requirements during such a mass transition unnecessary."
"Prior to the Commission designating a REP as a POLR pursuant to P.U.C. SUBST. R. 25.43 it must first be certificated pursuant to P.U.C. SUBST. R. 25.107. It is unclear how a REP that is already certificated under P.U.C. SUBST. R. 25.107 could be required to have a different capital requirement during a mass transition since mass transitions typically occur with minimal notice. Reliant opposes the imposition of a more onerous capital requirement that would apply only to REPs designated as POLRs. The REP certification procedures and requirements found in P.U.C. SUBST. R. 25.107 define the minimum financial qualifications to serve as a REP. The same financial certification rules should apply to all REPs regardless of their designation as a POLR provider," Reliant said.
"Regarding customer rate impact [to POLR customers from a higher SWOC], Reliant believes the existing POLR rule adequately provides incentives for REPs to place customers on a market based rate when possible yet retains an important rate design protection to reflect the cost of providing last resort service," Reliant said.
Project 41641
ADVERTISEMENT Search for more retail energy careers: Copyright 2010-
October 7, 2013
Email This Story
Copyright 2010-13 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com
NEW Jobs on RetailEnergyJobs.com:
• NEW! -- Vice President, Residential Sales and Marketing -- Retail Provider -- Houston
• NEW! -- Accounting Manager -- Retail Provider -- Houston
• NEW! -- Indirect Sales Representative -- Retail Provider -- Texas
• NEW! -- Indirect Sales Coordinator -- Retail Provider
• NEW! -- Database Reporting Analyst -- ESCO -- NY
• Director of Operations & Compliance
• Director of National Accounts -- DFW
• Marketing Coordinator -- Retail Supplier
• Risk Manager -- Retail Provider -- Houston
RetailEnergyJobs.com
|
|
|
|