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ERCOT Proposes NPRR To Clawback Certain RMR Payments If Plant Later Returns To Market

August 3, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

ERCOT has proposed Nodal Protocol Revision Request 795 to require that capital expenditures funded by ERCOT under a Reliability Must Run (RMR) agreement are refunded if the RMR later returns to service outside of an RMR agreement.

"This NPRR creates a mechanism by which capital expenditures funded by ERCOT under an RMR Agreement may be refunded subsequent to the termination of the RMR Agreement. If the Generation Resource returns to commercial operations, the refund is based on depreciated book value of the capitalized expenditures. Otherwise the refund is based on the salvage value associated with the capitalized expenditures. This is similar to refunds of capital contributions that may be required for capacity procured under the provisions of Section 6.5.1.1, ERCOT Control Area Authority," ERCOT said in the NPRR.

"This NPRR ensures that the capital value provided by ERCOT as part of an RMR Agreement accrues to the market. This NPRR is intended to minimize undue subsidization of potentially uneconomic Generation Resources that have been contracted under RMR Agreements," ERCOT said in the NPRR

Specifically, the NPRR would provide that a QSE that has received payments from ERCOT for contributed capital expenditures pursuant to an RMR agreement entered into on or after October 12, 2016 must refund to ERCOT the contributed capital expenditures as follows:

(a) If the resource entity chooses not to have the Generation Resource participate in energy or ancillary service markets after the termination date of the RMR agreement, the QSE representing the Resource Entity shall repay, in a lump sum payment, the positive salvage value associated with the contributed capital expenditures, as estimated at the time of the RMR agreement. The salvage value must be consistent with that used in the resource entity’s depreciation schedule for the asset(s).

(b) If the resource entity chooses to have the generation resource participate in the energy or ancillary service markets after the termination date of the RMR agreement, the QSE representing the resource entity shall repay, in a lump sum payment, 100% of the remaining book value of the capitalized equipment and capitalized installation charges based on straight-line depreciation over the estimated life of the capitalized component(s) as of the termination date of the RMR agreement in accordance with GAAP or IAS standards for electric utility equipment. The estimated life shall be based on documentation provided by the manufacturer; or, if installing used equipment, the estimated life may be based on an approximation agreed to by the resource entity and ERCOT.

ERCOT requested urgent status for the NPRR

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