ERCOT Proposes To Disburse LSEs' Proceeds From Uplift Securitization To Their QSEs; Notes PUC May Wish To Consider Mandating Pass-through Back To LSEs
ERCOT Seeks Approval For Uplift, Default Balance Financing Orders
July 19, 2021 Email This Story Copyright 2010-21 EnergyChoiceMatters.com
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ERCOT has filed with the Texas PUC petitions for orders to finance the Winter Storm Uri Uplift Balance (Uplift proceeding) and the Default Balance (Default proceeding)
In the Uplift proceeding, ERCOT sought authorization to obtain financing of the Uplift Balance in an amount up to $2.1 billion (the statutory cap), plus reasonable costs to implement a Debt Obligation Order
Eligible costs included in the Uplift Balance are documented Reliability Deployment Price Adder ("RDPA") charges and Ancillary Service costs above the Commission's system-wide offer cap for the period beginning 12:01 a.m., February 12, 2021, and ending 11:59 p.m., February 20, 2021.
ERCOT noted that it cannot readily quantify the costs that comprise the Uplift Balance, because ERCOT has no way of knowing which LSEs were exposed to the RDPA charges and the Ancillary Services costs in excess of the system-wide offer cap. "Nor does ERCOT have a way to quantify the exposure of those LSEs that were exposed to those types of charges. The LSEs themselves will need to provide that information," ERCOT said, noting that the provision of such information by LSEs is contemplated by statute
ERCOT requested that the Commission open a separate docket in which load-serving entities ("LSE") should also be required to provide documentation of their exposure to the costs included in the Uplift Balance so that ERCOT will be able to quantify the amounts to be financed
ERCOT proposed that such separate document should also be used for eligible LSEs to exercise an opt-out from the Uplift Balance (and associated recovery). Entities which are eligible to make a one-time opt-out election are municipally owned utilities, electric cooperatives, river authorities, a retail electric provider ("REP") that has the same corporate parent as each of the provider's customers, a REP that is an affiliate of each of the provider's customers, and transmission-voltage customers served by a REP.
ERCOT proposes to disburse the proceeds of the Uplift Balance financing by issuing a miscellaneous invoice for payment to each QSE who represents an LSE that the Commission deems eligible to receive such proceeds. This process would rely upon a QSE who receives financing proceeds on behalf of a represented LSE to pass the funds directly on to the LSE that was deemed eligible to receive the financing. Such payments must be made by ERCOT through the QSE because ERCOT's systems only allow for financial transactions with QSEs, not LSEs directly. "The Commission may wish to consider including language in the Debt Obligation Order that would specifically direct QSEs to pass through the Uplift Balance financing proceeds to the eligible LSEs," ERCOT said
To recover the Uplift Charge, ERCOT proposes to allocate a nonbypassable charge to QSEs on a daily basis. The allocation will be based on the load ratio share for the day prior for the LSEs represented by the QSEs. In calculating the load ratio share, ERCOT will exclude the load of those LSEs that opt out under PURA § 39.353(d). ERCOT proposes that the load ratio share used to assess Uplift Charges be updated on a daily basis, based on actual load. ERCOT proposes to create a new daily settlement invoice for the Uplift Charges only. On a going-forward basis, ERCOT will include the load of any new LSE that enters the ERCOT market in the allocation of the Uplift Charge.
As with the distribution of proceeds from the financing of the Uplift Balance to QSEs representing LSEs, ERCOT proposes to settle Uplift Charges with QSEs.
As the total amount of the Uplift Balance is not known, a specific per MWh recovery charge was not proposed at this time.
The Uplift Balance is being addressed in Docket 52322
Separately, ERCOT also petitioned the PUC for an order to partially finance the Default Balance, as that term is defined in PURA § 39.602(1).
ERCOT is seeking an order to finance $800 million under the Default Balance, which is the statutory cap. ERCOT noted that the Default Balance exceeds $800 million. ERCOT said that the sum of Default Balance amounts is approximately $1.3 billion: $50 million in implementation costs; $318 million owed to short-paid market participants; and $766 million financial revenue auction receipts used to temporarily reduce short payments, which includes the approximately $100 million already used to reduce short payments.
ERCOT proposes to distribute the $800 million by setting aside approximately $50 million to defray the costs incurred to implement the Debt Obligation Order and to retire or refund existing debt. ERCOT next proposes to apply approximately $318 million of the proceeds to pay amounts owed to market participants who were short-paid due to short payments by terminated competitive wholesale market participants. ERCOT will then apply all of the remaining Default Balance financing proceeds to replenish the financial revenue auction proceeds
ERCOT proposes to recover the amount of the financed Default Balance by assessing nonbypassable Default Charges on Qualified Scheduling Entities (QSEs) and Congestion Revenue Right (CRR) Account Holders. ICE NGX Canada Inc. and the City of Lubbock are exempt from the Default Charges
ERCOT will allocate Default Charges on a monthly basis, and the allocation of the charges will be based on the QSE's or CRR Account Holder's volume of activity in the market in the most recent month for which "final settlement" data is available. ERCOT typically issues "final settlement" statements on the 55th day following an operating day.
Allocation of Default Charges to existing wholesale market participants will include QSEs and CRR Account Holders that are in payment breach with ERCOT -- such as Brazos Electric Power Cooperative Inc. and Rayburn Country Electric Cooperative, Inc. -- but that are still participating in the wholesale market, and will also include those market participants who enter the ERCOT wholesale market after a Debt Obligation Order is issued
The Default Balance is being addressed in Docket 52321