Update: Settlement On Allocation Of Uplift Securitization Proceeds To LSEs In ERCOT Includes Weighting For REPs With Smaller Exposure
Includes Obligation To Pass-Through Proceeds To Affected Customers
September 21, 2021 Email This Story Copyright 2010-21 EnergyChoiceMatters.com
Reporting by Paul Ring • firstname.lastname@example.org
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Parties in a Texas proceeding concerning an "uplift" financing program as directed by HB 4492 have filed an unopposed settlement addressing certain issues, including the methodology and process for allocation of securitization proceeds to load serving entities
HB 4492 creates a program to finance, and provide funds to LSEs, 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 (known as "uplift")
The signatories to the stipulation, which include various retail electric providers, agree that up to $2.1 billion in securitization proceeds shall be
allocated to LSEs that have not opted out on a load ratio
share (LRS) basis using the methodology described and set
1. LSE Load Ratio Share Calculation – ERCOT will calculate a load ratio share for each LSE using
ERCOT interval-level Adjusted Meter Load (AML) data for the 180-day Real Time Market True
Up settlements for the period of emergency (defined as February 12-20, 2021) adjusted for the
LSE’s transmission level opt-out settlement meter data which will be adjusted to account for
transmission losses and unaccounted for energy allocations (LRS). The LRS is weighted by the
market-wide total interval-level exposure related to the reliability deployment price adder (RDPA)
and ancillary services (AS) costs in excess of the Commission's system-wide offer cap (SWCAP)
as allocated to each LSE by ERCOT for February 12 through February 20, 2021.
a. This calculation uses data found in the ERCOT settlement extracts.
b. The total market-wide cost exposure for the period of emergency is approximately
c. Each LSE’s LRS is its transmission level opt-out adjusted total exposure divided by the
market-wide total exposure provided in Step 1.b.
d. Because the LSE’s LRS is adjusted for transmission level opt-outs, the aggregate of all
LSEs’ LRS will not total 100%.
2. LSE Base Allocation – Allocate the $2.1 billion of available funds to each LSE by multiplying $2.1
billion by the LRS for each LSE from Step 1. This will provide each LSE’s base case of bond
proceeds allocation (Base Allocation). Because the LSEs’ LRS are adjusted for transmission level
opt outs in Step 1, there will be a remainder amount associated with transmission level opt outs.
3. Opt-Out Pool – Identify entities (eligible LSEs) that have opted out or are not entitled to receive
funds (i.e., defaulted REPs that have been removed from the market, D.C. Ties, and other non-
LSEs); sum the amounts allocated to those LSEs in Step 2 and add the amounts associated with the
transmission level opt outs. The lesser of this amount or the remaining headroom between the $2.1
billion cap and the non-opt-out LSE Base Allocations will be designated for an "Opt-out Pool."
4. Opt-Out Pool Allocation – The Opt-out Pool will then be allocated to LSEs within the same
corporate family in four Categories as follows and as reflected in the table below: (a.) REPs without
affiliates that own generation or load resources in ERCOT (Unaffiliated REPs) and with less than
$40 million in total exposure will have their LRS weighting from Step 1 multiplied by 3; (b.)
Unaffiliated REPs with more than $40 million in total exposure will have their LRS weighting from
Step 1 multiplied by 2.15; (c.) REPs with affiliates that own generation or load resources in
ERCOT (Affiliated REPs) and with less than $300 million in total exposure will have their LRS
weighting from step 1 multiplied by 1.35; (d.) Affiliated REPs with more than $300 million in total
exposure, Municipally Owned Utilities, and Electric Cooperatives will utilize their LRS weighting
from Step 1 without adjustment. The LRS weighting for each LSE in Categories (a.) through (d.)
will be added together and then an adjusted LRS will be calculated for each and scaled
proportionally to sum to 100% and the Opt-out Pool will be multiplied by the adjusted LRS for
a. The total allocation of funds to each LSE will be capped at 100% of its adjusted total
exposure as determined in Step 1(c.).
5. Overage Allocation – If there are unallocated funds remaining after Step 4 due to LSEs that reached
their 100% adjusted total exposure allocation cap, the remaining funds will be distributed to LSEs
proportionally based on LRS weighting from Step 4, excluding opt-outs and capped LSEs, and
scaled proportionally to sum to 100%, until there is no remainder.
6. Final Allocation – In the event that the Opt-Out Pool funds and Overage Allocations are insufficient
for the LSEs in Category 4(a.) above to reach an allocation equal to 100% of their adjusted total
exposure, a portion of the Opt-Out Pool funds allocated to LSEs in Category 4(d.) will be reallocated
to the LSEs in Category 4(a.) to ensure that the LSEs in Category 4(a.) receive 100% of
their adjusted total exposure.
The following process will be used to effect the mechanism described above.
a. Each REP that is eligible and chooses to receive proceeds under Subchapter
N, Chapter 39 of PURA will provide ERCOT with the interval-level
settlement meter data for each of its transmission level customers (including
associated ESIIDs) that have opted out.
b. ERCOT will aggregate that interval-level meter data for each REP, adjust
for transmission losses and unaccounted-for-energy, and provide the
market-wide aggregated data to the parties in Docket No. 52364.
c. ERCOT will calculate the LRS for each LSE as set out in Step 1 as described above and provide it in Docket No. 52364.
d. For each eligible LSE, ERCOT will provide a calculation of total exposure,
total exposure adjusted for transmission customer opt-outs, and LRS, in
accordance with the methodology set forth as described above and provide it
in Docket No. 52364. Each eligible LSE will verify the calculation of its
total exposure as provided by ERCOT in Docket No. 52364 no later than
the deadline established by the Commission.
e. ERCOT will then perform the calculation of the proceeds allocation under
the terms of the settlement pursuant to the steps described as described above.
ERCOT will provide documentation of the calculation in Docket No.
The stipulation further provides that each LSE that receives securitization proceeds must:
(1) provide a refund to customers for any AS costs in excess of the SWCAP or RDPA charges that
were passed through and have been paid by the LSE’s customers; and
(2) adjust customer invoices
to remove AS costs in excess of the SWCAP or RDPA charges that were passed through but have
not been paid by the LSE’s customers.
Furthermore, the settlement provides that, "If an LSE is not allocated 100% of its total exposure, any
refunds or adjustments to invoices will be made in an amount that is not less than an amount that
is proportionate to the percentage of the LSE’s total exposure that was allocated to that LSE."
LSE that receives securitization proceeds is not required to pass through those proceeds for any
AS costs in excess of the SWCAP or RDPA charges that could have been passed through under a
customer’s terms of service and were not, and the LSE will not hold the customer responsible for
payment of those AS costs or RDPA charges," the settlement provides
As noted above, each REP will be placed into a category based on its exposure and affiliation for purposes of the allocation. The settlement includes a list placing REPs into such categories. Any REP
that is not represented by a party to the proceeding must propose any changes to its resource
affiliate status (Unaffiliated REP or Affiliate REP) as listed in the settlement no later than the deadline set by the
Commission in either this docket or in Docket No. 52364. A REP’s resource affiliate status will
be used to determine the category for which the REP will be allocated funds from the opt-out pool,
as described above
Concerning opt-out of transmission level customers, the stipulation provides that each REP must provide notice
to transmission voltage customers served by that REP regarding the process to opt out, and each
transmission voltage customer that is eligible and chooses to opt out must make a filing in Docket
No. 52364 indicating so by the deadline identified by the Commission. A REP may make this filing on behalf of a transmission voltage customer if the customer provides written authorization
for the REP to do so, the settlement provides
The signatories agree that subsequent to the execution of the stipulation,
supporting testimony will be filed in the docket that will include agreed forms of notice to
transmission voltage customers regarding the opt-out notice, and an agreed form for transmission
voltage customers to opt out. In addition, the supporting testimony will address agreed deadlines
for REPs to provide notice to their transmission voltage customers regarding the opt out process
and for transmission voltage customers to file the agreed form to opt out
As previously reported, under the statute, a REP that has the same corporate parent
as or is an affiliate to each of the REP’s customers may opt-out of the program. The settlement notes that Texas Retail Energy, LLC has elected to opt-out of the program