ERCOT Rolling Outages End For Now, ERCOT Adjusts e1 Credit Factor for DAM

Rolling outages in ERCOT ended at approximately 2:00 p.m. local time yesterday, but ERCOT is continuing to urge conservation, stating that any additional unexpected major losses of generation could force operators to begin emergency procedures to avoid an uncontrolled statewide blackout.

As of 6:35 a.m. local time this morning, unexpected offline generation had been reduced to 3,000 MW, from a height of 7,000 MW yesterday. The 7,000 MW figure included more than 50 plants which were unexpectedly offline.

Peak demand this morning is projected to be more than 56,800 MW, a winter record. ERCOT's winter electricity demand peaked yesterday evening at 56,334 MW between 7-8 p.m., eclipsing the prior winter record of 55,878 MW, which occurred on Jan. 8, 2010.

Yesterday's morning peak was 53,223 MW -- with 4,000 MW dropped via rotating outages -- at 9-10 a.m.

ERCOT has adjusted, for all Counter-Parties (CPs), the "e1" factor used to determine exposure for bids in the Day Ahead Market (DAM). The revised "e1" will be set at 70% of the current "e1." The adjusted "e1" will be used for the DAM runs on February 3 and 4, 2011. The "e1" factors will revert to the February 2, 2011, version on February 5, 2011.

Each Counter-Party will receive an email notice with the revised "e1" that will be used. Each Counter-Party will also receive an email when "e1" reverts back to the current level.

Nodal Protocol Section 16.11.4.1, Determination of Total Potential Exposure (TPE) for a Counter-Party, subsection (3) provides that:

"If ERCOT, in its sole discretion, determines that the TPE for a Counter-Party calculated under paragraph (1) above does not adequately match the financial risk created by that Counter-Party's activities under these Protocols, then ERCOT may set a different TPE for that Counter-Party. ERCOT shall, to the extent practical, give to the Counter-Party the information used to determine that different TPE. ERCOT shall provide written or electronic notice to the Counter-Party of the basis for ERCOT's assessment of the Counter-Party's financial risk and the resulting creditworthiness requirements."

On February 2, 2011, Real Time Settlement Point Prices were high across all zones for an extended period. In considering the impact on forward estimates of exposure, ERCOT:

1) Applied a factor of 0.667 to the Not Completed (Forward Days) section of the Aggregate Incremental Liability (AIL) component effective from February 2, 2011, through February 9, 2011, and

2) Will exclude Operating Day February 2, 2011, from the Average Daily Transaction Extrapolated (ADTE) calculated on February 18, 2011, before determining the Highest ADTE.

The outages come as ERCOT is up for sunset review, and has already drawn an array of critical responses from lawmakers.

Lt. Gov. David Dewhurst also said Wednesday that Luminant's Oak Grove and Sandow plants were among those which tripped offline, due to frozen and/or burst water pipes, according to Dewhurst.