ERCOT Credit Relaxation Saved Retail Suppliers from Default

Several measures taken by ERCOT in February to exclude the impacts of the anomalous severe weather event on credit requirements prevented several additional retail electric providers from defaulting, two leading retail executives told KEMA's Executive Forum.

Stream Energy Chairman & Co-Founder Rob Snyder said that had it not been for the temporary relaxation of credit standards, several additional REPs, perhaps as many as 10, likely would have defaulted. The only REP thus far to have defaulted as a result of the severe cold event has been Abacus Energy Resources, although at least one customer book was sold in the aftermath as well (though the sale had been pending for some time prior to the cold snap).

Among other things, ERCOT excluded results from the operating days affected by the severe cold from the historic measures used to set credit levels, and also temporarily lowered the "uth" percentile used to determine exposure for Point-to-Point (PTP) Obligation Bids in the Day-Ahead Market (DAM) from the 90th percentile to the 80th percentile (see 2/4).

ERCOT continues to adjust credit metrics consistent with its earlier action. For example, the Final Settlement Statements for February 2 and 3, 2011, were invoiced on April 7, 2011. "Given the atypical nature of the activity on these days and to be consistent with other adjustments made eliminating the Real Time activity for February 2 and 3, 2011, from credit calculations, ERCOT has excluded Operating Days February 2 and 3, 2011, from the Unbilled Final and True Up Adjustment (UFTA) beginning with the calculation on April 8, 2011," ERCOT said in a market notice.