ERCOT Outlines How It Will Collect Nearly $3 Billion Short Paid To Market Via Uplift, Absent Legislative Or PUC Changes
Provides Expected Timeline For Issuance Of First Uplift Invoice, Collection Would Take 96 Years Under Current Rules
April 14, 2021 Email This Story Copyright 2010-21 EnergyChoiceMatters.com
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The Electric Reliability Council of Texas, Inc. (ERCOT) filed with the Texas PUC a Notice of Planned Implementation of Default Uplift Invoice Process, "to provide clarity to the Commission and ERCOT Market Participants regarding ERCOT’s understanding of the ERCOT Protocols that control the Default Uplift Invoice process."
The planned implementation described below is subject to further guidance that may be provided by the Commission, ERCOT said. "Further, there may be a need to modify this planned implementation if the Texas Legislature takes actions that impact the ERCOT market. In addition, ongoing litigation and bankruptcy proceedings by current ERCOT Market Participants may require ERCOT to modify its planned implementation. Finally, this planned implementation may be modified if there are other changed circumstances or new information is obtained by ERCOT," ERCOT said
The following is a high-level summary of ERCOT’s planned implementation of the Default Uplift Invoice process, as described in more detail later in this filing:
• Currently, outstanding short payments (i.e., payments due but unpaid) in the ERCOT market total approximately $2.9 billion.
• Although ERCOT has the authority to start issuing Default Uplift Invoices to collect outstanding short-pay amounts as early as May 24, 2021, ERCOT does not intend to begin issuing Default Uplift Invoices until after the conclusion of the current session of the Texas Legislature, in light of certain actions under consideration by the Texas Legislature at this time. Currently, ERCOT expects that the first set of Default Uplift Invoices related to February 2021 will be issued sometime during the summer of 2021.
• Unless otherwise advised by the Commission, ERCOT intends to issue Default Uplift Invoices that collectively total no more than $2.5 million each month (a limitation under the current protocols). At that rate, it will take over 96 years to collect the current amount of outstanding short payments using only the Default Uplift Invoice process.
• Collections from Default Uplift Invoices will be used to pay short-paid Invoice Recipients, starting first with payments due on the oldest short-paid Invoices. ERCOT will also use collections from the Default Uplift Invoices to help replenish the portion of the CRR auction fund used to cover short payments in February 2021.
• Default Uplift Invoices will be issued to all Entities active in the ERCOT market in the month before the month in which the short-payments being recovered occurred, so long as the Entity is either still active in the ERCOT market or voluntarily terminated its ERCOT registration after the short-payments being recovered occurred. Further, active Market Participants that have short-paid ERCOT -- such as the NOIEs referenced above and short-paying Entities on payment plans -- will be allocated a Default Uplift Ratio Share and issued Default Uplift Invoices. This means Entities such as Brazos Electric Cooperative and Rayburn Country Electric Cooperative will receive Default Uplift Invoices Market Participants with no activity in the month prior to the month covered by the short-paid Settlement Invoices being collected (e.g., new market entrants) will not receive Default Uplift Invoices for that short-paid month.
• Each Entity’s total share of responsibility for the outstanding short-payment amounts -- i.e., each Entity’s Default Uplift Ratio Share -- will be based on the Entity’s share of activity in the ERCOT market in the month before the month in which the short-payments being recovered occurred.
• An Entity that voluntarily terminates its ERCOT registration remains responsible for its entire Default Uplift Ratio Share following its termination. Upon a voluntary termination, ERCOT will require the terminating Entity to provide Financial Security in the amount of their unrecovered Default Uplift Ratio Share.
• ERCOT Protocol Section 220.127.116.11(3) expressly contemplates that, if a Default Uplift Invoice is itself short paid, then that short payment amount will also be subject to collection by
ERCOT using the Default Uplift Invoice process. This means that any Counter-Party active in ERCOT in the month prior to the date on which a payment for Default Uplift Invoice was due but not paid will be allocated a pro rata share of that short-pay amount, if it must be collected by ERCOT using the Default Uplift Invoice process. In other words, a market participant not active in February 2021 but which is active at the time a Default Uplift Invoice is due would be allocated any associated uplift if the original Default Uplift Invoice is short paid by the market.
ERCOT noted that, "Although Protocol Section 9.19.1 provides significant detail regarding the Default Uplift Invoice process, ERCOT has never before implemented the above language in the circumstances currently presented, in which the total amount of expected uplift vastly exceeds the monthly $2,500,000 limitation in Protocol Section 9.19.1(4), and in which Market Participants whose short-payments are part of the expected uplift amount continue to participate in the ERCOT market."
To the extent ERCOT utilized approximately $800 million from the Congestion Revenue Right (CRR) auction fund to cover part of the payments that were due to Invoice Recipients on February 26, 2021, ERCOT currently intends to use part of the collections from Default Uplift Invoices to replenish the CRR auction fund with sufficient funds to come into compliance with ERCOT’s Financial Corporate Standard, which currently requires ERCOT to have on hand six months of forecasted redistribution of CRR Auction receipts. ERCOT also intends to use funds collected via other methods—such as through payment plans—to help replenish these CRR Auction funds.