Understanding ERCOT Default Uplift and Payment Procedures
ERCOT's default uplift and payment procedures involve handling short-paying invoice recipients, implementing payment plans, and collecting total short pay amounts from QSEs and CRRAHs. Default uplift invoices may be issued after 90 days of a short pay, with a maximum cap of $2.5 million per monthly set. The process aims to maintain revenue neutrality for ERCOT while addressing defaults and ensuring proper reimbursement. Market participants should be aware of these protocols to navigate ERCOT's settlement framework effectively.
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7. Default Uplift Mark Ruane Sr. Director, Settlements, Retail and Credit CWG / MCWG ERCOT Public March 25, 2021
Short-Paying Invoice Recipients Upon a QSE s/CRRAH s failure to timely pay a Settlement Invoice, ERCOT must draw on any available Financial Security of the short- paying entity, and offset/recoup any amounts owed by ERCOT against amounts not paid by the short-paying entity. If ERCOT still does not have sufficient funds to pay amounts owed (and following the deduction of certain fees), ERCOT must reduce payments to all Settlement Invoice Recipients owed monies from ERCOT. Such reduction is based on a pro rata share of that which is owed to each Settlement Invoice Recipient, to the extent necessary to achieve revenue neutrality for ERCOT. Market Notice ERCOT is required to provide the market with payment details on all short pays and subsequent reimbursements. Payment Plans ERCOT may enter into a payment plan with a short- paying Invoice Recipient. Any such plan must be disclosed to Market Participants. 2 ERCOT Public
Default Uplift ERCOT must collect the total short pay amount for all Settlement Invoices for a month, less the total payments expected from any payment plan, from QSEs and CRRAHs CP Share of Uplift (CP s payment obligation) - Based on Settlement activity of the CPs QSEs/CRRAHs in the month prior to the month in which the default occurred. CP s share of the Default Uplift is invoiced to its QSEs/CRRAHs, pro rata, based on each of the QSE s/CRRAH s share of the CP s max MWh activity. DAM/CRR MWh Activity: greater of the MWh purchases/sales RTM MWh Activity: greater of the MWh load/generation Settlement Activity does not include Defaulted QSEs/CRRAHs mp none A Market Participant that is a non-defaulting QSE or CRRAH. 3 ERCOT Public
Default Uplift Default Uplift Invoices may be issued after 90 days of a short pay Max of $2.5m total can be charged in any monthly set of Default Uplift Invoices until ERCOT uplifts the entire short-paid amount A monthly set includes all outstanding months with Defaults; not one set per default month i.e., although Defaults occurred in February and March, total Default Uplift Invoices for a single month would be capped at $2.5M. In addition to the $2.5 million cap, default Invoices must be spaced at least 30 days apart. February Defaults based on January activity (earliest - May 24th) March Defaults based on February Settlement activity (earliest May 31st) February Settlement expected to be invoiced until complete (before March Defaults are uplifted), rather than trying to allocate uplifts from multiple months 4 ERCOT Public
Default Uplift If a CP voluntarily terminates its registration (no Default), its Settlement activity is not excluded from the Default Uplift calculation. Protocol Section 16.11.7, Release of Market Participant s Financial Security Requirement (1) Following the termination of a Market Participant s Standard Form Market Participant Agreement, ERCOT shall retain Financial Security to cover potential future obligations of the terminated Market Participant. These obligations may include, but are not limited to, Resettlement Statements, Final or True- Up Settlements, and Default Uplift Invoices. (2) Financial Security for potential future obligations of a terminated Market Participant is the maximum of the CP s TPE, as applicable, or $5,000. 5 ERCOT Public
Default Uplift Potential Uplift component of TPE PUL $ Potential Uplift Potential uplift to the Counter-Party, to the extent and in the proportion that the Counter-Party represents Entities to which an uplift of a short payment will be made pursuant to Section 9.19, Partial Payments by Invoice Recipients. It is calculated as the sum of: (a) Amounts expected to be uplifted within one year of the date of the calculation; and (b) 25%, or such other percentage based on available statistics regarding payment default under bankruptcy reorganization plans, of any short payment amounts being repaid to ERCOT under a bankruptcy reorganization plan that are due more than one year from the date of the calculation. 6 ERCOT Public
Default Uplift Discussion 7 ERCOT Public
