Credit Finance Sub Group update to the. Technical Advisory Committee
Updates from the recent ERCOT Credit Finance Sub-Group meeting include discussions on voting matters, operational NPRRs without credit impacts, new invoice report implementation, and evaluation of changes to the Letter of Credit Concentration limits. Additionally, NPRRs related to State of Charge with Real-Time Co-Optimization and Seasonal Coal Inventory Declaration were reviewed. The meeting also featured discussions on Invoice Reports, EAL Changes, and analysis of Estimated Aggregate Liability reports.
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Credit Finance Sub Group update to the Technical Advisory Committee Brenden Sager, Austin Energy, Chair Loretto Martin, NRG, Vice Chair 15 November 2023 1
General Update General Update 15 November CFSG meeting Voting matters Operational NPRR s without credit impacts Discussion items new invoice report, and NPRR on bank qualifications EAL Change Proposals Letter of Credit Concentration limits Regular credit exposure updates
NPRR Reviewed NPRR Reviewed NPRR1204, Considerations of State of Charge with Real-Time Co-Optimization Implementation URGENT NPRR1181, Submission of Seasonal Coal and Lignite Inventory Declaration ERCOT Credit Staff and CFSG have reviewed NPRR1204 and do not believe that it requires changes to credit monitoring activity or the calculation of liability
Update on Invoice Report from NRG Update on Invoice Report from NRG This Nodal Protocol Revision Request (NPRR) creates a new daily report which lists the ERCOT Invoices issued for the current day and day prior at a Counter-Party level. The Credit Finance Sub Group (CFSG) provided feedback to ERCOT that it is cumbersome for Counter-Parties to monitor the posting of Invoices that are posted at infrequent intervals (e.g. quarterly). ERCOT has observed this difficulty, noticing Qualified Scheduling Entities (QSEs) with a history of timely paying Settlement Invoices missing payment timelines for Wide Area Network (WAN) and Electric Reliability Organization (ERO) Invoices. This NPRR creates a daily report that lists the Invoices issued to all the QSEs and Congestion Revenue Right (CRR) Account Holders represented by the Counter-Party for the current day and the prior day. This report can be used by Counter-Parties to ensure they are aware of all Invoices posted, which helps assure timely payment. This also has the benefit of decreased administrative burden on ERCOT to manage late payments. Next step: to PRS for December meeting 4
EAL Changes and Analysis EAL Changes and Analysis DC and Rainbow requested changes to the Estimated Aggregate Liability report that represents parameters defining the CP s collateral obligation to ERCOT Members expressed desire to have settlement from RT and DA combined in the calculation Current forward adjustment factors apply separately to DA and RT Evaluating lookback period designed to protect against default mass transition Varies but can reflect up to 40 days of invoices and financial market activity Evaluating Forward Adjustment Factors (FAFs), ratios of future and past prices scaling invoices CFSG will continue to review EAL calculation methodology ERCOT Credit team is evaluating four scenarios and presenting these to CFSG in detail. Scenario 2 involves applying Forward Adjustment Factors against Real Time Liability and removing the Max function from the 40 day lookback period Scenario 3 involves CP-level customized Forward Adjustment Factors based on a ratio of forward and settled prices Waiting for scenarios 1 and 4 5
Letter of Credit Discussion Letter of Credit Discussion ERCOT has issuer LC max limits of $750 million per issuer with sublimits based on ratings Once limit breached, no more new LC s or increases from that issuer Credit Agricole and BBVA have breached, six other issuers in the "danger zone" at > 60% capacity ERCOT staff discussed with the group the possibility of raising limits No CFSG action taken but group will continue to monitor and staff will include a consolidated view of LC amounts at monthly meetings in the future
Letter of Credit Discussion Letter of Credit Discussion Issuer Limits based on Tangible Net Worth(US$) 228,846,942 $ 336,159,380 $ 86,909,848 $ 207,264,000 $ 480,291,951 $ 750,000,000 $ 559,046,851 $ 327,642,875 $ 750,000,000 $ 362,438,985 $ 13,159,965,524 $ Unused Capacity based on Tangible Net Worth(US$) (219,062,458) $ (63,840,621) $ 2,209,848 $ 21,163,998 $ 117,632,388 $ 186,437,989 $ 180,046,851 $ 117,171,736 $ 359,699,224 $ 202,437,978 $ 8,612,965,887 $ Total LC Amounts Per Issuer(US$) 447,909,400 $ 400,000,000 $ 84,700,000 $ 186,100,002 $ 362,659,563 $ 563,562,011 $ 379,000,000 $ 210,471,139 $ 390,300,776 $ 160,001,007 $ 4,546,999,637 $ Tangible Net Worth(US$) 28,605,867,700 $ 48,022,768,500 $ 10,224,688,000 $ 24,384,000,000 $ 64,038,926,800 $ 120,721,538,800 $ 65,770,217,758 $ 40,955,359,400 $ 128,401,000,000 $ 48,325,197,960 $ 1,854,928,001,308 $ Issuer Name Credit Agricole Corporate & Investment Bank SA (FI) BBVA(FI) CoBank ACB (FI) DNB Bank ASA (FI) Societe Generale (FI) BNP Paribas (FI) Royal Bank of Canada (FI) Lloyds Bank Corporate Markets PLC (FI) Wells Fargo (FI) Credit Suisse AG (FI) Totals Over CL 196% 119% 97% 90% 76% 75% 68% 64% 52% 44% 65%
Monthly Highlights September 2023 October 2023 Market-wide average Total Potential Exposure (TPE) increased from $2.50 billion in September 2023 to $2.88 billion in October 2023 TPE increased due to the higher forward adjustment factors in October Discretionary Collateral is defined as Secured Collateral in excess of TPE,CRR Locked ACL and DAM Exposure Average Discretionary Collateral decreased from $5.04 billion in September 2023 to $4.33 billion in October 2023 No unusual collateral call activity
Available Credit by Type Compared to Total Available Credit by Type Compared to Total Potential Exposure (TPE) YTD Oct 2023 Potential Exposure (TPE) YTD Oct 2023
