Analysis of Change in EAL Calculation Scenarios

In this analysis, Sanchir Dashnyam, the ERCOT Market Credit Manager, discusses the change in the EAL calculation formula, exploring different scenarios and their impacts on ERCOT markets. The scenarios involve adjustments to the application of RFAF against various parameters, aiming to optimize the EAL calculation process for different market conditions.

• EAL Calculation
• ERCOT Markets
• Scenario Analysis
• RFAF Formula
• Market Credit

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1. Change to EAL calculation: analysis of various scenarios Sanchir Dashnyam ERCOT Market Credit Manager ERCOT Public August 16, 2023

2. Current EAL Formula EAL q = Max [IEL during the first 40-day period only beginning on the date that the Counter-Party commences activity in ERCOT markets, RFAF * Max {RTLE during the previous lrq days}, RTLF] + DFAF * DALE + Max [RTLCNS, Max {URTA during the previous lrq days}] + OUT q + ILEq EAL t = Max [RFAF * Max {RTLE during the previous lrt days}, RTLF] + DFAF * DALE + Max [RTLCNS, Max {URTA during the previous lrt days}] + OUT t EAL is driven by (1) changes in FAF and (2) how FAF s applied. 2 ERCOT Public

3. Scenario # 1: applying RFAF against RTCLNS instead of MAX RTLE EAL q = Max [IEL during the first 40-day period only beginning on the date that the Counter-Party commences activity in ERCOT markets, RFAF * Max {RTLE during the previous lrq days}, RTLF RFAF*RTLCNS*M1] + DFAF * DALE + Max [RTLCNS, Max {URTA during the previous lrq days}] + OUT q + ILE q EAL t = Max [RFAF * Max {RTLE during the previous lrt days}, RTLF RFAF*RTLCNS*M1] + DFAF * DALE + Max [RTLCNS, Max {URTA during the previous lrt days}] + OUT t RFAF = 21 ICE future / most recent days (time period of RTLCNS) this can be 5 days to 7 days RTLCNS = average RLCNS value 3 ERCOT Public

4. Scenario # 2: applying RFAF against all RTLE in the lookback period and taking the Max EAL q = Max [IEL during the first 40-day period only beginning on the date that the Counter-Party commences activity in ERCOT markets, Max{(RFAF * Max {RTLE) during the previous lrq days}, RTLF] + DFAF * DALE + Max [RTLCNS, Max {URTA during the previous lrq days}] + OUT q + ILE q EAL t = Max{(RFAF * Max{RTLE) during the previous lrt days}, RTLF] + DFAF * DALE + Max [RTLCNS, Max {URTA during the previous lrt days}] + OUT t 4 ERCOT Public

5. Scenario # 3: adjusting RFAF formula to reflect each MPs unique situation EAL q = Max [IEL during the first 40-day period only beginning on the date that the Counter-Party commences activity in ERCOT markets, RFAF * Max {RTLE during the previous lrq days}, RTLF] + DFAF * DALE + Max [RTLCNS, Max {URTA during the previous lrq days}] + OUT q + ILE q EAL t = Max [RFAF * Max {RTLE during the previous lrt days}, RTLF] + DFAF * DALE + Max [RTLCNS, Max {URTA during the previous lrt days}] + OUT t RFAF = Projected Real-Time ICE Forward Average Price / Max RTLE date Historic Real-Time Settled Average Price 5 ERCOT Public

6. Scenario # 4: Netting of RTM and DAM EAL q = Max [IEL during the first 40-day period only beginning on the date that the Counter-Party commences activity in ERCOT markets, RFAF * Max {RTNLE during the previous lrq days}, RTNLF] + DFAF * DALE + Max [RTNLCNS, Max {ULERTA during the previous lrq days}] + OUT q + ILE q OUT q = OIA q + UDAA q + UFA q + UTA q + CARD EAL t = Max [RFAF * Max { RTNLE during the previous lrt days}, RTNLF] + DFAF * DALE + Max [RTNLCNS, Max { ULERTA during the previous lrt days}] + OUT t OUT t = OIA t + UDAA t+ UFA t + UTA t 6 ERCOT Public

7. Scenario # 4: Netting of RTM and DAM, continued NLE = Total net liability extrapolated Average)*M1 (Last 14 days RTM Initial Statement Average + Last 14 days DAM Initial Statement Time Settled Average Price RFAF = Projected Real-Time ICE Forward Average Price / Max NLE date Historic Real- NLF = net liability forward = 1.5 * NLCNS NLCNS = RTLCNS + UDAA ULE = unbilled liability extrapolated Average)*M2 (Last 14 days RTM Initial Statement Average + Last 14 days DAM Initial Statement 7 ERCOT Public