module 2: congestion revenue rightsslide 14 allocation of crrs pre-assigned crrs (pcrrs) •...

Module 2: Congestion Revenue

Rights

Module Objectives: Congestion Revenue Rights

Upon completion of this module,

learners will be able to:

• Describe the Congestion Revenue

Rights (CRRs) Settlement process

• Identify the settlement charges and

payments associated with the CRR

Auction

• Explain how CRR Auction Revenues

are disbursed.

Day 1

Course Introduction 9:00 A

Congestion Revenue

Day-Ahead Market

9:30 A

Rights

1:00 P

Purpose of Congestion Revenue Rights

• Financial instruments

• Hedge against

congestion costs

• Financial Investment

• Payment or charge when

Grid is congested

Congestion Revenue Rights

A CRR is not a right to

deliver physical energy

Types of Congestion Revenue Rights

Point-to-Point Congestion

Revenue Rights


Flowgate Rights (FGRs)


• Defined between source and

sink Settlement Points

• Two Instruments:

• Point-to-Point Options

• Point-to-Point Obligations

• Settlement based on difference

between sink and source

Settlement Point Prices


Revenue Rights




Revenue Rights

Point-to-Point Options

• Can only result in a payment

Point-to-Point Obligation

• Can result in a payment or charge


Point-to-Point (PTP) Options

Source A

Sink B

Source C

$5/MWh

$10/MWh

$15/MWh


Option AB Payment = $5.00

Option CB Payment = $0.00 ?

Point-to-Point (PTP) Obligations

Source A

Sink B

Source C

$5/MWh

$10/MWh

$15/MWh


Obligation AB Payment = $5.00

Obligation CB Payment = -$5.00 ?



• Defined for a specific Flowgate

• Flowgate is directional network

element or bundle of network

elements


A Flowgate Right can

only result in a payment



• Settlement based on Shadow

Price of Flowgate

• Shadow Price is marginal cost to

relieve a MW of congestion on a

Flowgate.



Three ways of acquiring CRRs:

• CRR Auction

• Allocation (Special Case)

• Bilateral Trades

Auction

Allocation

Trade

CRRs


CRRs are allocated, traded or auctioned in:

• One month strips

• Time-of-Use Blocks

Mon. Tues. Wed. Thurs. Fri. Sat. Sun.

Off-Peak (0100 – 0600)

Off-Peak (2300 – 2400)

Peak Weekday (0700 – 2200) Peak Weekend

(0700-2200)

Slide 12

CRR Auction

• Monthly and Semi-Annual Auctions

• Single-round simultaneous auction

• Based on Network Operations Model


Allocation of CRRs

Pre-Assigned CRRs (PCRRs)

• Allocated to Non-Opt-In Entities (NOIEs)

• Based on long-term supply contracts

• Cost based on Auction clearing price


http://ep.ercot.com/npt/ERCOT Nodal Graphics/allocation_titled.png

http://ep.ercot.com/npt/ERCOT Nodal Graphics/Certificate.PNG

Trading CRRs Bilaterally

• PTP Options

• PTP Obligations

• Flowgate Rights

• Characteristics remain unchanged

• Both parties must meet credit requirements.


Slide 15

CRR Settlements

Three Settlement Processes

• CRR Auction Settlement

• CRR Settlement

• CRR Balancing Account


Slide 16

CRR Auction

CRR Auction

Revenue

Distribution

Charges and Payments for CRRs

Auction Settlements: Outcomes

Charge to CRR Account Holder for Awarded Bid in the CRR Auction

Outcome

#2

Outcome

#3

Outcome

#1

Payment to CRR Account Holder for

Awarded Offer in the CRR Auction

Charge to NOIE for Allocated CRRs

Auction Settlements: Charge of an Awarded Bid

• CRRAH5 bids to buy a Peak WD block of 10

MWs of PTP Options in a Monthly Auction

• Sets a Not-to-Exceed Price of $10/MW

Trigger

#1

CRR

ID Source Sink MW Price

Time

Of

Use

Buy

or

Sell

Hedge

Type Start Date End Date

54321 RN1 LZ1 10 10 Peak

WD Buy OPT 07/01/2013 07/31/2013

Monthly Auction


• ERCOT executes Auction Process Trigger

#1 • Auction clears CRRAH5’s PTP Options at

Clearing Price of $2/MW

• Clearing Price less than Not-to-Exceed Price

and Bid is Awarded


• CRRAH5 bought:

• 10 MWs

• Peak WD (5x16) block of PTP Options

• Price of $2/MW

• 352 hr in July 2013

Trigger

#1

Outcome

#1

• For one hour:

(Price) * (Quantity)

($2/MW) * (10 MW) = $20

• For Entire Block:

$20 * 352 = $7040

OPTPAMT crrh, (j, k), a = OPTPR (j, k), a * OPTP crrh, (j, k), a


crrh CRR Account Holder

j Source

k Sink

a CRR Auction

f FGR

PTP Option Purchase Amount

Option Price

Option Purchase

CRR Auction

Revenue

Distribution


OBLPAMT crrh, (j, k), a = OBLPR (j, k), a * OBLP crrh, (j, k), a

Obligation Price

Obligation Purchase



j Source

k Sink

a CRR Auction

f FGR

PTP Obligation Purchase Amount CRR Auction

Revenue

Distribution




Outcome

#2

Outcome

#3

Outcome

#1




Auction Settlements: Payment of an Awarded Offer

• CRRAH3 offers a Peak WD block of 5 MWs of

PTP Obligations in a Monthly Auction

• Sets Minimum Reservation Price At $8/MW

Trigger

#2

CRR

ID Source Sink MW Price

Time

Of

Use

Buy

or

Sell

Hedge


12345 RN4 LZ3 5 8 Peak

WD Sell OBL 07/01/2012 07/31/2012

Monthly Auction


• ERCOT executes Auction Process Trigger

#2 • Auction clears CRRAH3’s PTP Obligation at

Clearing Price of $8/MW

• Clearing Price meets CRRAH3’s Minimum

Reservation Price and Offer is Awarded


• CRRAH3 sold:

• 5 MWs

• Peak WD (5x16) block of PTP Obligations

• Price of $8/MW

• 336 hr in July 2012

Trigger

#2

Outcome

#1

• For one hour:

(-1) * (Price) * (Quantity)

(-1) * ($8/MW) * (5 MWs) = -$40


-$40 * 336 = -$13440


OBLSAMT crrh, (j, k), a = (-1) * OBLPR (j, k), a * OBLS crrh, (j, k), a


j Source

k Sink

a CRR Auction

f FGR

Obligation Price

Obligation Sale

PTP Obligation Sale Amount CRR Auction

Revenue

Distribution



OPTSAMT crrh, (j, k), a = (-1) * OPTPR (j, k), a * OPTS crrh, (j, k), a

PTP Option Sale Amount


j Source

k Sink

a CRR Auction

f FGR

Option Price

Option Sale

CRR Auction

Revenue

Distribution




Outcome

#2

Outcome

#3

Outcome

#1




Auction Settlements: Charge for an Allocated CRR

• CRRAH4 (QSE4) nominates CAPACITY

option of CRRs

Trigger

#3

PCRR Pricing Factors

CRR

ID Source Sink MW

Time

Of

Use

PCRR

Type

Hedge


14916 RN4 LZ2 15 Peak

WD Capacity OPT 07/01/2013 07/31/2013


Trigger

#3

• CRRAH4 nominates CAPACITY option of CRRs

• CRRAH4 nominates for 15 MWs of PTP Options

• CRR Account Holder / NOIE has a Coal

Resource

Monthly Auction


• ERCOT executes PCRR Allocation Process

• Allocation Process awards PCRRs

• ERCOT executes Auction Process

• Auction Process sets price of awarded PCRRs

Trigger

#3

• Auction sets Clearing Price at $10/MW

• NOIE is charged for its allocation


• CRRAH4 was allocated:

• 15 MWs

• Peak WD (5x16) block of PTP Options

• Price of $10/MW

• Pricing Factor of 10% for Coal

Trigger

#3

Outcome

#3

• For one hour:


$15 * 352 = $5280

[(Price) * (Quantity)] * (Pricing Factor)

[($10/MW) * (15 MW)] * (10%) = $15

PCRROPTAMT crrh, (j, k), a, tech = PCRROPTF tech * OPTPR (j, k), a *

PCRROPT crrh, (j, k), a, tech

PCRR Option

pricing Factor Option Price

PCRR PTP

Option quantity

Auction Settlements: Charge for an Allocated PCRR

PCRR PTP Option Amount


j Source

k Sink

a CRR Auction

f FGR

tech Resource Technology

CRR Auction

Revenue

Distribution


PCRROBLAMT crrh, (j, k), a, tech = PCRROBLF tech * OBLPR (j, k), a *

PCRROBL crrh, (j, k), a, tech



j Source

k Sink

a CRR Auction

f FGR


PCRR PTP Obligation Amount

If the Price is greater than Zero, then:

PCRR Obligation

pricing Factor Obligation Price

PCRR PTP

Obligation quantity

CRR Auction

Revenue

Distribution


PCRROBLAMT crrh, (j, k), a, tech = OBLPR (j, k), a *

PCRROBL crrh, (j, k), a, tech


PCRR PTP Obligation Amount

Obligation Price

PCRR PTP

Obligation quantity

If the Price is less than Zero, then:


j Source

k Sink

a CRR Auction

f FGR


CRR Auction

Revenue

Distribution



• CRRAH4 (QSE4) nominates REFUND

option of CRRs

Trigger

#3

CRRAH4 receives the PCRRs at no cost.

CRR Auction

CRR Auction

Revenue

Distribution


CRR Auction Settlement

Pay to QSEs

representing Load

CRR Auction Net

Receipts

+

PCRR Revenues

Distribution occurs once a month.

Auction Settlements: CRR Auction Revenues

http://ep.ercot.com/npt/ERCOT Nodal Graphics/CRR Auction Revenues.png


Collection & Distribution of CRR Auction Revenues

Charges for

Awarded

CRR Bids

(same Zone)

Payments for

Awarded

CRR Offers

(same Zone)

Charges for

Awarded

CRR Bids

(different Zones)

Payments for

Awarded

CRR Offers

(different Zones)


• CRR Sale Amount Totals for Zone 1: -$25,000

• $0 for FGRs

• -$15,000 for Options

• -$10,000 for Obligations

• CRR Purchase Amount Totals for Zone 1: $50,000

• $0 for FGRs

• $30,000 for Options

• $20,000 for Obligations

Trigger

Outcome

Sum of Sales and Purchases

-$15,000 + -$10,000 + $30,000 + $20,000 = $25,000

Total Revenue


CRRZREV z,a =

( OBLSAMTcrrh,(j,k),z,a,h +

OPTSAMTcrrh,(j,k),z,a,h + FGRSAMTcrrh,f,z,a,h +

OBLPAMT crrh,(j,k),z,a,h +

OPTPAMTcrrh,(j,k),z,a,h + FGRPAMTcrrh,f,z,a,h )

h

j

k

crrh

j

k

crrh

crrh

f

j

k

crrh

j

k

crrh

crrh

f


j Source

k Sink

a CRR Auction

f FGR

z Congestion Zone

h Hour

CRR Zonal Revenue CRR Auction

Revenue

Distribution



• CRR Sale Amount Totals inter-Zone: -$13,000

• -$0 for FGRs

• -$8,000 for Options

• -$5,000 for Obligations

• CRR Purchase Amount Totals inter-Zone: $40,000

• $0 for FGRs



Trigger

Outcome

Sum of Sales and Purchases

-$8,000 + -$5,000 + $30,000 + $10,000 = $27,000

Total Revenue


CRRNZREV a =

( OBLSAMTcrrh,(j,k),a,h +

OPTSAMTcrrh,(j,k),a,h + FGRSAMT crrh,f,a,h +

OBLPAMT crrh,(j,k),a,h +

OPTPAMTcrrh,(j,k),a,h + FGRPAMT crrh,f,a,h)

h

j

k

crrh

j

k

crrh

crrh

f

j

k

crrh

j

k

crrh

crrh

f


j Source

k Sink

a CRR Auction

f FGR

h Hour

CRR Non-Zonal Revenue CRR Auction

Revenue

Distribution



Collection & Distribution of CRR Auction Revenues


• PCRR Purchase Amount Totals for Zone 1:

$12,000



Trigger

Outcome

Sum of Purchases

$10,000 + $2,000 = $12,000

Total Revenue

PCRRZREV z, a =

( PCRROBLAMT crrh,(j,k),z,a,tech,h +

PCRROPTAMT crrh,(j,k),z,a,tech,h )

Auction Settlements: PCRR Auction Revenues

tech

j

k

crrh

h

tech

j

k

crrh

PCRR Zonal Revenue


j Source

k Sink

a CRR Auction

f FGR


h Hour

z Congestion Zone

CRR Auction

Revenue

Distribution



• PCRR Purchase Amount Totals inter-Zone:

$8,000



Trigger

Outcome

$6,500 + $1,500 = $8,000

Sum of Purchases

Total Revenue

Auction Settlements: PCRR Auction Revenues

PCRRNZREV a =

( PCRROBLAMT crrh,(j,k),a,tech,h +

PCRROPTAMT crrh,(j,k),a,tech,h)

tech

j

k

crrh

h

tech

j

k

crrh

PCRR Non-Zonal Revenue


j Source

k Sink

a CRR Auction

f FGR


h Hour

CRR Auction

Revenue

Distribution


CRR Auction Revenue Disbursement

The CRR Auction Revenue Disbursement

(CARD) invoice will pay the net Auction

revenues to QSEs who represent Load

Disbursement based on:

• Monthly Load Ratio Share

• Zonal and Non-Zonal

• ERCOT Peak load interval

CARD CRR Auction

Revenue

Distribution



Zonal Revenue Disbursement


• Zone 1 Amount Totals: $37,000

• $25,000 for Options, Obligations, FGRs

• $12,000 for PCRRs

• QSE4’s LRS = 10%

• Zonal peak load interval for month

• LRS at peak interval

Trigger

Outcome

(Sum of Revenue) * (Monthly Load Ratio Share Zonal)

-1 * ($25,000 + $12,000) * 0.1 = -$3,700

CRR Monthly Revenue


LACMRZAMT z, q = (-1) * (CRRZREV z, a + PCRRZREV z, a) * MLRSZ z, q a

z A 2003 ERCOT CMZ.

a CRR Auction

q A QSE

Monthly Load Ratio

Share Zonal

Load-Allocated CRR Monthly Revenue

Zonal Amount

CRR Auction

Revenue

Distribution



Non-Zonal Revenue Disbursement


• Inter-Zone Amount Totals: $35,000

• $27,000 for Options, Obligations, FGRs

• $8,000 for PCRRs

• QSE4’s LRS = 20%

• ERCOT peak load interval for month

• LRS at peak interval

Trigger

Outcome

(Sum of Revenue) * (Monthly Load Ratio Share)

-1 * ($27,000 + $8,000) * 0.2 = -$7,000

CRR Monthly Revenue


LACMRNZAMT q = (-1) * (CRRNZREV a + PCRRNZREV a) * MLRS q a

Load-Allocated CRR Monthly Revenue

Non-Zonal Amount

a CRR Auction

q A QSE

Monthly Load

Ratio Share

CRR Auction

Revenue

Distribution


Module Summary

$ Describe the Congestion Revenue

Rights (CRRs) Settlement process

$ Identify the settlement charges and

payments associated with the CRR

Auction

$ Explain how CRR Auction Revenues

are disbursed

Day 1

Course Introduction 9:00 A

Congestion Revenue

Day-Ahead Market

9:30 A

Rights

1:00 P

module 2: congestion revenue rightsslide 14 allocation of crrs pre-assigned crrs (pcrrs) •...

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