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CRR Portfolio Disposal Discussion

CRR Portfolio Disposal Discussion. Issue. MP Defaults holding a portfolio of CRRs Currently one-time auction used to dispose Entire portfolio clear Cannot clear negative Positive value offsets default Any remaining value goes back to defaulted party

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CRR Portfolio Disposal Discussion

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  1. CRR Portfolio Disposal Discussion

  2. Issue • MP Defaults holding a portfolio of CRRs • Currently one-time auction used to dispose • Entire portfolio clear • Cannot clear negative • Positive value offsets default • Any remaining value goes back to defaulted party • If auction doesn’t clear CRRs are liquidated in the market • PJM Greenhat event creates questions • What if portfolio is very large? • What if it is negatively valued?

  3. Alternative Methods • Modify existing one-time auction • Allow negative bidding • Potentially decreases impact of net negative portfolio • Would increase default (as does liquidation) • Allow “percentage slices” to be purchased • Beneficial for larger portfolios • May result in residual unsold • Less impact than full liquidation

  4. Alternative Methods • Liquidate in next Long Term Auction or Monthly Auction Sequence • Allows for more competitive solution • Portfolio can be synthesized into other CRRs • Sequence breaks up portfolio (6 mo. at a time) • Default impact is drug out over time • Participants could come and go over that timeframe • Could distort outcomes if portfolio is large

  5. Alternative Methods • No auction, liquidate all rights in DAM • Most competitive result • Drags out default over very long time (up to 3 yrs) • Implications?

  6. Mix and Match? • Liquidate small portfolio in one time auction • Liquidate medium portfolio in LTAS/Monthlies • Liquidate large portfolio through slice of system sales auction then LTAS/Monthlies • What is large/medium/small? • MWh?, MTM value?, Regional MW?

  7. ERCOT Discretion? • PJM requested a temporary waiver of FTR rules to stop GH liquidation for auction tenors beyond the prompt month (ER18-2068) • PJM noticed “significant divergence” from expected Day-Ahead outcomes due to lack of liquidity • Waiver rejected by FERC • PJM’s requested rehearing, which is still under consideration • Significant uncertainty remains • With all cases, should a step be added to allow ERCOT discretion? • Prior to liquidation to determine method? • Ability to reject results of an auction? • What criteria?

  8. Next Steps • Discuss Alternatives • Develop Best Solution Whitepaper or Presentation • Present to CMWG/WMS • Draft NPRR based on recommended result

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