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NPRR 638 – Exponentially Weighted Moving Average CWG/MCWG Suresh Pabbisetty, ERP, CQF, CSQA. PowerPoint Presentation
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NPRR 638 – Exponentially Weighted Moving Average CWG/MCWG Suresh Pabbisetty, ERP, CQF, CSQA. - PowerPoint PPT Presentation


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NPRR 638 – Exponentially Weighted Moving Average CWG/MCWG Suresh Pabbisetty, ERP, CQF, CSQA. ERCOT Public August 20, 2014. Background. NPRR638, “Revisions to Certain Price Components of EAL,” proposes using historic prices in the calculation of RTLE and DALE.

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slide1

NPRR 638 – Exponentially Weighted Moving Average

CWG/MCWG

Suresh Pabbisetty, ERP, CQF, CSQA.

ERCOT Public

August 20, 2014

background
Background
  • NPRR638, “Revisions to Certain Price Components of EAL,” proposes using historic prices in the calculation of RTLE and DALE.
  • During its July 2014 meeting, CWG has asked ERCOT to explore if EWMA (Exponentially Weighted Moving Average) method can be used to calculate the DASPPEST and RTSPPEST price components.

ERCOT Public

ewma methodology
EWMA Methodology
  • A proxy month (one week past + 3 weeks forward = 28) of price points over 3 years (total = 84) is used to estimate DASPP and RTSPP.
  • EWMA methodology uses a decay factor (lambda) to apply more weight to more recent values. The weight reduces as the time series data gets older.
  • Solving for EWMA methodology gives a lambda value of approximately 0.75.
  • This results in 14 (only 2 weeks) most recent price points contributing to 98% of the result (DASPPEST and/or RTSPPEST).
  • Under these conditions, this method may not adequately pick up price volatility.

ERCOT Public

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Questions

ERCOT Public