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CRR Credit Policy Task Force

CRR Credit Policy Task Force. Item 5: Discuss Allocation Mechanisms. Allocation Fundamentals. Apply to “cost causers” if possible Imbalanced QSEs charged balancing energy As fair and level as possible Non-discriminatory, somewhat predictable or formulaic Discourage “bad behaviors”

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CRR Credit Policy Task Force

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  1. CRR Credit Policy Task Force Item 5: Discuss Allocation Mechanisms

  2. Allocation Fundamentals • Apply to “cost causers” if possible • Imbalanced QSEs charged balancing energy • As fair and level as possible • Non-discriminatory, somewhat predictable or formulaic • Discourage “bad behaviors” • Gambling with other people’s money • Support “good behaviors” • PJM allocation of reserves to deviations • Support self correction • Those that pose risk should desire corrective action • Prevent downstream defaults • Allocation could cause additional market defaults of entities • This shouldn’t supersede “fair and level” though • Does as little harm to the market as possible

  3. Applied to Current Nodal Protocols • Apply to “cost causers” if possible • Cost Causer has defaulted • As fair and level as possible • Application to DAM sellers varies with amount sold • Discourage “bad behaviors” • DAM participation supports efficient commitment and market operation • A/S market is essential to proper ERCOT operations • Support “good behaviors” • No good behavior supported by current allocation • Support self correction • DAM participation is voluntary, so there is no “skin in the game” • Prevent downstream defaults • DAM activity dwindles • DASPPs diverge from RTSPPs • Hedges move to RT which is funded by Load • Does as little harm to the market as possible • DAM could be at risk with a large default

  4. Questions to be answered • Does something need to be done? • If so, what does that something entail? • Application to DAM buyers? • Application to both DAM sellers and buyers? • Application to Load Ratio Share? • Application to Generation Ratio Share? • Draw from Balancing Account if CRR Account Holder is defaulting entity? • Evaluate each option against fundamentals • Do we need another meeting?

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