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TITLE 16ECONOMIC REGULATION
PART 2PUBLIC UTILITY COMMISSION OF TEXAS
CHAPTER 25SUBSTANTIVE RULES APPLICABLE TO ELECTRIC SERVICE PROVIDERS
SUBCHAPTER OUNBUNDLING AND MARKET POWER
DIVISION 3CAPACITY AUCTION
RULE §25.381Capacity Auctions

      (i) For bidders with an investment grade credit rating. The amount of credit available to a bidder relying on an investment grade credit rating of itself or its guarantor will be determined according to procedures set out below. If the bidding entity or its guarantor has an investment grade credit rating and minimum equity of $100 million, the amount of credit available will be determined using the lesser of $125 million, or the applicable percentage of the bidder's stockholder equity set out in the following table, except that the amount of credit will be reduced to the extent appropriate to take into account any outstanding commitments that a bidder has for existing capacity auction entitlements.

Attached Graphic

      (ii) If the bidder is a municipality or cooperative not publicly rated. If the bidder is a municipality or electric cooperative that is not publicly rated but has a minimum equity (patronage capital) of $25 million, a minimum times-interest-earned ratio (TIER) of 1.05, a minimum debt service coverage (DSC) ratio of 1.00, and a minimum equity- to-assets ratio of 0.15, then the amount of credit will be the lesser of $125 million or 5.0% of the bidder's unencumbered assets, except that the amount of credit will be reduced to the extent appropriate to take into account any outstanding commitments that a bidder has for existing capacity auction entitlements.

      (iii) If the bidder is a privately-held entity not publicly rated. If the bidder is a privately-held entity that is not publicly rated, but has a minimum equity of $100 million, a minimum tangible net worth of $100 million, a minimum current ratio of 1.0, a maximum debt-to- capital ratio of 0.60, and a minimum ratio of earnings before interest, taxes, depreciation, and amortization (EBITDA) to interest and current maturities of long term debt (CMLTD) of 2.0, then the amount of credit will be the lesser of $125 million or 1.80% of the bidder's stockholder equity, except that the amount of credit will be reduced to the extent appropriate to take into account any outstanding commitments that a bidder has for existing capacity auction entitlements.

    (C) All cash and other instruments used as credit security shall be unencumbered by pledges for collateral.

    (D) If a bidder or entitlement holder chooses to use a surety bond to satisfy its credit requirements, then the form of such surety bond will be negotiated in good faith between the bidder or entitlement holder and the affiliated PGC and reasonably acceptable by an issuer of surety bonds.

    (E) In the event the holder of the entitlement initially relied on its investment grade credit rating but subsequently loses it during the entitlement period, the holder of the entitlement shall provide alternative financial evidence within three business days.

    (F) The holder of the entitlement shall notify the affiliated PGC of any material changes that impact its compliance with the financial requirements it relied on in meeting the credit standards in this section.

    (G) In the event the holder or seller of the entitlement fails to meet or continue to meet its security requirement, or an Event of Default results in the termination of the Agreement, the entitlement shall revert to the affiliated PGC and shall be auctioned in the next auction for which notice can be provided of the sale of the entitlement pursuant to subsection (h)(2)(B) of this section.

    (H) If an entitlement holder's creditworthiness or financial security materially and adversely changes after the auction is completed, as a result of an event specified in the Agreement, the affiliated PGC shall provide the entitlement holder with written notice requesting additional credit support or performance assurance in a commercially reasonable manner, as set forth in the Agreement. The seller's credit requirements shall clearly identify objective criteria that would trigger a request for additional security and the methods and time frame in which an entitlement holder must satisfy such a request. The affiliated PGC may suspend delivery of any capacity or energy for which the affiliated PGC has not already received payment until the performance assurance is received, in accordance with the Agreement.

    (I) If at any time after the auction is completed, there shall occur a downgrade event with respect to the credit standing of the seller, then the entitlement holder may require the seller to provide a credit assurance in an amount determined by the entitlement holder in a commercially reasonable manner. In the event the seller fails to provide a commercially reasonable performance assurance or guarantee within three business days of the receipt of notice, then an event of default shall be deemed to have occurred, and the entitlement holder will be entitled to suspend performance under the Agreement and withhold payments for energy not yet delivered, and may ultimately terminate the Agreement after the suspension period as prescribed in the Agreement.

(f) Product descriptions for capacity auctions in ERCOT. The provisions in this subsection apply to capacity auctions in ERCOT. Subsection (g) of this section contains provisions applicable to capacity auctions in non-ERCOT areas.

  (1) Definitions.

    (A) The following words and terms, when used in this subsection shall have the following meanings, unless the context indicates otherwise.

      (i) Balancing energy service down deployed--The number of megawatt- hours (MWh) of balancing energy service down deployed by ERCOT from an entitlement.

      (ii) Balancing energy service up deployed--The number of MWh of balancing energy service up deployed by ERCOT from an entitlement.

      (iii) Daily capacity commitment--The amount of capacity scheduled by an entitlement holder that an affiliated PGC must make available from an entitlement for the provision of energy or permitted ancillary services for an operating day from an entitlement.

      (iv) Day-ahead schedule--A schedule submitted by an entitlement holder to an affiliated PGC of the entitlement holder's scheduled usage of the entitlement for the following operating day.

      (v) Default qualifying scheduling entity (QSE)--The QSE that is designated by the entitlement holder to ERCOT as its default QSE.

      (vi) Energy scheduled--The final schedule for energy, for each settlement interval, that an entitlement holder submits to an affiliated PGC, subject to the limits on timing and amounts of schedules contained in the capacity auction product descriptions.

      (vii) Energy deployed down--The sum of regulation energy down energy deployed and balancing energy service down energy deployed.

      (viii) Energy deployed up--The sum of regulation energy up energy deployed, responsive energy deployed, non-spinning energy deployed, and balancing energy service up energy deployed.

      (ix) Grouped entitlements--All of the entitlements from an affiliated PGC that an entitlement holder holds for a particular entitlement month.

      (x) Grouped ancillary services--The amount of each type of ancillary service available from each entitlement grouped by:

        (I) Type of ancillary service;

        (II) Type of capacity auction product; and

        (III) Congestion zone for those ancillary services that are, or may be, dispatched by congestion zone.

      (xi) Hour-ahead schedule--A schedule other than a day-ahead schedule submitted by an entitlement holder to an affiliated PGC no later than one hour before the end of an adjustment period of the entitlement holder's scheduled use of the entitlement for the operating hour corresponding to that adjustment period.

      (xii) Non-spinning energy deployed--Energy deployed by ERCOT from the non-spinning reserve service as determined under the procedures in paragraph (2)(B) of this subsection.

      (xiii) Product--Electric capacity, energy, capacity auction products or other product(s) related thereto as specified in a transaction by reference to a product listed in the Agreement or as otherwise specified by the parties in a transaction.

      (xiv) Regulation energy down deployed--Energy deployed down by ERCOT from the regulation energy service as determined under the procedures of paragraph (2)(B) of this subsection.

      (xv) Regulation energy up deployed--Energy deployed up by ERCOT from the regulation service as determined under the procedures of paragraph (2)(B) of this subsection.

      (xvi) Responsive energy deployed--Energy deployed by ERCOT from the responsive reserve service as determined under the procedures of paragraph (2)(B) of this subsection.

      (xvii) Two-day-ahead schedule--A schedule submitted by the entitlement holder to the affiliated PGC of the entitlement holder's scheduled usage of the entitlement for the operating day two days in the future.

    (B) The following terms have the respective meanings given to them in the ERCOT protocols as amended from time to time:

      (i) Ancillary services;

      (ii) Balancing energy service;

      (iii) Congestion zone;

      (iv) Non-spinning reserve service;

Cont'd...

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