BPM - CG CC 5910 Shortfall Allocation

Settlements & Billing

BPM Configuration Guide: Shortfall Allocation

CC 5910

Version 5.23

Table of Contents

1.Purpose of Document

2.Introduction

2.1Background

2.2Description

3.Charge Code Requirements

3.1Business Rules

3.2Predecessor Charge Codes

3.3Successor Charge Codes

3.4Inputs – External Systems

3.5Inputs - Predecessor Charge Codes or Pre-calculations

3.6CAISO Formula

3.7Outputs

4.Charge Code Effective Date

1.Purpose of Document

The purpose of this document is to capture the requirements and design specification for a SaMC Charge Code in one document.

2.Introduction

2.1Background

Each Scheduling Coordinator must remit to the CAISO Clearing Account the amount shown on an Invoice as payable by that Scheduling Coordinator no later than 10:00am on the relevant Payment Date for that Invoice. Furthermore, each Scheduling Coordinator is obligated to notify the CAISO as soon as they are aware that a payment will not, or is unlikely to be remitted to the CAISO Bank by 10:00 am on the Payment Date for a given Invoice.

On the Payment Date, the CAISO will determine if all amounts required to be remitted to the CAISO Clearing Account were received. Once all payments are received, the CAISO is obligated to remit to the Settlement Accounts maintained by the CAISO Creditors the amount owed as specified on the Invoice (Payment Advice) by the close of business on the Payment Date. If all payments are not received, and the CAISO has determined there are CAISO Debtors in default, the CAISO will identify the Scheduling Coordinator(s) that has failed to pay, and begin to take the appropriate steps to recover the overdue amount so that payments to CAISO Creditors can be made.

In the event of a default, the CAISO must take the following steps to process the Shortfall and ensure the CAISO Clearing Account clears on the payment date:

1. First, use the defaulting Scheduling Coordinator’s Financial Security (if any) to the extent necessary to cover the Default Amount and allow CAISO Creditors to be paid.

1. If Financial Security is not available, and there are funds standing to the credit of a reserve account, the ISO shall debit the reserve account for the default amount and apply that amount to the clearing account in order to pay creditors. However, the ISO will exercise all its options to fully collect the defaulted amount from the ISO debtor in order to make the reserve account whole.

If the ISO is unable to collect the defaulted amount, the ISO will allocate, on the next available invoice, the unpaid amount via Charge Code 5912 Default Loss Allocation to all Default-Invoice SCs to which the percentages shares calculated for the current calendar quarter apply, excluding the ISO debtor that has not paid the payment default amount.If Financial Security is not available, and there are funds standing to the credit of the CAISO Reserve Account, the CAISO shall debit the CAISO Reserve Account for the Default Amount and apply that amount to the CAISO Clearing Account in order to pay CAISO Creditors.

1. If neither Scheduling Coordinator Financial Security amounts nor CAISO Reserve Account credits are sufficient to cover the Default Amount, the CAISO shall reduce payments to all CAISO Creditors proportionally to the net amounts payment to them on the relevant Payment Date to the extent necessary to clear the CAISO Clearing Account. This amount will be netted with any offsets used to clear a past billing Shortfall. Collections of defaulted receivables (other than Interest) will be distributed pro rata to CAISO Creditors in the bill period(s) of the default.

Defaulting Scheduling Coordinators are subject to Interest charges on overdue amounts for the period from the Payment Date to the date on which the payment is remitted to the CAISO Clearing Account. The interest charges and payments received are settled in accordance with the principles described for Charge Code 3999 Default Invoice Interest Charge and 2999 Default Invoice Interest Allocation.

The first two steps are processes facilitated outside of Settlement calculations. The third step is covered by Settlement calculations associated with Shortfall Allocation and Shortfall Receipt Distribution configurations covered under Charge Codes 5910 and 5900 respectively. In the event that a shortfall gets declared a default, the following steps apply.The first two steps are processes facilitated outside of Settlement calculations following the principles outlined in Section 11.29.9 through 11.29.17 of the Tariff. The third step is covered by Settlement calculations (also prescribed by the Tariff section referenced above) associated with Shortfall Allocation and Shortfall Receipt Distribution configurations covered under Charge Codes 5910 and 5900 respectively.

For payment defaults for a Trading Day on or after April 1, 2009, each payment default amount allocated to CAISO Creditors through a shortfall allocation that remains unpaid by the defaulting Scheduling Coordinator or CRR Holder will be first reversed via Charge Code 5901 Shortfall Allocation Reversal and then allocated via Charge Code 5912 Default Loss Allocation on the next available Invoice to the Default-Invoiced SCIDs to which the percentage shares calculated for the current calendar quarter apply, excluding the CAISO Debtor that has not paid the payment default amount.

2.2Description

Shortfall Allocation processing is facilitated through a coordinated effort between CAISO Finance and CAISO Settlements and will occur against the Invoice (Payment Advice) balance against which the default occurred. This process will result in the issuance of supplemental Payment Advice to CAISO Creditors against all Payment Advices generated in the Invoice Run that are impacted by the default. A Payment Advice in an Invoice Run may contain multiple Bill Periods. These supplemental Payment Advices will be separate from the original Payment Advice (that this, the Payment Advice against which cash was unable to clear) and have its own unique Invoice Reference number. The supplemental Payment Advice will provide a reference to this original Payment Advice (via the Invoice Reference number attribute) and will contain the Shortfall Amount representing the payment amount outstanding to the CAISO Creditor. This is the amount that will be held until the defaulting Scheduling Coordinator remits a payment against the Default Amount. Netting the supplemental Payment Advice against the original Payment Advice will reveal the actual amount that the CAISO Creditor will receive for all Bill Period(s) contained within that Invoice.

When a CAISO Debtor is in default, and until all defaulting amounts have been collected, the CAISO will make the revised Shortfall payments (that is, the net of the supplemental and original Payment Advice) either on the Payment date or as soon as practical within five (5) business days of the collection date for the Payment Advice.

This Charge Code 5910 for Shortfall Allocation determines the unrecoverable settlement amounts for CAISO Creditors in the event of a default, after any offsets prior to the execution of fund transfers through the CAISO Clearing Account.

The positive Shortfall Amount is provided (by the Market Clearing System) as a Pass Through Bill transaction. If market clearing pre-determines the allocation distribution by providing the payment hold amount with a overwrite flag indicator with a value equal to one, then the payment hold amount provided will simply be passed through the Settlement engine and appear directly on the supplemental Payment Advice as the Shortfall Allocation Settlement Amount. If market clearing does not pre-determine the allocation distribution, the overwrite flag indicator will have a zero value and the calculation logic as laid out in this document will be executed and the default amount is allocated to all Creditor Business Associates based on their share of the total outstanding AP Settlement (amounts) Payments are made to Creditors to the extent funds are available after the application of funds to pay CAISO Grid Management Charges (GMC), FERC Fees, and Creditor balances under $5000. These adjustments (if necessary) are performed before CAISO financially clears the market. Supplemental Payment Advices are produced with the resulting Shortfall Allocation amount as describe above to ensure that the dollars paid out by CAISO exactly match receipts. These shortfall amounts will reduce the overall due balance and are itemized on the Payment Advice as Financial Adjustments so that market clearing can process as payment “holds.”

For payment defaults occurring on or after April 1, 2011, each payment default amount allocated to CAISO Creditors through a shortfall allocation that remains unpaid by the defaulting Scheduling Coordinator or CRR Holder will be allocated on the next practicable Invoices to the Default-Invoiced SCIDs to which the percentage shares calculated for the current calendar quarter apply, excluding the CAISO Debtor that has not paid the payment default amount.

Beginning with the second calendar quarter of 2011, the CAISO will provide to each Default-Invoiced SCID on or about the first Business Day of the applicable calendar quarter its own percentage share of any payment default amount that may be allocated in the calendar quarter to which the percentage share applies, subject to adjustment to account for any non-paying CAISO Debtor, based on application of the methodology for allocating payment default amounts to the applicable Default Look-Back Period. In calculating the percentage share for each Default-Invoiced SCID the CAISO will determine the percentage share for each full calendar quarter and will average those quarterly percentage shares.

These provisions will not apply to the allocation of payment default amounts and interest accrued thereon that are associated with Trading Days that occurred prior to April 1, 2009.

3.Charge Code Requirements

3.1Business Rules

• GMC paid first
• Monthly FERC Fees paid second
• Creditor Invoices under $5,000 are paid third.
• All other amounts paid fourth and are equally pro-rated. This includes any amounts collected in Trust, non-Default relatedInterest, CRR settlements, and TAC settlements.

• BusinessAssociateTotalSettlementAmountforBillPeriod
• CAISOGMCOffsetBalanceAmount
• FERCTrustBalanceAmount
• OtherBalanceAmounts