1 ICE Price Data Analysis CWG/MCWG Suresh Pabbisetty, CQF, ERP, CSQA. ERCOT Public January 20, 2016.

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Presentation transcript:

1 ICE Price Data Analysis CWG/MCWG Suresh Pabbisetty, CQF, ERP, CSQA. ERCOT Public January 20, 2016

2 ICE Price Analysis Background: CWG/MCWG is considering using ICE futures prices as an input to determine ERCOT’s credit risk exposure ERCOT staff has been running a Capacity Forecast Model (CFM) since early 2015 to estimate Excess Reserves by Operating Hour CWG/MCWG has reviewed preliminary analysis results at their December 2015 meeting Additional analysis was requested to compare ICE prices to actual RTM prices to market-wide TPE Run descriptive statistics of relation between ICE prices to RTM prices ERCOT Public

3 ICE Price Analysis Data Inputs and Transformations: ICE Futures prices pertaining to North HUB Settlement Point for Daily Peak (END) and Off-peak (NED) contracts ICE doesn’t have new pricing information available on weekends and holidays. The most recent available price of the same contract is substituted if a price is missing ICE Prices from early January 2011 through mid-December 2015 Daily Average Price is calculated as (16 * Peak Price + 8 * Off-peak Price)/24 North HUB RTSPP from early January 2011 through mid- December 2015 Daily Average Price is calculated using simple average of all interval RTSPPs in an Operating Day ERCOT Public

4 ICE Price Analysis Data Inputs and Transformations (continued): Capacity Forecast Model (CFM) Excess Reserves from mid- March 2015 through mid-December 2015 Prior tests of data indicated that relationship between CFM Excess Reserves and RTSPP is non-linear A logarithm is taken for both CFM Excess Reserves and RTSPP to allow linear regression. Regression is performed to the above mentioned to identify the linear relationship as; Log10(CFM Predicted Price) = ( )*Log10(CFM Excess Reserves) A slope of indicates a negative correlation, so that 1 unit of increase in Log10(Excess Reserves) would result in a decrease of units to Log10(CFM Predicted Price). ERCOT Public

5 ICE Price Analysis Data Inputs and Transformations (continued): CFM Predicted Prices are available only for 6 forward days. Most recently available (6 th Day) Forward Price is used for 7 th through 21 st forward days Aggregated market-wide TPE from October 2012 through mid- December 2015 Forward Price Averages of 21 days, 15 days and 7 days are calculated and used for analysis purposes ERCOT Public

6 ICE Price Analysis OFF1 P50 Excess Reserves to RTSPP regression by Hour: ERCOT Public

7 ICE Price Analysis Price and TPE Comparison (2011 to 2015): ERCOT Public

8 ICE Price Analysis Price Comparison (2011 to 2015): ERCOT Public

9 ICE Price Analysis Price Comparison (2015): ERCOT Public

10 ICE Price Analysis 21 Days Average Price Comparison (2015): ERCOT Public

11 ICE Price Analysis 21 Days Average of ICE Price to RTSPP Correlation (2015): ERCOT Public

12 ICE Price Analysis 21 Days Average of CFM Predicted Price to RTSPP Correlation (2015): ERCOT Public

13 ICE Price Analysis 15 Days Average Price Comparison (2015): ERCOT Public

14 ICE Price Analysis 15 Days Average of ICE Price to RTSPP Correlation (2015): ERCOT Public

15 ICE Price Analysis 15 Days Average of CFM Predicted Price to RTSPP Correlation (2015): ERCOT Public

16 ICE Price Analysis 7 Days Average Price Comparison (2015): ERCOT Public

17 ICE Price Analysis 7 Days Average of ICE Price to RTSPP Correlation (2015): ERCOT Public

18 ICE Price Analysis 7 Days Average of CFM Predicted Price to RTSPP Correlation (2015): ERCOT Public

19 ICE Price Analysis Statistics of ICE Price Errors (Actual RTSPP – ICE/CFM Price): ERCOT Public

20 ICE Price Analysis Statistics of CFM Predicted Price Errors (Actual RTSPP – ICE/CFM Price) - continued: ERCOT Public

21 ICE Price Analysis R-Square Matrix: ERCOT Public

22 Questions ERCOT Public