4.  Calculation of Delivery Failure Charge

Per the BPM: “Energy Delivery Failures occurring in multiple hours on the same Day are counted as one Energy Delivery Failure for purposes of calculating the Delivery Failure Charges.” Does the counter ever re-set? 

Examples

Entity A has one failure to deliver in July and another in August (same binding season) is the August failure considered the second, or does the counter reset monthly like the FS Monthly Deficiency Charge?

Entity A has a failure to deliver in July 2026, and a second failure in January 2027.  Does the counter reset as WRAP has entered a new binding season.

Entity A has a failure to deliver in July 2026, and a second failure in December 2029.  Does the counter never reset, and failure counts are per entity into perpetuity?

1.  If failure to deliver occurs during negative price conditions the receiving party is not harmed. There should be no charge for failure to deliver during negative price events.

2.  Charge Rates and Delivery Failure Factors:  The combination of 'Cumulative Delivery Failure Window' (5 years) and 'Charge Rate' (multiplier factors - 5/10/20 and 25/50) raise question of if the factors are excessive. A participant could have a delivery failure, make hundreds of deliveries under the program and 9 binding seasons later (5 years) have a second delivery failure and be assessed a charge with a 50 times adder.  We should ensure delivery failure penalties are stiff, but we also need to be concerned about them being excessive and punitive!  Consider conducting some analysis with realistic data to determine how these factors might play out.

In addition, section 5 already addresses a maximum dollar limit in a single FS year (winter and summer binding period) - has an analysis been completed to show that a 50x factor doesn’t immediately trigger the Maximum dollar trigger? Or at what point the two converge (how many delivery failures using these multiples trigger the Maximum dollar limit)? Calculation needs to account for a delivery failure would only happen when no energy is available to purchase from the market - as a result the hourly energy price would be very high.

SRP values the detailed approach to calculating the Delivery Failure Charge and recommends the inclusion of various examples demonstrating charge calculations, particularly in unusual market conditions such as negative pricing.

Further, clarification would be appreciated on the method used when both Day-Ahead and Real-Time Prices are negative. SRP's understanding is that using historical positive values may not accurately represent current market conditions. A review of this approach is suggested to ensure fairness and market relevance.

SRP request detailed information on the Cumulative Delivery Failure Window, particularly its duration and alignment with the 5-year forward showing period, and how delivery failures are tracked within this rolling timeframe.

Further explanation is encouraged regarding the rationale behind the Delivery Failure Factors, both in standard situations and when other participants cover a shortfall. This will help ensure that the penalty structure is perceived as fair and reasonable.

APS requests additional clarity be added to the section around what is done when there is a negative Day-Ahead Price and Real-Time Price when energy delivery failure occurs. We believe the current language says that the highest index price over the last 30 days will be used to calculate the delivery failure. It seems misaligned to charge this amount, if the actual price during failure was negative in both day ahead and real-time markets. This indicates market surplus is available in both day ahead and real-time, and for that reason a $0 penalty may be more appropriate.

As a point of clarification, if the surplus party can deliver only a portion of the original full delivery amount (see highlighted text), will charges be assessed on the delta qty of MWh ( Original Full delivery amount - Actual Delivery Amount delivered) ?

The BPM needs to clearly state which index prices will be used for each of the subregions – i.e., MID-C subregion will use the MID-C index price and the SWEDE subregion will use the Palo Verde index price. For hours where the day-ahead and real-time market prices are negative, the BPM states that the highest price between both markets over the last 30 days will be used. Is this on an hourly basis or will the highest price be used for all hours that there was a delivery failure? If a failure occurred during HE20 will WRAP compare past day-ahead and real-time prices for just HE20, or the highest of any hour in the last 30 days?

Additionally, the circumstances which a participant is subject to the 50x multiplier when failing to deliver energy. Under the non-covered delivery failure section, there is language that reads second or more non-waived energy delivery failure in a cumulative delivery failure window (regardless of whether the first non-waived energy delivery failure was covered or non-covered). The sentence in the parenthesis seems to contradict with the multipliers listed in the “covered” delivery charge section. The language implies that they would always be subject to the 50x multiplier and not the scaled approach for “covered” as seen in the section above.

No comment.