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Credit and Treasury

Credit and Treasury. Weekly Update. September 3, 2010. Week in Review. Core credit – CMM Posted Credit Reports and sent ACLs each business day DAM Credit Constraint “e” Factors

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Credit and Treasury

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  1. Credit and Treasury Weekly Update September 3, 2010 Market Trials - Friday call

  2. Week in Review Core credit – CMM • Posted Credit Reports and sent ACLs each business day DAM Credit Constraint • “e” Factors • “e” Factor changes will be effective on Friday, September 3rd for the DAM run for operating day Saturday, September 4th • Email notification sent on September 1 • There were no “specific” ‘e1’ and ‘e2’ set • The biweekly reset was based on CP data • NPRR 206 and “e” factors training materials are posted @ http://nodal.ercot.com/training/courses/nprr206_workshop.html http://nodal.ercot.com 2

  3. Week in Review Market Trials - Friday call

  4. Next Week - Schedule of activity Market Trials - Friday call

  5. Next week – Credit for 168 hour test • Core Credit – CMM • ERCOT’s Goal • Meet the requirements of the 168- hour test • Provide CPs an opportunity to see what their exposure (TPE) might be after go live by “cleaning up” initial exposure going into the 168-hour test • CP’s Responsibility If CPs want to gain an understanding of what their exposure might be after go-live, they should operate in the 168-hour test as they would post go live • Utilize Energy Trades and DAM, exercise bids and offers that are realistic, etc http://nodal.ercot.com 5

  6. Next week – Credit for 168 hour test • Key assumptions re: Exposure calculation going into the 168 – hour test • Nodal RT activity is similar to Zonal BES activity • Zonal ADTE is a reasonable proxy for risk in the Nodal RT • AIL (similar to Zonal NLRI) acts as a “reasonableness test” for RT activity captured in the ADTE • The AIL is assumed to be less than the ADTE (e.g. the ADTE adequately represents RT exposure) at the start of the 168-hour test • AIL data prior to operating day Sept 9th will be deleted • RT activity will be captured in the AIL component as it occurs in the 168-hour test http://nodal.ercot.com 6

  7. Next week – Credit for 168 hour test • Key assumptions re: Exposure calculation going into the 168 – hour test • DAM – treated same as it will be at “go live” at Dec 1 – no DAM activity prior to operating day September 9th will be included • The only DAM runs included in the calculation will be the ones run during the 168 – hour test • Impact will accumulate and build over the 7 days • DALE will “kick in” on the Credit Report dated Tuesday, September 14th with first invoice generated on 168-hour test data (for operating day September 9th) • September 14th and 15th should be the days most likely to reflect “normal” activity http://nodal.ercot.com 7

  8. Next week – Credit for 168 – hour test http://nodal.ercot.com 8

  9. Next week – 168-hour test http://nodal.ercot.com 9

  10. Next week – Credit for 168-hour test http://nodal.ercot.com 10

  11. Next week – 168-hour test • Summary • Credit Reports available on Tuesday (morning and evening), September 7th will be “cleaned” up as described on previous pages and should reflect something like what might be expected at November 29th just prior to “go live” • To the extent DAM activity exists, TPE will build over the 168-hours until it reaches something like “steady state” when the DALE calculation begins on September 14th • If CPs utilize the DAM, they should plan for daily increases in their TPE exposure until the DALE calculation kicks in. http://nodal.ercot.com 11

  12. Next Week – 168 hour test • ERCOT • Will send ACLs for DAM and CRR Auction • Will not override ACLs • Will send collateral calls if exposure exceeds credit limit • If ERCOT sends a collateral call, the CP will likely not be able to bid in DAM until additional e-collateral is received • Counter-Parties • Since ERCOT no longer overrides ACLs, CPs should review Credit Reports and consider a) their exposure and b) upcoming DAM, CRR Auction and any LFC test c) that the ACL report indicates the total ACL and does not reflect any credit limit held for the CRR auction • ERCOT has not seen many bilateral trades for CRRs. CPs are requested to initiate a few trades to test this functionality. Market Trials - Friday call

  13. Next week – 168-hour test • DAM Credit • “e” factors – If CPs wish to set a “specific” “e” factor for the 168-hour test, they can notify ERCOT at markettrials@ercot.com no later than Tuesday, September 8th at 3:00 pm • The 95th percentile difference between RT and DA prices used during the DAM run and in the non-business day DAM exposure calculation will be capped at $20. http://nodal.ercot.com 13

  14. Other topics • Tentative timeline for First Priority Security Interest document • July 1, 2010 – ERCOT circulated initial draft to CPs. • July 19, 2010 – Comments back from CPs. • August 6, 2010 – ERCOT circulated second draft to CPs. • August 17, 2010 – ERCOT reviewed document with F&A. • August 23, 2010 – Final comments due back from CPs. • September 21, 2010 – Final review and possible approval by F&A and ERCOT Board. Market Trials - Friday call

  15. Other topics – “e” factors • Alternative or Favorable treatment • CPs should notify ERCOT of their desire to receive the “alternative” or “favorable” treatment in Market Trials • by sending an e-mail to markettrials@ercot.com with “Credit – “e” factors – favorable treatment requested” in the subject line • Finally, if CPs do not believe their DAM activity in Market Trials in July and August is indicative of their projected activity after “Go Live”, they may request ERCOT to set their “e” - factors to reflect their anticipated activity • By sending an e-mail to markettrials@ercot.com with “Credit – “e” factor – specific “e” factors requested” in the subject line and the e factors requested in the body of the e-mail • Any “override” will be effective until the next bi-weekly reset (e.g. must be requested again or factors will be reset based on data) Note: Request for favorable or specific treatment should be sent by Monday, September 13th for the Wednesday, September 15st reset. Market Trials - Friday call

  16. “e” Factors – Bi-weekly Process - Market Trials

  17. New Known Issues • No new known issue • Migration of fixes for most outstanding known issues is planned for today - Friday, September 3rd • Note: Known Issues can be reviewed at : http://nodal.ercot.com/readiness/markettrials/coms/index.html, http://nodal.ercot.com 17

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