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M1 Calculation Options CWG/MCWG ERCOT Public December 16, 2013

M1 Calculation Options CWG/MCWG ERCOT Public December 16, 2013. Mass Transition Timing. Given a system limitation of approximately 75,000 transactions/day, the timing of a Mass Transition will differ greatly depending on the Counter-Party.

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M1 Calculation Options CWG/MCWG ERCOT Public December 16, 2013

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  1. M1 Calculation Options CWG/MCWG ERCOT Public December 16, 2013

  2. Mass Transition Timing Given a system limitation of approximately 75,000 transactions/day, the timing of a Mass Transition will differ greatly depending on the Counter-Party. 82% of Counter-Parties with ESIIDs can be transitioned in three days, but 78% of ESIIDs would require seven days or more. ERCOT Public

  3. M1 M1 covers additional actions besides Mass Transition. ERCOT Public

  4. Mass Transition Timing The total timing of a Mass Transition could range up to 41 days after the operating day assuming transitions take place on weekends and holidays. M1 Weighted average transition-only days Note: Assumes two-day cure period. ERCOT Public

  5. M1 Proposed Approach • Proposed approach: • Decompose M1 into two components: • M1a – Time period required to cover any termination event • M1b – Time period to cover mass transitions only • M1a applicable to all entities; M1b applicable only to Counter-Parties with Load • In M1b, adjust the mass transition days to reflect the decline in potential exposure during the transition period • Give credit against M1b to Counter-Parties meeting ERCOT Creditworthiness Standards

  6. M1 Proposed Approach • Calculation • Determine number of Counter-Party ESIIDs (n) • Determine estimated ESIID switch rate (assumed 75,000/day) (r) • Unscaled number of days = u = n/r (round up to whole days) • Weighted average transition number of days = s = 2+max(1, (u+1)/2) (round up to whole days) • If Counter-Party meets ERCOT Creditworthiness Standards, reduce s by a defined percentage p, (1-Discount Factor) * M1b Example:

  7. M1 Proposed Approach Under the proposed methodology, the M1 value for most ERCOT Counter-Parties would decrease.

  8. Questions ERCOT Public

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