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Accelerated Settlements

Accelerated Settlements. Accelerating the settlement cycle has the potential to significantly : Reduce the risk of loss utilization among market participants (uplift); Reduce the collateral requirements for participation in ERCOT administered markets

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Accelerated Settlements

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  1. Accelerated Settlements • Accelerating the settlement cycle has the potential to significantly : • Reduce the risk of loss utilization among market participants (uplift); • Reduce the collateral requirements for participation in ERCOT administered markets • Improve market liquidity by allowing for greater participation, and greater certainty of participants performing on obligations • Qualification: The benefits described above occur only if data integrity by QSE is maintained with the shortened settlement cycle. If the quality of data used for billing diminishes and results in a significantly higher level of adjustments by QSE at Final or True up, much of the benefit may be negated.

  2. Settlement Cycles in other ISO/RTOs • NEPOOL –Weekly billing (13 days) • MISO –Day 2 FERC accepted weekly billing in tariff • SPP –Currently proposes Weekly Billing for its Day 2 tariff; • PJM –Monthly billing (approx. 55 days) • NYISO –Monthly billing (approx. 55 days) • CAISO –Approx. 90 days to settle initial invoice

  3. Recent Regulatory Actions • FERC issued a Policy Statement on Creditworthiness Nov. 19, 2004 • FERC said “… the Commission asks ISOs/RTOs to initiate processes to reduce credit exposure and minimize the mutualized default risk in their markets by adopting shortened settlement periods.” 109 FERC ¶ 61,186 (23) • FERC required the ISO/RTOs to report back in 90 days (last week)

  4. NEPOOL EXPERIENCE • ISO-NE and NEPOOL Participants worked together to reduce the risk of loss mutualization • ISO-NE performed analysis showed reducing the settlement cycle from approx 55 days to 13 days for all hourly market services (weekly billing) reduced financial assurance required in NEPOOL by 67 percent from approx. $177MM to $58MM. • Actual experience has been consistent with the estimate

  5. NEPOOL Members Reaction to Weekly Billing • NEPOOL Participants voted 80% in favor of weekly billing (Sector voting shares) • Generators 67% • Transmission Owners 57% • Supply 76% • Public Power 100% • End Users 100%

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