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Credit Transition to Nodal (Preliminary)

Credit Transition to Nodal (Preliminary). Topics. Credit Cutover Overview December 2010 CRR Auction held in November January 2011 CRR Auction held in December Approach for estimating initial exposure in CMM Preliminary Credit Cutover Timeline. Credit Cutover Overview.

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Credit Transition to Nodal (Preliminary)

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  1. Credit Transition to Nodal(Preliminary) Market Readiness Seminar

  2. Topics • Credit Cutover Overview • December 2010 CRR Auction held in November • January 2011 CRR Auction held in December • Approach for estimating initial exposure in CMM • Preliminary Credit Cutover Timeline Market Readiness Seminar

  3. Credit Cutover Overview • Nodal Protocol Section 16.11 on Credit will light up for the December 1 operating day (16.11.4.6.1 Credit Requirements for CRR Auction Participation will light up beginning with the December 2010 CRR Auction) • Prior to that, credit requirements need to be established for the December 2010 CRR Auction held in November • Plan to handle similarly to the current Zonal TCR Auctions • Separate collateral posted • Available Credit Limits (ACL) viewable in CRR, not MIS • Credit Reports will begin being posted on Tuesday, November 23rd • To support the January 2010 CRR Auction held in December • In preparation for the first DAM run on November 30th Market Readiness Seminar

  4. December 2010 CRR Auction held in November Establish ACLs for December 2010 CRR Auction • ERCOT Credit will verify creditworthiness of CRRAHs by October 1, 2010 • CRRAHs that meet Creditworthiness Standards and are assigned unsecured credit will notify Credit staff of how much unsecured credit (other than that used for QSE activity) to assign to the December 2010 CRR Auction (if any) between October 28 and November 8 • CRRAHs that do not meet the Creditworthiness Standards but wish to participate in the December 2010 CRR Auction will: • Send collateral specifically earmarked for the December 2010 CRR Auction to ERCOT via wire transfer between October 28 and November 8 • The combination of posted collateral and unsecured credit allocated by the CRRAH will be the ACL provided for the CRR Auction Market Readiness Seminar

  5. December 2010 CRR Auction held in November View ACLs prior to December 2010 CRR Auction • ACLs will be viewable in the CRR Application beginning October 29, 2010 • ACLs will be viewable only by CRR Account Holders and Counter-Parties and only in the CRR Application leading up to the December CRR Auction (e.g. not on MIS). • December 2010 CRR Auction bid submission window opens on November 9, closes on November 11, and the CRR Auction begins execution on November 12 After the CRR Auction has executed • Auction results posted in CRR Application and on MIS on November 15 • PCRR and CRR Auction invoices are posted on MIS by November 16 (before midnight) • CRR Auction invoice payments are due by November 19 by 5:00 PM (CST) • ERCOT to pay CRR amounts on November 22 Market Readiness Seminar

  6. December 2010 CRR Auction held in November Release of CRR collateral / Ongoing collateral requirement for CRR obligations • Once invoices are paid, CRR collateral or unsecured credit is released and may be refunded, with the following consideration • CRR Obligations - An amount equal to the greater of the ACPE component of the FCE calculation and the Auction Clearing Price (ACP) will be held as collateral for FCE until ACLs are produced by CMM • CRR Options - No collateral will be retained Market Readiness Seminar

  7. January 2011 CRR Auction held in December Establish ACLs for January 2011 CRR Auction • ERCOT Credit will verify creditworthiness of CRRAHs prior to the auction • ACLs will be set in CMM • Initial exposures will be calculated using available Zonal data until Nodal data becomes available (see next page) View ACLs prior to January 2011 CRR Auction • ACLs will be viewable from CMM Credit Reports posted to MIS beginning November 23, 2010 and in the CRR Application beginning November 24, 2010 • January 2011 CRR Auction bid submission window opens on December 7, closes on December 9, and the CRR Auction begins execution on December 10 After the CRR Auction has run • Timelines for posting Auction results and CRR Auction invoices are per Nodal Protocols • CRR Auction invoice payment requirements are per Nodal Protocols Release of CRR collateral / Ongoing collateral requirement for CRR obligations • Release of CRR collateral and ongoing collateral requirements for CRR obligations are per Nodal Protocols Market Readiness Seminar

  8. Approach for establishing the initial exposure in CMM • Overview • Utilize Zonal data to the extent possible to establish initial TPE • CRR Obligations from December 2010 auction will be collateralized at the greater of the ACPE component of the FCE calculation and the Auction Clearing Price (ACP) • CRR Options will not have value initially (until DAM values are available) Market Readiness Seminar

  9. Approach for establishing the initial exposure in CMM Market Readiness Seminar

  10. Preliminary Credit Cutover timeline • Thursday, November 18th • Zonal invoice published • last Zonal EAL credit calculation from which a collateral call will be made (system will be maintained through Go Live and will be available for a period beyond Go Live) • Friday, November 19th • Nodal CRR auction invoice payments due • Tuesday, November 23rd • Post first Nodal Credit Reports and send ACL to CRR and DAM • No collateral calls sent based on these reports • Wednesday, November 24nd • Last Zonal NLRI credit calculation from which a collateral call will be made (system will be maintained through Go Live and will be available for a period beyond Go Live) • Thursday / Friday, November 25th / 26th – Thanksgiving holiday Market Readiness Seminar

  11. Preliminary Credit Cutover timeline • Monday, November 29th – • Zonal invoice published • First Nodal credit calculation from which a collateral call will be made • For example, collateral may be required based on AIL activity (e.g. Zonal NLRI data) • Will exclude Zonal invoice from November 29th from the calculation • send ACL for initial DAM (afternoon) • Tuesday, November 30th • initial DAM • “e” factors set at 1/0/1 • Second Nodal credit calculation • Will include Zonal invoice from November 29th in the calculation • Wednesday, December 1st – “Go Live” Market Readiness Seminar

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