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MCWG Update to WMS

MCWG Update to WMS. 5/11/2011. Exposure / Collateral Update. Nodal Total Potential Exposure reported by ERCOT as of 4/30/11 remains less than Zonal Estimated Aggregate Liability (TPE = ↓38% since 10/31) Collateral Posted has increased since 10/31 Cash/LOCs ↑129% @ $894MM

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MCWG Update to WMS

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  1. MCWG Update to WMS 5/11/2011

  2. Exposure / Collateral Update Nodal Total Potential Exposure reported by ERCOT as of 4/30/11 remains less than Zonal Estimated Aggregate Liability (TPE = ↓38% since 10/31) Collateral Posted has increased since 10/31 Cash/LOCs ↑129% @ $894MM Guarantees ↑14% @ $759MM Net Impact – Secured MPs are posting 5.3xTPE vs. 2.0xEAL Unsecured Credit Limits have increased Dollar % ∆ = ↑225% @ $856MM [Dollar / CPTY] ∆ = ↑19.7MM from $13.2MM # MPs ↑+6 from 20 Note – Exposure reported does not include DAM Credit Exposure nor CRR Auction Credit Exposure as calculated in Section 4 and 7 of the Protocols Source: Finance And Audit Committee Meeting Materials, ERCOT Market Credit Status, Sept 2010 – May 2011

  3. 2011 Status Update

  4. May 4th Meeting Summary • CFTC Update • ERCOT met with CFTC and received positive feedback on obtaining exemption • Key Dates: (1) June 20th – Submit exemption application, (2) Late July - proposed exemption order to be published, (3) August -30 day public comment • DAM Collateral Parameters • ERCOT requested a change to the DAM collateral process document • Provide ERCOT discretion to revise DAM credit parameters • Loosen credit parameters with less than 2 Bank Business Days notice • Tighten credit parameters after 2 Bank Business Day notification • Tabled for further review after StarTex comments • Abacus Update • Short $731,419.61 ; Allocation based on 1/2011 ; Uplift month 9/2011 • ERCOT Legal Update – LOC Form & Guarantee Form • Chad Seely will provide MPs opportunity to provide additional comments on LOC & Guarantee forms • NPRR 347 – Daily Settlement Invoice and Minimum Collateral • NPRR 357 - Multi-Month CRR Auction and Revisions to Collateral Requirements

  5. NPRR 347 • NPRR Summary – (1) Reduce RT invoicing cycle to the 10th BD following the operating day, (2) Revise forward exposure calculations • Status Update • 4/18 – SEWG filed comments to revise invoicing back to the MP level rather than Counter-Party • 4/21 - Passed by PRS • 5/04 - Tabled by CWG

  6. NPRR 357 Luminant filed NPRR 357 and presented key concepts to MCWG/CWG Key Concepts Settlement • Revise the CRR settlement terms from payment being required post the auction clears to prior to the delivery month Auction Attributes • Increase the frequency of multi-month auctions from once per year to monthly • Temporarily reduce the term of the auction • Revise the amount of capacity made available in the auction • Revise the collateral requirements by: • Recognizing max bid exposure (i.e. similar to DAM Bid Exposure calculation included in NPR 323) • Path/Term/Product specific adders (i.e. revise values A and M) • Not requiring collateralization of the entire bid value since settlement terms have been revised Forward Exposure • Revise the Forward Credit Exposure calculations by incorporating an initial margin requirement that is path/term/product specific and a mark-to-market value that is derived from the difference between the latest ACP and CPTY’s award price for Forward Months not settled • Incorporate into the Forward Credit Exposure calculation an estimate for CRR Balancing Account Revenue

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