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Market Credit Working Group Update to WMS. Wed. July 21, 2010. MCWG July 2010 Overview. MCWG Activities Since June 2010 WMS Update ERCOT Market Trials and Credit Requirements MCWG Activities Since June 2010 WMS Update 2010 Goals (and parking lot) Next Meeting MCWG.

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mcwg july 2010 overview
MCWG July 2010 Overview
  • MCWG Activities Since June 2010 WMS Update
  • ERCOT Market Trials and Credit Requirements
  • MCWG Activities Since June 2010 WMS Update
  • 2010 Goals (and parking lot)
  • Next Meeting MCWG
ercot market trials and credit requirements
ERCOT Market Trials and Credit Requirements
  • Indications from different market participants that credit requirements have improved significantly, with improved data, but that credit requirements remain extremely high
    • This applies to both the energy markets and CRR markets
    • Note NPRR 206 has now been been incorporated into the credit requirements, and the ‘e’ factors are expected to be incorporated on or about August 9th
  • Other issues identified
    • Availability to reports, and accuracy ~much improved, but issues are still being worked on by Staff
    • Clarity on how cutover will work ~Staff is developing a plan to use nodal prices for Day 1
    • Parallel review of credit requirements has begun (next slide)
mcwg activities since june 2010 wms update
MCWG Activities Since June 2010 WMS Update
  • MCWG meet twice since the last WMS update
    • July 2nd, 2010 (via phone)
      • WMS Update, and discuss kick-off meeting for parallel process to review nodal credit
    • July 15th, 2010 (in person + WebEx)
      • kick-off meeting for parallel process to review nodal credit (next slide)
july 15 th meeting nodal credit
July 15th Meeting: Nodal credit

MCWG reviewed the following areas

  • DAM Credit Requirements
  • CRR Credit Requirements
  • CRR Security Interest Agreement (separate item/slide)
  • NPRR 241
july 15 th meeting dam and crr s
July 15th Meeting: DAM and CRR’s
  • Quality of data has improved for the energy markets. Credit requirements have come down significantly, but remain high
    • ‘e’ factors remain outstanding until early August
      • MCWG will monitor the impact of the ‘e’ factors and review again at a separate face-to-face meeting in late August 2010
  • CRR credit requirements represented largest part of the face-to-face meeting
    • Luminant provided a presentation (distributed to exploder)
      • Findings/recommendations provided by Luminant (next slide)
      • No consensus by MCWG to the recommendations by Luminant
        • MCWG will continue to monitor and discuss again in late August at the next face-to-face meeting
luminant crr proposals 1
Luminant CRR Proposals (1)

Prior to Nodal Inception

Revise variable inputs within the Auction Clearing Price Exposure (“ACPE”) calculations and manage FMM Weights

Decrease “Y” and “A” from $1.5 to a “Rightsized” value

Eliminate the need for a negative bid to post collateral (i.e. remove absolute bid price requirement)

Revise the FMM weights following an auction to reflect 100% ACP and monitor

luminant crr proposals 2
Luminant CRR Proposals (2)

Other Parking Desk Proposals for CRR’s

Incorporate partial netting of CRRs into TPE, DAM & DALE

Increase ACL utilization limit from 90%

Revise FCEOBL to equal the Sum of ACPEOBL and - FMMOBL

Bid Auction constraint based on the Shadow Price or a Historical Auction/Market Value

Determine ACPE values based on Source/Sink, Volatility, TOU, Term, CPTY

Design FCE equations to incorporate FWD market values

Incorporate CRR Account Balance into the TPE equation

Exclude Counterparties who have granted a first lien from the Auction Exposure Calculation and from prepayment requirements

first priority security interest crr s document timeline from staff
First Priority Security Interest (CRR’s) Document Timeline from Staff
  • July 1, 2010 – ERCOT circulates initial draft to CPs.
  • July 19, 2010 – Comments back from CPs.
  • August 2, 2010 – ERCOT circulates second draft to CPs.
  • August 17, 2010 – ERCOT reviews document with F&A.
  • September 21, 2010 – Final review and possible approval by F&A and ERCOT Board.
first priority security interest crr s
First Priority Security Interest (CRR’s)
  • MCWG discussed the First Priority Security Agreement at the July 15th meeting
    • Appears Munis can not sign
    • Others indicated they may be prohibited under their financing agreements, though this was not uniform
    • Stakeholders were encouraged to submit comments that may allow them to sign
      • Will revisit after ERCOT reviews the first set of comments
      • Stakeholders may need to seek waivers from lenders, or in the case of Muni’s a Protocol change, to allow for netting
nprr 241
NPRR 241
  • Issue of XML versus XLS format was discussed and Staff is to review
  • Staff to review language to ensure language is consistent with intent, and modify accordingly.
mcwg parking lot for 2010
MCWG Parking Lot for 2010

Direction of invoice timing change

Perform bottom up review of existing creditworthiness standards (after CCRO Best Practices efforts)

Reduction of settlement cycle due to PRR 568 (7days)

Further reductions in settlement cycles

This includes looking at the potential to reduce the settlement cycle 30% with improved metering

next meeting mcwg
Next Meeting MCWG
  • Friday July 23th 9:30AM (phone)
    • Update on MCWG presentation to WMS
    • Other business