Nodal Credit Monitoring and Management

1
Nodal Credit Monitoring and Management
Transition

• ERCOT CREDIT Department
• July 23, 2007

2
Credit Approach

• Credit Qualification
• March 1, 2008 is due date for executing nodal
  version of Standard Form Market Participant
  Agreement
• Existing QSEs without any significant change do
  not need to go through another credit
  qualification process
• New QSE/ CRR Account Holders will need to go
  through credit qualification process
• Credit Exposure Monitoring
• Zonal
• Zonal/Nodal Overlap
• 1st CRR Auction, 1st RT Operation, 1st DAM
• Nodal

3
Credit Exposure Monitoring timeline shown is
for discussion purpose
4
Credit Transition from Zonal to Nodal

• CRR Auction Credit limit - initial auction in
  Oct/Nov 2008
• MPs send collateral (if needed) specific for the
  auction (similar to TCR auction today)
• ERCOT credit staff will provide related credit
  limit for CRR system
• Through CMM, if possible
• Manually or through uploaded file, etc, if CMM
  interface is not yet up
• RT Operations December 1, 2008
• Invoices from the old market (before the Texas
  Nodal Market Implementation Date) will be used to
  calculate EAL until an Invoice that includes
  Initial Settlement Statements for a full seven
  days is generated under the new market (after
  the Texas Nodal Market Implementation Date).
• The most recent EAL determined from the old
  market (calcd on Nov 29 or Dec 6, TBD) will be
  manually entered into the CMM system (using IEL
  or other appropriate field) (Day 1 TPE old
  EAL)
• Assumption after Day 1, there is no new Zonal
  market activity, although there is expected to be
  ongoing resettlement of Zonal activity.

5
Credit Transition from Zonal to Nodal

• 3. Day 2 - CMM database will begin populating
  with data from new market systems after the
  Texas Nodal Market Implementation Date.
• Total Potential Exposure (TPE) Day 2 and beyond
  will be determined in CMM using info from 2. and
  3. above, as information becomes available.
• ERCOT will continue to monitor run-off data
  from old market settlements and use adjustment
  fields in CMM to ensure TPE appropriately
  reflects liability.
• 6. Notwithstanding the above, Financial Security
  required from each Counter-Party for the first
  six weeks from the date of conversion to the
  new market is equal to or greater than the
  Financial Security held on behalf of any
  Counter-Party at the date of conversion to the
  new market

6
Credit Transition from Zonal to Nodal

• 3. Day Ahead Market (DAM)
• Exposures (TPE) for each entity will be
  established as defined in section 2 RT
  Operations.
• Credit Limits for DAM will reflect collateral
  held or unsecured credit allowed in excess of
  those TPE amounts.

7
Credit Transition Expectations

• More fully defined transition plan for credit as
  overall transition plan is more fully defined.
• Maintain open dialogue with TPTF to ensure we are
  considering all the market activities relevant to
  the transition from Zonal to Nodal market.

8
Questions and Discussion
?