Market Credit Working Group Update to Wholesale Market Subcommittee - March 10th Summary
Stay updated on the latest developments from the Market Credit Working Group's joint meeting with the Wholesale Market Subcommittee on March 10th. Key highlights include NPRR reviews, seasonal adjustment factors for summer 2015, mitigation of credit tail risk exposure, and consolidation of binding documents related to credit standards. Find out more about the ongoing initiatives and recommendations in this comprehensive update.
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Presentation Transcript
Market Credit Working Group update to the Wholesale Market Subcommittee 04/06/2015 1
MCWG update to WMS Joint meeting of MCWG and CWG on Tuesday, March 10th 4 NPRRs reviewed for credit impacts by email vote 3 NPRRs were operational and had no credit impact 1 NPRR, NPRR683, impacts credit NPRR683 changes the Available Credit Limit calculation 90% buffer applied to ACL which penalizes entities that overcollateralize NPRR683 applies the 90% to gross up TPE instead of decreasing ACL Improves the incentives to provide additional collateral above credit exposure 2
MCWG update to WMS Seasonal Adjustment Factor for summer of 2015 ERCOT has proposed a methodology to calculate SAFs using the ratio of historical prices to the previous month ERCOT provided additional analysis requested by MCWG/CWG members at the Feb meeting CWG/MCWG voted to endorse the SAF values below for summer of 2015 2015 ERCOT Calculation 115% 101% 224% 100% CWG/MCWG Recommendation 115% 125% 200% 100% Month 2014 Value June July August September 100% 200% 300% 150% 3
MCWG update to WMS Mitigation of credit tail risk exposure Formation of the Credit Risk Impacts and Modeling (CRIM) sub group to develop tail risk scenarios and assist ERCOT modeling Initial meeting on March 10th established scope and objectives CRIM will meet after the regularly scheduled CWG/MCWG meetings Capacity forecast report Daily posting commenced week of February 24rd http://www.ercot.com/services/rq/credit/index.html CWG/MCWG reviewed initial results 4
MCWG update to WMS Consolidation of Other Binding Documents related to credit Creditworthiness Standards (NPRR690 submitted) Credit Application (NPRR pending) ERCOT Credit and Legal will jointly draft NPRR Procedures for Setting Nodal Day Ahead Market (DAM) Credit Requirement Parameters and Credit Formulas (NPRR671) Draft NPRR formalizing prepay account procedures Targeting April PRS Audited financials and Standard Form Agreement Attachment A required by April 30th for Counter- Parties with December 31, 2014 FYE. 5
Update on NPRR638 NPRR638 is currently tabled at PRS Technical issues under consideration Gas price adjustment using a FIP ratio (gas price normalization) To be considered at PRS (estimated May PRS) Apply a minimum and maximum heat rate to limit application of gas price adjustment To be considered at PRS (estimated May PRS) ERCOT analysis on NPRR638 & Lookback parameters ERCOT published detailed analysis on gas price adjustments and lookback parameter impacts on April 2nd PLEASE REVIEW THIS ANALYSIS PRIOR TO APRIL 22 CWG/MCWG MEETING AND BE PREPARED TO VOTE ON LOOKBACK PARAMETER 6
Update on NPRR638 Policy issues under consideration Process to update the Market Adjustment Factor (MAF) History of the MAF in NPRR638 July 2014: ERCOT submits NPRR638, ERCOT has sole discretion to use MAF based on price increases due to market rule changes, 14 day notice Oct 2014: ERCOT submits comments to increase MAF notice period to 45 days Jan 22, 2015: CWG/MCWG submits comments endorsing process where TAC recommends MAF change and Board approves Jan 30, 2015: ERCOT submits comments removing TAC/Board approval, reinstates sole discretion with 45 day notice, corrects greybox section Feb 9, 2015: F&A Committee discusses MAF process and requests stakeholder feedback Feb 24, 2015: Reliant submits comments supporting CWG/MCWG endorsed version of MAF process March 9, 2015: ERCOT submits comments expanding use of MAF to changes in market conditions; maintains sole discretion and 45 day notice ERCOT & Stakeholders are negotiating a compromise. An update will be discussed at April 22 CWG/MCWG Targeting vote at May PRS 7
