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Letter of Credit Concentration Limits Vanessa Spells CWG/MCWG Meeting March 27, 2013

Letter of Credit Concentration Limits Vanessa Spells CWG/MCWG Meeting March 27, 2013. Letter of Credit Concentration Limit. On March 18, F&A requested ERCOT staff submit a Letter of Credit Concentration Limit proposal at the May 13 F&A meeting Letter of Credit Concentration Limit Proposal

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Letter of Credit Concentration Limits Vanessa Spells CWG/MCWG Meeting March 27, 2013

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  1. Letter of Credit Concentration Limits Vanessa Spells CWG/MCWG Meeting March 27, 2013

  2. Letter of Credit Concentration Limit • On March 18, F&A requested ERCOT staff submit a Letter of Credit Concentration Limit proposal at the May 13F&A meeting • Letter of Credit Concentration Limit Proposal • Letters of Credit subject to an overall limit of $750 million per Letter of Credit issuer for all ERCOT Counter-Parties • Issuer limits adjusted based on Tangible Net Worth (TNW) and credit rating • This may reduce the overall limit for lower-rated entities and those for which LCs issued to ERCOT make up a larger proportion of Tangible Net Worth

  3. Letter of Credit Concentration Limit • Limit structure will be reviewed by CWG and approved by F&A no less than annually • On Bank Business Days, EROT will issue a report of each Letter of Credit issuer and available capacity • Market Participants may inquire intra-day • ERCOT in its sole discretion may authorize exceptions to the Letter Credit of Concentration limits • Implementation • ERCOT supports a phase-in approach for implementation of any approved limits • ERCOT will test the proposed limit structure on a shadow basis over the summer months before seeking approval of any final proposal from F&A • This will enable ERCOT and the market to understand the potential impacts of higher price caps on Letters of Credit Concentration limits

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