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MCWG Update to WMS

MCWG Update to WMS. 4/12/2013. MCWG Update to WMS. General Update March 27 th Joint MCWG/CWG Meeting Review NPRRs All operational except - NPRR523 Available Credit Limit Calculations During Computer System Failures. MCWG provided comments that this NPRR has positive credit implications

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MCWG Update to WMS

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  1. MCWG Update to WMS 4/12/2013

  2. MCWG Update to WMS • General Update • March 27th Joint MCWG/CWG Meeting • Review NPRRs • All operational except - • NPRR523 Available Credit Limit Calculations During Computer System Failures. MCWG provided comments that this NPRR has positive credit implications • NPRR 519– Exemption of ERS-Only QSEs from Collateral and Capitalization Requirements • ERCOT provided comments to the NPRR that proposed 2 options to prevent ERS-only QSEs from participating in the DAM and RT market. • Create a read-only access profile, or • Manual process under which ERCOT staff would verify whether participation in any market had taken place or if ERS-only QSE had registered for some other Market Participant role • There was discussion in the group that the ERS-only QSE should submit a risk management policy and be a required to submit a “notice of material change”, should that occur. • New comments are being prepared which will be considered and voted on at the next meeting. The group endorsed the overall concept.

  3. MCWG Update to WMS • Letter of Credit Concentration Update • ERCOT provided summary of the F&A discussion on this topic. • Despite the CWG vote against the proposed financial institution LC limit, F&A have charged ERCOT with creating a proposal and implementing a limit. • ERCOT’s proposal contains the following: • Imposed a limit of $750 million per qualified bank • Issuer limits will be based on a matrix that includes Tangible Net Worth and credit rating • Required CWG to review and F&A to approve the limit no less than annually. • On Bank Business Days, ERCOT will issue a report of each issuer and available LC capacity. • Authorized ERCOT to increase the limit under “extreme market conditions” • Implementation will be on a phased approach, with a test of the proposal conducted on a shadow basis over Summer 2013, prior to seeking F&A approval. • Comments from market participants to the proposal included: • Support for a multi-month “cure period” if the issuer limit is breached; this will allow users time to secure a new issuer. • Discussion on the determination of the caps. It was proposed that a % of the issuer’s financial regulatory capital be incorporated in the issuer limits matrix. • Giving ERCOT authority to act on material adverse changes in a bank’s credit quality

  4. MCWG Update to WMS • Day Ahead Collateral Parameters • ERCOT provided summary of the parameters currently in use. • It was agreed among the group to keep the current Future Credit Exposure parameters for CRRs, in light of the passing of NPRR484 which will completely change the collateralization calculation for CRRs. • There was discussion over the apparent mismatch of percentile values for Three-Part offers and energy only bids: • TPOs use the 50th percentile; EOB’s use the 85th percentile • Member of the working group will provide examples of this disparity and its effects at the next MCWG meeting.

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