MCWG Update to WMS

1. MCWG Update to WMS 3/13/2013

2. MCWG Update to WMS • General Update • February 27 Joint MCWG/CWG Meeting • Confirm Chair and Vice Chair • Trish Egan – Chair • Loretto Martin – Vice Chair • NPRR 519– Exemption of ERS-Only QSEs from Collateral and Capitalization Requirements • CWG/MCWG members believe that exempting ERS-Only QSEs from ERCOT credit requirements would not result in additional risk to the market provided that sufficient controls are in place to prevent such entities from participating in the DAM, CRR, and Real-Time markets. • Given that condition, the group requested that ERCOT include a description of these controls in the NPRR before the group could recommend approval of the NPRR. • Attachment J – Annual Certification Form • Annual form signed by a company officer certifying that the Counter-Party • Is in compliance with each of the Counter-Party criteria • Agrees to abide by procedures for verification of its risk management framework • Due no later than 120 days after fiscal year close

3. MCWG Update to WMS • Letter of Credit Concentration Update • CWG held an email vote on a proposed change to the Creditworthiness Standards to address the issue. • Proposal included: • Imposed a limit of $750 million per qualified bank. • Required CWG to review and F&A to approve the limit on a quarterly basis. • Required ERCOT to post a daily report detailing the amount of letters of credit issued to ERCOT by each qualified bank. • Authorized ERCOT to increase the limit under “extreme market conditions” • Comments from market participants to the proposal included: • Authorizing ERCOT to work with a Counter-Party to avoid default if a letter of credit is rejected • A matrix setting different limits based on credit rating • Giving ERCOT authority to act on material adverse changes in a bank’s credit quality