Executive Summary

In a lightly attended Spring Break CWG/MCWG the only action taken was a non-endorsement of a compromise NPRR (NPRR1112-Reduction of Unsecured Credit) that the CWG had essentially written via its comments.  Even though they had written the comments that were approved by the Protocol Revision Subcommittee, CWG decided to not endorse it as they feel the entities that are being extended unsecured credit are more creditworthy than banks.  Beyond that, there was further discussion of two issues that have been percolating at CWG for a while namely reducing collateral for trading only entities and changes to the default uplift methodology.  ERCOT also presented a new NPRR, NPRR1125(Use of Financial Security for Securitization Default Charge), that would allow ERCOT to use general collateral to cure securitization breaches if needed, and finally Clayton Greer raised the question (to absolutely no answer from ERCOT) whether ERCOT had the legal authority to negotiate (on market participants’ behalf) in the Brazos bankruptcy case.

AGENDA

• ERCOT Meeting Page

Notes

• • NPRR1112(Reduction of Unsecured Credit). As part of the review of NPRRs for credit implications, CWG looked at NPRR1112.  After much discussion, where much was brought up of the credit ratings of the entities to which ERCOT extends unsecured credit, and how those credit ratings are better than the average bank (according to some incomplete analysis done by Bob Wittmeyer and the additional say-so of Clayton Greer), the committee decided to say that the credit implications (of the compromise that they authored) were neutral to slightly bad.
  • Reduce Collateral Requirements for Trading Only Entities Not enough people had read the draft NPRR, so it remained tabled for another month.
  • Changes to Default Uplift Methodology. DC Energy (Seth Cochran) is continuing down the path of a scalar multiplier on the CRR volume in the current methodology, but has now expanded the scalars that they want to look at down to 50%.  ERCOT to come back to the next CWG with more analysis.
  • Securitization.  ERCOT (Mark Ruane) presented NPRR1125(Use of Financial Security for Securitization Default Charge) that would allow ERCOT to use general financial security to fix defaults to securitization payments.

• Brazos Bankruptcy. Morgan Stanley (Clayton Greer) asked if ERCOT legal was sure they had the right to negotiate on the behalf of market participants on how much of the short pay Brazos needs to pay back (in the Brazos bankruptcy case.)

Discussed Issues

• Reduce Collateral for Trading Only Entities
• NPRR1112(Reduce Max Unsecured Collateral to $30M)
• Changes to Default Uplift Methodology
• Securitization M
• Securitization N
• Brazos Bankruptcy