NOTICE DATE:  February 2, 2011

NOTICE TYPE:  W-C020211-01 Financial/Credit

SHORT DESCRIPTION:  Credit Monitoring and Management (CMM) change to Total Potential Exposure (TPE)

INTENDED AUDIENCE:  Market Participants who participate in ERCOT DAM 

DAYS AFFECTED:  February 2 – 9, 2011 (impacting DAM runs on February 3 – 10, 2011)

LONG DESCRIPTION:  Nodal Protocol Section 16.11.4.1, Determination of Total Potential Exposure (TPE) for a Counter-Party, subsection (3) provides that: 

“If ERCOT, in its sole discretion, determines that the TPE for a Counter-Party calculated under paragraph (1) above does not adequately match the financial risk created by that Counter-Party’s activities under these Protocols, then ERCOT may set a different TPE for that Counter-Party. ERCOT shall, to the extent practical, give to the Counter-Party the information used to determine that different TPE. ERCOT shall provide written or electronic notice to the Counter-Party of the basis for ERCOT’s assessment of the Counter-Party’s financial risk and the resulting creditworthiness requirements.”

On February 2, 2011, Real Time Settlement Point Prices were high across all zones for an extended period. In considering the impact on forward estimates of exposure, ERCOT:

1) applied a factor of 0.667 to the Not Completed (Forward Days) section of the Aggregate Incremental Liability (AIL) component effective from February 2, 2011, through February 9, 2011, and

2) will exclude Operating Day February 2, 2011, from the Average Daily Transaction Extrapolated (ADTE) calculated on February 18, 2011, before determining the Highest ADTE.

ERCOT will continue to monitor credit exposure over the next few days and may take additional actions to adjust TPE and/or DAM parameters as needed.

CONTACT:  If you have any questions, please contact Vanessa Spells at [log in to unmask], (512) 225 7014, or Rizaldy Zapanta at [log in to unmask], (512) 225-7015. You may also send credit inquiries to [log in to unmask].

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