1. 1 Credit Protocols Clarifications and Corrections Mark Ruane Director Settlements, Retail and Credit CWG / MCWG May 20, 2015 ERCOT Public

2. 2 Credit Protocols Clarifications and Corrections ERCOT Public ERCOT staff have reviewed credit Protocols and identified a number of items for correction/clarification. Protocol Ref.DescriptionRationale 16.11.4.1(2)CRRA flag for CRR activity other than FCE deleted.CRRA flag was temporary pending finalization of CFTC rules. 16.11.4.1(2)Apply SAF to DARTNET in MCE calculationAs-built alignment 16.11.4.1(2)DARTNET is defined as the absolute value of net DAM clearings. The abs function is applied to DARTNET As-built alignment 16.11.4.1(2)“Calendar days” changed to “Operating Days” and d subscript changed to od Protocol consistency 16.11.4.1(2)Move Potential Uplift (PUL) from EAL to TPE calculation PUL is only computed at the Counter-Party level

3. 3 Credit Protocols Clarifications and Corrections ERCOT Public (cont.) Protocol Ref.DescriptionRationale 16.11.4.2(1)Delete “until ERCOT issues the first Invoice for the Counter-Party. After ERCOT issues the first Invoice, it shall calculate credit exposure based on the Counter- Party’s EAL.” Protocol language on use of the IEL is contradictory. This aims to eliminate the contradiction. 16.11.4.3Change “IELq during the first 40-day period” to “IELq during the first 40-day period beginning on the date that the Counter-Party commences activity in ERCOT markets”. 16.11.4.3Simplify EALq equation by grouping terms.Simplification. Previously suggested at CWG/MCWG 16.11.4.3Simplify EALa formula by eliminating terms that evaluate to zero Simplification ThroughoutChange “Real Time” to “Real-Time”Protocol consistency

4. 4 Credit Protocols Clarifications and Corrections ERCOT Public (cont.) Protocol Ref.DescriptionRationale 16.11.4.3Provide definitions for components of Outstanding Unpaid Transactions (OUT) calculation Transparency 16.11.4.3Correct M1b = Min(B, (2 + Max(1,(u+1)/2))*(1-DF)) to M1b = Max(B, (2 + Max(1,(u+1)/2))*(1-DF)) Correction 16.11.4.3Group M1 parameters in a table specifying current change control process Simplification and transparency 16.11.4.5Change “CRR Owner” to “CRR Account Holder”Protocol consistency 16.11.4.5Change CRRAH subscript from o to aProtocol consistency

5. 5 Credit Protocols Clarifications and Corrections ERCOT Public (cont.) Protocol Ref.DescriptionRationale 16.11.4.7(2)Pending implementation of NPRR484 Phase 1b (deferred invoicing), delete: “ERCOT shall post once each Business Day on the MIS Certified Area each active Counter-Party’s credit monitoring and management related reports or extracts as listed below; however, these reports may not be posted if system limitations are prohibitive or if the Counter-Party has no active CRR ownership. (a)Future Credit Exposure for CRR PTP Obligations (FCEOBL) Detail Report; and (b)Future Credit Exposure for CRR PTP Options (FCEOPT) Detail Report. Language should no longer be necessary

6. 6 Credit Protocols Clarifications and Corrections ERCOT Public In addition, other changes may be considered, including Revising order of TPE components Breaking out MCE into a separate sub-section “Parameterizing” and providing change control process for additional variables used in IEL, URTA, etc. Where feasible, replacing verbiage with formulas

7. 7 ERCOT Public Questions Credit Protocols Clarifications and Corrections