Market Credit Working Group update to the Wholesale Market Subcommittee 10/07/2015 1

MCWG update to WMS Joint meeting of MCWG and CWG on Wednesday, September 16 9 NPRRs reviewed for credit impacts – All NPRRs had no credit impact 2

MCWG update to WMS Minimum Current Exposure as a Floor MCWG continued discussion on objectives of MCE Entities that over-hedge will have an MCE of near zero MCWG reviewed a draft NPRR submitted by ERCOT which introduces a floor on MCE equal to 1 day of exposure based on average load position and real-time prices over the most recent 14 days for which settlement statements were produced General consensus on the proposed approach 3

MCWG update to WMS Development of a Market Risk Appetite Goal – Market Participant Survey to be developed to collect: Demographic data (segment, size, unsecured/secured) Views of collateral posting levels, maximum posting tolerance Views of default uplift risk (risk appetite vs. risk tolerance) – MCWG discussed survey questions and format – Confusion over objectives of the survey – Small group met on Sept 24 th and decided to seek feedback from F&A Committee 4

MCWG update to WMS Modifications to NPRR638 to use Forward Price Data Continued discussion on proposals to utilize forward price data in the calculation of TPE CWG/MCWG will continue to evaluate forward price data vendors and how to incorporate this data into forward credit exposure estimation Genscape on the October agenda ICE on November agenda 5

MCWG update to WMS Capacity Forecast Model Update Summer 2015 results reviewed and appear promising. See next slide. 6

Capacity Forecast Model Excess Reserves vs Actual Results Correlation Summary: An Exceedance Confidence Interval of P 50 Same Exceedance Confidence Interval is used for the corresponding reports published on MIS since late February Capacity Forecast Model – Correlation Summary PeriodOFF4 CorrelationOFF1 Correlation Mar 2015-Aug %92% Spring %83% Summer %96% August %96%