DAM Collateral Requirements Carrie Bivens Manager, Day-Ahead Market Dec 16,

Objectives for credit constraints in Day Ahead Market Objectives for having credit constraints in the Day Ahead Market (DAM) Ensure that a Counter-Party (CP) can pay for its activity in the DAM and any potential related activity in Real Time (RT) –Bids to buy from DAM are covered –RT impact from offers to sell in the DAM are covered Source of information Protocol Section Credit Requirement for DAM Bids and Offers Procedures for Setting Nodal Day Ahead Market (DAM) Credit Requirement Parameters 2

Credit Exposure(CE) for Energy Bid 1.If Bid Price <= 0 then CE= 0 2. If Bid Price > d th Percentile DASPP then CE= quantity*(d th Percentile + e1*(Bid Price- d th Percentile)) 3. If 0 < Bid Price <= d th Percentile DASPP, then CE= quantity* Bid Price dth Percentile DASPP: 85th percentile of the Day-Ahead Settlement Point Price (DASPP) for the hour over the previous 30 days e1 : 95th percentile of Ratio1 over the last 30 days, where Ratio1 is a daily calculation as follows: Ratio1 = Min[1, Max[0, (Σh=1,24 (Qcleared-Bids*PDAM - Qcleared-TPO*PDAM - Qcleared-EOO*PDAM)/ (Σ h=1,24 Qcleared-Bids*PDAM)]] except Ratio1 = 1 when Σ h=1,24 Qcleared-Bids*PDAM = 0 3

Energy Bid CE Calculations 4 Scenario e1 = 1e1 = 0.2 dth Percentile DASPP 60 Bid Price5,000 e110.2 Quantity10 CE FormulaQuantity *(DASPP + e1*(Bid Price-DASPP)) CE Value 10*(60 + 1*(200-60)) = 50,000 10*( *(200-60)) = 10,480

Credit Exposure(CE) for Three Part Supply Offer 1.If offer Price <= yth Percentile DASPP then If zth Percentile DASPP >0 then CE= quantity*zth Percentile DASPP (CE reduced) If zth Percentile DASPP <0 then CE= quantity*zth Percentile DASPP ( CE increased) 2. If offer price > yth Percentile DASPP then CE = 0 yth Percentile DASPP: 45th percentile of the Day-Ahead Settlement Point Price (DASPP) for the hour over the previous 30 days zth Percentile DASPP: 50th percentile of the Day-Ahead Settlement Point Price (DASPP) for the hour over the previous 30 days 5

TPO CE Calculations 6 ScenarioOffer Price <= yth Percentile DASPP (TPO transactions that are “likely to be awarded”) Offer Price > yth Percentile DASPP (TPO transactions that are deemed “not likely to be awarded”) yth Percentile DASPP zth Percentile DASPP Offer Price Quantity10 CE FormulaQuantity * zth percentile DASPP CE Value10*60=600 (CE Decreased) 10*-4 = -40 (CE Increased) 0

“e” Factors ParameterApplies to:Calculated:Used to: “e1”DAM Energy Bids Defined ratio (Ratio1) comparing balance between awarded DAM Energy Bids, EOOs and TPOs. Calculated daily by CP. Calculated based on values (quantity * price). A specified percentile from the past 30 days Ratio1 is used Modify DAM Energy Bid exposure and set value between recent historical pricing (when “e1” is near “0” ) and bid price (when “e1” is near “1”) “e2”EOOsDefined ratio (Ratio2) comparing balance between awarded EOOs, TPOs and DAM Energy Bids Calculated daily by CP. Calculated based on quantities only A specified percentile from the past 30 days Ratio2 is used Modify EOO exposures and allow between no offset value (when “e2” is near “0”) and full offset value at the 45th percentile of historical prices (when “e2” is near “1”) for offers likely to be awarded. “e3”EOOsValued at 1Require collateral for 90% of the price difference between DAM and RT for all EOO offers, whether likely to be awarded or not 7

“e” Factors Calculation ParameterNew Counter Party (From entry until the second biweekly reset) Default value for every Counter-PartyEntities who meet the requirements for favorable treatment “e1”1 95th percentile of Ratio1 over the last 30 days where Ratio1 is a daily calculation as follows: Ratio1 = Min[1, Max[0, (Σh=1,24 (Qcleared-Bids*PDAM - Qcleared-TPO*PDAM - Qcleared-EOO*PDAM)/ (Σ h=1,24 Qcleared-Bids*PDAM)]] except Ratio1 = 1 when Σ h=1,24 Qcleared-Bids*PDAM = 0 75th percentile of Ratio1 over the last 30 days where Ratio1 is a daily calculation as follows: Ratio1 = Min[1, Max[0, (Σh=1,24 (Qcleared-Bids*PDAM - Qcleared-TPO*PDAM - Qcleared-EOO*PDAM)/ (Σ h=1,24 Qcleared-Bids*PDAM)]] except Ratio1 = 1 when Σ h=1,24 Qcleared-Bids*PDAM = 0 “e2”00 25th percentile of Ratio2 over the last 30 days where Ratio2 is a daily calculation as follows: Ratio2 = 1 - Max[0, (Σh=1,24 (Qcleared-EOO + Qcleared-TPO - Qcleared-Bids)/ (Σ h=1,24 (Qcleared-EOO + Qcleared-TPO))] except Ratio2 = 0 when Σ h=1,24 (Qcleared-EOO + Qcleared-TPO) = 0 “e3”111 8

Questions 9