New York ISO Files New Credit Requirements

The New York ISO has filed at FERC tariff modifications to better align the credit requirements for imports to, exports from, and wheels through (External Transactions) the New York Control Area with the associated market risk.

External Transactions are currently included in the calculation of a Market Participant’s credit requirement for Energy and Ancillary Services. By establishing a distinct credit requirement for External Transactions, the NYISO can better align the credit requirements for those transactions with the market risk they present, NYISO said.

NYISO will calculate External Transaction credit requirements by evaluating each transaction bid from the initial offer through settlement and (i) distinguish between imports, exports and wheels through, (ii) distinguish between external locations, and (iii) as appropriate, group months and times-of-day with similar risk characteristics together.

Specifically, NYISO will establish each Market Participant’s credit requirement for External Transactions by summing its credit requirement for all Import, Export and Wheels Through Bids, excluding Non-Firm Transactions, and any amounts owed for settled External Transactions

To enable the NYISO to determine these credit requirements, each month the NYISO will calculate and update the import and export price differentials for each external location using a methodology comparable to the one used to calculate credit requirements for Virtual Transactions, which will capture similar risk exposure. The price differential methodology is based on historical data, applying a 97% probability, that the credit requirement for an import or export position would equal or exceed any payment due to the NYISO as a result of a loss on the import or export if the transaction did not flow in real-time. The price differential will equal the price differential for Energy prices in the Day-Ahead Market (DAM) and Real-Time Market for the period of time from April 1, 2005 up to the date that LBMP data is available for that external location, for the same season and time-of-day (including consideration of whether it is a weekend or holiday).

In addition, for Import Bids, each month, the NYISO will calculate a historical performance ratio based on bid data from the prior three month period (or six month period, if there is insufficient data during the prior three month period) for each Market Participant that bids to import to determine the proportion of the Market Participant’s Day-Ahead positions that have settled at a loss. If 25% or more of that Market Participant’s MWhs bid settled at a loss, then that Market Participant will be subject to the Import Credit Requirement.

Under the proposed tariff revisions the new External Transaction Component of the Operating Requirement will equal the sum of the Market Participant’s (i) Import Credit Requirement, (ii) Export Credit Requirement, (iii) Wheels Through Credit Requirement, and (iv) the net amount owed to the NYISO for settled External Transactions, with each described further below:

Import Credit Requirement
The Import Credit Requirement will apply to all Market Participants entering an Import Bid into the DAM unless the historical bid analysis, as outlined in the tariff, determines that the Market Participant’s prior three month (or six month) period import market activity falls below the historical performance threshold. The Import Credit Requirement for an Import Bid in the DAM is calculated by multiplying the MWhs bid by the appropriate import price differential. Once the DAM schedules and prices have been established after the DAM posts, the credit requirement for accepted DAM Bids will be the MWhs scheduled in the DAM multiplied by the appropriate import price differential. After the market runs in real-time the Import Credit Requirement will be the greater of the estimated balancing payment owed to the NYISO by the Market Participant reduced by the DAM Settlement owed to the Market Participant by the NYISO or zero.

Export Credit Requirement
For the Export Credit Requirement, all Export Bids of a Market Participant that have the same Source, Sink and Bid Date/Hour will be grouped together and evaluated as one bid-group. Day-Ahead Bids and Hour-Ahead Bids will be grouped separately. The Export Credit Requirement for each Export bid-group in the DAM will be the higher of the maximum potential exposure to the NYISO based on the Bid Prices and the MWhs that a Market Participant bids to export at those Bid Prices or the sum of all MWhs in the bid-group multiplied by the appropriate export price differential. Once the DAM schedules and prices have been established after the DAM posts, the credit requirement for accepted DAM Bids will be the MWhs scheduled in the DAM multiplied by the greater of the LBMP or the appropriate export price differential. The Export Credit Requirement for each bid-group in the Hour-Ahead Market (HAM) will be the maximum potential exposure based on Bid Prices and the MWhs that a Market Participant bids to export at those Bid Prices. After the market runs in real-time the Export Credit Requirement will be the greater of any amounts owed to the NYISO by the Market Participant reduced by an estimate of any balancing payments owed by the NYISO to the Market Participant or zero.

Wheels Through Credit Requirement
The Wheels Through Credit Requirements for DAM Bids will be the maximum potential congestion exposure to the NYISO based on the Bid Prices and the MWhs that a Market Participant bids to wheel through at those Bid Prices. Once the DAM schedules and prices have been established after the DAM posts, the credit requirement for accepted DAM Bids will be the greater of the MWhs scheduled in the DAM multiplied by (DAM LBMP at the Point of Withdrawal minus the DAM LBMP at the Point of Injection) or zero. The Wheels Through Credit Requirement for HAM Bids will be the maximum exposure to the NYISO based on the Bid Prices and the MWhs that a Market Participant bids to wheel through at those Bid Prices (the MWhs are reduced by the MWhs of a DAM Bid with the same hour/date, location and Bid transaction ID). After the market runs in real-time the Wheels Through Credit Requirement will be the greater of any amounts owed to the NYISO by the Market Participant reduced by an estimate of any balancing payments owed by the NYISO to the market participant or zero.

Settled External Transactions
After the market day is complete, the credit requirement for import, export or wheel through transactions will equal the net payments due to the NYISO as determined by the daily bill results for that market day.

Under the proposed tariff revisions the NYISO will monitor the External Transaction Bids submitted by a Market Participant and if the credit support required exceeds the available credit support then the Bids will be rejected. Additionally, if the net amount owed to the NYISO for External Transactions reaches 50% of the credit support provided for External Transactions the NYISO may issue a demand for credit support and potentially suspend the Market Participant from engaging in External Transactions until the Market Participant makes payment or provides additional credit support. If at any time the amount owed to the NYISO by a Market Participant reaches 100% of the credit support provided by the Market Participant to support its External Transactions, then the NYISO may immediately suspend the Market Participant’s authorization to engage in External Transactions until the Market Participant makes payment or provides its required amount of credit support

The NYISO requested that the changes become effective on June 12, 2013.