Southwest Power Pool CREDIT PRACTICES WORKING GROUP November 17, 2016 Teleconference Minutes

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1 Southwest Power Pool CREDIT PRACTICES WORKING GROUP November 17, 2016 Teleconference Minutes Agenda Item 1 Call to Order Mark Holler called the meeting to order at 1:31 p.m. The following members were in attendance: Mark Holler (Tenaska); Ronnie Hall (KCPL); Cassandra Strange (OGE); Malcolm Booker (OMPA); and Terri Wendlandt (Westar). Also in attendance were: Carrie Dixon (Xcel Energy); Christi Nicolay (Macquarie); Nick Becvar (ACES); Scott Smith (SPP); Erin Brown (SPP); Dendy Collier (SPP); and Patti Kelly (SPP). Agenda Item 2 Approval of Minutes from October Meeting Mark Holler asked if there were changes to the October meeting minutes (CPWG Minutes ). Cassandra Strange made a motion to accept the minutes and Malcolm Booker seconded. The minutes were unanimously accepted without amendment. Agenda Item 3 FERC TCR Auction Netting Update Scott Smith advised the Group that SPP still has not heard back from FERC regarding this item. He said he will check with SPP s Regulatory group to see if there is anything that can be done to speed up the process. Agenda Item 4 Using Positive Valued TCRs as Collateral Scott Smith presented concerning a Finance Committee directive to reevaluate use of positive valued TCRs as collateral for TCR Portfolios. Scott will present this to the Finance Committee on December 5 th, Other Items Mark Holler brought up the topic of a potential increase to the Unsecured Credit Limit (UCL) cap that was discussed at the October 20 th CPWG meeting. The methodology used to set the UCL will be reviewed for appropriateness at the December 15 th CPWG meeting. An increase in the UCL cap will be put to a vote at a future meeting. Ronnie Hall asked that a review of the Credit Policy be performed in the 2017 CPWG meetings. He asked that credit calculations be targeted first, along with any other sections that the group believes may need changes. Agenda Item 5 Next Meeting December 15 Mark Holler advised the group that the next meeting will be December 15, Agenda Item 8 Adjournment There being no further business, the meeting was adjourned at 2:03 p.m. Respectfully submitted, Erin Brown, Acting Secretary

2 Southwest Power Pool, Inc. CREDIT PRACTICES WORKING GROUP MEETING November 17, 2016 Teleconference AGENDA 1:30 3:30pm 1. Call to Order... Mark Holler 2. Approval of Minutes from October Meeting... Mark Holler 3. FERC TCR Auction Netting Update... Scott Smith 4. Using Positive Valued TCRs as Collateral... Scott Smith 5. Next Meeting December Mark Holler 6. Adjournment... Mark Holler Relationship-Based Member-Driven Independence Through Diversity Evolutionary vs. Revolutionary Reliability & Economics Inseparable

3 Southwest Power Pool CREDIT PRACTICES WORKING GROUP October 20, 2016 Teleconference Minutes Agenda Item 1 Call to Order Mark Holler called the meeting to order at 1:36 p.m. The following members were in attendance: Mark Holler (Tenaska); Ronnie Hall (KCPL); Bill Thompson (AEP); Cassandra Strange (OGE); Malcolm Booker (OMPA); and Terri Wendlandt (Westar). Also in attendance were; Dennis Heinz (NorthWestern Energy); Jeff Bieker (Sunflower); Jill Jones (MEAN); Justin Riddell (TEA); Matt Robson (Sesco); Melody Wright (Empire); Michael Erbrick (MICS); Christi Nicolay (Macquarie); Jan Smith (MRES); Erin Brown (SPP); Scott Smith (SPP); Dendy Collier (SPP); Patti Kelly (SPP); and Jared Barker (SPP). Agenda Item 2 Approval of Minutes from September Meeting Mark Holler asked if there were changes to the September meeting minutes (CPWG Minutes A ). Ronnie Hall made a motion to accept the minutes and Malcolm Booker seconded. The minutes were unanimously accepted without amendment. Agenda Item 3 FERC TCR Auction Netting Update Scott Smith advised the Group that FERC was putting together a Task Force to address backlog of rehearing requests. Otherwise, there had been no further action by FERC. Agenda Item 4 Using Positive Valued TCRs as Collateral Scott Smith presented concerning a Finance Committee directive to reevaluate use of positive value TCR as collateral for TCR Portfolio. Mark Holler will present to the Finance Committee on December 5 th, 2016 with findings. Agenda Item 5 Unsecured Credit Allowance Review and Discussion Scott Smith presented on SPPs current Unsecured Credit Limit cap of $25mm. FERC Order 741 allows for cap of up to $50mm. The Group discussed the adequateness of the $25mm cap and risk/reward of increasing this cap. If a future decision is made to increase the cap, the Group advised it would like to see discussions regarding the appropriateness of SPPs current credit worthiness and scoring methodologies. Agenda Item 6 Q3 Credit Metrics Erin Brown presented the third quarter credit statistics (2016 Q3 Credit Metrics). There were few changes since the last report Agenda Item 7 Next Meeting November 17 Mark Holler advised the group that the next meeting will be November 17, Agenda Item 8 Adjournment There being no further business, the meeting was adjourned at 3:00 p.m. Respectfully submitted, Phil McCraw, Secretary

4 Appropriateness of Using TCRs as Collateral 1

5 Action Item from FC 2

6 Credit Practices Working Group Discussed issue in October and November Credit Policy designed to allow netting of positive and negative TCRs under certain conditions 3

7 FERC Order 741 Also disallows netting of credit requirements between FTR and non-ftr activity 4

8 Credit Risk and Mitigations SPP disallows netting of credit requirements between FTR and non-ftr activity FERC Order 741 Other ISO/RTO credit policies are designed with similar netting concepts Estimation of an MP s entire portfolio For like TCR products in a portfolio Never results in positive exposure Conservative nature of TCR Reference Prices 5

9 Mitigation: Estimating Portfolio July TCR1: ($10) TCR2: $8 Jul: ($2) In July, SPP holds $5 collateral Negative = Liability August TCR3: ($6) TCR4: $10 Aug: $4 In August, SPP holds $5 collateral September TCR5: ($12) TCR6: $7 Sep: ($5) In September, SPP holds $5 collateral Regardless of any other Marketplace position, SPP holds $5 in collateral in July August exposure does not offset other TCR products Disallowing netting would result in SPP holding $28 in July 6

10 Risk Mitigations: TCR Ref Prices TCR Ref Price = Mean Price Stress Test Price Typically, more than doubles collateral requirement for historically negative paths Reduces the impact of netting positive paths Historically negative paths use 90 th percentile stress test Captures additional volatility of historical MCCs in risk assessment Historically positive paths use 75 th percentile stress test Historically Positive Path Historically Negative Path Mean Price $10 ($10) - Stress Test Price * ($5) $15 Final TCR Ref Price $10 ($25) * Not allowed to increase value of positive path 7

Southwest Power Pool CREDIT PRACTICES WORKING GROUP March 16, 2017 Teleconference Minutes

Southwest Power Pool CREDIT PRACTICES WORKING GROUP March 16, 2017 Teleconference Minutes Agenda Item 1 Call to Order Terri Wendlandt called the meeting to order at 1:32p.m. The following members were