CALIFORNIA ISO MARKET NOTICE

Requested Client Action:  Action Date

 

Date of Distribution:  May 18, 2006

 

Categories:  Settlements and Market Clearing

 

Subject:  New Credit Management Policy

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Summary:  On May 12, FERC issued an order conditionally accepting the California ISO’s (ISO) March 2006 Credit Policy Amendment effective as of May 14, 2006.  The ISO will transition to the new approach in establishing Unsecured Credit Limits over the next 30 days.  Scheduling Coordinators that currently have an Approved Credit Rating and other entities that may be eligible for an Unsecured Credit Limit should submit an Application for Unsecured Credit as soon as possible.  All entities subject to the new credit requirements that have not submitted an application by June 19, 2006, will be assigned an Unsecured Credit Limit of zero and will be required to post collateral to cover any outstanding ISO obligations.

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Main Text:  The ISO’s March 2006 Credit Policy Amendment revises several aspects of ISO’s credit management policy.  The most significant change is the manner in which collateral requirements are determined. 

 

Prior to the effectiveness of this Amendment, entities that maintained an “Approved Credit Rating” as defined by the ISO Tariff were not required to post collateral to secure any of their outstanding ISO obligations.  Under the new approach, the criteria for establishing an Unsecured Credit Limit have been expanded, but no entity may receive unsecured credit in excess of $250 million.  The ISO’s Credit Policy and Procedures Guide specifies how the ISO will set Unsecured Credits Limits.  Entities that previously were not eligible for unsecured credit may receive unsecured credit based on the new approach. 

 

All impacted entities are encouraged to review the Credit Policy and Procedure Guide and submit the Application for Unsecured Credit available on the ISO website:  http://www.caiso.com/17b3/17b371e06a2b0.doc (or Operationsà Marketsà Settlements à Credit Policy à ISO Credit Application).  Entities that have not submitted an Application for unsecured credit by June 19, 2006, will be assigned an Unsecured Credit Limit of zero and will be required to post collateral to cover any outstanding ISO obligations.

 

FERC’s approval of the March 2006 Credit Policy Amendment requires the ISO to revise some aspects of its proposed policy and to submit a compliance filing.  Interested parties may review the following documents:

FERC’s Order                            http://www.caiso.com/17f7/17f7869c20480.doc

ISO’s filing:                                http://www.caiso.com/17b8/17b8cae591c0.html

Credit Related Materials here:     http://www.caiso.com/docs/2005/06/14/200506141656326466.html

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For More Information Contact:  Your Client Representative or Kevin King (kking@caiso.com, 916-608-1247)

 

 

 

The California ISO strives to be a world-class electric transmission organization built around a globally recognized and inspired team providing cost-effective and reliable service, well-balanced energy market mechanisms, and high-quality information for the benefit of our customers.