1. Tamila Nikazm Chair, Credit Work Group Tab 7: Periodic Report on Credit Work Group Activity Finance & Audit Committee Meeting ERCOT Public November 12, 2012 1

2. 2 Tab 7 ERCOT Public Credit Work Group Update Completed Annual review of Day Ahead Market Collateral Parameters Process as required by Protocols Approved updates to Creditworthiness Standards –Requires use of approved documentation for Letters of Credit and Surety Bonds –Removes credit rating reduction applicable to foreign guarantors –CWG did not endorse concentration limits on issuers of Letters of Credit. A sub-group will continue evaluating this issue.

3. 3 Tab 7 ERCOT Public Credit Work Group Update Key Outstanding Issues Implementation of NPRR 347/400 –Four Market Participants volunteered to participate in the testing program –During the testing process issues with Protocol language were identified which in certain scenarios could lead to incorrect credit limits. An urgent NPRR was submitted for correction. NPRR 484 –Revises collateralization for CRRs to address path-specific risk –CWG has endorsed for review by PRS.

4. 4 Tab 7 ERCOT Public Credit Work Group Update Key Outstanding Issues Future credit design –A working group created by WMS has met twice to consider initiatives for future credit design: Shortening the settlement timeline Creating a probabilistic credit model –CWG will report developments to F&A regularly