Collateral Policy
The introduction of financial transmission rights in combination with financial transmission right auctions has created a need for credit policies to assure that market participants purchasing financial transmission rights will pay for them. In addition, because most financial transmission rights sold in auctions are defined as obligations, ISOs must have a collateral policy that provides reasonable assurance that market participants will be able to pay day-ahead market charges on speculative financial transmission right holdings. The Tower, Exel, Greenhat and Hill defaults on payments due on financial transmission right holdings in PJM have shown the potential costs that can result from inadequate collateral requirements on speculative FTR holdings. Similarly, there is a potential for default on payments due on virtual bids, particularly speculative virtual bids that are not associated with a bilateral or exchange traded contract. This section includes several notes and presentations that have been prepared over the years discussing ISO collateral policy as it relates to financial transmission rights and virtual bidding.
Scott Harvey, "Virtual Bidding Collateral," June 5, 2023 filed in Docket ER23-1307.
Scott M. Harvey, "Analysis of TCC Credit Policy Background," May 21, 2007.