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Stakeholder Comment and Rationale Form

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					Stakeholder Comment and Rationale Form

AESO AUTHORITATIVE DOCUMENT PROCESS

Stakeholder Consultation Draft
2011-04-14

Proposed New ISO Rules Section103.3 “Financial Security Requirements”




 Date of Request for Comment [yyyy/mm/dd]:          2011/04/14
                                                                                                  Contact:    Company Contact
 Period of Consultation [yyyy/mm/dd]:       2011/04/14       through 2011/05/06
                                                                                                  Phone:      Contact Phone Number
 Comments From:          Company Name
                                                                                                  E-mail:
 Date [yyyy/mm/dd]:


Listed below is the summary of changes for the proposed new, removed or amended sections of the ISO rules. Please refer back to the Letter of Notice under the “Attachments to Letter of Notice”
section to view the proposed content changes to the ISO rules. Please place your comments / reasons for position underneath (if any).

1. ISO Rules Definitions                                                             Stakeholder Comments and/or Alternate Proposal            AESO Replies
  (a) New                                                                            Comment # 1: Insert Comments / Reason for Position (if
                                                                                     any)
  “Package 8” ISO Rule Definition Changes, containing new ISO rules definitions,
  are being consulted on concurrently with proposed New Financial Rules. Click
  here to view the Letter of Notice for the “Package 8” ISO Rules Definition
  Changes.

  (b) Removals                                                                       Comment # 2: Insert Comments / Reason for Position (if
                                                                                     any)
  “Package 8” ISO Rule Definition Changes, containing ISO rules definitions
  proposed for removal, are being consulted on concurrently with proposed New
  Financial Rules. Click here to view the Letter of Notice for the “Package 8” ISO
  Rules Definition Changes.

  (c) Amendments                                                                     Comment # 3: Insert Comments / Reason for Position (if
                                                                                     any)
  “Package 8” ISO Rule Definition Changes, containing ISO rules definitions
  proposed for amendment, are being consulted on concurrently with proposed


Issued for Stakeholder Consultation: 2011-04-14                                                                                                                                 Page 1 of 8
  New Financial Rules. Click here to view the Letter of Notice for the “Package 8”
  ISO Rules Definition Changes.




2. ISO Rules                                                                              Comments                                                 AESO Replies
  (a)   New                                                                               Comment # 4: Insert Comments / Reason for Position (if
                                                                                          any)
  Proposed new ISO rules Section 103.3 set out the financial assessment,
  obligations and security requirements for market participants obtaining services
  from the AESO. These requirements have been redrafted, consolidated and
  relocated from existing ISO rules Section 2, subsection 2.1 “Prudential
  Requirements” and ISO rules Appendix 3 “Pool Participant Prudential
  Requirements”.
  As well, and to be consistent with the AESO’s practice of managing credit and
  security on a portfolio basis, the AESO has included consideration of services
  provided under the ISO tariff and liquidated damages related to ancillary services
  agreements with the AESO in the requirements of proposed new ISO rules
  Section 103.3
  While the AESO considers certain services provided by it in managing credit and
  security on a portfolio basis in proposed new ISO rule 103.3, this approach does
  not impose any additional financial security requirements on market participants.
  Existing ISO rules Section 2, subsection 2.1 and Appendix 3 will be removed in
  their entirety once proposed new ISO rules Sections 103.3 and 103.7 come into
  effect.

  Subsection 1 - Applicability                                                            Comment # 5: Insert Comments / Reason for Position (if
                                                                                          any)
  This subsection specifies that proposed new ISO rules Section 103.3 applies to
  market participants and the AESO, and is a change from the previous
  applicability only to pool participants as specified in existing ISO rules Section 2,
  subsection 2.1 and Appendix 3. In the AESO’s opinion, the change in applicability
  from pool participants to market participants is appropriate and consistent with



Issued for Stakeholder Consultation: 2011-04-14                                                                                                                   Page 2 of 8
  the AESO’s current practices of managing credit on a portfolio basis with a
  market participant, who may have a number of separate relationships with the
  AESO, including as a pool participant and a system access service customer. .
  The AESO assesses credit risk and grants unsecured lines or requires financial
  security across the different energy market, transmission, ancillary services and
  connection project relationships. Therefore, in the AESO’s opinion, the change to
  market participant from pool participant is warranted.

  Subsection 2 - Provision of Financial Security                                          Comment # 6: Insert Comments / Reason for Position (if
                                                                                          any)
  This subsection requires a market participant to provide and maintain sufficient
  financial security to meet its entire portfolio of financial obligations to the AESO.
  Other than the requirement being applying to a market participant, this
  requirement in essence is a successor provision to existing ISO rules Section 2,
  subsection 2.1 and Appendix 3, Section 2.

  Subsection 3 – Determination of Financial Total Amounts                                 Comment # 7: Insert Comments / Reason for Position (if
                                                                                          any)
  This subsection requires the AESO to calculate financial obligations relating to
  the energy market, system access service, connection projects, ancillary services
  and any other services provided to market participants. While existing ISO rules
  Section 2 and Appendix 3 considers only the energy market transactions, it is the
  AESO’s practice to consider all services when determining the financial obligation
  amounts of a market participant. In the AESO’s opinion, it is appropriate to align
  the language in proposed new ISO rules Section 103.3 with current AESO
  practices.

  The financial obligations in proposed new ISO rules Section 103.3 relating to the
  energy market have been redrafted and relocated from existing ISO rules
  Appendix 3 Section 2.

  The financial obligations in proposed new ISO rules Section 103.3 relating to
  security for system access service makes reference to security in the amount
  equal to the estimate of charges for two settlement periods. This reference is
  consistent with the security requirement set out in the AESO’s proposed 2010
  ISO tariff and does not impose any additional security requirements.


Issued for Stakeholder Consultation: 2011-04-14                                                                                                    Page 3 of 8
  The financial obligations in proposed new ISO rules Section 103.3 relating to
  security for connection projects makes reference to security equal to the amount
  required under a Construction Commitment Agreement. This reference is
  consistent with the security requirement set out in the AESO’s proposed 2010
  ISO tariff and does not impose any additional requirements.

  The financial obligations in proposed new ISO rules Section 103.3 relating to
  ancillary services makes a general reference to the financial security under
  ancillary services agreements and does not impose any additional security
  requirements.
  As well, this subsection requires a market participant, registering as a pool
  participant under existing ISO rules Section 201.1 “Pool Participant Registration”,
  to provide an estimate of the net energy that will be consumed for two (2)
  consecutive settlement periods. This requirement has been redrafted and
  relocated from Appendix 3, Section 2. In the AESO’s opinion, and for clarity, the
  language specified in Appendix 3, Section 1 regarding the “two month estimate of
  net energy” is also a requirement for market participants registering to become a
  pool participant as well as mp already registered as a pool part. The AESO
  amended the language to create this clarity.

  Subsection 4 - Unsecured Credit                                                         Comment # 8: Insert Comments / Reason for Position (if
                                                                                          any)
  This subsection allows the AESO to grant unsecured credit to market
  participants. Other than referencing market participants rather than pool
  participants, this subsection is a successor to a provision currently within existing
  ISO rules Appendix 3, Section 2. For clarity the AESO has not amended the
  referenced acceptable credit rating agencies.

  Subsection 5 - Unsecured Credit Limit for Rated Entities                                Comment # 9: Insert Comments / Reason for Position (if
                                                                                          any)
  This subsection specifies the requirements under which the AESO may grant
  unsecured credit to rated entities. Other than referencing market participants
  rather than pool participants these requirements are successors to those
  specified in existing ISO rules Appendix 3, Section 3. For clarity, the AESO has
  not amended the credit ratings and the related unsecured credit limits.


Issued for Stakeholder Consultation: 2011-04-14                                                                                                    Page 4 of 8
  Subsection 6 - Unsecured Credit Limit for Non Rated Entities                            Comment # 10: Insert Comments / Reason for Position
                                                                                          (if any)
  This subsection specifies the requirements under which the AESO may grant
  unsecured credit to non-rated entities. As well, this subsection specifies the
  financial information requirements that a market participant must provide to the
  AESO. Other than referencing market participants rather than pool participants
  these requirements are successors to those specified in existing ISO rules
  Appendix 3, Sections 4 and 8. For clarity, the AESO has not amended the proxy
  credit ratings and the related unsecured credit limits, or the financial information
  requirements.

  Subsection 7 - Unsecured Credit for Parent, Subsidiary and Affiliated                   Comment # 11: Insert Comments / Reason for Position
  Companies                                                                               (if any)

  This subsection specifies the requirements under which a market participant who
  is a subsidiary company or affiliate of a rated parent company may make an
  application to the AESO for an unsecured credit limit, even though the parent
  company has a credit rating from a bond ratings agency that is acceptable to the
  AESO. As well, this subsection requires the AESO to grant the unsecured credit
  limit based on the lower of the parent company’s credit rating and the proxy
  credit rating for the market participant, and specifies that the AESO will only grant
  one universal unsecured credit limit to a group of parent company and affiliated
  entities. Other than referencing market participants rather than pool participants
  these requirements are the successors to those specified in existing ISO rules
  Appendix 3, Section 5.
  Subsection 8 - Acceptable Forms of Financial Security                                   Comment # 12: Insert Comments / Reason for Position
                                                                                          (if any)
  This subsection specifies the requirements for the various forms of security the
  AESO may accept. As well, this subsection allows the AESO to review the credit
  worthiness at any time after its initial approval and, as required, the market
  participant must provide additional or replacement financial security within two (2)
  business days. Other than referencing market participants rather than pool
  participants these requirements are the successors to those specified in existing
  ISO rules Section 2.1, subsection 2.1.2 and Appendix 3, Section 6. For clarity,
  the acceptable forms of security have not changed.


Issued for Stakeholder Consultation: 2011-04-14                                                                                                 Page 5 of 8
  Subsection 9 - ISO Review and Reassessment of Financial Security                         Comment # 13: Insert Comments / Reason for Position
  Adequacy                                                                                 (if any)

  This subsection allows the AESO the right to review and reassess the financial
  security and financial information to ensure that the market participant and any
  credit support provider continue to meet their financial obligations. As well, this
  subsection provides the AESO the option to notify the market participant, in
  writing, with regard to any change resulting from the review and reassessment,
  and, if notified, the market participant must provide any replacement or additional
  financial security within two (2) business days following receipt of the notification.
  This subsection further allows a market participant the right to request the AESO
  to review and potentially reduce the financial security held. These requirements
  are the successors to those specified in existing ISO rules Section 2, subsection
  2.1.2 and Appendix 3, Sections 4 and 9.

  Subsection 10 - Material Adverse Change                                                  Comment # 14: Insert Comments / Reason for Position
                                                                                           (if any)
  This subsection requires the market participant or the credit support provider to
  notify the AESO of a material adverse change having occurred or likely to occur.
  As well, this subsection requires the AESO to determine the impact of the
  material adverse change, whether additional financial security is required, and as
  necessary, make a written demand on the market participant specifying the dollar
  amount or form of the additional, restructured or replacement financial security
  required. Furthermore, if required, the market participant must satisfy those
  financial security requirements within two (2) business days following receipt of
  the notification. These requirements are the successors to those specified in
  existing ISO rules Appendix 3, Section 7.

  Subsection 11 - Costs and Expenses Related to Financial Security                         Comment # 15: Insert Comments / Reason for Position
                                                                                           (if any)
  This subsection requires the market participant to cover all costs and expenses
  with the implementation of financial security and any related obligations to
  securitize the AESO. These requirements capture the intent of ISO rules
  Appendix 3, Section 10.



Issued for Stakeholder Consultation: 2011-04-14                                                                                                  Page 6 of 8
  Subsection 12 - Confidential Financial Information                                  Comment # 16: Insert Comments / Reason for Position
                                                                                      (if any)
  This subsection requires the AESO to treat the market participant or credit
  support provider information and records as confidential in accordance with
  existing ISO rules Section 103.1 “Confidentiality”. These requirements are the
  successor to those specified in existing ISO rules Section 2, subsection 2.1.3.

  Other                                                                               Comment # 17: Insert Comments / Reason for Position
                                                                                      (if any)
  This AESO has not relocated the following provision from existing ISO rules
  Appendix 3, Section 4, as this provision is addressed in the Regulation Rate
  Option Regulation and therefore, in the AESO’s opinion, does not need to be
  duplicated in ISO rules.

  “Pool participants who are formed or operate under Acts of the Province of
  Alberta (other than the Business Corporations Act) may be granted an
  unsecured credit limit at the sole discretion of the ISO.”

  This requirement was intended to address the financial security requirements in
  the Regulated Rate Option Regulation, as specified below:
  REGULATED RATE OPTION REGULATION

  Financial security requirements
  21 A rural electrification association is exempt from the requirement to provide
  financial security, as determined under the ISO rules, in respect of the electric
  energy acquired by the rural electrification association to meet its obligations
  under its regulated rate tariff.

  The AESO has not relocated the authoritative provisions specified in existing
  Appendix 3, Section 4 regarding AESO discretion to grant an unsecured credit
  limit to pool participants who are formed or operate under Alberta statutes other
  than under the Business Corporations Act, as a rural electrification association,
  to which this provision was meant to apply, is exempt under the Regulated Rate
  Option Regulation. Therefore, these provisions, in the AESO’s opinion, do not
  need to appear in proposed New ISO Rules Section 103.3



Issued for Stakeholder Consultation: 2011-04-14                                                                                             Page 7 of 8
  (b)   Removals                                                               Comment # 18: Insert Comments / Reason for Position
                                                                               (if any)
  No ISO rules are being proposed for removal.




  (c)   Amendments                                                             Comment # 19: Insert Comments / Reason for Position
                                                                               (if any)
  No amendments to ISO rules are being proposed.


  (d)   Other (Stakeholders wishing to comment on specific provisions are      Comment # 20: Insert Comments / Reason for Position
        requested to copy the provision into this area and provide comments)   (if any)




Issued for Stakeholder Consultation: 2011-04-14                                                                                      Page 8 of 8

				
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