[Federal Register Volume 86, Number 35 (Wednesday, February 24, 2021)]
[Notices]
[Pages 11278-11281]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-03730]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket Nos. AD21-6-000; AD20-6-000]


RTO/ISO Credit Principles and Practices; Credit Reforms in 
Organized Wholesale Electric Markets Supplemental Notice of Technical 
Conference

    As first announced in the Notice of Technical Conference issued in 
this proceeding on November 4, 2020, the Federal Energy Regulatory 
Commission (Commission) will convene a staff-led technical conference 
in the above referenced proceeding on Thursday,

[[Page 11279]]

February 25, 2021 from 9:00 a.m. to 5:00 p.m. and Friday, February 26, 
2021 from 9:00 a.m. to 1:00 p.m. Eastern Time. The conference will be 
held electronically and broadcast on the Commission's website. 
Commissioners may attend and participate. This conference will discuss 
principles and best practices for credit risk management in organized 
wholesale electric markets.
    We note that discussions at the conference may involve issues 
raised in proceedings that are currently pending before the Commission. 
These proceedings include, but are not limited to:

DC Energy, LLC v. PJM Interconnection, L.L.C., Docket No. EL18-170;
Shell Energy North America (US), L.P., Docket No. EL20-49;
PJM Interconnection, L.L.C., Docket No. ER21-520;
ISO New England Inc., New England Power Pool Participants Committee, 
Docket No. ER21-816;
Midcontinent Independent System Operator, Inc., Docket No. ER21-920.

    Attached to this Supplemental Notice is an agenda for the technical 
conference, which includes the final conference program and speakers. 
The conference will be open for the public to attend. Registration for 
the conference is not required, however members of the public may 
preregister online at: https://ferc.webex.com/ferc/onstage/g.php?MTID=e2b36f2a0411532188b8cd973144668ff. Anyone who registers by 
Monday, February 22, 2021 will be given instructions on how to access 
the event. Information on the technical conference will also be posted 
on the Calendar of Events on the Commission's website, http://www.ferc.gov, prior to the event. The conference will be transcribed. 
Transcripts of the conference will be available for a fee from Ace-
Federal Reporters, Inc. (202-347-3700).
    For more information about this technical conference, please 
contact:

Michael Hill (Technical Information), Office of Energy Policy and 
Innovation, (202) 502-8703, <a href="/cdn-cgi/l/email-protection#8ec3e7ede6efebe2a0c6e7e2e2cee8ebfceda0e9e1f8"><span class="__cf_email__" data-cfemail="5a173339323b3f3674123336361a3c3f2839743d352c">[email protected]</span></a>.
Sarah McKinley (Logistical Information), Office of External Affairs, 
(202) 502-8004, <a href="/cdn-cgi/l/email-protection#8ddeecffece5a3c0eee6e4e3e1e8f4cdebe8ffeea3eae2fb"><span class="__cf_email__" data-cfemail="65360417040d4b28060e0c0b09001c25030017064b020a13">[email protected]</span></a>.

    Dated: February 10, 2021. .
Kimberly D. Bose,
Secretary.

RTO/ISO Credit Principles and Practices Technical Conference

Docket Nos. AD21-6-000 and AD20-6-000

February 25-26, 2021

Agenda and Speakers
Day 1--Thursday, February 25, 2021
9:00 a.m.-9:15 a.m.: Welcome and Opening Remarks
9:15 a.m.-10:45 a.m.: Panel 1: Credit Principles and Practices in RTO/
ISO Markets
    Scott Miller, Principal, Whitehall Bay Energy Services
    Bob Wasserman, Chief Counsel, Division of Clearing and Risk, U.S. 
Commodity Futures Trading Commission
    Vince Kaminski, Professor in the Practice of Energy, Rice 
University
    Geoffrey Harris, Knowledge Leader II, Federal Reserve Bank of 
Chicago
    Erik Heinle, Assistant People's Counsel, Office of the People's 
Counsel for the District of Columbia
    Ted Thomas, Chairman, Arkansas Public Service Commission

    This panel will explore the fundamental principles underlying 
credit risk management and the panelists' understanding of how those 
principles are applied within RTO/ISO markets. Panelists will discuss 
how credit risk is managed and regulated in other industries and 
whether any best practices can be applied to the RTO/ISO markets. This 
panel will also discuss the RTO/ISO credit policy requirements set 
forth in Order No. 741 \1\ and whether there is a need for the 
Commission to update those requirements. The panel may include a 
discussion of the following topics and questions:
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    \1\ Credit Reforms in Organized Wholesale Electric Markets, 
Order No. 741, 133 FERC ] 61,060 (2010), order on reh'g, Order No. 
741-A, 134 FERC ] 61,126 (2011), reh'g denied, Order No. 741-B, 135 
FERC ] 61,242 (2011).
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    1. What is credit risk and who bears the credit risk in RTO/ISO 
markets? How can RTOs/ISOs better understand and minimize the credit 
risk that their market participants pose?
    2. What are the key components of an effective credit policy? What 
principles and best practices of credit risk management are applicable 
to RTO/ISO markets?
    3. What impact has Order No. 741 had in reducing credit risk? Are 
there aspects of credit policy beyond those addressed by Order No. 741 
which should be explored? Are there areas where the Commission can and 
should provide additional guidance or regulations to mitigate credit 
risk?
    4. What types of credit structures or market designs (in terms of 
moving some products to financial exchanges or central clearing 
parties, increasing mark-to-market frequency, collateral practices, 
liquidity) could be set up to reduce the likelihood that non-defaulting 
market participants bear the costs of a market participant defaulting? 
How would such structures or designs affect participants' access to the 
markets?

10:45 a.m.-11:00 a.m.: Break
11:00 a.m.-12:30 p.m.: Panel 2: RTO/ISO Comparison of Risk Management 
Structure, Credit Enhancements and Lessons Learned
    Ryan Seghesio, Vice President, Chief Financial Officer and 
Treasurer, California ISO
    Scott Smith, Director of Treasury and Risk Management, Southwest 
Power Pool
    Melissa Brown, Senior Vice President and Chief Financial Officer, 
Midcontinent ISO
    Nigeria Bloczynski, Chief Risk Officer, PJM Interconnection, LLC
    Sheri Prevratil, Manager of Corporate Credit, New York ISO

    This panel will compare and contrast the risk management 
structures, credit practices, and recent credit enhancements 
implemented by the RTOs/ISOs. This panel will present an overview of 
each RTOs'/ISOs' experience in managing credit risk and will allow the 
panelists to ask questions of one another to facilitate the exchange of 
best practices. The panel may include a discussion of the following 
topics and questions:
    1. How is the risk management function in your RTO/ISO structured? 
What are the tools and resources (in terms of personnel, data, 
software, etc.) your risk department uses to implement the RTO's/ISO's 
credit policy? How do you evaluate a new or existing market 
participant's risk of default? When and how do you communicate with 
market participants to obtain information or to convey credit concerns? 
To what extent do you communicate with other departments within the 
RTO/ISO regarding credit risk concerns in the RTO/ISO markets?
    2. To what extent does the RTO/ISO need discretion to implement its 
credit policy to protect the markets from the risk of market 
participant defaults? Does your RTO/ISO currently have such discretion? 
How should this discretion be balanced with the need to ensure non-
discriminatory treatment of market

[[Page 11280]]

participants? What remedies, if any, do you currently have available to 
market participants suspended or rejected for posing an unreasonable 
credit risk to the RTO/ISO markets?
    3. What significant enhancements has your RTO/ISO made to its 
credit policy in recent years? What tools and resources did it require 
to implement these enhancements? What lessons has your risk department 
learned in implementing these enhancements? What would you recommend to 
other RTOs/ISOs considering similar enhancements?
    4. Do certain RTO/ISO products (such as virtuals) or aspects of 
market design pose greater credit risk than others? How, if at all, 
have recent market design changes impacted the credit risk in the RTO/
ISO markets, particularly the Financial Transmission Rights (FTR) 
markets (e.g., limiting the available FTR contract paths, altering the 
FTR capacity available at auction, or changing the frequency of long-
term FTR auctions)? To what extent is the risk department involved in 
discussions of market design changes?
    5. What Know Your Customer protocols do RTOs/ISOs have in place, 
and are they adequate? Are RTOs/ISOs able to share information with one 
another to assist in implementing Know Your Customer protocols? Have 
market participants indicated concerns about such information sharing 
(within the RTO/ISO departments, and with other RTOs/ISOs) and if so, 
how have they been addressed? Are there barriers or rules the 
Commission should modify to facilitate the exchange of information 
among RTOs/ISOs? If not, are there ways that information could be 
shared securely and confidentially? What impact, if any, would the 
sharing of additional information have on the mitigation of credit 
risk? What concerns exist for the confidential treatment of information 
and how could those concerns be addressed? Who is best positioned to 
address those concerns?

12:30 p.m.-1:30 p.m.: Lunch
1:30 p.m.-3:00 p.m.: Panel 3: Internal Resources and Expertise within 
RTOs/ISOs
    Robert Anderson, Executive Director, Committee of Chief Risk 
Officers
    Melissa Brown, Senior Vice President and Chief Financial Officer, 
Midcontinent ISO
    Nigeria Bloczynski, Chief Risk Officer, PJM Interconnection, LLC
    Morgan Davies, Executive Director, Alliance Risk Group
    KC Cloyd, Former VP of Commercial Credit, Exelon

    This panel will (1) address what internal resources and expertise 
are needed for the RTOs/ISOs to protect their markets and market 
participants from defaults, and (2) explore best practices for 
efficiently building expertise on credit risk management. The panel may 
include a discussion of the following topics and questions:
    1. What are key principles for the organization and governance of 
risk management departments, and how should those principles be applied 
to the RTOs/ISOs?
    2. Are there best practices such as minimum experience 
requirements, training, or certifications that RTOs/ISOs should 
consider that ensure their risk departments have sufficient staff, 
training, and resources to identify and mitigate credit risks 
efficiently and effectively? What are the key responsibilities of staff 
and management in the risk departments of RTOs/ISOs?
    3. What data and technological systems do the RTOs/ISOs need to 
manage risk? How often are the efficiency and effectiveness of these 
systems assessed?
    4. How frequently should the risk departments communicate with 
other departments within the RTO/ISO? Should the risk departments at 
one RTO/ISO communicate with the other RTOs/ISOs? What communication 
protocols are currently in place to elevate concerns regarding risk? Is 
there a need for additional protocols or standards for sharing data 
among the RTOs/ISOs, and if so who should be responsible for setting 
those standards? Have market participants indicated concerns about such 
information sharing (within the RTO/ISO departments, and with other 
RTOs/ISOs) and if so, how have they been addressed?
    5. Are there any additional resources that RTOs/ISOs should obtain 
or practices they should adopt to help reduce the risk of defaults?

3:00 p.m.-3:15 p.m.: Break
3:15 p.m.-4:45 p.m.: Panel 4: Impact of Market Design on Credit Risk
    Abram Klein, Managing Partner, Appian Way Energy Partners
    Keith Collins, Executive Director of Market Monitoring Unit, 
Southwest Power Pool, Inc.
    Scott Everngam, President, Blue Horseshoe Energy, LLC
    Demetri Karousos, Chief Operating Officer, Nodal Exchange and Chief 
Risk Officer, Nodal Clear
    Ruta Skucas, Partner, Pierce Atwood LLP

    The purpose of this panel will be to discuss how market design 
impacts the credit risk in RTO/ISOs markets, particularly the FTR 
markets. This panel will highlight how RTOs/ISOs and market 
participants view the risk posed by different market products 
(including virtuals and FTRs with different contract lengths, 
locations, auction calendars, and tenors) and how this helps shape the 
credit policy of the market products. This panel will also discuss how 
differences between comparable market products shape credit policy 
differences between the RTOs/ISOs. The panel may include a discussion 
of the following topics and questions:
    1. How do differences in market design across RTOs/ISOs shape 
credit risk and policies among similar market products? What role does 
a market products' liquidity play in shaping the credit risk in RTO/ISO 
markets?
    2. How can market design minimize credit risk? To what extent 
should the consideration of potential market design changes consider 
the impact of such changes on credit risk? How should the RTO/ISO 
credit policies and market design strike an appropriate balance between 
protecting their markets from defaults while also ensuring sufficient 
competition and ease of entry?
    3. Could greater coordination with the risk department within an 
RTO/ISO during the market design process help to reduce the overall 
risk in the markets?
    4. What are potential benefits and drawbacks to the RTOs/ISOs and 
to market participants with third party clearing of FTRs? What are the 
potential benefits and drawbacks of the RTO/ISOs clearing financially 
settled products using a model similar to those used by other 
exchanges?

Day 2--Friday, February 26, 2021
9:00 a.m.-9:15 a.m.: Opening Remarks
9:15 a.m.-10:45 a.m.: Panel 5: Addressing Counterparty Risk: Minimum 
Participation Requirements and Know Your Customer Protocols
    Andrew Stevens, Managing Director, DC Energy
    Eric Twombly, Principal, Devon Solutions LLC
    C.J. Polito, Partner, Sidley Austin LLP
    Lauren David, Director of Credit and Collateral Management, Exelon 
Corporation
    Noha Sidhom, CEO, Viribus Fund LP

    This panel will address how RTOs/ISOs understand and address the 
counterparty risks of market participants through minimum 
capitalization requirements, creditworthiness documentation, RTO/ISO 
review processes and Know Your Customer protocols. In particular, this 
panel will discuss whether minimum

[[Page 11281]]

participation requirements create undue burdens for market 
participants, and whether increased or decreased uniformity in such 
requirements would be beneficial. This panel will provide an overview 
of the tools available to RTOs/ISOs to conduct and proactively manage 
counterparty risk, as well as best practices and opportunities for 
increased efficiency. Additionally, the panel will explore 
opportunities for increased information sharing across RTOs/ISOs, as 
well as RTO/ISO authority and burden. The panel may include a 
discussion of the following topics and questions:
    1. What is the fundamental purpose of minimum capitalization 
requirements? Are the barriers to entry created by current minimum 
capitalization requirements commensurate with a reduction in risk to 
the RTO/ISO markets?
    2. How, if at all, should minimum capitalization differ for 
different types of market participants, either based on their structure 
or on the RTO/ISO markets in which they participate? How, if at all, 
should minimum capitalization levels scale with the size of a market 
participant's portfolio? Should a market participant's participation in 
another RTO/ISO affect minimum capitalization requirements? Should 
different market products have different minimum capitalization 
requirements?
    3. What are current best practices for Know Your Customer 
protocols? Are there tools and practices available that the RTOs/ISOs 
should consider adopting? Are different practices needed for different 
market products or for different types of market participants based on 
type of entity, ownership structure, or business strategy? Are tools 
specific to the RTOs/ISOs necessary or would commercially available, 
off-the-shelf tools be adequate?
    4. What burden does the Know Your Customer process pose on market 
participants? Are there ways the RTOs/ISOs could make the Know Your 
Customer process more efficient without reducing its effectiveness?
    5. What level of discretion should all RTOs/ISOs have to reject or 
suspend a market participant based on information discovered during 
initial or periodic reviews of a market participant's risk? How should 
this be balanced against market participants' rights?

10:45 a.m.-11:00 a.m.: Break
11:00 a.m.-12:30 p.m.: Panel 6: Collateral, Initial and Variation 
Margining for FTR and non-FTR positions
    J.C. Kneale, Vice President for North American Natural Gas, Power, 
NGL, and LNG Markets, Intercontinental Exchange Inc.
    Rafael Martinez, Senior Financial Risk Analyst, U.S. Commodity 
Futures Trading Commission
    Robert Marsh, Chief Operating Officer, Monolith Energy Trading
    Kenneth Schisler, Vice President of Regulatory and Government 
Affairs, CPower Energy Management
    Sam Siegel, Associate General Counsel and VP of Regulatory 
Compliance for Trading and Generation, Vistra Corp
    Ryan Seghesio, Vice President, Chief Financial Officer and 
Treasurer, California ISO

    The purpose of this panel will be to explore the principles 
underlying initial margin (the initial amount of collateral required to 
enter into a contract) and variation margin (the change in collateral 
required as the value of a contract changes over time) and how RTOs/
ISOs apply these principles to the markets they administer, 
particularly to FTR markets. This panel will highlight the key 
differences in FTR credit practices, as well as recent changes in FTR 
credit policy. The panel may include a discussion of the following 
topics and questions:
    1. What are basic principles underlying initial and variation 
margin and how are they applied in the RTO/ISO markets? Do current RTO/
ISO practices adhere to general principles for setting initial and 
variation margin? Are there any metrics and assumptions (e.g. 
collateral confidence levels and re-assessment/true-up intervals, and 
position closeout assumptions) that should be examined to see how well 
RTO/ISO practices ensure that initial and variation margin levels are 
adequate?
    2. What are some of the best practices in terms of measuring a 
market participant's FTR portfolio's anticipated exposure? What are the 
potential benefits and downsides of using Mark-to-Auction collateral 
requirements, incorporating future transmission changes into models, or 
other methods of incorporating forward-looking price information into 
FTR collateral requirements? Should all the RTOs/ISOs consider 
implementing minimum collateral requirements for FTRs?
    3. How long should collateral be held by the RTOs/ISOs? Do any 
RTOs/ISOs hold collateral longer than necessary or not long enough to 
adequately protect their markets from the risk of market participant 
defaults?
    4. Are the forms of collateral currently accepted by the RTOs/ISOs 
sufficient? What are benefits and drawbacks of RTOs/ISOs accepting 
surety bonds as a form of collateral? What must an RTO/ISO consider 
when determining whether to accept surety bonds as a form of 
collateral?

12:30 p.m.-12:45 p.m.: Closing Remarks

[FR Doc. 2021-03730 Filed 2-23-21; 8:45 am]
BILLING CODE 6717-01-P


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