Gatekeeper of Risk: The ISO's Forgotten Function?

 

Seven steps for evaluating how well the ISO manages credit standards for its members.

To date, the power industry has viewed independent system operators (ISOs) as tariff supported, non-profit organizations that pose little to no credit risk, but that assumption deserves a second look.

Especially, as these agencies grow in number and membership, and trade greater volumes of electricity, the credit standards applied for membership will become increasingly important.

The credit standards used should be of particular interest to large sellers of power, such as investor-owned utilities, that traditionally have significant receivables exposure. In this regard, the ability to effectively evaluate the standards applied, including the level of daily oversight, is of paramount importance. This point is further reinforced by the fact that public rating agencies such as Standard & Poor's, Moody's Investors Service, and Duff & Phelps do not yet evaluate the credit risk of the ISOs.