ISDA has prepared this brief summary of frequently asked questions to assist in your consideration of the 2011 ISDA Cinergy Hub Protocol (the "Protocol").
THIS FREQUENTLY ASKED QUESTIONS DOES NOT PURPORT TO BE AND SHOULD NOT BE CONSIDERED A GUIDE TO OR AN EXPLANATION OF ALL RELEVANT ISSUES OR CONSIDERATIONS IN CONNECTION WITH THE PROTOCOL. PARTIES SHOULD CONSULT WITH THEIR LEGAL ADVISERS AND ANY OTHER ADVISER THEY DEEM APPROPRIATE PRIOR TO USING OR ADHERING TO THE PROTOCOL. ISDA ASSUMES NO RESPONSIBILITY FOR ANY USE TO WHICH ANY OF ITS DOCUMENTATION OR OTHER DOCUMENTATION MAY BE PUT.
Adherence Letter Submission Process
When do I need to send in my Adherence Letter?
The Protocol opens for adherence on Monday, December 12, 2011 and closes at 12:00 noon New York City time on Friday, December 23, 2011. ISDA reserves the right to reopen the Protocol for a subsequent adherence period.
How do I send in my Adherence Letter?
All Adherence Letters must be delivered by email to CinergyHubprotocol@isda.org. In the email, you must submit both your conformed and executed copies of the Adherence Letter.
The Adherence Letter(s) should be on your firm's letterhead. Nothing in the form Adherence Letter available on ISDA's website may be changed with the exception of completing the details of your firm name, date and signature block.
You are not required to send your original Adherence Letter(s) by mail to ISDA.
What is a “conformed copy”?
A conformed copy of the Adherence Letter means that the name of the authorized signatory (for example, Patricia Smith) is typed rather than having Patricia Smith’s actual signature on the letter. ISDA only posts on its website the conformed copy of all Adherence Letters.
You must also submit an executed, or signed, copy of the Adherence Letter in addition to the conformed copy of the Adherence Letter. ISDA keeps the executed copy of the Adherence Letter for its files and does not share the executed copy with anyone else.
Who is an authorized signatory?
An authorized signatory to the Adherence Letter is an individual who has the legal authority to bind the adhering firm.
What if I am an investment or asset manager – how do I complete the signature block?
If you are an investment or asset manager and act on behalf of multiple funds, you must indicate the following in the signature block: "Investment/Asset Manager, acting on behalf of the funds and accounts listed in the relevant Master Agreement between it and another Adhering Party". A separate Adherence Letter for each fund or account does not need to be submitted to ISDA. Further, no specific names of clients of the investment/asset manager will be publicly disclosed on the ISDA website in connection with the Protocol.
Can I change the text of the Adherence Letter?
No. The Adherence Letter must be in the same format as the form letter published in the 2011 ISDA Cinergy Hub Protocol. You may obtain a copy of the form Adherence Letter by visiting the ISDA website, www.isda.org and clicking on "2011 ISDA Cinergy Hub Protocol" and then clicking on "Form of Adherence Letter".
Does it cost any money to adhere to the Protocol?
Who Should Use the Protocol?
Any company with an active derivatives business, whether or not it is an ISDA Member, should strongly consider using the Protocol. The Protocol is open to both ISDA Members and non-Members.
No Right of Revocation
Can I revoke my participation in the Protocol?
No. Once an Adherence Letter has been accepted by ISDA, an Adhering Party is bound by all amendments with other parties that have adhered to the Protocol.
You can, however, bilaterally agree to amend your Covered Master Agreement with your counterparty (the other Adhering Party) in accordance with Section 5(b) of the Protocol, and any such subsequent amendments will supersede those made by the Protocol to the extent that they are inconsistent.
DETAILS RELATING TO THE PROTOCOL
What does the Protocol do?
The Protocol consists of the following three Amendments:
- No Market Disruption Event. The purpose of this amendment is to confirm that the transition of Duke Energy Ohio, Inc. (Duke Ohio) and Duke Energy Kentucky, Inc. (Duke Kentucky) from the Midwest Independent System Operator, Inc. (MISO) to the PJM Interconnection, LLC (PJM) and resulting transition of the EP Nodes (as defined in the MISO tariff) formerly comprising Cinergy Hub from MISO to PJM will not result in a "Price Source Disruption", a "Material Change in Formula" or any other "Market Disruption Event" or "Additional Market Disruption Event", each as defined in the Commodity Definitions, under Covered Transactions (as defined in the Protocol).
- Modification to Delivery Point for Physically-Settled Covered Transactions. This amendment enables parties to a physically-settled Covered Transaction that references Cinergy Hub in the definition of the Delivery Point to (i) replace references to Cinergy Hub with a reference to Indiana Hub, and (ii) replace any reference to a price published by MISO (or any other exchange, publication or data source) in respect of Cinergy Hub in the definition of Contract Price with the corollary price published by MISO (or any other exchange, publication or data source) in respect of Indiana Hub, in either case, in respect of deliveries to be made on and after the Transition Date.
- Modification to Commodity Reference Price/Floating Price for Cash-Settled Covered Transactions. This amendment enables parties to a cash-settled Covered Transaction that references a price published by MISO (or any other exchange, publication or data source) in respect of Cinergy Hub to replace any reference to such price with the corollary price published by MISO (or any other exchange, publication or data source) in respect of Indiana Hub in respect of calculations to be made on and after the Transition Date.
Who drafted the Protocol?
The Protocol is the result of extensive discussions that have involved members of ISDA’s Energy, Commodities & Developing Products Committee, ISDA Commodity Operations Working Group and the Edison Electric Institute’s Contract Drafting Committee. As with all ISDA documentation initiatives, the goal of the project was to produce standardized terms that have been reviewed and commented on by many different market participants reflecting different market perspectives.