Financial Transmission Rights (FTRs), Auction Revenue Rights (ARRs) & Qualified Upgrade Awards (QUAs)

Transcription

1 Financial Transmission Rights (FTRs), Auction Revenue Rights (ARRs) & Qualified Upgrade Awards (QUAs) John Lally, Senior Engineer Market Administration

2 Agenda FTR Basics FTR Auction FTR Settlement ARRs 2

3 FTRs The Basics

4 Purpose of FTRs Congestion A condition that occurs when insufficient transfer capacity is available to implement all of the preferred schedules for electricity transmission simultaneously. Causes: Insufficient transmission capacity, increased electricity demand, outages, maintenance. 4

5 Purpose of FTRs Congestion causes a non-zero LMP congestion component No Congestion LMP Components Energy Congestion Losses LMP Maine New Hampshire Vermont NE Mass SE Mass WC Mass Rhode Island Connecticut Internal Hub Congestion LMP Components Energy Congestion Losses LMP Maine New Hampshire Vermont NE Mass SE Mass WC Mass Rhode Island Connecticut Internal Hub

6 Purpose of FTRs To protect against Congestion costs an entity can obtain a Financial Transmission Right (FTR) from Point A to Point B. FTR is valued by subtracting Source A s DAM LMP Congestion Component (CC) from Sink B s DAM LMP CC. The entity obtains an FTR through a monthly or annual auction held through ISO-NE. The entity submits a bid for a specific path at a specific price. If the bid is selected in the FTR auction it is awarded an FTR on that path. A B 6

7 FTR Risks? Decision to seek FTRs requires a forward view of the market and an understanding of expected power flows through the transmission network under various topologies and patterns of load and dispatch Significant losses can accrue by making poor decisions in the FTR market 7

8 FTR Training Requirements Prior to participating in the FTR Market, each company must have at least one individual complete ISO sponsored FTR training including: Wholesale Electricity Markets - Intermediate (WEM 201) Wholesale Electricity Markets - Advanced (WEM 301) FTRs, ARRs & QUAs Web-based training The Web-based FTR training is located on the ISO Web at: Support > Training > Course Materials > Financial Transmission Rights The FTR training is a requirement of the ISO s Financial Assurance Policy. 8

9 FTR Benefit or Liability LMP Components Energy Congestion Losses Congestion Benefit Sink Price - Source Price = Positive Value Congestion Liability LMP Maine New Hampshire Vermont NE Mass SE Mass WC Mass Rhode Island Connecticut Internal Hub Highgate Phase I/II New Brunswick Cross Sound Cable Cable NY Northern AC Sink Price - Source Price = Negative Value 9

10 FTR Benefit or Liability LMP Components Energy Congestion Losses $4.52/MW - (-$3.84/MW) = $8.36/MW -$2.33/MW - $5.44/MW = -$7.77/MW LMP Maine New Hampshire Vermont NE Mass SE Mass WC Mass Rhode Island Connecticut Internal Hub Highgate Phase I/II New Brunswick Cross Sound Cable Cable NY Northern AC Congestion Benefit Congestion Liability 10

11 FTR Benefit or Liability Benefit Liability Awarded FTR Path Awarded FTR Path Maine Source (Injection) Connecticut Source (Injection) -$3.84/MW $5.44/MW Congestion Congestion Vermont Sink (Withdraw) SEMASS Sink (Withdraw) $4.52/MW -$2.33/MW $4.52/MW (-$3.84/MW) = $8.36/MW -$2.33/MW - $5.44/MW = -$7.77/MW 11

12 Valuation of FTRs in Day-Ahead Market Determine the Path Price of the following FTRs: Path for FTR NH-CT is from NH (source) to CT (sink). FTR NH-CT = = $7.63/MW FTR RI-HUB = = $4.09/MW Determine the Hedge Provided by 10 MW of this FTR: FTR HUB-CT = ($ 5.44 /MW - $ 0.27 /MW) x 10 MW = $

13 FTR Auction

14 FTR Auction Calendar Home > Markets > Other Markets Data > Financial Transmission Rights > FTR Auction Calendars 14

15 Auction Business Rules ISO-NE Auction Assumptions Posting, including: Power flow model with transmission system impedances, ratings Transmission Facility Outages Interface Definitions and Limits Other information relevant to Auction Posted on FTR Market page (link from eftr) 15

16 eftr Internet-based application Allows eligible FTR Bidders and FTR Holders to participate in ISO New England s FTR Auction and Secondary Market 16

17 FTR Bids/Offers Quote Buy bid (charge per bid) Sell offer MW quantity (minimum quantity is 0.10 MW) Dollar value per MW (for the Auction period) Class On-Peak Hours ending 08:00 through 23:00 on weekdays Off-Peak Hours ending 24:00 through 07:00 on weekdays Hours ending 01:00 through 24:00 on weekends and NERC holidays FTR path (from a Source to a Sink Location) Between any two locations Any Node, Zone, or the Hub 17

18 Auction Business Rules FTR Customer Satisfy Financial Assurance An FTR must be owned for entire period to submit an offer to sell. A bid to purchase is deemed a bid to purchase that MW amount or less for less than or equal to the bid price. An offer to sell is deemed an offer to sell that MW amount or less for greater than or equal to the offer price. Bids incur a charge. 18

19 FTR Auction Process

20 Auction Parameters Long-Term System Capability Time 50% 12 month Monthly System Capability Time 95% 1 month term Previously awarded (long-term) FTRs modeled as fixed injections and withdrawals in the monthly FTR Auction Transmission capability remaining after the long-term FTR Auction is available for bidding in the monthly FTR Auction 20

21 Winning Quotes Are... The set of simultaneously feasible FTRs with highest total Auction Bid Value Determined by bids of buyers and sell offers Reserve (maximum) prices of buyers respected Reserve (minimum) prices of sellers respected Transmission limits respected Normal limits during all lines in conditions Emergency limits during contingency analysis Minimum FTR Award is to a tenth of a megawatt Awarded FTRs incur a charge 21

22 Bid Selection and Binding Constraint $/MW $1000 FTR 25 MW $ Total MWs bid =

23 FTR Auction Clearing Prices FTR Auction Clearing Prices On Peak Period Off Peak Period Maine New Hampshire Vermont NE Mass SE Mass WC Mass Rhode Island Connecticut Internal Hub LD.HOLYOKE LD.SANDWICH LD.WESTBORO LD.YARMOUTH UN.LAKE_RD 21 LRD UN.MILSTONE24.0MIL UN.MYSTIC 18.1MYS UN.OCEAN_ST13.8OSP

24 FTR Auction Clearing Exercise Determine the Path Clearing Price of the following FTRs: On Peak FTR Mystic 8 Connecticut = = $577.07/MW Off Peak FTR HUB Southeastern Massachusetts = = $115.68/MW Determine the Price of a 10 MW Award for this FTR: On Peak FTR Maine Sandwich = ( ) x 10 = $ 13, Note: Path for FTR Maine Sandwich is from Maine (source) to Sandwich (sink). 24

25 FTR Settlement

26 FTR Funding FTR Holders / Congestion Revenue Fund DA Market + RT Market + - FTR Holder Obligations + FTR Holders Benefit - Settled at the end of the year Paid to: Under funded FTR holders Load Serving Entities 26

27 Monthly FTR Settlement Daily Summary Report Home > Markets > Other Markets Data > Congestion Revenue Summary 27

28 Auction Revenue Rights (ARRs) Overview

29 ARR Revenue Stream FTR Auction $ Qualified Upgrade Awards (QUA) Auction Revenue Rights (ARR) 29

30 Qualified Upgrade Awards (QUAs) Qualified Upgrade Awards (QUAs) New transmission upgrades that increase transfer capability New upgrades placed in-service as of March 1, 1997 Additional FTRs possible due to upgrade Award according to increased Auction Revenue QUAs are paid the value of FTRs cleared due to upgrade. Auction is rerun to determine the value of upgrades Awarded in proportion to cost responsibility 30

31 Auction Revenue Rights (ARR) ARRs are rights to receive FTR Auction Revenues from the sale of FTRs other than FTRs sold by FTR Holders Four-Stage Process Allocates ARRs (in MW) Load ratio share of all internal and external sources Special treatment of certain contracts Excepted Transactions and NEMA Contracts Resulting ARRs are simultaneously feasible ARR allocation consistent with congestion as determined by the FTR Auction 31

32 ARR Valuation: MW to $ ARRs to each node valued by FTR Auction Clearing Prices Values of ARR awards summed by Load Zone Apply proportional adjustment to achieve revenue neutrality (Four-Stage allocation is not revenue neutral) Distribute $ shares ET, NEMA $ distributed directly Load ratio share $ distributed in proportion to Real-Time Load Obligation (excluding External Sales) within each Load Zone at time of ISO New England coincident peak for month being settled 32

33 Questions 33