ARRs and FTRs MISO Training

Transcription

1 MISO Training Level 200 Auction Revenue Rights and Financial Transmission Rights Last material update: 07/09/2015

2 Course Content and Disclaimer 2 Course Description This is a Level 200 overview of MISO s Auction Revenue Rights and Financial Transmission Rights. The following slides present the concepts and processes of the registration and allocation of ARRs and valuation and acquisition of FTRs. This presentation is intended for those individuals seeking a more comprehensive understanding of MISO s Auction Revenue Rights and Financial Transmission Rights and the processes associated with these mechanism. It is not intended to expand into task-oriented detail on the concepts presented here. The next available training presentation on MISO s Auction Revenue Rights and Financial Transmission Rights is the Level 300 presentation, which includes a more task-based focus on the concepts, as well as expanded detail on this presentation s content. It will also include specific examples where applicable. Frequently used terminology, along with reference-links to MISO documentation and contacts, is included in this presentation. Notice The following training materials are intended for use as training materials only and are not intended to convey, support, prescribe or limit any market participant activities. These materials do not act as a governing document over any market rules or business practices manual. The data used in the examples is hypothetical data and should not be used to support market analyses.

3 Course Agenda 3 Level 200 Training Introduction Auction Revenue Rights (ARRs) Financial Transmission Rights (FTRs) Market Data Registration Allocation Obligations Valuation Acquisition Valuation Important Takeaways Reference Materials and Contacts

4 Introduction 4 Why Auction Revenue Rights and Financial Transmission Rights? Prior to the MISO markets: Firm transmission (network and pointto-point) service was sold for physical delivery Congestion costs implicit in the firm transmission service With the advent of MISO markets: Firm transmission service required for firm loads Congestion costs charged for scheduling Financial mechanisms provide a hedge against the congestion cost

5 Introduction 5 FTR & ARR Guiding Principles Participating Provide incentives to participate in the Day-Ahead market Price Transparency Efficiently price congestion hedges within/through MISO Creating Incentives Create incentives for new transmission capacity investments Hedging Process that allocates rights to ensure that LSE meet reasonable needs

6 Introduction 6 Auction Revenue Rights (ARRs) Why ARRs are financial instruments that entitle their holders to a share of the Auction revenue, which may then be used to offset cost of transmission congestion What ARRs entitle their holder to a share of the auction revenue (credit or charge) generated in the annual FTR Auction Who ARRs are allocated to Market Participants based on firm historical usage of the transmission network and Market Participants that have funded network upgrades How ARRs are acquired in the annual ARR allocation

7 Introduction 7 Financial Transmission Rights (FTRs) Why As transmission congestion occurs, LMPs vary and provide price signals for efficient market operations, creating uncertainty for MPs, especially in congested areas What FTRs enable their holder to hedge against the cost of congestion in the Day-ahead market Who ARR holders converting ARRs into FTRs Any Market Participant with creditworthiness can purchase FTRs How FTRs can be acquired in the Annual or Monthly Auctions Acquired as part of a new member integration for entities joining during the planning year Secondary market

8 Auction Revenue Rights 8 ARR Concepts ARRs are financial instruments, not physical rights Do not give owners the right to schedule physical use of the transmission system Independent of fees associated with transmission service reservations Hedging mechanism to manage the uncertainty of the cost of acquiring FTRs Entitles holder to revenue or charges based on the price of the FTR in the FTR auction Do not protect MPs from congestion charges in the Day- Ahead or Real-Time markets

9 Auction Revenue Rights 9 Path to an ARR Long Term Firm Transmission Service (NITS, PTP) Power Supply Arrangement (Unit Ownership, Contract) ARR entitlement from the resource to the ARR Zone Candidate ARR ARR Entitlement nominated in the Annual ARR Allocation ARR feasibility through Simultaneous Feasibility Test ARR Feasible ARRs awarded subject to transmission capacity availability

10 Auction Revenue Rights 10 Data Gathering and Annual ARR Registration Data Gathering ARR Registration Nomination for Allocation Establish Eligible Transmission Service Convert Transmission Services to ARR Entitlements Request Candidates for Allocation from ARR Entitlements Establish Sources (RSPs) Establish ARR Zones (Sinks) Determine Distribution of RSPs in a Zone Allocation of ARRs / FTRs

11 Auction Revenue Rights Registration 11 Year 1 Registration Data Gathering Prior to Phase 1 Market Participants Submit Spreadsheets with existing transmission service Market Participants Provide Historical transmission service information Capacity factors Scheduling factors MISO Determines Eligible NITS, PTP and GFA Transmission Services Qualified ARR Points of Delivery and Resources

12 Auction Revenue Rights Registration 12 PRSS, HUFU, and BRSS Peak Reserved Source Set All RSPs that do not qualify as BRSS or HUFU Can only be nominated in Stage 1B Baseload Reserved Source Set (BRSS) Subset of PRSS Capacity Factor requirement (50% or higher for three years) Can be nominated in any stage of the allocation High Utilization Factor Unit (HUFU) Subset of PRSS Any RSP with Utilization factor > 70%, but not BRSS Not eligible for nomination in stage 1A BUT can be assigned as counterflow

13 Auction Revenue Rights Registration 13 Data Gathering Establishes Transmission Services Eligible for ARR Allocation Based on Reference Year Establishes a qualified set of ARR Points of Delivery (sinks) and Resources (sources) Occurs at the time of the new member integration only Reference Year is used by MISO to determine the initial ARR Zones and ARR Entitlements Determines ARR Zones and Reserved Source Points (RSP) Determines which RSP are Baseload (BRSS) and which are Peak (PRSS) Annual ARR Registration is done annually prior to each annual ARR Allocation

14 Auction Revenue Rights Registration 14 ARR Zones and RSPs ARR Zones Geographic areas defined for the purpose of allocating ARRs Based on where MP served their load during the Reference Year Reserved Source Points (RSP) Generation Resources historically used by MPs to serve load in an ARR Zone Must be a valid CPNode and meet the Resource Qualification Requirements (RQR) ARR Zone RSP RSP RSP

15 Auction Revenue Rights Registration 15 Data Gathering Categories Depending on the terms on the NITS/PTP/GFA contract, ARR Zone representing its Point of Delivery (POD) will fall under one of two categories Category 1 ARR Zone will correspond to the Balancing Area(s) (BAs) specified in the NITS contract that existed during the Reference Year Example: SIGE.AZ Category 2 ARR Zone can be requested by an entity BA is split into multiple states Sink is a load zone or a subset of the load points of a Category 1 ARR Zone is specified in the contract Set of generation resources serving the load zone or load points is specified in the contract Example: SIGE.HEPM_1.AZ

16 Auction Revenue Rights Registration 16 RSP Qualification RSP Qualification described in Section 43.2 in Module C of the MISO Tariff Generation Resource Qualification Requirements Market Participant must have ownership interest in the unit or contract with the unit for Capacity & Energy Must be a Designated Network Resource with firm service Ownership or contract must be of at least 5 years Generation Resource Qualification Exception: If MW in PRSS is LESS than MPs baseload usage, then the time requirement is reduced from 5 years to 1 year

17 Auction Revenue Rights Registration 17 ARR Entitlement Validation For ARR nomination in the allocation process, Market Participants first register transmission entitlements for MISO to validate Network Integration Transmission Service Point-To-Point Transmission Service Grandfathered Agreements

18 Auction Revenue Rights Registration 18 ARR Registration Process Phase 1: Entitlement Validation and Signoff ARR Entitlement Definition (for GFA and PTP services) Phase 2: Asset Owner (AO) approval Phase 3: Network ARR Entitlement Definition

19 Auction Revenue Rights Registration 19 Updates to ARR Registration (Year 2+) Year 2+ Updates may include Load Shift RSP Additions/ Replacements/ Terminations New Point-to- Point Additions New Entitlements for Network Upgrades

20 Auction Revenue Rights Registration 20 ARR Registration - Phase 1: Validate TE, Define and Approve ARR Entitlements (AE) AE Source CPNode, Sink CPNode, MW Transmission Entitlements Source Area, Sink Area, MW AE Source CPNode, Sink CPNode, MW AE Source CPNode, Sink CPNode, MW

21 Auction Revenue Rights Registration 21 ARR Registration Phase 2: Asset Owner Approval AOs of the resources in the ARR Zones approve or reject usage TE approval required by all AOs If rejected by any AOs, TE is rejected

22 Auction Revenue Rights Registration 22 ARR Registration Phase 3: Network ARR Entitlement Definition MISO must ensure that the transmission system can support the set of ARRs, so Network ARR Entitlements will be calculated based on the following information: Usage of each Resource Capacity of the Resource associated with an ARR Zone Network ARR Entitlement Net Peak Load Forecast of the MP in an ARR Zone

23 Auction Revenue Rights Allocation 23 ARR Allocation Conducted in Stages Stage 1A Nominations Restoration Stage 1B Nominations Stage 2 Up to 50% of Peak Usage Processing of curtailed Stage 1A CARRs Up to 100% of Peak Usage No Nomination Candidate Baseload ARR Rights Processing of LTTR Termination Requests Candidate Peak ARR Rights Difference between Stage 1 Nominations Cap and ARRs MPs receive ARR Obligations in stages during the Annual ARR Allocation based on the nominations submitted by MPs and subject to simultaneous feasibility

24 Auction Revenue Rights Allocation 24 ARR Allocation Stage 1A ARRs allocated in Stage 1A are called Long-Term Transmission Rights (LTTRs) Nomination of ARR entitlements which have a source at a base loading resources (BRSS) Allocated Stage 1A ARRs are guaranteed for the next year s allocation, as long as they are nominated

25 Auction Revenue Rights Allocation 25 ARR Allocation Restoration Step LTTR Restoration Restoration of Market Participant s Stage 1A CARRs curtailed in its year 1 Annual ARR Allocation ( year 1 Stage 1A CARRs ) Restoration of candidate LTTRs curtailed in a Market Participant s year 2 and ensuing Annual ARR Allocations

26 Auction Revenue Rights Allocation 26 ARR Allocation Restoration Step LTTR Termination with Restoration Processing LTTR termination requests Terminate the LTTRs requested Restoring Stage 1A Candidate ARRs by allocating LTTRs Requesting Termination

27 Auction Revenue Rights Allocation 27 ARR Allocation 1B and 2 FTR Auction excess revenue is the dollar amount held by MISO after receiving and making payments associated to Bids and Offers cleared in the auction and Allocated ARRs Stage 1B Allows MPs to nominate up to 100% of their entitlements that are not already allocated in Stage 1A and Restoration Stage 2 Assignment of rights to a share of the excess FTR auction revenue based on each MPs unallocated eligible MW MPs that did not receive ARRs for their full allocation eligibility, will receive a share of the excess auction review

28 Auction Revenue Rights Allocation 28 Allocation of Incremental ARRs Fund Network Upgrades Incremental ARRs may be allocated

29 Auction Revenue Rights-Allocation 29 Three Round RSP Process Round 1: RSP Termination MPs may terminate an RSP corresponding to a retiring (or retired) Generation Resource or an expiring (or expired) long-term power purchase agreement (PPA) subject to termination eligibility rules Round 2: BRSS Addition/Replacement MPs may add a new BRSS RSP MPs may terminate an existing RSP and any associated ARR Entitlements, ARRs and LTTRs, and replace it with a new RSP Subject to eligibility rules and SFT process Round 3: PRSS Addition/Replacement MPs may add a new PRSS RSP MPs may terminate an existing RSP and any associated ARR Entitlements, ARRs and LTTRs, and replace it with a new RSP Subject to eligibility rules and SFT process

30 Auction Revenue Rights-Allocation 30 MVP and ARR Allocation for in-service facilities MVP ARR Allocation: Identify incremental capacity created by MVP upgrades MVP entitlement is created in each direction MVP ARR allocation is performed using most recent annual Stage 1B base case The resulting MVP ARRs are nominated in the next and future annual ARR Allocation Stage 1B MVP/ARR Basics MVP ARR Entitlements: MISO - Held MVP Rights results from the MVP ARR Allocation MISO fully nominates the MVP ARR Entitlements during next Annual ARR Allocation Stage 1B MVP ARRs: ARRs resulting from the nomination of MVP ARR Entitlements are subject to SFT MVP ARRs are not self-scheduled in the annual FTR Auction Settlement: Valued based on clearing prices from the corresponding Annual FTR Auction Positively valued MVP ARRs are settled MISO distributes that Month's share of the sum of the value of all MVP ARRs, pro rata, based on MVP allocation charges pursuant to the MVP-related schedules

31 Auction Revenue Rights 31 ARRs: convert to FTRs or not Options for ARR holders prior to the Annual FTR Auction MP converts awarded ARRs into an FTR MP does not convert awarded ARRs into an FTR Enables the ARR holder to hedge against the cost of acquiring the FTRs. The cost of acquiring the FTR and the revenues associated with the ARRs cancel out ARR holder entitled to the revenue associated with the ARR (credit or charge). These ARRs are valued using annual FTR Auction prices

32 Auction Revenue Rights 32 ARR Quick Facts Eligibility Firm historical usage of MISO Transmission System Fund Transmission Upgrades Procurement Annual ARR Registration Participation Source / Sink Source must be RSP Sink must be ARR Zone or Interface CPNode Settlement Monthly Settled on CPNode clearing price from Annual FTR Auction

33 Auction Revenue Rights Obligations 33 Allocated ARR Obligations ARR Obligations Held by Market Participants Do not represent a physical right for delivery Settled on clearing prices from Annual FTR auction

34 Auction Revenue Rights Obligations 34 An ARR Obligation is Defined by Delivery Point (ARR Sink) ARR MW Quantity ARR TOU (On-Peak/ Off-Peak) Receipt Point (ARR Source) ARR ARR Term

35 Auction Revenue Rights Valuation 35 ARR Valuation Prior to the Annual FTR Auction, the values of ARRs are unknown Value is determined based on the clearing prices in the Annual FTR Auction Can result in a charge or credit ARR values are set upon completion of the Annual FTR Auction for the entire planning year ARRs are allocated once a year, for eight different periods: Season (Summer, Fall, Winter, Spring) TOU (Peak, Off-peak) ARRs are settled on a monthly basis

36 Auction Revenue Rights Valuation 36 Valuation of ARRs Entitles holder to a share of revenue generated in the Annual FTR Auction Credit FTR auction price at the Source is greater than at the Sink Charge FTR auction price at the Source is less than at the Sink 36

37 Auction Revenue Rights Valuation 37 ARR Example Valuation of ARRs ARR Value = (Shadow Price Sink Shadow Price Source ) x ARR MW Auction Shadow Price at ARR Sink Auction Shadow Price at ARR Source ARR MW Example Charge ($10 - $5 ) * 10 = $50 Total Auction Shadow Price $5 ARR Receipt Point 10 MWs ARR Delivery Point Auction Shadow Price $10 Auction Shadow Price at ARR Sink Auction Shadow Price at ARR Source ARR MW Total Example Credit ($10 - $20 ) * 10 = $-100 Auction Shadow Price $20 ARR Receipt Point 10 MWs ARR Delivery Point Auction Shadow Price $10

38 Auction Revenue Rights Valuation 38 ARR Valuation ARR from A B for 10 MW that did not self schedule Entitled to $100 of revenue (Sink Source) * MW (5 15) * 10 MW = $ -100 (credit to MP) ARR from A B for 10 MW that decides to self schedule 10 MW into an FTR Revenue associated with the ARR is $100 (see above) Cost of acquiring that FTR is $100 Source Sink * MW (15 5) * 10 MW = $ 100 (charge to MP) Self- scheduling enables the holder of feasible ARRs to hedge against the cost of acquiring the FTR Source Node A Clearing Price = $15 ARR = 10 MW Sink Node B Clearing Price =$5

39 Auction Revenue Rights 39 ARR Hedging Exposed Hedged Over- Hedged ARR payments cover a portion of the cost of acquiring FTRs in the auction ARR payments exactly cover the cost of acquiring FTRs in the auction ARR payments exceed the cost of acquiring FTRs in the auction Exposed to FTR price uncertainty Net charges and uncertainty is zero MP ARR payments more than cover FTR price and congestion costs

40 Auction Revenue Rights 40 FTRs / ARRs are Awarded Through a Series of Processes The Monthly FTR Auction follows the Annual FTR Auction which follows the Annual ARR Allocation. Annual ARR Allocation MISO first runs a Simultaneous Feasibility Test (SFT) to award ARRs for all 4 seasons, Peak and Off-Peak Annual FTR Auction Auctions are conducted for Peak and Off-Peak for each of four seasons After the Annual FTR Auction, the Monthly FTR Auction is held Monthly FTR Auction

41 Financial Transmission Rights 41 FTR Usage Highlights Used to hedge congestion costs related to future transmission system use FTR FTRs are valued based on the congestion in the Day- Ahead Market

42 Financial Transmission Rights 42 FTR Quick Facts Eligibility Any MP meeting credit requirements Self scheduled ARRs Funding Network Upgrade Procurement FTR Auction Monthly Annual Secondary Market Source / Sink Source & Sink may be any valid CPNode Settlement Hourly Value (Daily Settled) Settled on CPNode MCCs from DA LMP

43 Financial Transmission Rights 43 FTR Obligations FTRs Held by MPs Do not represent a physical right for delivery Settle in the Day- Ahead Market only Provide a right to congestion credits (or charges)

44 Financial Transmission Rights Valuation 44 FTR Hedging There are three types of hedges, depending on the characteristics of the FTR Exposed FTR payments from MISO cover a portion of transmission congestion charges Hedged FTR payments from MISO exactly cover transmission congestion charges Over- Hedged FTR payments from MISO exceed transmission congestion charges Translates to being exposed to transmission congestion charges Net congestion charges and uncertainty is zero Translates to making profit from transmission congestion charges

45 Financial Transmission Rights 45 An FTR is Defined by Delivery Point (FTR Sink) FTR MW Quantity FTR TOU (Peak/Off- Peak) Receipt Point (FTR Source) FTR FTR Term

46 Financial Transmission Rights Acquisition 46 FTR Auctions FTR Auctions facilitate buying and selling FTRs FTRs Awarded for: Peak and Off- Peak Annual Auction Monthly Auction

47 Financial Transmission Rights Acquisition 47 FTR Auction Basics FTRs entered into an auction must be valid over the whole period of the auction Entire season for annual auction Entire month/season for monthly auction Participants buy from and sell to the available pool of system FTR capacity No direct FTR trades between sellers and buyers in the FTR Auction

48 Financial Transmission Rights Acquisition 48 FTRs in the Annual Auction Self-Scheduled ARRs are submitted in round 1, but awarded as transmission capacity is utilized in later rounds FTR Bids and Offers are submitted in each round Round 1 One third of available transmission capacity utilized Round 2 Half of available transmission capacity utilized Round 3 All remaining transmission capacity utilized

49 Financial Transmission Rights Acquisition 49 FTR Concepts: Objective of FTR Auction Determine winning bids (to buy) and offers (to sell) FTRs Maximize value of transmission system Cleared (buy) bids are higher or equal to the clearing price Cleared (sell) offers are lower or equal to the clearing price Subject to simultaneous feasibility MW limits on all monitored elements Accounting for already-taken transmission capacity

50 Financial Transmission Rights Acquisition 50 Simultaneous Feasibility Test Checks for revenue adequacy by ensuring that MISO s Transmission System can support the subscribed set of ARRs/FTRs during normal system conditions with defined contingencies Determines shadow price through: Allocation nominations Auction Demand curve economics Defined contingencies Monitored transmission elements Base case transmission model Components of the SFT Requested ARR/FTR data set and software model

51 Financial Transmission Rights Acquisition 51 FTR Bid or FTR Offer Source Sink Bid/Offer Curve ($/MW) FTR Bid or Offer Peak or Off-Peak Each MP may submit a maximum of 6,000 bids (buys and sells combined) per period in the MPMA, and 4,000 bids per season in the Annual Auction

52 Price Financial Transmission Rights Acquisition 52 FTR Offer Curve Example An Offer Curve for an offer to sell FTRs into the auction is nondecreasing Qty (MW) Price ($/MW) FTR Offer Curve $ / MWh MW Quantity Up to 100 MW will be sold Nothing sold if the clearing price of the offered path is under $15/MW Between 0 and 10 MW if the clearing price is $15 Between 10 and 50 MW if the clearing price is between $15 and $35 Between 50 and 75 MW if the clearing price is $35 Between 75 and 100 MW if the clearing price is between $35 and $ MW if the clearing price is $50 or more

53 Price Financial Transmission Rights Acquisition 53 FTR Bid Curve Example A Bid Curve for a bid to buy into the auction is non-increasing Qty (MW) Price ($/MW) FTR Bid Curve $ / MWh MW Quantity Up to 80 MW will be bought Nothing bought if the clearing price of the offered path is above $50/MW Between 0 and 10 MW if the clearing price is between $10 and $50 Between 10 and 30 MW if the clearing price is between -$15 and $10 Between 30 and 80 MW if the clearing price is below -$15 A negative clearing price represents a payment to the buyer

54 Financial Transmission Rights-Acquisition 54 FTR Secondary Market FTR Holders may use a secondary market to transfer ownership MISO offers a Public Offering (bulletin board) for MPs to communicate information on secondary transactions Bids to Buy Offers to Sell

55 Financial Transmission Rights Valuation 55 FTRs valued on Marginal Congestion Component of LMP FTRs have a monetary value which will be paid to (or owed by) the holder FTR values are based on the difference between the Marginal Congestion Component (MCC) of the Day-Ahead LMP at the source and sink Marginal Energy Component Marginal Loss Component Marginal Congestion Component Locational Marginal Price

56 Financial Transmission Rights Valuation 56 FTRs Allow MPs To Hedge Transmission Congestion Costs Provides a right to congestion credits (or charges) Credit MCC at the Sink is greater than at the Source point Charge MCC at the Source point is greater than MCC at the Sink Source CPNode (MCC) FTR: MW Quantity Source CPNode Sink CPNode FTR term FTR TOU Sink CPNode (MCC)

57 Financial Transmission Rights Valuation 57 FTR Valuation: Hedge MP holds a 10 MW FTR from A to B which is commensurate with its bilateral transaction MP is subject to $100 of Day Ahead congestion cost based on market activity but is also entitled to $100 credit for the FTR MP is hedged against Day- Ahead congestion cost Description Sink Source MW Total Node C DA Congestion Cost ($15 - $5) * 10 = 100 Description Source Sink MW Total LMP =$33 MCC =$10 FTR Target Credit ($5 - $15) * 10 = -100 Source Sink Net: $0 Note: FTR Target Credit calculation is reversed to indicate cash flows with respect to MISO (-) MISO pays, (+) MISO collects Node A LMP = $27 MCC = $5 10MW Bilateral A B 10MW FTR A B Node B LMP =$39 MCC =$15

58 Financial Transmission Rights Valuation 58 FTR Valuation: Over Hedged MP s holds a 10 MW FTR from A to B but is only in need of 7 MW to meets its load forecast MP is subject to $70 of Day Ahead congestion cost but is still entitled to $100 credit for the FTR MP is over-hedged against congestion cost Description Sink Source MW Total Node C DA Congestion Cost ($15 - $5) * 7 = 70 Description Source Sink MW Total LMP =$33 MCC =$10 FTR Target Credit ($5 - $15) * 10 = -100 Source Sink Net: $-30 Note: FTR Target Credit calculation is reversed to indicate cash flows with respect to MISO (-) MISO pays, (+) MISO collects Node A LMP = $27 MCC = $5 7MW Schedule 10MW FTR A B Node B LMP =$39 MCC =$15

59 Financial Transmission Rights Valuation 59 FTR Valuation: Exposed MP s holds a 10 MW FTR from A to B and needs 12 MW to meets its load forecast MP is subject to $120 of Day Ahead congestion cost but is only entitled to $100 credit for the FTR MP is exposed to congestion costs MP could have procured more FTRs in the Auction if the capacity is available to mitigate their exposure Description Sink Source MW Total Node C DA Congestion Cost ($15 - $5) * 12 = 120 Description Source Sink MW Total LMP =$33 MCC =$10 FTR Target Credit ($5 - $15) * 10 = -100 Source Sink Net: $20 Note: FTR Target Credit calculation is reversed to indicate cash flows with respect to MISO (-) MISO pays, (+) MISO collects Node A LMP = $27 MCC = $5 12MW Schedule 10MW FTR A B Node B LMP =$39 MCC =$15

60 Financial Transmission Rights Valuation 60 FTR Valuation: Perfectly Hedged MP has a bilateral contract from A to B MP has acquired two 10 MW FTRs (A C and D E) MP is subject to $100 of Day Ahead congestion cost MP can hedge against congestion cost using alternative/proxy paths (ex. A C and D E below) if their preferred path is not obtained in the auction Description Sink Source MW Total DA Congestion Cost ($15 - $5) * 10 = 100 Description Source Sink MW Total Target Credit for FTR 1 10 MW A C Target Credit for FTR 1 10 MW D E ($5 - $10) * 10 = -50 ($5 - $10) * 10 = -50 Net: $0 Note: FTR Target Credit calculation is reversed to indicate cash flows with respect to MISO (-) MISO pays, (+) MISO collects Source Node A LMP=$27 MCC= $5 10MW FTR A C Node D LMP = $33 MCC= $5 Node C LMP=$33 MCC =$10 10MW Bilateral A B 10MW FTR D E Node E LMP = $36 MCC= $10 Sink Node B LMP=$39 MCC=$15

61 Market Concepts Market Data 61 Data Available for Market Participants on the Market Portal General Data Download Model data for power flow studies for Allocations and Auctions Portal Used for MP Functions Market Submissions Reviewing Transmission Entitlements Signing off on Transmission Entitlements Defining ARRs Asset Owner Approvals Defining Network Entitlements

62 Market Concepts Market Data 62 Market Portal Data: Public Allocation Result Data Allocation Results Binding Constraints Sensitivities of Binding Constraints to Loopflows Allocation Summary Data Total ARR Entitlement MWs for an Allocation Period by peak/off-peak for the following entitlement types: OATT PTP OATT Network PreOATT Option A GFAs PreOATT Option B GFAs OATT Network ARR Zone load by Asset Owner

63 Important Takeaways 63 Important Takeaways From This Presentation Auction Revenue Rights (ARRs) Financial instruments that entitle their holders to a share of the revenue generated in the Annual FTR Auction Financial Transmission Rights (FTRs) Right to congestion credits or charges along a path during a given time frame for a certain MW quantity ARRs/FTRs may provide a partial hedge, full hedge or over hedge Auction Revenue Rights (ARRs) Data Gathering Process of submitting historical transmission system activity to MISO and MISO approving those submissions Registration Market Participants must first register historical usage of the transmission system as transmission entitlements for MISO to validate. Allocation MPs receive ARR Obligations in stages during the Annual ARR Allocation based on the nominations submitted by MPs and subject to simultaneous feasibility Obligations An ARR obligation is a hedging mechanism to manage the uncertainty of the cost of acquiring FTR

64 Important Takeaways 64 Important Takeaways From This Presentation ARR Valuation Valued at the difference in the Shadow Price of the Delivery Point and Receipt Point in the FTR Auction. Financial Transmission Rights (FTRs) Acquiring FTRs FTR Auction MISO conducts Annual FTR Auctions to allow MISO to sell FTRs for the residual FTR capability of the Market Footprint. Secondary Market FTR Holders may trade their FTRs in a secondary market outside MISO-administered allocations and auctions FTR Obligations Allow MPs to hedge transmission congestion costs by providing a right to congestion credits (or charges) FTR Valuation Valued at the difference in the Marginal Congestion Component of the Delivery Point and Receipt Point in the Day-Ahead Energy and Operating Reserve Market. Market Data is available on the Market Portal for download Market Portal is used for MP activities and public data Market Timeline FTR and ARR market activities are posted on the market timelines, including registration, offer submission and result availability

65 List of Acronyms 65 AO Asset Owner ARR Auction Revenue Right ARRE (or AE) Auction Revenue Right Entitlement BA Balancing Authority BAA Balancing Authority Area BRSS Baseload Reserved Source Set CARR Candidate Auction Revenue Right CF Capacity Factor EB Eligible Base EST Eastern Standard Time FTR Financial Transmission Right GFA Grandfathered Agreement HUFU High Utilization Factor Unit ILTTR Incremental Long-Term Transmission Right

66 List of Acronyms 66 LBA LBAA LMP LSE LTTR MCC MECT MP NITS NPLF MW POD POR PRSS PTP Local Balancing Area Local Balancing Authority Area Locational Marginal Pricing Load Serving Entity Long-Term Transmission Right Marginal Congestion Component Module E Capacity Tracking Tool Market Participant Network Integration Transmission Service Net Peak Load Forecast Megawatt Point of Delivery Point of Receipt Peak Reserved Source Set Point-to-Point

67 List of Acronyms 67 RQR RSP SF SFT TE Resource Qualification Requirements Reserved Source Point Scheduling Factor Simultaneous Feasibility Test Transmission Entitlement

68 List of References 68 References for Training Level 100 Training Level 300 Training Documents FTR MPMA Market User API Documents 0 BPM 004 FTR and ARR Tariff Reference Contacts Client Relations clientrelations@misoenergy.org