Introduction to market-based mechanisms for
optimizing usage of transmission network assets:
transmission capacity auctions
prepared by London Economics International LLC
October 17, 2005
Régie de l’Énergie (“Régie”) is currently in the process of evaluating Phase II of Hydro-Quebec
TransÉnergie’s (“HQT”) rate case. Traditionally, rates for transmission service along HQT’s
network have been set using a cost-of-service methodology. The cost-of-service ratemaking
approach aims to ensure full cost recovery (including a reasonable commercial return on
investment) for the applicant, in this case, HQT. The cost-of-service methodology, however,
does not take into account the market value that other entities may place on the services that
HQT provides, namely the transmission capacity that it makes available. An auction process,
whereby firms compete to buy (or reserve) transmission capacity may allow HQT to further
optimize the usage of its transmission network and increase revenues. There are ample
examples of such transmission auctions. This brief paper provides an overview of auction
mechanisms and describes the experiences of a sample of jurisdictions with transmission
auction processes, as described in the table below. The experiences of these other jurisdictions
illustrate that the concept of an auction of transmission rights is commercially viable.
Furthermore, there are many analogous conditions in these other jurisdictions to that in
Quebec, further suggesting that the experiences of these jurisdictions is of relevance to HQT’s
situation.
Jurisdiction
Type of auction
Coverage of auction
Germany to France
physical capacity rights
unilateral (Germany to France)
cross-border transmission paths
daily, monthly, and quarterly
Czech Rep. - Germany - Poland
physical capacity rights
all cross-border transmission paths
daily, monthly, and annual
Nordel
implicit auction (physical and financial
transmission rights)
all cross-border transmission paths
daily, weekly, monthly, quarterly,
annual, and multi-year
New York
purely financial contracts;
point-to-point obligation
all internal transmission paths
6 months, one-year, multi-year (up to
five years), with monthly
reconfiguration auctions
PJM
purely financial contracts;
point-to-point obligation
all internal transmission paths
annual and monthly (on- and offpeak, or all 24 hours)
New England
purely financial contracts;
point-to-point obligation
all internal transmission paths
annual and monthly (on- and offpeak)
Ontario
purely financial contracts;
external point-to-point paths
all external point-to-point paths
monthly and annual
California
both physical grandfathered rights and
financial contracts using flowgates;
upcoming market redesign will switch to
point-to-point
all internal transmission paths
annual
MISO
purely financial contracts;
point-to-point obligation
all internal transmission paths
annual and monthly (on- and offpeak)
Texas
purely financial contracts;
flowgate rights
all internal transmission paths
monthly and annual
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Typical terms of transmission
rights
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Table of Contents
1
WHAT IS AN AUCTION? ................................................................................................................................3
1.1
1.2
1.3
2
WHY USE AUCTIONS FOR TRANSMISSION CAPACITY?....................................................................................3
WHAT IS SOLD AT A TRANSMISSION CAPACITY AUCTION?.............................................................................4
HOW ARE THE AUCTIONS RUN? .....................................................................................................................5
EUROPEAN CASE STUDIES ..........................................................................................................................7
2.1
2.2
GERMANY TO FRANCE: UNILATERAL EXPLICIT AUCTION ............................................................................10
CZECH REPUBLIC – POLAND – GERMANY: MULTILATERAL EXPLICIT AUCTIONS .........................................11
3
NORTH AMERICAN CASE STUDIES.........................................................................................................14
4
CONCLUDING REMARKS ...........................................................................................................................18
5
APPENDIX A: SAMPLE GUIDE TO AN AUCTION OF PHYSICAL TRANSMISSION CAPACITY 19
6
APPENDIX B: FURTHER DESCRIPTION OF FINANCIAL TRANSMISSION RIGHTS....................21
7
APPENDIX C: KEY CHARACTERISTICS OF FTR MARKETS ACROSS NORTH AMERICA........23
Table of Figures
FIGURE 1. CONGESTION MANAGEMENT METHODS IN EUROPE ...................................................................................8
FIGURE 2. ILLUSTRATIVE EXAMPLE OF PRICE FORMATION PROCESS FOR CROSS-BORDER EXPLICIT AUCTIONS ...........9
FIGURE 3. GRAPHICAL REPRESENTATION OF PRICE FORMATION EXAMPLE...............................................................10
FIGURE 4. BREAKDOWN OF AUCTION RESULTS BY TERM FOR THE GERMANY TO FRANCE INTERCONNECTION.......11
FIGURE 5. DAILY AUCTION RESULTS FOR OCTOBER 9, 2005 ALONG THE CZECH REPUBLIC-GERMANY INTERTIE ...12
FIGURE 6. RESULTS OF YEARLY AND MONTH MULTILATERAL EXPLICIT AUCTIONS...................................................13
FIGURE 7. MARKET-CLEARING PRICES FROM RECENT LONG-TERM TCC AUCTIONS (SPRING 2005), $/MW/ 6MONTH OR $/MW/1-YEAR ...............................................................................................................................17
FIGURE 8. CEPS AUCTION SCHEDULE OF EVENTS FOR ALL PRODUCTS IN 2005 ........................................................19
FIGURE 9. STYLIZED EXAMPLE OF AN FTR .................................................................................................................21
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1 What is an auction?
According to the Cambridge University Press, an auction is a “public sale of goods or property,
where people make higher and higher bids (offers of money) for each item, until the item is sold
to the person who will pay most.”1 One expert describes auctions as forums for “allocating and
pricing scarce resources.”2 In this respect, auctions appear to be a natural solution for
optimizing HQT’s transmission network.
Auctions have been used to sell goods and services since the times of the ancient Greeks and
Romans. But only recently, since the pioneering work of Vickrey,3 have economists seriously
examined what does and does not make auctions successful, and how to structure the rules of
sale so as to best meet the sellers’ objectives. At the same time, as the theory of auction
mechanisms has advanced, we have observed a proliferation of application of auctions to a
variety of products and services, including gas pipeline capacity, generation assets (including
“virtual capacity”), electric transmission rights, radio spectrum rights, 3G telecommunications
licenses, and airport landing slots (to name a few).
The most basic type of auction is an “ascending” auction, which is a process wherein one or
more items are for sale, there are several bidders for each item and the auction allows for
multiple bidding rounds. The auction proceeds in rounds, and closes when no bidder wishes to
increase its bid on any of the items for sale. This closure rule can be specific to sub-sets of the
items for sale or can apply to the whole set. At each round, bidders can only increase their bid,
and must increase their bid so as to beat the winning bid in the previous round by a threshold
amount. The best known example of ascending auctions is the open outcry English auction
commonly used for the sale of art.
Some other common forms of ascending auctions are first-price and second-price auctions; in
the former auction the highest bidder wins and pays the amount he bid, whereas in the latter
auction the highest bidder wins but pays the amount of the second highest bid. A Dutch
auction, on the other hand, is a “decreasing” auction where the initial bid is set very high and
the auctioneer incrementally lowers the bid until a bidder stops the auction and claims the item.
There are also auctions that involve multiple products, for example combinatorial auctions.
1.1
Why use auctions for transmission capacity?
Economists have long argued that the best regulation is that which emulates competition. An
auction of transmission rights would achieve this goal. Auctions of point-to-point transmission
capacity on HQT’s network would promote and accommodate efficient allocation of HQT’s
transmission – i.e., transmission capacity will go to those buyers that value it the most. The
Régie has made it clear in its stipulations to HQT that it is concerned with the underutilization
1
See, Cambridge Dictionary of American English, Cambridge University Press, 2001.
2
See, Crampton, P. “Ascending Auctions,” European Economic Review, 42, 1998, 745-756.
3
See, for example, Vickrey, W. “Counterspeculation, Auctions, and Competitive Sealed Tenders,” Journal of
Finance, 16, 1961, 8-37.
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of HQT’s transmission network. An auction, if structured properly, should allow HQT to
maximize the utilization of its system and also the revenue potential of its asset base (by setting
rates based on market signals or supplementing regulated revenues with market-based sales).
There is a lot of flexibility in the auction design process. For example, HQT can auction off all its
network capacity or it can sell only the spare capacity, after meeting the needs of local load.
Furthermore, HQT can auction off individual point-to-point capacity associated with the
interties, or it can auction off a specific set of point-to-point paths.
In addition, key policy objectives can be incorporated into the auction process. The approved
cost-of-service revenue requirement can be used to guide HQT in setting the “floor” or
reservation price for the auction, thus ensuring that HQT would meet its revenue target. To the
extent that new investment (generation or transmission) is necessary, auction outcomes will
provide location-specific signals to investors about the needs of the system, and incremental
revenues can be set aside and used by HQT to finance needed transmission upgrades. In
addition, the auction can be customized, possibly through the auction-clearing process and the
use of bundled sets of point-to-point paths, to comply with the Régie’s directives to maintain
territorial uniformity of rates.
1.2
What is sold at a transmission capacity auction?
Transmission capacity auctions sell what are commonly referred to as transmission rights these are essentially property rights, which entitle the owner of the right (i.e., the winning
bidder) to use the transmission capacity along the specified path or route on the electricity
network for the duration of the right. In other words, the owner is paying to reserve
transmission capacity on the system. Generally, transmission rights serve multiple purposes, all
of which are intended to make markets more efficient and competitive, as we discuss further
below.
There are two broad categories of transmission rights: physical capacity rights and financial
transmission rights (referred to as “FTRs” in some jurisdictions). Auctions of physical capacity
rights involve the forward sale of actual capacity on the network path. The buyer of the physical
transmission capacity can then use the capacity to facilitate his future trades. The buyer pays
for this transmission reservation at the auction based on the auction clearing price and typically
there are no additional charges for use of this capacity.4 The auction clearing price represents
the lowest accepted bid for transmission capacity necessary to set total demand for transmission
equal to total supply (i.e., total available capacity). Therefore, the auction clearing price reflects
the maximum willingness to pay of the bidders (buyers of capacity). The main objective of
using auctions to allocate physical capacity is to optimize the use of the network and ensure that
limited transmission capacity goes to those who value it most. The efficiency consideration is
one of the main drivers behind the European Union’s decision to compel auction mechanisms
for rationalizing scarce transmission capacity between member states.
4
Though there may be additional charges associated with use of other parts of the transmission network or
other transmission services.
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Auctions of financial transmission rights involve the sale of a financial instrument that is
derived from the underlying physical capacity. The underlying purpose of a physical rights
auction and financial rights auction is alike and typically the auction process, itself, would be
similarly driven by supply-demand fundamentals. There is, however, one key difference
between an FTR and a physical transmission right. The buyer of the FTR at the auction pays for
the right to receive (or pay) congestion rents5 associated with the specified transmission path,
rather than to use the physical capacity. Thus, FTRs require a settlement process after
completion of the auction. In deregulated electricity markets with centralized power pools or
exchanges and a nodal or locational marginal pricing system, financial transmission rights are
the preferred auction product as they provide flexibility to the system operator with respect to
physical operations while allowing market participants to buy instruments that efficiently
allocate a derivative of the physical transmission capacity and provide buyers with a financial
hedge against transmission congestion. For instance, FTRs are used across the U.S., in the
Nordic countries in Europe, and Australia. Over the longer term, financial transmission rights
are expected to serve as a catalyst for investment. Congestion rents collected through FTR sales
can be used to signal the need for incremental system investment and finance such incremental
investment in both transmission capacity and location-specific generation capacity.
In our opinion, a physical transmission capacity auction would be a more appropriate option
for HQT. A financial transmission right auction would be difficult to implement in the absence
of a wholesale energy market with locational pricing. A physical transmission capacity auction
could be put into place within the current industry structure in Quebec and would effectively
allow HQT to realize the same objectives: optimization of system utilization, more efficient
allocation of capacity, and maximization of revenues.
1.3
How are the auctions run?
A centralized auction for transmission rights is usually coordinated by an Independent System
Operator (“ISO”), a neutral party that does not favor any individual market participant (in some
cases, the Transmission Owner is also the ISO). The time length of the auction product can
range from an hour to a year or longer (though most FTRs have had terms of a year or less).
Often, there are secondary markets in which acquired transmission rights can be sold by one
market participant to another (a secondary market is in fact an important pre-requisite for
achieving the most efficient outcomes for the market as a whole and for the entity selling the
transmission rights).
In the event that a market participant is unable to pay for an accepted bid (i.e., defaults) or a
product is not fully sold out, the ISO often acts as counterparty to the transmission owner for
the transmission right obligation. Therefore, in order to maintain the financial solvency of the
ISO and not jeopardize system reliability, the auction must satisfy “simultaneous feasibility
5
Congestion rents arise when transmission line constraints prevent cheap power from one region (market)
from flowing to a higher priced region (market). The need to dispatch more expensive generation in the
region cut off from further imports means that prices in that region rise; those who control the available
export capacity on the line are then able to garner additional revenues from the resulting higher prices in the
zone to which they are exporting. These additional revenues are typically referred to as “congestion rents.”
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conditions” dictated by the technical constraints of the transmission system. In other words, the
ISO has to determine ahead of time how much capacity is (expected to be) available for the term
of the transmission right.
As with other auction mechanisms and competitive solicitation processes, there will be auction
rules that dictate how potential bidders get qualified to participate and how the auction process
will proceed – for example, what rules govern participation and whether it will be a sealed-bid
or an open bidding process. We discuss some of these issues on a case-by-case basis in the next
two sections of this paper. More detailed information on auction rules and the accompanying
standard contracts (which assign the property right) are widely available from the entities
running these auctions and can be used as the foundation for setting up a process in Quebec.
For conceptual purposes, Appendix A to this paper contains a step-by-step guide that has been
adopted from the auction rules developed and implemented by the Transmission System
Operator in the Czech Republic for their cross-border auctions of physical transmission
capacity.
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2 European case studies
The European power sector has been evolving rapidly over the last five years, though certain
jurisdictions deregulated their electricity sector as far back as the early 1990s. The European
Union (“EU”) has set policy objective for its member nations which has opened the transmission
networks to competition (open access) and has also orchestrated the privatization of electricity
sector assets once held typically by a publicly-owned monopoly. The landscape of the
European energy sector is in many ways similar to North America. For example, the regional
independence in the U.S. and Canadian provinces is paralleled by the national market structure
in Europe, where each member state has effectively its own national market. As in North
America, cross-border (inter-regional) trade in electricity is evolving and is in fact an important
element of many of the continental European markets which rely on imports and exports from
neighboring countries to provide low cost power for their native consumers. There is also a
patchwork of different regulations and industrial structures in Europe, with some nations
retaining public ownership of electric sector assets and others privatizing completely. This is
similar to the assortment of state (provincial), regional, and Federal regulation in the U.S. and
Canada, and public (municipal and Crown corporations) and investor-owned corporate
structures.
The Florence Regulatory Forum, which began in 1998, laid the groundwork for discussing the
creation of a truly internal electricity market in the EU. One important step toward this goal
was the passing of Regulation 1228/2003 by the European Parliament into law. This
Regulation, which came into force in the EU on July 1, 2004, seeks to enhance competition in the
power sector by facilitating cross-border trade among member countries. It states that crossborder congestion management should have non-discriminatory market-based solutions that
give efficient economic signals. 6
Both physical and financial transmission capacity rights auctions have taken place in various
jurisdictions in Europe to comply with the above noted regulation. The overall objective has
been the same behind the use of auctions: let the market decide how to efficiently allocate scarce
transmission capacity. Figure 1 on the following page provides a list of EU interconnections
that have had transmission rights auctions. With few exceptions (as we will describe in more
detail in the specific case studies), most of these auctions are conducted in a very similar
manner.
European experiences with transmission auctions are typically classified as either explicit or
implicit. Explicit auctions are straightforward; the physical transmission capacity rights are
themselves the product that is sold off. Depending on the interconnection, explicit auctions are
considered appropriate for long-term allocations – months, quarters, years (though there are
also examples of daily explicit auctions for physical transmission capacity). Implicit auctions,
on the other hand, are more complex; both capacity and energy are sold as a bundled product.
This requires a high level of coordination: a centralized power exchange, homogenized energy
markets, and financial instruments for long-term price hedging and bilateral trade between
6
See Article 6 on congestion management in Regulation (EC) 1228/2003.
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price-areas. The power exchange in the Nordic countries engages in a type of implicit auction
known as market splitting, where it manages the cross-border power flows of the entire fourcountry market area. When there is congestion, the markets split into pre-determined price
areas (i.e. zones) and are cleared individually at area prices. The ultimate goal of EU policy is to
move towards a combination of short-term implicit auctions and long-term explicit auctions.
Figure 1. Congestion management methods in Europe
Method
Explicit Auctions
Market Splitting
(Implicit Auction)
Involved Interconnections
Direction
AUSTRIA - CZECH REP.
AUSTRIA - HUNGARY
BELGIUM - NETHERLANDS
CZECH REP. - SLOVAKIA
DENMARK EAST - GERMANY
DENMARK WEST - GERMANY
FRANCE - UNITED KINGDOM
GERMANY - CZECH REP.
GERMANY - FRANCE
GERMANY - NETHERLANDS
GERMANY - POLAND
GREECE - ITALY
HUNGARY - SLOVAKIA
NO. IRELAND - REP. of IRELAND
NO. IRELAND - SCOTLAND
POLAND - CZECH REP.
POLAND - SLOVAKIA
UNITED KINGDOM - REP. of IRELAND
BOTH
A => H
BOTH
BOTH
BOTH
BOTH
BOTH
BOTH
G => F
BOTH
BOTH
BOTH
BOTH
BOTH
BOTH
BOTH
P => S
BOTH
ALL INTERCONNECTIONS WITHIN THE
NORDIC REGION (DENMARK EAST &
WEST, FINLAND, NORWAY, SWEDEN)
ALL
Sources: ETSO, SONI and CEPS
Figure 2 provides an illustration of the explicit auction clearing price formation, which is
perhaps the most applicable example to HQT’s situation. The first step is to determine the
available capacity. The various system operators determine the available capacity in accordance
with system constraints, applicable laws and regulations. When the total available capacity is
determined, the auction office informs the market participants about the total volume of
capacity that will be sold off, and the participants in turn submit their bids (volume and prices).
The bids are usually submitted in a first-price sealed-bid auction format, in which the bids
submitted by the market participants are not revealed to the other participants in order to
minimize the possibility of price manipulation.
Given that the objective of the auction is to sell the available transmission capacity so as to
maximize revenues, the auctioneer will accept the highest priced bids to achieve the sale of all
2,000 MW of available transmission capacity. When the sum of all bids submitted equals or
exceeds the total available capacity, the clearing price is equal to the lowest accepted bid price.
For example, in the stylized example below, all of the bids at 4.00 €/MW and above are
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accepted, and the bid at 2.00 €/MW is rejected. The participant that bid 3.00 €/MW (Auction
participant 3 in the example below) receives only part of the capacity requested. The marketclearing price is set to 3.00 €/MW.
Figure 2. Illustrative example of price formation process for cross-border explicit auctions
Bids offered by buyers of transmission capacity (Demand):
Auction participant 1:
200 MW at 10.00 €/MW and 500 MW at 5.00 €/MW
Auction participant 2:
300 MW at 8.00 €/MW and 200 MW at 4.00 €/MW
Auction participant 3:
500 MW at 5.00 €/MW and 800 MW at 3.00 €/MW
Auction participant 4:
500 MW at 2.00 €/MW
Auction Clearing Process: (Rank Bids by Bid Price)
Requested
Awarded
Participant Bid price
transmission
transmission
(€/MW)
number
capacity (MW)
capacity (MW)
1
10.00
200
200
2
8.00
300
300
1
5.00
500
500
3
5.00
500
500
2
4.00
200
200
3
3.00
800
300
4
2.00
500
0
Auction Results:
Clearing Price: 3.00 €/MW
Auction participant 1:
Auction participant 2:
Auction participant 3:
Auction participant 4:
Cumulative awarded
transmission capacity
(MW)
200
500
1,000
1,500
1,700
2,000
2,000
700 MW awarded (all bids accepted)
500 MW awarded (all bids accepted)
800 MW awarded (500 MW at higher bid + 300 MW at lower bid)
0 MW awarded
•
In Figure 3 below, we show the same information in Figure 2 in a graphical form with supply
(available capacity) and demand (bid) curves. The intersection of the supply and demand
curves yields the auction clearing price. The figure also illustrates which bids were rejected and
which were accepted.
In this hypothetical example, the auction ensures the full 2,000 MW of transmission is utilized
and results in total revenues of €6,000. In comparison, based on the preferences of participants
represented in their bids, a regulated tariff of €8 /MW would have resulted in only 500 MW of
transmission capacity being used, leaving 1,500 MW of available transmission capacity
completely unused, and an income of only €4,000 to the transmission system owner.
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Figure 3. Graphical representation of price formation example
€ 12
Bids Offered for
Available Transmission
Capacity Rights
Price of Bids (Euro/MW)
€ 10
Total Available
Transmission
Capacity Rights
Player 1
Player 2
€8
Player 3
Player 4
€6
Auction-clearing price = €3/MW
€4
€2
€0
-
500
1,000
1,500
2,000
2,500
3,000
3,500
Total Quantity of Bids for Transmission Capacity Rights (MW)
2.1
Germany to France: unilateral explicit auction
On April 5, 2005, two of the four control areas and the corresponding Transmission System
Operators (“TSOs”) in Germany (RWE Transportnetz Strom GmbH and EnBW
Transportnetzstrom AG) launched a daily auction for net transfer capacity from Germany to
France. Starting on July 1, 2005, auctions of monthly and quarterly transmission capacity rights
also began. RWE Transportnetz Strom GmbH is the auction coordinator for both German
control areas. There is no secondary market for these rights at this time, because the capacity
allocations cannot be transferred to a third party.
This is a unilateral auction (as opposed to bilateral), since the allocation of capacities is
restricted to the German side of the cross-border interconnections. Congestion of transmission
electricity from the French side is managed by a priority list method, in which the French TSO,
Gestionnaire du Réseau de Transport d’Électricité (“RTE”),7 allocates capacities based primarily
7
RTE is a quasi-independent entity that is responsible for the French transmission system (operation,
maintenance, and development) and interconnections with other countries. RTE is a wholly owned
subsidiary of the holding company for the national electricity utility, EDF Group. EDF Group also owns a
subsidiary that is responsible for generation. RTE’s activities are overseen by the CRE (Energy Regulation
Commission). The structure of RTE is thus similar to the structure of HQT.
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on the date and time of the allocation request. Until recently, no congestion had been
experienced for exports from Germany to France, but a sudden spike in congestion occurrences
at the beginning of 2005 necessitated the development of an explicit auction mechanism. It is
generally agreed, however, that unilateral explicit auctions are not ideal solutions for crossborder allocations since the lack of coordination may lead to unbalanced exchanges.
Figure 4. Breakdown of auction results by term for the Germany to France interconnection
Auction
Term
Quarterly
Quarterly
Time
Deadline for bids
6/13/2005
9/13/2005
Publication of the
results
6/16/2005
9/14/2005
Available
Capacity (MW)
1,800
1,800
Requested
Capacity (MW)
11,341
7,414
Obtained
Capacity (MW)
1,800
1,800
3rd Quarter 2005
4th Quarter 2005
Monthly
Monthly
Monthly
Monthly
July-05
August-05
September-05
October-05
6/20/2005
7/18/2005
8/18/2005
9/19/2005
6/23/2005
7/20/2005
8/19/2005
9/20/2005
1,800
1,800
1,800
1,800
9,290
6,465
7,415
5,580
1,800
1,800
1,800
1,799
82.44
86.00
75.84
74.50
Daily
10/13/2005
10/12/2005 8:30
10/12/2005 10:00
4,286
12,692
4,285
0.06
Price (€/MW)
218.40
1,175.00
Note: for daily auction, the capacities and price are an average of the hourly figures (prices are thus denominated as €/MWh)
In Figure 4 above, we observe that the requested capacity far exceeds the available capacity in
all periods, which suggests that there has been strong demand for this Germany-France
transmission capacity. With regard to term, the auction coordinator offered the same amount of
capacity for the quarterly and monthly markets (1,800 MW) and more than double that amount
in the daily auction (4,286 MW). This is consistent with the EU’s goals to facilitate trade, since
arbitrage opportunities which would use the daily auction’s transmission rights products are
much more short-term in nature. Furthermore, we can observe that the auction clearing price
decreases with respect to the length of the auction term. This, too, is consistent with typical
system dynamics, since the value of even physical transmission rights hinge on expectations of
congestion and arbitrage opportunities between markets. Short-term auctions pose less
uncertainty to bidders about the timing and frequency of congestion (and therefore the value of
the transmission rights), and so it is natural that the willingness to pay of bidders rises. Prices
for long-term transmission rights also include expectations about congestion, but those are
averaged out over longer periods and they are muted given the longer tenure of the annual
transmission right. All the clearing prices are positive, which means that constraints are
common across this interconnection. For example, for the monthly contracts, the price ranges
from 74.50 €/MW to 86.00 €/MW (which at current exchange rates is $106.77/MW to
$123.25/MW in Canadian dollar terms).
2.2
Czech Republic – Poland – Germany: multilateral explicit auctions
On November 24, 2004 CEPS, the Transmission System Operator of the Czech Republic acting
as the Auction Coordinator of three cross-border control areas – Czech Republic (CEPS), Poland
(PSE-O), and Germany (VE-T) – held its first explicit auction of annual physical transmission
capacity rights. CEPS later incorporated a monthly auction on December 12, 2004 and a daily
auction on April 12, 2005. Bids for the yearly and monthly auctions are conducted through the
mail (sealed-bid) or by fax for now, whereas the daily auction is held through an online portal
(http://www.e-trace.biz) and a unique price is set for each hour of the day. Long-term online
auctions are expected to be put into place in 2006. The online portal is set up to allow the
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market participants to transfer their yearly or monthly capacity allocations to the daily auction
market.
The table below provides a snapshot of the results of the October 9, 2005 auction for the Czech
Republic to German intertie. The quantity-weighted average auction price for those hours with
positive prices was equal to 4.8 €/MWh (which is approximately $6.90/MWh at current
exchange rates). It is interesting to note that auction prices cleared at zero during off-peak
hours when demand for capacity (i.e., total requested”) was equal to or less than what was
made available (i.e., proxied by “total allocated”). A zero auction-clearing price under such
supply-demand situations is an explicit element of this auction’s market design (see Appendix
A). It is equally feasible to set a higher minimum auction clearing price (i.e., reservation price).
However the latter may result in an inefficient allocation (underutilization) of available
transmission capacity.
Figure 5. Daily auction results for October 9, 2005 along the Czech Republic-Germany intertie
Source TSO
Target TSO
Hour
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
CEPS (Czech Republic) to
VE-T (Germany)
Total Requested Total Allocated
[MW]
[MW]
0
0
0
10
10
10
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
40
0
0
0
0
0
10
10
10
20
20
20
10
10
10
10
10
10
10
10
10
10
10
10
10
0
0
Auction Price
[Cdn$/MW]
0
0
0
0
0
0
0
0
0
2.85
7.07
12.00
10.33
6.15
3.88
3.75
3.41
4.03
8.01
7.42
10.71
9.97
0
0
Source: http://market.e-trace.biz/auction_result_summary.asp
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Figure 6 below provides a summary of the yearly and monthly auction results up to the present
for all paths. For comparative purposes, the annual auction price for 2005 ranged from 8,935.2
€/MW (or $12,805.5/MW in Canadian terms) to over 101,186.6 €/MW (or $145,015.6/MW).
Prices across six paths have differed substantially as the underlying market-value differs based
on then prevailing market conditions on either side of the intertie. As expected, the monthly
auction clearing prices are generally consistent with the yearly auction clearing price for a given
interconnection path. The monthly clearing prices fluctuate significantly from one auction
period to another based on market conditions, thereby demonstrating the value of a centralized
auction for optimizing power flows and reflecting that in the form of revenues for capacity
across interconnections.
Figure 6. Results of yearly and month multilateral explicit auctions
Reservation Period
Year 2005
January 2005
February 2005
March 2005
April 2005
May 2005
June 2005
July 2005
August 2005
September 2005
October 2005
November 2005
Capacity & Price
Poland →
Czech Rep
Czech Rep →
Poland
Commercial Profile & Direction
Germany →
Czech Rep →
Czech Rep
Germany
Germany →
Poland
Poland →
Germany
Total Promise of Capacity (MW)
Auction Price (€/MW)
0
101,186.63
80
8,935.20
282
0.00
320
53,260.80
0
8,935.20
480
101,186.63
Total Promise of Capacity (MW)
Auction Price (€/MW)
Total Promise of Capacity (MW)
Auction Price (€/MW)
Total Promise of Capacity (MW)
Auction Price (€/MW)
Total Promise of Capacity (MW)
Auction Price (€/MW)
Total Promise of Capacity (MW)
Auction Price (€/MW)
Total Promise of Capacity (MW)
Auction Price (€/MW)
Total Promise of Capacity (MW)
Auction Price (€/MW)
Total Promise of Capacity (MW)
Auction Price (€/MW)
Total Promise of Capacity (MW)
Auction Price (€/MW)
Total Promise of Capacity (MW)
Auction Price (€/MW)
Total Promise of Capacity (MW)
Auction Price (€/MW)
149
3,013.20
150
1,105.00
99
1,360.80
136
2,016.08
115
3,035.53
329
3,133.99
0
13,219.92
0
21,336.00
109
5,986.30
20
8,589.90
200
2,936.30
150
60.00
140
273.00
160
601.01
50
720.00
60
446.00
65
346.00
9
1,310.00
20
1,795.00
110
265.00
103
103.20
69
77.00
209
0.01
194
0.02
95
0.00
205
0.00
205
0.00
175
0.00
215
0.00
205
0.00
175
0.00
100
0.00
130
0.00
178
9,874.03
136
7,392.00
55
6,401.10
180
6,371.24
25
10,800.00
0
11,501.30
280
4,791.36
327
5,804.00
0
15,712.81
0
14,020.00
0
18,922.00
20
60.00
0
273.00
10
601.01
0
720.00
0
446.00
0
346.00
0
1,310.00
0
1,795.00
0
265.00
0
103.20
0
77.00
120
9,874.03
155
7,392.00
95
6,401.10
205
6,371.24
123
10,800.00
249
11,501.30
20
13,219.92
120
21,336.00
195
15,712.81
350
14,020.00
149
18,922.00
Source: e-trace
Although multilateral explicit auctions are difficult to coordinate, they have several benefits.
The creation of common transmission capacity allocation rules in the region facilitates the
maximization of available transmission capacity for the entire region. If properly coordinated,
efficient signals would be sent to market players for the operation and value of the network.
This in turn would lead to enhanced trading and proper investment signals for transmission
infrastructure enhancement to eliminate bottlenecks and improve reliability. In the near future,
it is expected that several other control areas will join the CEPS multilateral auction: E.ON
(Germany), APG (Austria), MAVIR (Hungary), and SEPS (Slovakia).
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3 North American case studies
Many of Quebec’s neighboring jurisdictions have employed auctions for transmission capacity.
Because transmission capacity auctions have been prevalent in jurisdictions with deregulated,
centralized power exchanges, they have naturally been financial, with settlement of the contract
against spot energy prices. Given the current structure of the Quebec market, an FTR auction is
not plausible in the short-term. A physical transmission capacity auction is more consistent
with the current industry framework in Quebec. Nonetheless, the experiences of other North
American jurisdictions still contain useful insights and considerations for HQT even if it were to
embark on designing an auction of physical capacity rights.
The objectives of FTR auctions in North American jurisdictions are similar to those in Europe
with respect to physical transmission capacity: auctions are implemented to ensure efficient
and market-compatible allocation of scarce transmission capacity and to promote efficient use
of the infrastructure and send proper signals for new investment.
Indeed, many of the key parameters in these FTR auctions are transferable to an auction of
physical transmission capacity. For example, all the auctions have had to establish how to
proceed with the initial determination of available capacity and feasibility testing, agree on
allocation of pre-existing rights, decide which transmission paths to put up for auction (e.g.,
Ontario has auctioned FTRs for only its congested interconnects), and prepare auction rules and
process (such as qualification of bidders, etc.). These are important lessons for any entity
considering implementing an auction of physical or financial transmission rights.
In order to provide a more detailed perspective of these issues, we provide an overview of the
FTR market in New York, which is known as the Transmission Congestion Contract (“TCC”)
market. Where relevant, we refer to similarities between NY and other FTR markets in North
America. Appendix C to this paper contains a summary table comparing the key characteristics
of FTR markets across the U.S. and in Ontario, Canada.
New York Case Study
New York ISO began its LMP (“Locational Marginal Pricing”)-based energy market in
November 1999; at the same time, it also implemented point-to-point financial transmission
rights that are called Transmission Congestion Contracts (“TCCs”). New York ISO was in fact
the first Independent System Operator (“ISO”) to introduce an annual auction for financial
transmission rights. The technical definition of a TCC is as follows:
“A TCC represents the right to collect, or the obligation to pay, the Day-Ahead
Congestion Rents associated with one (1) megawatt (MW) of transmission between a
specified Point of Injection (“POI”) and specified Point of Withdrawal (“POW”).”8
8
See http://www.nyiso.com/public/webdocs/products/tcc/general_info/
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Initial Allocation of transmission rights in New York
Before the first TCC auction took place in September 1999, the NYISO had to transition existing
transmission rights and contracts into the TCC system. The holders of existing transmission
rights (based on then existing contracts and agreements) were given an opportunity either to
retain grandfathered rights or to convert them into Grandfathered TCCs which remain active
until the time the original right would have expired. In addition, transmission owners that had
obligations to serve load were allocated certain load-related transmission rights, a portion of
which could be converted into six-month TCCs and the remainder would be sold as TCCs by
the NYISO but treated as Auction Revenue Rights, entitling the transmission owner to the
revenues resulting from the sale of the corresponding TCCs in the bi-annual auctions.
This initial allocation of grandfathered rights was implemented in a different manner in several
neighboring markets. In both the Pennsylvania-New Jersey-Maryland (“PJM”) and New
England markets, the allocation of grandfathered rights recurs at least annually based on
updated statistics on load being served, etc.
•
In PJM, Auction Revenue Rights (“ARRs”) are allocated annually to (1) load
serving entities up to their total annual load and to (2) customers with firm
point-to-point service up to the quantity specified in the transmission reservation
and for the period of the reservation. ARRs are nominated by eligible
transmission customers and their award is subject to a simultaneous feasibility
test.
•
In New England, transmission upgrades are emphasized in the allocation process
of ARRs. In each month, ARRs are allocated first to the entities that invest in
transmission upgrades (Qualified Upgrade Awards, or “QUAs”) and thus
increase transfer capability on the New England transmission system. By
increasing transfer capability, it is possible for the ISO to sell additional FTRs in
the auction. The remaining ARRs in New England are allocated to congestionpaying load-serving entities (“LSEs”), based on their load ratio share. This
residual assignment to LSEs is adjusted so that all the ARRs are simultaneously
feasible given the other rights, such as excepted transactions9 and Quality
Upgrade Awards.10 Any ARRs assigned that are negative in the New England
FTR auctions are eliminated.
9
Excepted Transactions (grandfathered contracts) are given the option to receive ARRs from the generator to
the specified load location. The Excepted Transactions consist primarily of transmission agreements for
certain point-to-point wheeling transactions across or out of the network and are assigned to two types of
entities: 1) entities serving load where energy is delivered or 2) entities dealing with an external transaction.
In addition, there is a separate class of grandfathered contracts within Northeastern Massachusetts (“NEMA
contracts”) that are dealt with like the Excepted Transactions in the ARR allocation process.
10
The FTR bids and revenues are first determined with the upgrade and then without each upgrade. Then
ISO New England compares the difference in revenues between the two, which can be viewed as the value
the upgrade brings to the system. The ARR is then awarded to those entities that provided the upgrade.
Qualified Upgrade payments are made as long as the entity is paying for the upgrade, or for the life of the
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In summary, these jurisdictions’ experience with allocation processes has important lessons for
HQT who would also have to undergo similar rationalization and assignment of existing
transmission rights and possibly rights associated with upgrades, if it were to choose to auction
off its transmission system capacity.
Transmission Congestion Contracts (“TCC”) Auctions in New York
The New York ISO (“NYISO”) holds a number of auctions each year to facilitate the liquidity of
the TCC market with the revenues remitted to the owners of the transmission assets11 (and
credited against the transmission service charge of the transmission owner). Currently, there are
two types of NYISO-administered auctions: bi-annual auctions and monthly “Reconfiguration”
auctions. In addition to the NYISO-administered auctions, TCCs may also be obtained directly
from existing TCC holders through the secondary market.
In the bi-annual transmission rights auction, the NY system operator (the NYISO) sells TCCs
associated with available point-to-point physical transmission capacity (including TCCs based
on grandfathered rights) through a two stage, multi-round auction process:
during the first stage, a certain percentage of all the TCCs for sale are released in
each of the four rounds.
the second stage allows TCC holders to resell rights they purchased through the
first stage.
Currently the term of the auctioned TCCs is determined by the NYISO, and is either 6 months
or one-year. At the discretion of the NYISO, multi-year TCCs may be offered, with the longest
term currently being five years.12
The auction clearing price for the TCCs is determined by the lowest winning bid for a particular
TCC point-to-point pair in a specific round. Settlement of the TCCs takes place against the
NYISO administered Day-Ahead energy market and the Locational-based Marginal Prices
(“LBMPs”) associated with the specified POI and POW of the TCC.13
As discussed above, the New York ISO also holds monthly Reconfiguration Auctions in which
TCC holders can offer to sell their TCCs for the subsequent month. As with the TCCs sold in
the bi-annual auctions, settlement continues to takes place against LBMPs in the Day-Ahead
energy market.
asset, whichever is shorter. To date, less than 2% percent of the total FTR revenues have been assigned to
QUAs in New England.
11
Transmission owners are the initial holders of the TCCs in the first stage of the bi-annual TCC auction. In
the second stage of the bi-annual auction and in the monthly Reconfiguration auctions, other entities may be
holders of TCCs for sale, and thus payments from these auctions go to the existing holder of the TCC.
12
The NYISO experimented with two-year and five-year TCCs in the fall 2000 auction.
13
Appendix B to this paper has a conceptual example of the settlement process for generic FTRs.
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Summary results of the spring 2005 auction are displayed in the figure below. On average
across all TCCs sold in this auction, the market-clearing price ranged from US$4.2/kW to
US$5.1/kW for 6-month terms and US$5/kW to US$7.4/kW for one–year terms, which at
current exchange rates is equivalent to $5.0/kW to $6.0/kW (six-month term) and $5.9/kW to
$8.8/kW (one-year term) in Canadian dollars. It is important to note that this is a summary of
all point-to-point TCCs sold during the auction. Certain point-to-point paths garnered
substantially higher market-clearing prices because of their market value (which was based on
the predicted level of congestion rents over the duration of the TCC). For example, in the State
of the Market report for 2004, the independent market advisor to the NYISO notes that Hudson
Valley to NYC Zone path enjoyed an average TCC clearing-price of US$9.6/MWh over the
months of May to October 2004, which at current exchange rates is equivalent to
Cdn$11.4/MWh.14
Figure 7. Market-clearing prices from recent long-term TCC auctions (spring 2005), $/MW/ 6month or $/MW/1-year
with-congestion flows
6 month
1 year
($/MW/6-mo) ($/MW/1-yr)
Average market-clearing price
Minimum market-clearing price
Maximum market-clearing price
Volume of contacts traded
$
$
$
4,214.9 $
0.1 $
46,456.0 $
874
7,440.1
21.0
88,193.7
120
Counter-congestion flows
6 month
1 year
($/MW/6-mo) ($/MW/1-yr)
$
$
$
5,147.4 $
8.7 $
44,212.2 $
404
5,002.5
23.0
89,089.2
271
Note: Prices quoted in US dollars in figure above. TCCs that cleared the auction at a price of zero have been excluded
As hedging instruments for market participants, TCCs (and FTRs in other jurisdictions) have
been deemed to be efficient based on market experience to date. Indeed, it was the success of
the FTR markets that had served as a catalyst to the EU’s adoption of Regulation 1228/2003,
requiring competitive auctions of cross-border transmission capacity. Economists generally
believe that longer term FTRs, when made available (and assuming sensible auction design),
could theoretically garner sufficient sales revenues to finance and carry the costs of
transmission investment. On that basis, longer term auctions of transmission capacity may be
able to replace the regulated access charges.
14
See 2004 State of the Market Report, Independent Market Advisor to the New York ISO. July 2005.
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4 Concluding remarks
This paper demonstrates that in many jurisdictions, the value of transmission (and therefore its
“market price”) can be determined through a public auction rather than set by regulation. The
auction can be either for the physical transmission capacity itself, as exemplified by European
jurisdictions pursuing auctions of cross-border intertie capacity, or for a financial instrument
derived off the physical transmission capacity, a Financial Transmission Right. Auctions of
Financial Transmission Rights have also been implemented widely, particularly across North
America but also in other deregulated power markets worldwide.
In jurisdictions without a centralized wholesale power market with locational price signals,
such as Quebec, the auction of physical capacity rights would be the best fit. Further, an
auction of physical capacity rights would broadly capture the same benefits of FTR auctions: it
would allow for efficient and competitive use of the transmission network based on market
terms rather than regulation.
Provided sufficient customers participate in the auction and that the auction rules are designed
to meet the objectives of the auction while taking into account the underlying market
conditions, the auction process will optimize the use of the transmission system, efficiently
allocate transmission capacity to those who value it most and, incidentally in so doing,
maximize the revenue potential of the transmission assets for its owner. Auction designs are
both flexible and robust. For example, the auction process can be customized to accommodate
the auction of some of the capacity or all of the capacity. Furthermore, setting reservation prices
in the auction provides certainty that the auction will not clear at an unacceptably low price.
The examples from Europe show that transmission capacity can be successfully auctioned in
similar environments to that found in Quebec. The success of the auction is not dependent on
the existence of a competitive wholesale electricity market, a centralized power exchange or
locational energy pricing systems. We therefore believe that it is ultimately feasible to auction
some, if not all, of HQT’s transmission capacity.
Given the Régie’s previously stated desire for HQT to optimize the use of its transmission
system to the benefit of native load, we would strongly recommend that the Régie order HQT to
investigate the use of auctions to sell its point-to-point transmission capacity.
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5 Appendix A: Sample guide to an auction of physical transmission
capacity
Summary of Auction Rules coordinated by CEPS (TSO for the Czech Republic)15
Scope of the Auction Rules
The Auction Rules describe the requirements of the participants and the auction coordinator,
the auction algorithm, and the conditions for the use of capacity. The auction results are
essentially a “promise of capacity” (or physical capacity rights) to be delivered over a certain
interconnection at an agreed upon price. The three Transmission System Operators (CEPS
(Czech Republic), PSE-O (Poland), VE-T (Germany)) have committed themselves to accept the
result of the common auctions – i.e. reserve the physical transmission capacities and carry out
the transmission services. Grid access within the control area of each Transmission System
Operator, though, is not covered or granted by the scope of the Auction Rules.
The auction coordinator assumes the liability of default on payments. However, in accordance
with risk management procedures, the auction participants must possess a certain minimum
credit rating and failure to pay would put their credit ratings at jeopardy. The minimum credit
rating would allow for a € 5 million credit limit for a given auction participant.
Auction schedule
The auction coordinator organizes yearly, monthly, and daily auctions. The auction reservation
period for the yearly product is January 1, 2005 to December 31, 2005; the monthly product is
the first day to the last day of a calendar month in 2005; and the daily product lasts for an
individual hour throughout 24 hours of a calendar day in 2005 (with one hour adjustments
during daylight saving time change days). The publication of available capacity for the auction
products will occur on the website (www.e-trace.biz) according to the schedule below. Yearly
and monthly bids will be delivered by fax or mail (sealed-bid), and the daily bids will be
transacted on-line through their web-based auction system. Auction results are published and
invoiced per the schedule below.
Figure 8. CEPS auction schedule of events for all products in 2005
15
Auction
Product
Publication of
available capacity
Deadline for
bids
Publication of
results
Monthly invoice
issue date
Monthly payment
due date
Yearly
11/18/2004
11/24/2004
12/1/2004
generally, first day of
month
three weeks after invoice
issue date
Monthly
within the first week of
previous month
one week after
publication of
available capacity
two days after
deadline for bids
one day after
publication of results
two weeks after invoice
issue date
Daily
9 a.m. on the day of
auction
within first week of
following month
three weeks after invoice
issue date
9:45 a.m. on the day 10 a.m. on the day of
of the auction
the auction
For a full version of the auction rules, see http://www.e-trace.biz
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Auction algorithm
There are three interconnections managed by the auction coordinator – PSE-O ↔ VE-T (PolandGermany), PSE-O ↔ CEPS (Poland-Czech Republic), and VE-T ↔ CEPS (Germany–Czech
Republic); with power flowing in both directions. The auction coordinator arranges all received
bids in descending order according to the individual bid price (merit order), independent of
interconnection and direction of the individual bid. The auction coordinator will then check the
feasibility of the merit order based on the technical constraints in the transmission systems.
If the considered bid – together with already accepted bids – does not exceed the limits of the
technical constraints, the auction coordinator will accept the bid and assign the requested
capacity to the auction participant. The auction price is set at zero in the case where no limits
are exceeded for a certain interconnection and direction. There is no minimum reservation
price for the auction.
If the considered bid – together with already accepted bids – exceeds the limit on any technical
constraint, the auction coordinator will execute the following actions depending on the auction
product. In the yearly and monthly auctions, the bid is rejected and the remaining capacity is
kept free for the next auction (monthly or daily, respectively). The auction price for either the
yearly or monthly product is set at the last accepted bid price. In the daily auction, bids on the
margin are accepted in the order of their individual time stamp (first-come first-serve). This
marginal bid will be assigned a capacity amount up to the technical limit of the interconnection
and direction. The auction price for the daily product is set at the marginal bid price.
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6 Appendix B: Further description of Financial Transmission Rights
When there is no congestion, electricity flows freely along the specified path, no price
differentials appear and thus there is no substantial value to the transmission right. When
congestion occurs, price differentials occur along the specified transmission path and thus
ownership of an FTR becomes valuable. In an event of congestion, the owner of the FTR then
receives a (settlement) payment that is the difference in electricity prices between the start
(injection point or origination) and end (withdrawal point or destination) of the specified
transmission route. Buyers of FTRs are thus paying a fixed payment at the auction in return for
all of the future congestion rents from a specific path or route over a specific timeframe.
Figure 9. Stylized example of an FTR
FTR Acquisition Process
Region A
PeA = $10/MWh
1 MW
Value Realization Process
Region B
Region A
PeB = $12/MWh
PRTA = $10/MWh
Player acquires annual FTR for 1
MW, based on expectation that flows
from Region A to B will be congested
10% of the time with an average price
difference of $2/MWh
Player pays upfront
fee for FTR
($1,752)
Region B
PRTB = $13/MWh
Markets results in a real time
congestion rate of 15% along this path
and over the year and an average
realized price difference of $3/MWh
Expected value of FTR = acquisition price:
=(10%*8760)*($12/MWh - $10/MWh)*1 MW
= $1,752
Player
acquires
FTR
1 MW
Realized value of FTR:
=(11%*8760)*($13/MWh - $10/MWh)*1 MW
= $3,942
Player
profits
from FTR
ISO
(mediator)
Player receives
FTR rents of $3,942
(in the form of a
FTR credit)
ISO
(mediator)
The figure above illustrates a stylized example of an FTR acquisition process. Imagine the buyer
to be a customer that is located in Region B but has a contract for delivery of energy to Region A
and must thus arrange for delivery of the contracted energy to his region, Region B. When
congestion occurs, this customer risks having his transaction cut by the system operator. Since
power moves from low cost areas to higher cost areas (absent system stability requirements),
congestion along a line necessitates the dispatch of higher priced power to serve the load that
was originally supposed to be supplied by the transaction that was cut. When this occurs, the
customer in our example has to buy higher priced power in Region B to replace the contracted
power he intended to transport over from Region A.
By holding an FTR, the customer is assured of receiving the additional rents from congestion,
since the ISO forwards these rents to the FTR holder in the form of an FTR credit or congestion
payment, and is thus hedged against the financial risk of having to replace the cheaper power
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he had contracted for in Region A with spot market purchases in Region B. If the customer is
facing a schedule which has cut his transaction, these FTR revenues will compensate for the
increased cost of meeting his needs through spot market purchases. In the example below, the
customer would have even realized a profit of $2,190 on the instrument because congestion was
higher than what was expected and resulted in larger price differences, as well. Other entities
may also find FTRs useful, for example, a generator or a marketer that has obligations or is
interested in trading between different markets.
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***CONFIDENTIAL DRAFT FOR CLIENT REVIEW***
7 Appendix C: Key characteristics of FTR markets across North America
Name
Inception
Type of auction
New York ISO
PJM ISO
transmission congestion contracts financial transmission rights
(TCCs)
September 1, 1999
April 1, 1998
purely financial contracts; point-to- purely financial contracts;
point obligation
point-to-point obligation
ISO New England
financial transmission
rights
March 1, 2003
purely financial contracts;
point-to-point obligation
Ontario (IESO)
transmisison tight (TRs)
California ISO
firm transmission
rights
May 1, 2002
February 1, 2000
purely financial contracts;
both a physical and a
external point-to-point paths financial contract;
flowgate rights
(FGRs), but will
switch to PTP
obligation
Midwest ISO
financial
transmission rights
May 1, 2005
purely financial
contracts; point-topoint obligation
all internal transmission paths
all internal transmission
paths
annual and monthly (onand off-peak)
all external point-to-point
paths
monthly and annual
all internal
all internal transmission paths
transmission paths
annual and monthly monthly and annual
(on- and off-peak)
2004 on-peak average:
CT: $4.6/MWh
WCMA: $-0.1/MWh
NEMA: $1.4/MWh
VT: $0.5/MWh
RI: $-0.2/MWh
SEMA: $-0.4/MWh
NH: $-0.7/MWh
ME: $-2.2/MWh
2004 off-peak average:
CT: $0.8/MWh
WCMA: $0.0/MWh
NEMA: $0.1/MWh
VT: $0.4/MWh
RI: $-0.1/MWh
SEMA: $-0.2/MWh
NH: $-0.2/MWh
ME: $-0.6/MWh
Oct 04 to Sep 05 monthly
2004 average annual
auction average - import into auction results:
Ontario:
$0.73/MWh
New York: $0.20/MWh
Michigan: $1.66/MWh
Minnesota: $1.29/MWh
Manitoba: $0.76/MWh
Quebec: $0.01/MWh
Oct 04 to Sep 05 monthly
auction average - export from
Ontario:
New York: $0.55/MWh
Michigan: $0.03/MWh
Minnesota: $0.07/MWh
Manitoba: $0.04/MWh
Quebec: $0.09/MWh
all internal transmission
paths
Typical terms of
6 months, one-year, multi-year (up annual and monthly (onto five years), monthly
and off-peak, or all 24
transmission rights
reconfiguration auctions
hours)
Average auction clearing
Sample range of recent average Spring 2005 auction
prices (2004-2005 planning
auction clearing prices results:
6-month term: $1.13-$1.38/MWh period):
(translated into
Buy Bids:
Canadian $/MWh using 1-year term: $0.68-$1.00/MWh
ComEd - $0.07/MWh,
current exchange rate)
MAAC - $0.71/ MWh
Sell Bids:
ComEd - $0.39/MWh,
MAAC - $0.26/MWh
Coverage of auction
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all internal
transmission paths
annual
Apr 05 to Oct 05
average monthly
auction results:
between $0.10/MWh
and $0.51/MWh
Texas (ERCOT)
transmission congestion rights
(TCRs)
February 15, 2002
purely financial contracts;
flowgate rights (FGRs)
2004 annual auction results:
West to North: $0.4/MWh
South to North: $2.6/MWh
South to Houston: $2.0/MWh
Northeast to North: $0.6/MWh
North to Houston: $0.6/MWh
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