ISO-NE expands auction opportunities for Financial Transmission Rights

On September 17, 2019, ISO New England launched the Financial Transmission Rights – Balance of Planning Period (FTR BoPP) project to provide market participants with more opportunities to configure their FTR portfolio. The ISO and the New England Power Pool filed jointly with the Federal Energy Regulatory Commission to make the changes.

FTRs are important financial instruments in the Day-Ahead Energy Market that entitle the holder, a market participant, to acquire an annual or monthly share of excess revenues collected by the ISO that arises when the New England transmission grid is congested. (Energy market prices are made up of three components: energy, transmission congestion costs, and losses.)

FTRs are defined in megawatts from a point of receipt (where the power is injected onto the grid) to a point of delivery (where the power is withdrawn from the grid). For each hour there is congestion between the points of receipt and delivery of the FTR, the holder of the FTR is awarded a share of the congestion charges collected for that hour.

Historically, FTRs have been acquired through auctions in which market participants bid for monthly and/or annual rights. In the past, market participants had two choices—bidding for a one-month FTR in an auction prior to the start of the month, or for a year-long FTR prior to the annual period. The FTR BoPP augments the bidding process by implementing multiple on-peak and off-peak auctions for the months remaining in the annual period, e.g. the FTR auctions held in January will include February-December, February auctions include March-December.

The new FTR rules also include financial assurance enhancements, such as:

  • Netting FTRs that have the same path, class, and month but are awarded in different auctions, to avoid “double-margining”
  • Increasing collateral on counterflow positions to enhance market protection
  • Introducing a new variable called “unsettled FTR financial assurance” to reflect the Mark-to-Market (MtM) value of an FTR portfolio created by multiple auctions
  • Updating the formula used to calculate the proxy value for FTR financial assurance

More information about the change, including training materials for market participants and technical documentation, can be found on the BoPP project webpage.

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