LBNL Report Number
Congestion management is an important component of electricity supply that is, in the U.S., typically achieved by operation of a transmission rights market, often purely financial. In principle, financial transmission rights serve market participants attempting to hedge against uncertain, and often sizable, congestion charges. In addition, effective congestion management can make primary energy markets more efficient and can identify areas where transmission investment is needed. The Wholesale Power Market Platform white paper circulated by the Federal Energy Regulatory Commission (FERC) in April 2003 proposes the establishment of receipt point-to-delivery point (PTP) obligations called Firm Transmission Rights (FTRs), if locational pricing is employed in the energy markets. These rights would allow the holder either to collect or pay the congestion rent between the specified point of injection (POI) and point of withdrawal (POW) for each right. This proposal system is similar to the Transmission Congestion Contract (TCC) system employed by the New York Independent System Operator (NYISO), which has been operating since the spring of 2000. NYISO TCCs are financial derivatives that can be freely traded both by market participants and by speculators.