PJM has been having discussions with stakeholders around FTRs.
A Financial Transmission Right (FTR) is a financial instrument that entitles the holder to receive compensation for Transmission Congestion Charges that arise in the Day-ahead Market. Each FTR is defined from a point of receipt (where the power is injected onto the PJM grid) to a point of delivery (where the power is withdrawn from the PJM grid). The hourly economic value of an FTR is based on the FTR MW reservation and the difference between Day-ahead Congestion Prices at the sink point (point of delivery) and the source point (point of receipt) designated in the FTR. During the effective lifetime of an FTR there is a potential for the source point and/or sink point to be terminated due to an LMP Bus Model update. Termination exists for reasons such as generation retirements, load removals, and system topology changes. When a point is terminated, there is no longer a corresponding LMP calculated and the FTR source and/or sink point must either be remapped to the closest equivalent or in extreme circumstances the FTR path may be terminated. Currently, PJM has a process for how to remap terminated points. The FTR group utilizes EMS one-line diagrams and historical congestion pricing in order to locate the closest electrically equivalent pricing point from the terminated point. Although efficient, the existing process may not guarantee an optimum substitute, thereby an equivalent economic value to the purchased FTR. PJM is also concerned that the existing process might lack complete transparency. PJM and its Stakeholders are currently discussing remapping this process
Anticipated Process Completion May 1, 2018 for the 2018 Fall LMP business model update
Another FTR discussion focuses on the Long-Term FTR modeling Current Long-Term FTR modeling practices do not account for future transmission system upgrades. Future upgrades can have significant impacts on congestion revenue. PJM is concerned that its Long-term FTR auction clearing prices may not fully reflect the true future system capability. Under today’s construct, the Long-term FTR Auction network model does not include future transmission system expansion.However, the Annual ARR/FTR network model does include upgrades that will be in-service by June 30th
PJM proposed to expand this current methodology to the Long-term FTR network model for one year into the future.
*Text and photo present in this article is from the December PJM MIC Meeting