LMP Market Design

LMP Market Design

Scott Harvey - Local Marginal Pricing Market Power

Financial Transmission Rights (FTRs, TCCs and CRRs)


The introduction of LMP pricing made it possible for the markets to switch from reliance on physical transmission rights to financial transmission rights as the prime mechanism for defining entitlements to use the transmission system without paying congestion charges. The acquisition of financial transmission rights provides a mechanism for transmission customers to hedge the congestion charges potentially associated with long term power contracts, while avoiding the inefficient use-it or lose-it incentives associated with physical transmission rights. These papers discuss issues pertaining to the revenue adequacy of financial transmission rights, both in theory and in practice. In addition, the papers in this section discuss the use of auctions to allocate financial transmission rights, issues relating to the valuation of financial transmission rights in transmission right auctions and collateral policies for financial transmission right holders.

Scott Harvey, "The Role of FTRs as Congestion Hedges and FTR Auction Values" EUCI FTR Conference, January 30, 2020.

Scott Harvey, "Review of PJM Mark to Auction FTR Designs," PJM Market Implementation Committee, December 12, 2018.

James Bushnell, Scott M. Harvey, Benjamin F. Hobbs, "Opinion on Congestion Revenue Rights Auction Efficiency Track 1B," Market Surveillance Committee of the California ISO, June 13, 2018.

Scott M. Harvey, "Congestion Rent Shortfalls in the California ISO and Other Electricity Markets," California ISO, Market Surveillance Committee Meeting, June 7, 2018.

Scott Harvey, "CRR Revenue Adequacy, Auction Values and Settlement Rules," Market Surveillance Committee Meeting, April 4, 2018.

James Bushnell, Scott M. Harvey, Benjamin F. Hobbs, "Opinion on Congestion Revenue Rights Auction Efficiency," Market Surveillance Committee of the California ISO, March 13, 2018.

Scott M. Harvey, "CRR Prices and Pay Outs; Are CRR Auctions Valuing CRRs as Hedges or as Risky Financial instruments?," California ISO Market Surveillance Committee Meeting, February 2, 2018, Folsom, CA.

Scott M. Harvey, "CRR Prices and Pay Outs; Are CRR Auctions Valuing CRRs as Hedges or as Risky Financial instruments?," California ISO Market Surveillance Committee Meeting, February 3, 2017, Folsom, CA.

Scott M. Harvey, "Sources of Congestion Rent Shortfalls in the Day-Ahead Market," California ISO, Market Surveillance Committee Meeting, October 15, 2014.

Scott M. Harvey, "Background on FTR Development," PJM FTR/ARR Senior Task Force Meeting, August 27, 2014.

Scott M. Harvey, "Analyzing the Impact of Monthly FTR Auctions on Shortfalls and Hedging,” MISO FTR Working Group, July 11, 2012."

Scott M. Harvey, "Addressing Congestion Rent Shortfalls," EUCI Financial Transmission Rights Conference, July 26, 2011.

Michael Cadwalader, Paul Gribik, William Hogan, Susan Pope, "Extended LMP and Financial Transmission Rights," June 9, 2010.

Scott M. Harvey, "Credit Coverage for Financial Transmission Rights," EUCI Unsecured Credit Conference, April 29, 2009

Scott M. Harvey, "Analysis of Midwest ISO Congestion Rent Shortfalls," prepared for Midwest ISO Market Subcommittee, March 4, 2008.

Scott M. Harvey, "Analysis of TCC Credit Policy Background," May 21, 2007.

Scott M. Harvey, "Credit Policy for Financial Transmission Rights," EUCI Conference on Financial Transmission Rights, March 20, 2007.

William Hogan, "Financial Transmission Right Formulations," March 31, 2002

Scott M. Harvey, William W. Hogan, and Susan L Pope, "Transmission Capacity Reservations and Transmission Congestion Contracts," June 6, 1996, Revised March 8, 1997

Susan Pope, "Affidavit on Congestion Pricing," prepared for the Member Systems of the New York Power Pool, Docket ER97-1523 et al, December 2, 1997.

William W. Hogan, "Testimony on the TCC Auction," prepared for the Member Systems of the New York Power Pool, Docket ER97-1523 et al, December 2, 1997.

William W. Hogan, "Contract Networks for Electric Power Transmission," Journal of Regulatory Economics, September 1992, Volume 4 #3

William W. Hogan, "Tranmission Capacity Rights for the Congested Highway: A Contract Network Approach," June 8, 1991, Docket PL91-1-000.