PJM Auction Awards First Long-Term Financial Transmission
Oct 10, 2008 - PRNewswire
PJM Interconnection's first auction
for long-term financial transmission rights (FTRs)
cleared 23,348 megawatts of transmission rights
for periods up to four years in the future.
The auction was held October 1 - 3 with 62 members
participating and 8,500 bids cleared. Previously,
FTRs could be acquired only for the coming planning
year. FTRs are financial instruments that enable holders
to hedge against locational electricity price differences
caused by transmission constraints in the day-ahead
"The success of this first auction is a strong indicator
of interest in these long-term instruments, which
provide more market certainty in developing long-term
contracts. The volume of transactions is about equal
to the amount we generally receive in our monthly
auctions, demonstrating the new auction already is
drawing participation similar to the more mature FTR
market," said Andrew L. Ott, senior vice president
Collectively, the auction cleared $18.5 million in
revenue for the June to May periods of the years,
2009-2010, 2010-2011 and 2011-12.
This auction was the first round of long-term FTR
auctions that enable participants to bid on FTR products
up to four years into the future. Durations of the
FTRs are from one to three years. Using this new tool,
electric power buyers can hedge future congestion
costs, which can help foster long-term power contracts.
Prior to this auction, FTRs could only be purchased
in one-month, three-month or one-year increments.
FTRs allow transmission customers to protect themselves
against the risk of congestion cost increases, providing
price certainty for transmission customers when receiving
electricity across constrained transmission lines.
Transmission customers pay the market price to move
energy from one point in the transmission system to
another. This cost increases when the delivery is
across transmission facilities that are constrained.
FTRs are a necessary hedging mechanism in the locational
"Having access to different types of FTRs for various
time periods allows participants to build flexible
portfolios to maximize the effectiveness of their
individual hedging strategies," Ott said.
The results of the first round auction are available
Round two of the long-term FTR auction will open
Dec. 1, 2008. Results are expected to be posted by
Dec. 10, 2008 on http://www.pjm.com/ .
PJM Interconnection ensures the reliability of the
high-voltage electric power system serving 51 million
people in all or parts of Delaware, Illinois, Indiana,
Kentucky, Maryland, Michigan, New Jersey, North Carolina,
Ohio, Pennsylvania, Tennessee, Virginia, West Virginia
and the District of Columbia. PJM coordinates and
directs the operation of the region's transmission
grid, which includes 6,038 substations and 56,350
miles of transmission lines; administers a competitive
wholesale electricity market; and plans regional transmission
expansion improvements to maintain grid reliability
and relieve congestion. Visit PJM at http://www.pjm.com/
CONTACT: PJM News, +1-866-756-6397
Web site: http://www.pjm.com/http://www.pjm.com/markets/ftr/auction-user.html
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