- How can transmission pricing be used to reduce the likelihood of anti-competitive behavior by those entities owning both generation and trasmission.
In the framework of the EC Regulation 1228/2003, the goal of this background paper is to provide a description of the different market based solutions available for transmission risk hedging in congestion management. This paper presents three different transmission risk hedging products that can be offered to the market in the field of cross-border trade and congestion management. Due to various facts several price zones exist within the overall European electricity market where the demand of each zone is met in real time by the production of the respective zone and a zone specific market price is found (e.g. on the respective Power Exchange). This raises the question of how a market player wishing to buy electricity in a certain price zone and to sell it in another one can hedge the risk of a price difference emerging between those zones. This paper describes the three main kinds of transmission risk hedging products identified by ETSO: • Physical Transmission Rights (PTRs); • Financial Transmission Rights (FTRs); • Financial Contracts for Differences (CfDs); The paper also provides a first evaluation of the different solutions adopting a markets’ perspective. From a practical perspective, the implementation of forward PTRs only requires a minimum of market infrastructure and contractual arrangements. This is probably the reason for this product to be widely and successfully implemented on most European interconnections. However, Market Splitting or Coupling or co-ordinated implicit auctions would be the main prerequisite towards the implementation of marketbased FTRs and CfDs in Europe. Vice versa, in case Implicit Auctions (Market Splitting or Coupling) are introduced FTRs form a reasonable complement to those schemes for transmission hedging.
For years, utilities, regulators, and economists have discussed the possibility of opening access to the electric transmission grid. It is now well past the time to cut the Gordian knot in impasse over the debate, and to raise the key strategic question of whether utility owned transmission facilities belong in the ratebase paid for by native-load ratepayers. The question is complex, but requires public discussion and debate as we move inexorably to more competitive bulk power markets. The issue is best approached from three different perspectives:
• Who should bear the risk of residual revenue respon-
sibility for transmission assets?
• Are actual costs and uses reflected in the allocation of responsibilities for transmission revenues?