Implementation of inter-island financial transmission rights
Current implementation work
The start date for the first FTR auction will be early May 2013, subject to confirmation of the Authority’s funding for FTR implementation.
The following activities are underway:
- The FTR manager, EMS, released its consultation document containing the draft FTR allocation plan. Submissions are due to EMS by 15 May 2012. Its consultation document is available on EMS’s website;
- The clearing manager, NZX, released its consultation document on a draft prudentials methodology, which will determine how prudentials are calculated for FTR market participants. Submissions are due to NZX by 22 May 2012. The consultation document is available on NZX’s website;
- The Authority is seeking an opinion from the Inland Revenue Department on the GST treatment of FTRs.
The Authority has sought an increase to its annual appropriation, which is funded through the industry levy, for the FTR market costs. The Authority will confirm the FTR start date after the Government’s 24 May 2012 budget announcements.
Completed work
FTR regulations come into force on 1 June 2012
Regulations to support the FTR market come into force on 1 June 2012.
The regulations:
- identify the FTR manager as a market operation service provider, having all the rights and obligations of market operation service providers under the Act, the Regulations, and the Code;
- establish a liability limit for the FTR manager of $500,000 from any one event or series of closely related events, and $2 million from all events in any one financial year; and
- make the clearing manager liable to holders of financial transmission rights (FTRs) who suffer loss that occurs as a result of any failure by the clearing manager to comply with its obligations under the Code.
The Authority consulted on these proposed regulations in October and November 2011. Submissions can be viewed on the consultation page.
The regulations can be viewed at:
Electricity Industry (Participants and Roles) Regulations 2012
Electricity Industry (Enforcement) Amendment Regulations 2012
FTR implementation: Financial Markets Authority declarations on FTRs
The Financial Markets Authority (FMA) has gazetted two notices:
- The Futures Contracts (Financial Transmission Rights) Notice 2012 defines FTRs as futures contracts that are regulated under the Securities Markets Act 1988.
- The Authorised Futures Dealers (Financial Transmission Rights) Notice 2012 identifies what kind of persons may trade in FTRs (‘approved participants’), and authorises the FTR manager and the clearing manager to deal in futures contracts that are FTRs.
The Authority sought these declarations as part of the establishment of the FTR market. As a financial product, FTRs are regulated under the Securities Markets Act 1988 and are subject to FMA scrutiny.
FTR manager selected
On 3 April 2012 the Authority appointed Energy Market Services (EMS), a division of Transpower New Zealand Limited, to the role of FTR manager.
The Authority selected EMS via a competitive open tender. EMS has engaged Nexant Inc, a US supplier of FTR auction software, to run FTR auctions on its i-HEDGE system.
Request for proposals for FTR manager
On 31 August 2011 the Authority released a request for proposals (RFP) for the role of FTR manager on the Government Electronic Tenders Service website (GETS). The deadline for submission of proposals to the Authority was 5.00pm, Monday 31 October 2011.
Prototype source code
As part of the RFP, on this page the Authority provided the source code for prototype software applications that fulfil a subset of two of the FTR manager’s functions. This source code is referred to in Appendix 6 of the RFP.
For the function of FTR grid design files include:
| Software | Description |
|---|---|
| FTR_Transmission_Outage_Database.accdb |
Microsoft access 2007 database application for processing outage data from POCP website (located in \vSPDExcel_v1.1_FTR\FTR_Transmission_Outage). |
| VSPD_FTR.xls | Microsoft excel user interface of the GAMS-based application "vSPD-FTR", which performs security analysis on outage states to derive limits on the FTR grid (located in \vSPDExcel_v1.1_FTR\Programs\). |
| FTR_BEN_to_OTA.gdx | vSPD-FTR data file for determining maximum volume of FTRs from Benmore to Otahuhu. It has a 5000 MW demand at Otahuhu, a one cent energy offer at Benmore and a $200 energy offer at Otahuhu (located in \vSPDExcel_v1.1_FTR\Input) (binary file). |
| FTR_OTA_to_BEN.gdx | vSPD-FTR data file for determining maximum volume of FTRs from Otahuhu to Benmore. It has a 5000 MW demand at Benmore, a one cent energy offer at Otahuhu and a $200 energy offer at Benmore (located in \vSPDExcel_v1.1_FTR\Input) (binary file). |
| *.gms | Various GAMS source files required by the vSPD-FTR application (located in \vSPDExcel_v1.1_FTR\Programs\). |
For the function of determining FTR rentals:
| Software | Description |
|---|---|
| BatchConvertFP_FTP_Server.m | Unzips final pricing case zip file and calls CreatePostMSP_GDX.m for each final pricing case to be processed. |
| CreatePostMSP_GDX.m |
Processes one final pricing case, producing, among other things, csv files of:
|
| loss_proc.sql | Calculates the FTR rentals generated by AC line loss curve blocks for each trading period within a specified date range for the specified set of balanced extreme FTR injection patterns. There are two balanced extreme FTR injection patterns denoted as inj_DCN (maximum transfer from Benmore to Otahuhu) and inj_DCS (maximum transfer from Otahuhu to Benmore) (clauses 7(2), 8(2), 8(3), 9(5) of schedule 14.6 of the Code). |
| constr_proc.sql | Calculates the FTR rentals generated by branch constraints involving AC line flow terms for each trading period within a specified date range for the specified set of balanced extreme FTR injection patterns (clauses 7(3), 8(4), 9(4) of schedule 14.6 of the Code). |
Note - shift factors are referred to in the software as participation factors or pfactors.