FTR market operating broadly as intended
Today the Electricity Authority published a decision paper about whether the market settings are fit-for-purpose in the financial transmission rights (FTR) market.
We found that the FTR market is working broadly as intended to assist market participants to manage their locational price risk, although questions remain around the efficiency of the funding design.
Following comparative analysis of FTR and ASX prices for FTRs, we found that FTRs are fair valued at the time of auction. However, the fair value finding does not indicate whether the current FTR market funding design is the best use of these funds.
Further analysis is required to determine whether using both loss and constraint excess and auction revenue to fund the FTR market is to the long-term benefit of consumers.
We will conduct this analysis in a future review of market funding and design settings of the FTR market. The timing of this review will be considered as part of our work programme on the transition to a renewables-based electricity system.
We will continue to engage with the FTR Manager on ways to further inform and support market participants, to ensure that the market is operating as intended.
View project: Financial transmission rights
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