Enabling investment and innovation
Removing Schedule 14.3 of the Code
To reduce the operating costs of the financial transmission rights market by removing the rentals calculation and allowing the market to settle using all available loss and constraints excess.
Overview
We consulted on removing Schedule 14.3 of the Code. This consultation raised broader concerns about the operation of other aspects of the financial transmission rights (FTR) market. We have decided to investigate these issues and will retain Schedule 14.3 to provide regulatory certainty whilst this review is underway.
Timeline
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3 May 2022
Development —To retain Schedule 14.3 of the Code
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2 February 2021
Development —Update on proposed changes to the FTR market
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Project background
The FTR market is settled using loss and constraint excess (LCE) and auction income. The FTR manager is required to calculate the amount of LCE to be allocated to FTRs in accordance with Schedule 14.3. The FTR LCE allocation calculation is complex. It requires specialist software that is costly to upgrade and maintain.
The FTR market has grown to the point that an average of 90% and sometimes up to 100% of the loss and constraint excess is allocated to the settlement of the FTR market.
This project proposed allocating 100% of the LCE to the FTR market, and returning any unused portion to transmission customers via Transpower, to help reduce IT costs and increase operational efficiencies.
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