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Financial Transmission Rights

The Electricity Commission is currently consulting the industry on what best transmission hedge product to implement.  Given Transpower’s support for an efficient and successful electricity market, we want to work with regulators and the electricity industry in an effort to raise the level of understanding of FTR options and risks so that an informed decision on the best option for New Zealand can be achieved.

FTRs are financial hedges that help protect energy purchasers or generators from price uncertainty caused by transmission losses and constraints.

They confer the right to receive the difference between the prices at the nodes between which the hedge is written for a defined amount of megawatts and a defined period of time. FTRs can be matched with an energy hedge to provide a high degree of price certainty.

FTRs are a standard component of the market design in most overseas electricity markets that, like New Zealand, are based on locational marginal (or nodal) pricing.  New Zealand has yet to introduce an FTR product, or any other form of tradable transmission hedge.

Financial Transmission Rights advice provided to the Electricity Commission

On 6 July 2009 the Electricity Commission sought Transpower’s advice in relation to FTRs and Locational Rental Allocations (LRA) by 24 July 2009.

• More information and full report to the Electricity Commission

Supporting information

• Background
• Transpower’s 2002 FTR design
• Dispatch & FTR simulator
• Dispatch, LRA & FTR simulator
• Transpower submissions relating to FTRs

Resources and discussion starters

The information on this web page, and related web pages, has been prepared solely for the purpose of information. It does not constitute an offer, or invitation to contract with Transpower New Zealand Limited ("Transpower"). While every effort has been made by Transpower to ensure accuracy, no liability or responsibility for accuracy or completeness of the information is accepted by Transpower. The reader must use its own judgement in applying the information depicted on this web page and not rely on such information. Transpower reserves the right to vary or update this information from time to time.