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FTR advice provided to Electricity Commission in 2009

This pages presents Transpower’s advice in relation to FTRs and Locational Rental Allocations (LRA) presented on request to the Electricity Commission in July 2009.

Transpower was asked for advice on:

1. How Transpower’s original FTR design (as proposed in September 2002)could be amended to:
   • Make it simpler and more appealing to participants; and
   • Deal with any issues raised by Dr Grant Read’s review of that proposal at that time (e.g. with respect to the horizons over which FTRs might be defined or traded). and
2. FTR implementation based on Transpower’s experience with its original FTR design including:
   • Ease or otherwise of implementing FTRs;
   • Time required to implement FTRs; and
   • Any difficulties Transpower faced in implementing their original FTR design.

Transpower was pleased to assist and provided its advice to the Commission on 28 July 2009.

Transpower’s paper briefly describes the parameters used in FTR design and how they could be set to meet basic locational price risk management requirements in today’s regulatory environment.  It is proposed that a simplified FTR design can be implemented within a short timeframe while the option to evolve design, with users, is preserved.

Transpower emphasised that user input to the FTR design is of fundamental importance and therefore proposes a simplified design that could achieve most of the hedging and competition benefits while a long-term FTR market is developed with significant user input.

If the Electricity Commission decideds to implement an FTR market, Transpower could have assisted by leveraging its existing investment in FTR design, FTR market systems and specialist expertise to fast track implementation at least cost.

To achieve an implementation within a short timeframe, Transpower suggestes the industry consider the following initial design parameters with their interim and long term settings:

Resources and discussion starters

• Background
• Transpower’s 2002 FTR design
• Dispatch & FTR simulator
• Dispatch, LRA & FTR simulator
• Transpower submissions relating to FTRs
• FTR advice and resources 2009