Transmission rights

Transmission rights are used by generators and/or marketers to ensure delivery of power to a point of sale. Given the current state of the transmission infrastructure, rights to use transmission can make or break any given transaction. The way that transmission rights are made available varies depending on the market structure and trading arrangements. 

One method of assigning rights is the point-to-point methodology. Under point-to-point, rights are assigned from one specific interconnection to a specific take-out point along a specific path. Common types of point-to-point rights include long-term firm transmission, short-term firm transmission, and non-firm transmission. If paths are congested, meaning more users wish to move power along a path than the capacity of the path will allow, some users’ schedules are curtailed based on priorities specified in the transmission tariffs or contracts. Point-to-point rights are commonly used in the wheeling and decentralized trading arrangements methods. 

The alternative method of assigning transmission rights is the network methodology. Under this method, rights are established to deliver and/or receive electricity within a specified transmission network. No specific path is defined as the network operator will move power in the most efficient manner. If paths are congested based on the lowest-cost dispatch model, then the system is “re-dispatched” to relieve congestion in the most optimal way for the overall market. All participants’ schedules are still delivered if physically possible, but locational adjustment of prices results in congestion costs for users associated with congested paths. 

The network methodology is used in the integrated trading arrangements method and is used by Independent System Operators (ISOs) in many ISO markets. To hedge against the financial uncertainty associated with congestion costs, ISOs often offer financial transmission rights (FTRs). FTRs are allocated or auctioned off to the marketplace and provide a fixed-price guarantee associated with use of a certain transmission path.