✨ Financial Transmission Rights Policy
3634 NEW ZEALAND GAZETTE, No. 123 30 OCTOBER 2006
Appendix One
Financial Transmission Rights
Introduction
1 Under marginal cost nodal pricing, different locations experience different prices caused by transmission losses and constraints.
2 Financial transmission rights (FTRs) should be introduced to assist in the management of locational price risk resulting from transmission losses and constraints and to improve economic signalling (including the signals for new transmission investment). The loss and constraint rentals arising out of the spot market provide the appropriate underpinning for FTRs.
3 The Government’s expectations in relation to FTRs are specified below.
Guiding principles for an FTR market
4 Realistic long term risk management mechanisms must be made available to end users and to competing retailers.
5 Economic efficiency is a critical goal that should be pursued in a robust but realistic fashion. The concept of economic efficiency includes the integrity of nodal price signals for price-sensitive generation, consumption and investment decisions.
6 FTR design and allocation should give priority to ensuring consumers have access to competitive markets, particularly in regions subject to transmission constraints, but otherwise have due regard to preserving continuity with established price relativities and commercial arrangements.
7 Pragmatic solutions must be developed which are implementable and endurable.
8 Transpower should not be required to take on commercial risk as a result of FTR arrangements without the agreement of Transpower’s Board.
9 The design of FTR arrangements should mitigate and manage risk to distribution companies.
FTR policy framework
10 Transpower should continue to receive loss and constraint rentals, and should use the rentals to fund an FTR product.
11 A market for short to medium term FTRs should be introduced covering the interconnected grid (with or without spur lines).
12 Some or all of Transpower’s off-take customers (including distribution companies and direct connect customers) should be offered a long term allocation of FTRs.¹² If a distribution company prefers that its allocation be given to an agent appointed by the distribution company and approved by the
¹² This focus on off-take customers does not preclude other customers from receiving a similar long term allocation.
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Online Sources for this page:
VUW Te Waharoa —
NZ Gazette 2006, No 123
Gazette.govt.nz —
NZ Gazette 2006, No 123
✨ LLM interpretation of page content
🌾 Financial Transmission Rights Policy Framework
🌾 Primary Industries & ResourcesEnergy, Electricity Market, Transmission Rights, Government Policy