FTR Properties: Advantages and Disadvantages

Part of the Lecture Notes in Energy book series (LNEN, volume 7)


While financial transmission rights (FTRs) were developed as a hedge for locational price risk, their advocates envision them as a multifaceted tool, providing revenue sufficiency for contracts for differences, distributing the merchandizing surplus an independent system operator (ISO) or regional transmission operator (RTO) accrues in market operations, and providing a price signal for transmission developers.


Transportation Radar Expense Volatility Dispatch 


  1. Apt J (2005) Competition has not lowered U.S. industrial electricity prices. Electr J 18(2):52–61MathSciNetCrossRefGoogle Scholar
  2. Barmack M, Griffes P, Kahn E, Oren S (2003) Performance incentives for transmission. Electr J 16(3):9–22CrossRefGoogle Scholar
  3. Benjamin R (2007) Principles for interregional transmission expansion. Electr J 20(8):36–47CrossRefGoogle Scholar
  4. Benjamin R (2008) Load-pocket management in restructured electricity markets: a hybrid model. Electr J 21(6):51–59CrossRefGoogle Scholar
  5. Benjamin R (2010) A further inquiry into FTR properties. Energy Policy 38(7):3547–3556CrossRefGoogle Scholar
  6. Benjamin R (2011) Tweaking merchant transmission expansion(again). Round table group. Available from author by requestGoogle Scholar
  7. Blumsack S, Apt J, Lave L (2006) Lessons from the failure of U.S. electricity restructuring. Electr J 19(2):15–32CrossRefGoogle Scholar
  8. Bogorad C, Huang W (2005) Long-term rights for new resources: a crucial missing ingreent in RTO markets. Electr J 18(7):11–24CrossRefGoogle Scholar
  9. Borenstein S, Bushnell J, Stoft S (2000) The competitive effect of transmission capacity in a deregulated electricity industry. Rand J Econ 31(2):294–325CrossRefGoogle Scholar
  10. Brunekreeft G (2004) Market-based investment in electricity transmission networks: controllable flow. Utilities Pol 15(4):269–281CrossRefGoogle Scholar
  11. Bushnell J, Stoft S (1996a) Electric grid investment under a contract network regime. J Regul Econ 10(1):61–79CrossRefGoogle Scholar
  12. Bushnell J, Stoft S (1996b) Grid investment: can a market do the job. Electr J 9(1):74–79CrossRefGoogle Scholar
  13. Bushnell J, Stoft S (1997) Improving private incentives for electric grid investment. Resour Energy Econ 19(1–2):85–108CrossRefGoogle Scholar
  14. Calviou M, Kleindorfer P, Paravalos M (2004) Creating value through transmission in an era of RTOs. In: Paper presented at the electricity transmission in deregulated markets conference, Carnegie-Mellon University, 15–16 Dec 2004. Available at
  15. Chao H, Peck S (1996) A market mechanism for electric power transmission. J Regul Econ 10(1):25–59CrossRefGoogle Scholar
  16. Chao H, Peck S (1997) An institutional design for an electricity contract market with central dispatch. Energy J 18(1):85–110Google Scholar
  17. Deng SJ, Oren S (2006) Electricity derivatives and risk management. Energy 31(6–7):940–953CrossRefGoogle Scholar
  18. Deng SJ, Oren S, Meliopoulos S (2010) The inherent inefficiency of simultaneously feasible financial transmission rights auctions. Energy Econ 32(4):779–785CrossRefGoogle Scholar
  19. Fabrizio K, Rose N, Wolfram C (2007) Do markets reduce costs? Assessing the impact of regulatory restructuring on US electric generation efficiency. Am Econ Rev 97(4):1250–1277CrossRefGoogle Scholar
  20. Gans J, King S (2000) Options for electricity transmission regulation in Australia. Aust Econ Rev 33(2):145–160CrossRefGoogle Scholar
  21. Green R (1997) Electricity transmission pricing: an international comparison. Utilities Pol 6(3):177–184CrossRefGoogle Scholar
  22. Hogan W (1992) Contract networks for electric power transmission. J Regul Econ 4(3):211–242CrossRefGoogle Scholar
  23. Hogan W (1998) Transmission investment and competitive electricity markets. Harvard University. Available at
  24. Hogan W, Rosellón J, Vogelsang I (2010) Toward a combined merchant-regulatory mechanism for electricity transmission expansion. J Regul Econ 38(2):113–143CrossRefGoogle Scholar
  25. Hsu M (1997) An introduction to the pricing of electric power transmission. Utilities Pol 6(3):257–270CrossRefGoogle Scholar
  26. Joskow P (2005) Transmission policy in the United States. Utilities Pol 13(2):95–115CrossRefGoogle Scholar
  27. Joskow P (2006) Markets for power in the United States: an interim assessment. Energy J 27(1):1–36Google Scholar
  28. Joskow P, Tirole J (2000) Transmission rights and market power on electric power networks. Rand J Econ 31(3):450–487CrossRefGoogle Scholar
  29. Joskow P, Tirole J (2005) Merchant transmission investment. J Ind Econ 53(2):233–264CrossRefGoogle Scholar
  30. Keller K, Wild J (2004) Long-term investment in electricity: a trade-off between co-ordination and competition. Utilities Pol 12(4):243–251CrossRefGoogle Scholar
  31. Knittel C (2002) Alternative regulatory methods and firm efficiency: stochastic frontier evidence from the U.S. electricity industry. Rev Econ Stat 84(3):530–540CrossRefGoogle Scholar
  32. Kristiansen T (2005a) Financial transmission rights: experiences and prospects. Kema 0000000ments/infraday/2005/papers/kristiansen_Financial_Transmission_Rights_Experiences_and_Prospects.pdfGoogle Scholar
  33. Kristiansen T (2005b) Markets for financial transmission rights. Energy Stud Rev 13(1):25–74MathSciNetGoogle Scholar
  34. Kristiansen T (2008) Allocation of long-term financial transmission rights for transmission expansion. Eur J Oper Res 184(3):1122–1139MathSciNetCrossRefMATHGoogle Scholar
  35. Lave L, Apt J, Blumsack S (2004) Rethinking electricity deregulation. Electr J 17(8):11–26Google Scholar
  36. Lave L, Apt J, Blumsack S (2007a) Deregulation/restructuring part I: reregulation will not fix the problems. Electr J 20(8):9–22CrossRefGoogle Scholar
  37. Lave L, Apt J, Blumsack S (2007b) Deregulation/restructuring part II: where do we go from here. Electr J 20(9):10–23CrossRefGoogle Scholar
  38. Leautier T (2001) Transmission constraints and imperfect markets for power. J Regul Econ 19(1):27–54CrossRefGoogle Scholar
  39. Liu M, Wu F (2007) Risk management in a competitive electricity market. Int J Electr Power Energy Syst 29(9):690–697CrossRefGoogle Scholar
  40. Morey M, Eakin K, Kirsch L (2005) RTOs and electricity restructuring: the chasm between promise and practice. Electr J 18(1):31–51CrossRefGoogle Scholar
  41. Morrison J (2005) The clash of industry visions. Electr J 18:14–30CrossRefGoogle Scholar
  42. Oren S, Spiller P, Varaiya P, Wu F (1995) Nodal prices and transmission rights: a critical appraisal. Electr J 8(3):24–35CrossRefGoogle Scholar
  43. PJM Interconnection, L.L.C. (2009) PJM manual 06 financial transmission rights. Available at
  44. Rosellón J (2003) Different approaches towards electricity transmission expansion. Rev Netw Econ 2(3):238–269CrossRefGoogle Scholar
  45. Rosellón J, Weigt H (2011) A dynamic incentive mechanism for transmission expansion in electricity networks—theory, modeling and application. Energy J 32(1):119–148Google Scholar
  46. Rosellón J, Myslíková Z, Zenón E (2011) Incentives for transmission investment in the PJM electricity market: FTRs or regulation (or both?). Utilities Pol 19(1):3–13CrossRefGoogle Scholar
  47. Rotger J, Felder F (2001) Promoting efficient transmission investment: the role of the market in expanding transmission infrastructure. Transenergie Report. Available at
  48. Rothkopf M (2007) Dealing with failed deregulation: what would price C. Watts do? Electr J 20(7):10–16CrossRefGoogle Scholar
  49. Sarkar V, Kharparde SA (2008) A comprehensive assessment of the evolution of financial transmission rights. IEEE Trans Power Syst 23(4):1783–1795CrossRefGoogle Scholar
  50. Schweppe F, Caramanis M, Tabors R, Bohn R (1988) Spot pricing of electricity. Kluwer, DordrechtCrossRefGoogle Scholar
  51. Siddiqui S, Bartholomew E, Marnay C, Oren S (2005) Efficiency of the New York independent system operator market for transmission congestion contracts. Manag Finance 31(6):1–45Google Scholar
  52. Taber J, Chapman D, Mount T (2006) Examining the effects of deregulation on retail electricity prices. Department of Applied Economics and Management, Cornell University, working paper 2005–14. Available at
  53. Vogelsang I (2001) Price regulation for independent transmission companies. J Regul Econ 20(2):141–165MathSciNetCrossRefGoogle Scholar
  54. Wu F, Varaiya P, Spiller P, Oren S (1996) Folk theorems on transmission access: proofs and counterexamples. J Regul Econ 10(1):5–23CrossRefGoogle Scholar
  55. Yu N, Somani A, Tesfatsion L (2010) Financial risk management in restructured wholesale power markets. Lowa State University. Available at

Copyright information

© Springer-Verlag London 2013

Authors and Affiliations

  1. 1.Round Table Group, IncGambrillsUSA

Personalised recommendations