Market Settlements Auction Revenue Rights & Financial Transmission Rights. March 2011 Henry Chu

Transcription

1 Market Settlements Auction Revenue Rights & Financial Transmission Rights March 2011 Henry Chu

2 Market Settlement Training Series Market Settlements Training Modules: Overview O101 (Feb. 2011) ARR/FTR AF201 (Mar. 2011) Virtual and Financial Schedules VF201 (Apr. 2011) Physical Schedules PS201 (May 2011) Load L201 (Jun. 2011) Generation G201 (Jul. 2011) Generation Wind Farm GWF202 (Aug. 2011) Overview O101 (Sep. 2011) 1

3 Midwest ISO Disclaimer The following training materials are intended for use as training materials only and are not intended to convey, support, prescribe or limit any market participant activities. These materials do not act as a governing document over any market rules or business practices manual. The data used in the examples is test data and should not be used to support market analyses. 2

4 Key Assumptions This material will discuss Settlements concepts centered on the Energy and Operating Reserves Markets This is not a stakeholder meeting. The purpose of this training is NOT to make or to debate market design decisions, policies, or rules Participants will actively participate in the training by asking constructive questions in an effort to improve the overall learning experience 3

5 Agenda TOPICS SCHEDULE Introduction ARR/FTR / Overview 09:45-10:45 Break 10:45-11:00 ARR Charge Types 11:00-11:45 Lunch 11:45-12:45 ARR Retail Load Shift 12:45-13:15 FTR Overview 13:15-13:45 FTR Charge Types 13:45-14:30 Break 14:30-14:45 FTR FULL Guarantee and Guarantee Uplift Example 14:45-15:45 Summary and Quiz 15:45-16:15 4

6 Market Settlement ARR/FTR 101 TOPICS Introduction ARR/FTR Overview ARR ARR Charge Types Review ARR Transaction Amount ARR Infeasible Uplift Amount ARR Stage 2 Distribution Amount ARR Retail Load Shift Charge Impact Overview FTR FTR Charge Types Review FTR Market Administration Amount FTR Monthly Transaction Amount FTR Annual Transaction Amount FTR Hourly Allocation Amount FTR Monthly Allocation Amount FTR Yearly Allocation Amount FTR Full Funding Guarantee Amount FTR Guarantee Uplift Amount Impact of FTR Full Funding Guarantee and FTR Guarantee Uplift Amount ARR/FTR Summary 5

7 ARR/FTR Introduction This course provides an overview of the Midwest ISO Auction Revenue Rights (ARR) and Financial Transmission Rights (FTR) markets and the related Settlement Charges. 6

8 Acronyms ARR Auction Revenue Rights FTR Financial Transmission Rights GFA Grandfathered Agreements PTP Point-to-Point Transmission Reservation LTTR Long Term Transmission Rights AO Asset Owner RLS Retail Load Shift NPLF Net Peak Load Forecast of the Market Participant in an ARR Zone NITS Network Integration Transmission Service 7

9 Market Settlements Auction Revenue Rights & Financial Transmission Rights Intro

10 ARR/FTR Overview Day Ahead Excess Congestion Fund $$$ Financial Transmission Rights Auction Revenue Rights Right to Stream of +/-Revenue $ From the Congestion Fund Annual Auction Value of the FTR ARR/FTR Introduction 9

11 ARR/FTR Overview FTR Buyers & Sellers ARR Holders $ Financial Transmission Rights Annual Season FTR Auction Auction Revenue Rights Right to Stream of +/-Revenue $ Annual Auction Value of the FTR ARR/FTR Introduction 10

12 ARR/FTR Market LTTR-GFA New TX TX Upgrade NITS for Network Load OASIS New PTP TX ARR Annual FTR Auction FTR Monthly Auction Secondary Market Day Ahead Congestions $$$ ARR/FTR Introduction 11

13 Hotel Example - Reserve rooms by the day, the week, the month and the year - Different room rate depending duration and day of the week or the season ARR/FTR Introduction 12

14 Hotel Example Some hotels sell all the rooms individually and the each owner shares the revenue generated by the Hotel regardless whether a particular the room is rented or not. ARR/FTR Introduction 13

15 Hotel Example The room rate for a particular night may be $200 a night But if the Hotel is only 90% full, you will get only $180 regardless your room was rented or not. ARR/FTR Introduction 14

16 Hotel Example In this example, if you decided to stay in your room, you would have to pay $200 but would get back only $180 so this is partial hedge. ARR/FTR Introduction 15

17 Hotel Example A FTR holder is like the Hotel room owner He is entitled to received the congestion (rents) between the source and sink based on the total Congestion collected from the whole market regardless what was collected along its FTR path ARR/FTR Introduction 16

18 Hotel Example If FTR represent a Stream of Revenue then an ARR is like getting a lump sum for a structure Settlement or Annuity. This ARR (Lump Sum) is calculated once a year for each season and paid in equal portion at the beginning of each month of the season. ARR/FTR Introduction 17

19 Charge Types Type Allocation ARR Admin Guarantee Transaction Description Charge or Credit for the congestion entitlement between the source and sink of each FTR based on the available congestion collected from the Market. Charge or Credit associated with ARR Transactions Recovery of Midwest ISO s FTR market administrative costs Charge or Credit used to ensure the FTRs are made whole and the costs are proportionally distributed Charge or Credit associated to the purchase or sale of a FTR in the Annual or Monthly Auctions 18

20 ARR/FTR Charge Types Load Related Real-Time Charges Charge Type Acronym Type FTR Hourly Allocation Amount FTR_HR_ALC Allocation FTR Monthly Allocation Amount FTR_MN_ALC Allocation FTR Yearly Allocation Amount FTR_YR_ALC Allocation FTR Transaction Amount- Pre 2008 FTR_TXN Transaction FTR Monthly Transaction Amount FTR_MO_TXN Transaction FTR Annual Transaction Amount FTR_ARR_FTR_TXN Transaction FTR Full Funding Guarantee Amount FTR_FFG Guarantee FTR Guarantee Uplift Amount FTR_GUL Guarantee ARR Transaction Amount FTR_ARR_ARR_TXN ARR ARR Infeasible Uplift Amount FTR_ARR_INF_UPL ARR ARR Stage 2 Distribution Amount FTR_ARR_STG2_DIST ARR FTR Market Administration Amount FTR_ADMIN Admin 19

21 Settlement Sign Convention Activity (+) (-) Settlement Statements Charges Payment due Midwest ISO Credits Payment due MP 20

22 ARR Introduction Questions? 21

23 Auction Revenue Rights (ARR) Overview

24 What is an Auction Revenue Right (ARR)? ARRs are financial instruments that entitle their holders to a share of the revenue generated in the annual FTR Auction. ARRs are initially allocated to Market Participants based on firm historical usage of the transmission network. Incremental ARRs may be allocated for Network Upgrades, and for new and replacement Network Resources. ARRs can be converted to FTRs in the annual FTR auction process. ARR Overview 23

25 What is the value of an ARR? Eligible to share the revenue from the Annual auction of Seasonal FTRs; or Eligible to convert the ARR to a FTR thus enabling the holder to obtain the revenue generated from that FTR. ARR Overview 24

26 ARR Six Characteristics ARRs do not represent a physical right for delivery of energy. Market Participants need not hold ARRs to schedule Physical or Financial Bilateral Transactions. ARR Holders are not required to schedule Physical or Financial Bilateral Transactions by virtue of holding ARRs. ARR Overview 25

27 ARR Six Characteristics: (Cont.) ARRs are settled based on the clearing prices from the annual FTR Auction prices. ARRs do not protect Market Participants from congestion charges in the Day-Ahead or Real-Time Energy and Operating Reserve Markets. ARRs are allocated in the Annual ARR Allocation prior to the annual FTR Auction. ARR Overview 26

28 Who is entitled to get an ARR? The Market Participant for a Tariff Customer may hold ARR Entitlements for the following classes of service: 1) Firm PTP Transmission Service reservations of annual duration or longer, valid during the Reference Year (March 1, 2004 to February 28, 2005) and rolled over into the current or next Allocation Period. 2) NITS for Network Load from qualifying Reserved Source Points (RSPs) valid during the Reference Year. ARR Overview 27

29 Who is entitled to get an ARR? (Cont.) 3) GFAs selecting treatment under Option A as defined in the Tariff. 4) ARR Entitlements may also be based on Market Participant-funded network expansion projects, to the extent of the incremental transmission capacity added by the upgrade. ARR Overview 28

30 ARR Entitlements ARR Overview 29

31 Grandfathered Agreements Grandfathered Agreements are only applicable to agreements executed or committed to prior to September 16, Independent Transmission Company (ITC) Grandfathered Agreements that are not subject to the specific terms and conditions of the Energy Market Tariff (EMT) consistent with the Commission s policies. These agreements must have been previously identified to the Midwest ISO and set forth in the EMT Attachment P. ARR Overview 30

32 Grandfathered Agreements Option B is no longer available option ARR Overview 31

33 Grandfathered Agreements EMT- Attachment P ARR Overview 32

34 ARR Overview Questions? 33

35 ARR Process ARR Nomination ARR Allocation Annual FTR Auction A Market Participant nominates Candidate ARRs (CARRs) to be considered in the Annual ARR Allocation Nominations are financially binding if the CARR is allocated Eligibility is based on firm historical usage of the Midwest ISO administered transmission system ARR Overview 34

36 ARR Process ARR Feasible ARR is determined by ARR the FTR SFT software Nomination Allocation and funded by the Auction Revenue Annual FTR Auction Four Allocation Infeasible Stages ARR is determined by the ARRs FTR SFT Allocated software for peak and off-peak Stage 1A: ARRs allocated in this stage periods for four different seasons and funded by the LTTR ratio are called Long Term Transmission Rights (LTTR) and are based on Baseload Resources and cannot be self scheduled. Restoration: MISO attempt to allocate curtailed Stage 1A CARRs by allocating Counter-Flow ARRs Stage 1B: MPs nominate up to 100% of their entitlements that are not already allocated in Stage 1A Stage 2: Assignment of rights to a share of any excess FTR auction revenue based on each Market Participant s unallocated eligible MWs Summer: June, July, August Fall: September, October, November Winter: December, January, February Spring: March, April, May ARRs can be feasible or infeasible ARR Overview 35

37 ARR Process ARR Nomination ARR Allocation Annual FTR Auction Prior to start of year 8 separate FTR Auctions aligning with the ARR Allocation - 1 for each season, peak and off-peak periods Market Participants offer in and bid on a pool for FTR capacity In the Annual FTR Auction, Stage 1A(feasible) and Stage 1B ARRs may be self-scheduled Self-scheduled ARRs are automatically converted into FTRs for the self-scheduled MW amount ARR Overview 36

38 ARR Timeline December ARR Allocation Registration 2010 ARR/FTR Calendar January February March Stage 1A&B ARR Nominations Stage 1A&B ARR Allocation January FTR Auction February FTR Auction March FTR Auction April FTR Auction April Stage 2 ARR Allocation Annual FTR Auction May June July May FTR Auction June FTR Auction July FTR Auction August FTR Auction August September October November September FTR Auction October FTR Auction November FTR Auction December FTR Auction ARR Overview 37

39 2010 ARR Allocation Annual ARR Registration, Allocation and Auction Timeline ARR Overview 38

40 2010 FTR Auction ARR Overview 39

41 ARR Valuation ARR Overview 40

42 ARR Overview Questions? 41

43 Question 1 ARR/FTR Review True/ False - I could buy an ARR from the Market. False 42

44 Question 2 ARR/FTR Review True/ False - I have to nominate all my LTTR entitlements to ARR False 43

45 Question 3 ARR/FTR Review True/ False - All ARR has a positive Cash value. False 44

46 Question 4 ARR/FTR Review True/ False - All ARRs are more valuable than FTR, therefore holding ARR are more preferable. False Depends on each ARR and FTR 45

47 Question 5 ARR/FTR Review True/ False Market Participants can still received a new GFA entitlement. False Approved GFA are defined in Schedule P in EMT. 46

48 ARR/FTR Charge Types Scenario Market Participant A Generation Resource, has gone through the ARR Allocation process, and is eligible to receive 100 MWs of ARRs Nominates the maximum allowed in Stage 1A, which in this example is 50 MWs Allocated 42 MWs in Stage 1A No ARRs Allocated during Restoration In Stage 1B, still has 50 MWs available and decides to nominate all 50 MWs - allocated 38 Stage 1B MWs Summary for Market Participant A : Stage 1A Feasible ARRs 17 MWs Stage 1A Infeasible ARRs 25 MWs Stage 1B ARRs 38 MWs (15 & 23 MWs) Stage 2 ARR 20 MWs Market Participant holds an ARR, for the quantities shown, which is valid for 1 season of the year, peak and off-peak periods ARR Overview 47

49 ARR Example In the annual FTR Auction, Market Participants bid on FTRs along specific paths, for certain time periods, and for specific MW quantities Market Participant A ARRs are shown with orange arrows CPNode A $1000 CPNode C $380 CPNode B $230 CPNode F CPNode D $500 CPNode E $750 CPNode G ARR Overview 48

50 ARR Example Results of Annual FTR Auction CPNode shadow prices are as shown in the table on the left ARR Target credit for the 3 ARRs held by Market Participant A CPNode Shadow Price A $1000 B $230 C $380 Stage Source CPNode Sink CPNode MW Qty ARR_PRC ARR Target Charge(-) Credit(+) 1A A B 42 $770 $32,340 1B B E 15 ($520) ($7,800) 1B A D 23 $500 $11,500 D $500 E $750 ARR Target Credit Calculated as: =(SP SOURCE SP SINK ) x ARR MW SP = Shadow Price of CPNode ARR Overview 49

51 ARR/FTR Charge Types Example Results of Annual FTR Auction CPNode shadow prices are as shown ARR Target credit for Market Participant A held ARRs Assumed values as a result of the Annual ARR Allocation and FTR Auctions Stage FTR Source CPNode Source CPNode Sink CPNode Sink CPNode MW Qty FTR Price Charge(+) Credit (-) 1 A C 20 $12,400 2 C E 10 -$3,700 3 A D 23 $11,500 Negated due to Self Schedule of ARR MW Qty ARR Target Charge(-) Credit (+) 1A A B 42 $32,340 1B B E 15 -$7,800 1B A D 23 $11,500 CPNode Shadow Price A $1000 B $230 C $380 D $500 E $750 FTR Price Calculated as: =(SP SOURCE SP SINK ) x FTR MW SP = Shadow Price of CPNode 50

52 ARR Settlement Based on the clearing price of its path (source to sink) in the Annual FTR Auction for the corresponding season and period (peak or off peak). Each month, a portion of the ARR s value is settled based on the duration of the ARR (i.e. seasonal = 1/3). Settlements of ARR Charges occur on the first operating day of each calendar month. Adjustments to redistribute ARR revenue due to Retail Load Shift are included in the calculations. ARR Overview 51

53 ARR Overview Questions? 52

54 Auction Revenue Rights Charge Types Review

55 ARR Charges ARR Settlement Awarded ARR FTR_ARR_ARR_TXN Distribution of ARR revenue FTR_ARR_FTR_TXN Self Scheduled FTR_ARR_INF_UPL Uplift of infeasible ARR FTR_ARR_STG2_DIST Distribution of residual Auction Revenue ARR Charges 54

56 ARR Charges # CHARGE TYPE ACRONYM BPM Sec. 1 ARR Transaction Amount 2 ARR Infeasible Uplift Amount 3 ARR Stage 2 Distribution Amount FTR_ARR_ARR_TXN C.10 FTR_ARR_INF_UPL C.11 FTR_ARR_STG2_DIST C.12 ARR Charges 55

57 Auction Revenue Rights Transaction Amount (FTR_ARR_ARR_TXN)

58 FTR_ARR_ARR_TXN Purpose Auction Revenue Rights Transaction Amount The net credit or charge from the monthly revenue settlement of ARRs The value of the ARR is determined by the clearing price of the associated FTR in the Annual FTR Auction Who gets paid? Asset Owners who hold ARRs Who pays? Market Participants who purchase FTRs in the Annual FTR Auction 57

59 FTR_ARR_ARR_TXN - Hierarchy ARR Charges 58

60 FTR_ARR_ARR_TXN - Formula *FTR_ARR_ARR_TXN = AO_FEAS_ACT ON-PEAK + AO_INFEAS + ON-PEAK AO_FEAS_ACT OFF-PEAK + AO_INFEAS OFF-PEAK + AO_ARR_MO_RLS_ADJ AO_FEAS_ACT PK_TYP = Actual Amount for an AO s Feasible On-Peak ARRs ($) AO _ FEAS _ TARG MISO _ FEAS _ DISC _ FCT PK _ TYP PK _ TYP AO_INFEAS PK_TYP = AO_ARR_MO_RLS_ADJ = Actual Amount for an AO s Infeasible On-Peak ARRs ($) 1 AO ARR _ INFEAS _ MW PK _ TYP ARR _ PRC ARR _ DURPK _ TYP ( ) Monthly ARR Retail Load Shift Adjustment Amount ($) ARR _ RLS _ MW ARR _ RLS _ PRC PK _ TYP ARR Charges 59

61 FTR_ARR_ARR_TXN - Example MP was allocated two ARRs (peak and off-peak are the same for Season 1): 1) Stage 1 A Feasible ARR = 17 MW ARR ARR_PRC = -$770 (Source $ Sink $230) 2) Stage 1B ARR = 15 MW ARR ARR_PRC = $250 (Source $ Sink $750) 3) Stage 1B ARR = 23 MW ARR ARR_PRC = -$270 (Source $230 - Sink $500) 4) Stage 1A Infeasible ARR = 25 MW ARR ARR_PRC = -$770(Source $ Sink $230) 5) MISO_FTR_TXN = $16,000,000 6) MISO_FEAS_TARG = -$15,500,000 7) MISO_INFEAS_DLS = $1,000,000 Note that the ARR price is multiplied by -1 for use in the Settlements process 60

62 FTR_ARR_ARR_TXN - Example *FTR_ARR_ARR_TXN = AO_FEAS_ACT ON-PEAK + AO_INFEAS + ON-PEAK AO_FEAS_ACT OFF-PEAK + AO_INFEAS + OFF-PEAK AO_ARR_MO_RLS_ADJ AO_FEAS_ACT ON-PEAK = AO _ FEAS _ TARG ON PEAK MISO _ FEAS _ DISC _ FCT ON PEAK = 1 * MISO _ FTR _ TXN ONPEAK AO ARR _ FEAS _ MWONPEAK ARR _ PRCONPEAK MIN 1, 1 ARR _ DURONPEAK * MISO _ FEAS _ TARGONPEAK = = ( 770) + 15 ( 250) + 23 ( 270) [ 5, ] min[ ( ) ( 1) ], 1] 16, 000, 000 min 1, 1 15, 500, 000 = -$ 5, Credit

63 FTR_ARR_ARR_TXN - Example *FTR_ARR_ARR_TXN = AO_FEAS_ACT ON-PEAK + AO_INFEAS + ON-PEAK AO_FEAS_ACT OFF-PEAK + + AO_INFEAS OFF-PEAK AO_ARR_MO_RLS_ADJ AO_INFEAS ON-PEAK = AO 1 ARR _ DUR ON PEAK ( ARR _ INFEAS _ MW ARR _ PRC ) ON PEAK ON PEAK ( 770) = = -$ 6, Credit ARR Charges 62

64 FTR_ARR_ARR_TXN - Example AO_FEAS_ACT + ON-PEAK AO_INFEAS + ON-PEAK = *FTR_ARR_ARR_TXN AO_FEAS_ACT OFF-PEAK + AO_INFEAS + OFF-PEAK AO_ARR_MO_RLS_ADJ AO_FEAS_ACT OFF-PEAK = AO _ FEAS _ TARG MISO _ FEAS _ DISC _ OFF PEAK FCT OFF PEAK = 1 * MISO_ FTR_ TXNOFF-PEAK AO ARR_ FEAS_ MW ARR_ PRC MIN 1 1, OFF-PEAK OFF-PEAK ARR_ DUR * MISO_ FEAS_ TARG OFF-PEAK OFF-PEAK = ( 770) + 15 ( 250) + 23 ( 270) 3 [ 5, ] min[ ( ) ( 1) ], 1] 16, 000, 000 min 1, 1 15, 500, 000 = = -$ 5, Credit 63

65 FTR_ARR_ARR_TXN - Example AO_FEAS_ACT + ON-PEAK AO_INFEAS + ON-PEAK = *FTR_ARR_ARR_TXN AO_FEAS_ACT OFF-PEAK + AO_INFEAS OFF-PEAK + AO_ARR_MO_RLS_ADJ AO_INFEAS OFF-PEAK = AO 1 ARR _ DUR OFF PEAK ( ARR _ INFEAS _ MW ARR _ PRC ) OFF PEAK OFF PEAK ( 770) = = -$ 6, Credit ARR Charges 64

66 FTR_ARR_ARR_TXN - Example *FTR_ARR_ARR_TXN = AO_FEAS_ACT ON-PEAK + AO_INFEAS + ON-PEAK AO_FEAS_ACT OFF-PEAK + AO_INFEAS + OFF-PEAK AO_ARR_MO_RLS_ADJ AO_ARR_MO_RLS_ADJ = ARR _ RLS _ MW ARR _ RLS _ PRC = $738 Retail Load Shift and the calculation of this ARR loss will be explained on slide

67 FTR_ARR_ARR_TXN - Example *FTR_ARR_ARR_TXN = AO_FEAS_ACT ON-PEAK + AO_INFEAS + ON-PEAK AO_FEAS_ACT OFF-PEAK + AO_INFEAS + OFF-PEAK AO_ARR_MO_RLS_ADJ *FTR_ARR_ARR_TXN = + -$ 5, $ 6, $ 5, $ 6, $ 738 *FTR_ARR_ARR_TXN = -$ 23, Credit for the Month 66

68 FTR_ARR_ARR_TXN - Summary The value of the ARR is determined by the clearing price of the associated FTR in the Annual FTR Auction. The MW volume of each ARR may be adjusted due to retail load shifting that has occurred in the ARR Zone. A discount factor is applied to the feasible ARRs if the Annual FTR Auction revenue is less than the target value of the feasible ARRs. This calculation is performed upon settlement or resettlement of the first calendar day of the month. Questions? 67

69 Auction Revenue Rights Infeasible Uplift Amount (FTR_ARR_INF_UPL)

70 FTR_ARR_INF_UPL - Purpose Auction Revenue Rights Infeasible Uplift Amount Infeasible ARR funds are collected from LTTR holders based on a ratio of LTTR MWs held to all LTTR MWs in MISO Total MISO LTTR MWs includes ARRs allocated as Stage 1A Feasible and Stage 1A Infeasible and excludes Stage 1B and Stage 2 Who gets paid? Market Participants holding Infeasible ARRs Who pays? Market Participants holding LTTRs 69

71 FTR_ARR_INF_UPL - Hierarchy ARR Charges 70

72 FTR_ARR_INF_UPL - Formula *FTR_ARR_INF_UPL = [( ( + AO_LTTR_RS ON-PEAK *MISO_INFEAS_DLS ON-PEAK AO_LTTR_RS OFF-PEAK x x *MISO_INFEAS_DLS OFF-PEAK ) ) ] x(-1) AO_LTTR_RS PK_TYP On-Peak LTTR Ratio Share for an AO (Ratio) = AO _ LTTR _ MWPK _ TYP MISO _ LTTR _ MW PK _ TYP *MISO_INFEAS_DLS PK_TYP = Dollar Amount for all MISO s Infeasible On-Peak ARRs ($) ARR Charges 71

73 FTR_ARR_INF_UPL - Example *FTR_ARR_INF_UPL = ( x ) x ) [ ( AO_LTTR_RS AO_LTTR_RS ON-PEAK OFF-PEAK *MISO_INFEAS_DLS ON-PEAK *MISO_INFEAS_DLS OFF-PEAK + ] x(-1) AO_LTTR_RS ON-PEAK = AO _ LTTR _ MW ON PEAK MISO _ LTTR _ MW ON PEAK = ( ARR _ LTTR _ MW ARR _ RLS _ INFEAS _ MW ) AO ONPEAK + MISO _ LTTR _ MW ONPEAK ,000 = =

74 FTR_ARR_INF_UPL - Example *FTR_ARR_INF_UPL = [( ( + AO_LTTR_RS ON-PEAK *MISO_INFEAS_DLS ON-PEAK AO_LTTR_RS OFF-PEAK x x *MISO_INFEAS_DLS OFF-PEAK ) ) ] x(-1) *FTR_ARR_INF_UPL = ( ( x x -$ 1,000,000 -$ 1,000,000 ) ) + x (-1) *FTR_ARR_INF_UPL = $ 3,360 Charge for the Month ARR Charges 73

75 FTR_ARR_INF_UPL - Summary Infeasible ARRs are funded via uplift to LTTR holders based on a ratio share of LTTR MWs held by an AO against all LTTR MWs in the Midwest ISO. The LTTR MWs are those ARRs allocated as Stage 1A Feasible and Stage 1A Infeasible and excludes Stage 1B and Stage 2. This calculation is performed upon settlement or resettlement of the first calendar day of each month. Questions? 74

76 Auction Revenue Rights Stage 2 Distribution Amount (FTR_ARR_STG2_DIST)

77 (FTR_ARR_STG2_DIST - Purpose Auction Revenue Rights Stage 2 Distribution Amount Credits Asset Owners based on the pro-rata share of their total Stage 2 ARR MWs when excess funds exist Who gets paid? Market Participants holding Stage 2 ARRs Who pays? Market Participants who purchase FTRs in the Annual FTR Auction ARR Charges 76

78 (FTR_ARR_STG2_DIST - Hierarchy ARR Charges 77

79 (FTR_ARR_STG2_DIST - Formula ( ) *FTR_ARR_STG2_DIST = AO_STG2_DIST ON-PEAK + AO_STG2_DIST OFF-PEAK On-Peak Stage 2 Distribution amount for an AO ($) AO_STG2_DIST ON-PEAK = [ (-1) x (AO_STG2_RS ON_PEAK x MISO_STG2_DLS ON_PEAK ) ] AO_STG2_DIST OFF-PEAK = Off-Peak Stage 2 Distribution amount for an AO ($) [ (-1) x (AO_STG2_RS OFF_PEAK x MISO_STG2_DLS OFF_PEAK ) ] ARR Charges 78

80 FTR_ARR_STG2_DIST - Example ( ) = *FTR_ARR_STG2_DIST AO_STG2_DIST ON-PEAK + AO_STG2_DIST OFF-PEAK = = AO_STG2_DIST ON-PEAK [ (-1) x ( x $ 500,000) ] -$ 1,250 AO_STG2_DIST ON-PEAK [ (-1) x (AO_STG2_RS ON-PEAK x MISO_STG2_DLS ON-PEAK ) ] AO_STG2_RS ON-PEAK = MISO_STG2_DLS ON-PEAK = = ( AO_STG2_MW ON-PEAK ) 20 *MISO_STG2_MW ON-PEAK 8,000 ( ) = (( ) ) MAX MISO_FTR_TXN ON-PEAK + MISO_FEAS_ACT ON-PEAK, 0 ) ) = (( MAX 16,000,000 + (-15,500,000), 0 = $ 500,000 ARR Charges 79

81 FTR_ARR_STG2_DIST - Example ( ) = *FTR_ARR_STG2_DIST AO_STG2_DIST ON-PEAK + AO_STG2_DIST OFF-PEAK ( ) = $1,250 * *FTR_ARR_STG2_DIST + $ 1,250 *FTR_ARR_STG2_DIST = $ 2,500 Credit for the Month *Assumption: On-Peak & Off-Peak are the same. ARR Charges 80

82 FTR_ARR_STG2_DIST - Summary The residual revenue (dollar amount left over after funding feasible ARRs) from the Annual FTR Auction is used to fund Stage 2 ARRs when funds exist. The funds are distributed pro-rata based on an AO s share of all Stage 2 MWs. This calculation is performed upon settlement or resettlement of the first calendar day of the month. QUESTIONS? ARR Charges 81

83 ARR Charges Summary # CHARGE TYPE ACRONYM BPM Sec. 1 ARR Transaction Amount 2 ARR Infeasible Uplift Amount 3 ARR Stage 2 Distribution Amount FTR_ARR_ARR_TXN C.10 FTR_ARR_INF_UPL C.11 FTR_ARR_STG2_DIST C.12 ARR Charges 82

84 ARR Charges Questions? 83

85 Question 6 ARR/FTR Review Who gets the residual fund after the FTR auction funded the Stage A and Stage B ARR holder? Holders of Infeasible ARR Holders of unallocated ARR Transmission Owners 84

86 Question 7 ARR/FTR Review If I self-scheduled my ARR, will I get a settlement charge? Yes, you will get a FTR_ARR_ARR_TXN and FTR_ARR_FTR_TXN amount. (Buy/Sell) 85

87 Question 8 ARR/FTR Review True/False I need to have a FTR to hold an ARR. False 86

88 Question 9 ARR/FTR Review True/False ARR is entitled to Day Ahead Congestion Fund. False 87

89 Asset Owner ARR Monthly Retail Load Shift Impact on ARR Charges

90 Retail Load Shifts Impacts Retail Load Shift 89

91 Retail Load Shifting Overview ARRs associated with NITS may be re-assigned to reflect Load switching under state retail choice programs, other state auction programs, or other transactions under which Load switches between Market Participants. On an annual basis, each Market Participant s nomination eligibility and the allocation of ARR(s) will be based on its Peak Usage within an ARR Zone and the NITS ARRs will be reassigned to reflect Load switching. Each month, the Midwest ISO will determine the ARR redistribution based on the Net Peak Load Forecast (NPLF) reported to have shifted between Market Participants within an ARR Zone for the previous month. Retail Load Shift 90

92 5 Key Points - Load Shifting 1. The Auction revenue collected by the Market Participant acquiring Load due to Load switching can be a net credit or charge to that Market Participant. 2. The NITS ARR must stay among the Market Participants within the sink ARR Zone and cannot be transferred into another ARR Zone following a Load shift. 3. Market Participants may serve Load in a particular ARR Zone one month and not the next (and vice versa). The ARR revenue re-assignment will be the same as the previous month s re-assignment when no Load data or inaccurate load data has been submitted. Retail Load Shift 91

93 5 Key Points - Load Shifting 4. ARR revenue re-assignment will not appear on the S7 or S14 Settlement Statements. Retail Load switching is performed once a month and occurs after the month is over. ARR revenue re-assignment will first appear on the S55 Settlement Statement or the S105 Settlement Statement at the latest. 5. The retail Load shift process has no effect on and is not affected by the method or CPNode that Market Participants use to bid their Load into the Energy and Operating Reserves Market; or monthly changes in Resource Adequacy for Load adjustments. Retail Load Shift 92

94 Load Shifting Reporting The designated entity for the ARR Zone must submit Load shift data in terms of the NPLF for the previous month by 11:59 pm of the 10th calendar day of the current month. That entity should submit the Load shift data to in the template located at: > FTR Information > New Initiatives > ARR/LTTR Allocation > Reference Documents > ARR Retail Load Shift Template ( _11cdc615aa1_-7adc0a48324a). Retail Load Shift 93

95 Load Shifting Overview Questions? 94

96 Load Shifting Example Market Participant Annual NPLF Retail Load Shift 95

97 Load Shifting Example Load Shift Data for the Month of July Retail Load Shift 96

98 Load Shifting Example Load Shift Data for the Month of July Supplier Load Shift MWs ARR Loss % ARR Loss % = Load Shift MWs (25) / Annual NPLF (150) ARR Gain % Stage 1 ARR Gain/Loss MWs Stage 2 ARR Gain/Loss MWs New Load New Stage 1 Allocation New Stage 2 Allocation MP % 0% MP2 0 0% 0% MP % 0% MP4 50 0% 67% MP5 25 0% 33% Total Stage 1 ARR Gain/ Loss = ARR Loss % (17) * Stage 1 ARR Allocation (100) Retail Load Shift 97

99 Load Shifting Example ARRs are Lost on a Pro-Rata basis for each ARR owned by a Market Participant. MP1 Before Adjust After Adjust ARR ID MW Price Total ARR ID % MW- loss Price Total ARR ARR 1 -ADJ 17% ARR ARR 2 -ADJ 17% ARR ARR 3 -ADJ 17% MP3 Before Adjust After Adjust ARR ID MW Price Total ARR ID % MW- loss Price Total ARR ARR 4 -ADJ 10% ARR ARR 5 -ADJ 10% Total Dollar value of ARRs lost $ (738) Total ARR MW lost -47 Avg price/mw of ARRs lost $ Retail Load Shift 98

100 Load Shifting Example Load Shift Loss Each ARR loss for each Asset Owner within an ARR zone is based on its percentage share of the total Load shift. If the AO loses 10% share then each ARR loses 10% of its value. Retail Load Shifts 99

101 Load Shifting Example ARRs are Gained on a Pro-Rata basis for each ARR owned by a Market Participant. MP4 Before Adjust After Adjust ARR ID MW Price Total ARR ID % MW- Gain Price Total ARR ARR 6 -ADJ 60% ARR ARR 7 -ADJ 20% ARR ARR 8 -ADJ 20% MP gained 66.67% of the Shift 47 MW or 31.5 MP5 Before Adjust After Adjust ARR ID MW Price Total ARR ID % MW- Gain Price Total ARR ARR 9 -ADJ 80% ARR ARR 10 -ADJ 20% MP gained 33.33% of the Shift 47 MW or 15.5 Total Dollar value of ARRs Gained $ 738 Total ARR MW Gained -47 Avg price/mw of ARRs gain $

102 Load Shifting Example Load Shift Gain Each ARR gain for each Asset Owner within an ARR zone is based on its percentage share of the total Load shift gain times the MW volume percentage of each of its ARRs to reflect individual ARR volume gains. The value of the ARR is based on the average cost of the ARR Loss. Retail Load Shift 101

103 Summary Load Shifting Example Load Shift Loss vs. Load Shift Gain Questions? 102

104 Settlement Statement Example 103

105 Retail Load Shifts Impacts Retail Load Shift 104

106 Retail Load Shifts Impacts FTR_ARR_ARR_TXN Charge Impact AO_FEAS_ACT ON-PEAK + AO_INFEAS ON-PEAK *FTR_ARR_ARR_TXN = AO_FEAS_ACT OFF-PEAK + AO_INFEAS OFF-PEAK + AO_ARR_MO_RLS_ADJ AO_ARR_MO_RLS_ADJ = ARR_RLS_MW ARR_RLS_PRC Retail Load Shift 105

107 Retail Load Shifts Impacts FTR_ARR_ARR_TXN Calculations ARR_TXN_RLS_ADJ Peak_FL = Y Stage 1B ARR_RLS_PRC ARR_RLS_MW Peak_FL = N Stage 1B ARR_RLS_PRC ARR_RLS_MW Peak_FL = Y Stage AIF ARR_RLS_PRC ARR_RLS_MW Peak_FL = N Stage AIF ARR_RLS_PRC ARR_RLS_MW Peak_FL = Y Stage AF ARR_RLS_PRC ARR_RLS_MW Peak_FL = N Stage AF ARR_RLS_PRC ARR_RLS_MW 106

108 Retail Load Shifts Impacts FTR_ARR_ARR_TXN Charge Impact The Retail Load Shift FTR_ARR_ARR_TXN Charge information is not on the Browser view (Style Sheet) of the Settlement Statement but can be found under the GRID tab in XMLSPY. The determinants are under the Heading ARR_TXN_RLS_ADJ (PRC) = ARR_RLS_PRC (VOL) = ARR_RLS_MW 107

109 Retail Load Shifts Impacts FTR_ARR_ARR_TXN Charge Impact (PRC) = ARR_RLS_PRC (VOL) = ARR_RLS_MW FTR_ARR_ARR_TXN Calculation Stage 1b Y Stage 1b N Stage 1AIF Y Stage 1AIF N Stage 1AF Y Stage 1AF N $14,

110 Retail Load Shifts Impacts Retail Load Shift 109

111 (Retail Load Shifts Impacts FTR_ARR_STG2_DIST *FTR_ARR_STG2_DIST = ( ) AO_STG2_DIST ON-PEAK + AO_STG2_DIST OFF-PEAK AO_STG2_DIST ON-PEAK = On-Peak Stage 2 Distribution amount for an AO ($) [ 1* ( AO _ STG2 _ RS * MISO _ STG2 _ DLS )] ON PEAK ON PEAK Off-Peak Stage 2 Distribution amount for an AO ($) AO_STG2_DIST OFF-PEAK = [ 1* ( AO _ STG2 _ RS * MISO _ STG2 _ DLS )] OFF PEAK OFF PEAK 110

112 Retail Load Shifts Impacts FTR_ARR_STG2_DIST ( ) = *FTR_ARR_STG2_DIST AO_STG2_DIST ON-PEAK + AO_STG2_DIST OFF-PEAK AO_STG2_DIST ON-PEAK = [ 1* ( AO _ STG2 _ RS * MISO _ STG2 _ DLS )] ON PEAK ON PEAK AO_STG2_RS ON-PEAK = AO _ STG2 _ MWON * MISO _ STG2 _ MW PEAK ON PEAK MISO_STG2_DLS ON-PEAK = MAX MISO _ FTR _ TXNON PEAK + * MISO _ FEAS _ ACTON PEAK,0 AO_STG2_MW = Σ AO (((AO_AZ_CAP_SHIFTON-PEAK+ AO_AZ_CAP_RLS_DLTON-PEAK) + AO_AZ_CAP_NON_SHIFTON-PEAK) ((AO_AZ_ALC_SHIFTON-PEAK + AO_AZ_ALC_RLS_DLTON-PEAK) + AO_AZ_ALC_NON_SHIFTON-PEAK)) 111

113 Retail Load Shifts Impacts FTR_ARR_STG2_DIST BPM vs. Settlement Determinants Name Settlement Statement BPM Of Market Settlements AO_ARR_STG2_DET SHIFT_NOM AO_AZ_CAP_SHIFT PK_TYP AO_ARR_STG2_DET NON_SHIFT_NOM AO_AZ_CAP_NON_SHIFT PK_TYP AO_ARR_STG2_DET SHIFT_ALLOC AO_AZ_ALC_SHIFT PK_TYP AO_ARR_STG2_DET NON_SHIFT_ALLOC AO_AZ_ALC_NON_SHIFT PK_TYP AO_ARR_STG2_DET_ADJ SHIFT_NOM AO_AZ_CAP_RLS_DLT PK_TYP AO_ARR_STG2_DET_ADJ SHIFT_ALLOC AO_AZ_ALC_RLS_DLT PK_TYP Retail Load Shift 112

114 Retail Load Shifts Impacts FTR_ARR_STG2_DIST Settlement Example Settlement Statement -S55 SHIFT_CAP SHIFT_ALLOC NON_SHIFT_CAP NON_SHIFT_ALLOC PEAK_FL Total N Y N Y N Y AO_STG2_MW peak AO_STG2_MW off peak

115 Retail Load Shifts Impacts FTR_ARR_STG2_DIST Settlement Example MISO_FTR_TXNpk MISO_FTR_TXNoffpk MISO_FEAS_ACTpk MISO_FEAS_ACToffpk MISO_STG2_MWpk MISO_STG2_MWoffpk 114

116 Retail Load Shifts Impacts FTR_ARR_STG2_DIST Settlement Example AO_STG2_MW MISO_STG_ MW AO_STG2_RS MISO_FTR_TXN MISO_FEAS_ACT MISO_STG2_DLS AO_STG2_DIST Peak (11,986,234.19) 15,793, ,807, $ 2, Off Peak (7,938,101.37) 10,625, ,687, $ 1, FTR_ARR_STG2_DIST $ 4,

117 Retail Load Shifts Impacts Retail Load Shift 116

118 Retail Load Shifts Impacts FTR_ARR_INF_UPL *FTR_ARR_INF_UPL = ( ( + AO_LTTR_RS ON-PEAK *MISO_INFEAS_DLS OFF-PEAK AO_LTTR_RS OFF-PEAK x x *MISO_INFEAS_DLS ON-PEAK ) ) AO_LTTR_RS ON-PEAK = AO _ LTTR _ MW ON PEAK MISO _ LTTR _ MW ON PEAK AO_LTTR_MW ON-PEAK = (Σ AO (ARR_LTTR_MWON-PEAK + ARR_RLS_LTTR_MWON-PEAK) ( Feasible and Infeasible) VOLUME 117

119 Retail Load Shifts Impacts FTR_ARR_ARR_TXN Charge Impact (PRC) = ARR_RLS_PRC (VOL) = ARR_RLS_MW FTR_ARR_ARR_TXN Calculation Stage 1b Y Stage 1b N Stage 1AIF Y Stage 1AIF N Stage 1AF Y Stage 1AF N $14,

120 Retail Load Shifts Impacts FTR_ARR_STG2_DIST Settlement Example MISO_LTTR_MWpk MISO_LTTR_MWoffpk MISO_INFEAS_DLSpk MISO_INFEAS_DLSoffpk 119

121 Retail Load Shifts Impacts FTR_ARR_INF_UPL FTR_ARR_INF_UPL calculation AO_LTTR_MW MISO_LTTR_ MW AO_LTTR_RS MISO_INFEAS_DLS MISO_STG2_DLS Peak (469,597.17) (286.37) Off Peak (124,614.94) (87.38) FTR_ARR_INF_UPL (373.75) 120

122 Retail Load Shifts Impacts Summary Financial Impact of Retail Load Shifts on ARR Charges FTR_ARR_ARR_TXN FTR_ARR_INF_UPL FTR_ARR_STG2_DIST Shift Gain Impact Increase $ Decrease $ Increase $ Shift Loss Impact Decrease $ Increase $ Decrease $ Retail Load Shift 121

123 Retail Load Shifts Impacts Questions? 122

124 Question 10 ARR/FTR Review In general, would a Load Gain have a positive or negative impact on my monthly ARR Settlement Charges? Positive 123

125 Question 11 ARR/FTR Review How many Charges would Load Shift impact? 3 124

126 Question 12 ARR/FTR Review In which Statement would I see my Retail Load Shift Adjustment? S7 S14 S55 S

127 Question 13 ARR/FTR Review If ARR Stage 2 is an allocation of excess FTR auction fund, will I ever get a charge? If you were paid in S7, it is possible that some or all of the money received can be taken back due to retail load shift. 126

128 Question 14 ARR/FTR Review When self-scheduling your ARR, there will be two charges FTR_ARR_ARR_TXN and FTR_ARR_FTR_TXN amount. Are these two amounts equal and opposite of each other? No. RLS impacts the FTR_ARR_ARR_TXN only, it is very possible that Both amounts will not be the same in a retail choice State. 127

129 Financial Transmission Rights Overview

130 Purpose of FTR Market Supports a liquid energy market by providing tradable financial instruments for the hedging of transmission congestion charges that may arise from the use of the transmission system in the Day-Ahead market Allows market participants to eliminate or greatly reduce the cost of uncertainties resulting from transmission congestion charges Encourages competitive energy trading, where the costs of congestion might otherwise be an impediment FTR Overview 129

131 What is a Financial Transmission Right (FTR)? Hedge against the cost and uncertainty that may arise from congestion through the use of transmission in the Day-Ahead Market Entitle the holder to a stream of revenue based on the congestion over the FTR path Impose a charge on the holder based on the direction of the congestion on the transmission lines Does not protect against congestion related to Real- Time scheduling or deviations from Day-Ahead FTR Overview 130

132 FTR Acquisition Annual FTR Auction Midwest ISO conducts an annual process of selling and buying FTRs through a multi-round auction. The Annual FTR auction offers for sale the entire transmission capability that is available on the Midwest ISO system on a long-term basis. The Annual Auctions are comprised of four seasons. Monthly FTR Auction Midwest ISO conducts a monthly process of selling and buying FTRs through an auction. The FTR auction offers for sale any residual transmission capability that is available after FTRs are awarded from the Annual FTR Auction. The auction also gives Market Participants an opportunity to sell FTRs that they are currently holding. Secondary Market The FTR secondary market is a bilateral trading system that facilitates trading of existing FTRs between Midwest ISO Members. FTR Overview 131

133 FTR Auction FTR Overview 132

134 Annual FTR Auction Jan 01,09-10 FTR Annual Auction Transaction Count FTR Annual Auction Dollars 60% (25,630) 40% (16,875) 44% ($1,067 m) 56% ($1,347 m) Self Scheduled FTR Non Self Scheduled FTR FTR Overview 134

135 Monthly FTR Auction The Midwest ISO conducts monthly FTR Auctions to: Allow the Midwest ISO to sell FTRs for the residual Adjusted Monthly FTR Capability of the Market Footprint; and Facilitate the buying and selling of existing FTRs between Market Participants. BPM-004 FTR and ARR Monthly FTR Auctions FTR Overview 135

136 FTR Funding Day-Ahead Market Available Congestion Fund Less Carve-Out Rebate Option PlusB Rebate Total Hourly Congestion Fund Hourly Allocation FTR s Holder FTR Obligations Monthly Allocation Monthly FTR Auction Fund Excess Congestion Fund FTR s Holder 136

137 Congestion Revenue Shortfall For those hours where: Then: Total Hourly Congestion Revenue Fund < Total Hourly Target Credits (positively valued) Total Congestion Revenue Fund Total Hourly X Customer Hourly Target Credits (positively valued) = FTR Credits Target Credits (positively valued) An FTR Holder is always obligated to pay the full amount of an FTR obligation during those hours were it is negatively valued Customer Target Charges (negatively valued) = FTR Charges FTR Overview 137

138 Congestion Revenue Excess/Adequate For those hours where: Total Hourly Congestion Revenue Fund Total Hourly Target Credits (positively valued) Then: Customer Hourly Target Credits = FTR Credits An FTR Holder is always obligated to pay the full amount of an FTR obligation during those hours were it is negatively valued Customer Target Charges (negatively valued) = FTR Charges FTR Overview 138

139 Financial Transmission Rights Settlement Statement

140 FTR Settlement Statement 1) Statement Heading AO, Scheduled_Date, Statement_Date, Statement_ID 2) Statement Line Item Total of each Charge Type for S7, S14, S55, S105. 3) Hourly Settlements Total for each Hour by Charge Type for latest Statement 4) Market Wide Determinants The MISO wide totals and hourly figures applicable to Charge type calculations such as LMP and Hourly Allocation factors 5) Asset Owner Determinants The AO totals and hourly figures applicable to Charge type calculations such as Monthly and Seasonal Auction figures, Hourly Admin Volume, and individual FTR volume 6) ARR Determinants Allocated ARR Determinants and ARR Stage 2 Distribution FTR Overview 140

141 FTR Settlement Statement Statement Heading FTR Overview 141

142 FTR Settlement Statement Statement Line Items S7 FTR Overview 142

143 FTR Settlement Statement Statement Line Items - S105 FTR Overview 143

144 FTR Settlement Statement Hourly Settlements Amounts: FTR Overview 144

145 FTR Settlement Statement Market Wide Determinants: 145

146 FTR Settlement Statement Asset Owner Determinants: FTR Overview 146

147 FTR Settlement Statement ARR Determinants: 147

148 FTR Overview Questions? 148

149 Question 15 ARR/FTR Review How many ARR/FTR Settlement Charges exist? 12 (in the BPM) 11 (active) Both answers are correct! 149

150 Question 16 ARR/FTR Review How many rounds are in the FTR Annual Auctions? 3 150

151 Question 17 ARR/FTR Review How many ARR Settlement Charges exist for Settlement purposes? 3 151

152 Question 18 ARR/FTR Review If I purchased a Seasonal FTR, can I sell all or part of it in the Monthly Auction? Yes. 152

153 ARR/FTR Charge Types Load Related Real-Time Charges Charge Type Acronym Type FTR Hourly Allocation Amount FTR_HR_ALC Allocation FTR Monthly Allocation Amount FTR_MN_ALC Allocation FTR Yearly Allocation Amount FTR_YR_ALC Allocation FTR Transaction Amount- Pre 2008 FTR_TXN Transaction FTR Monthly Transaction Amount FTR_MO_TXN Transaction FTR Annual Transaction Amount FTR_ARR_FTR_TXN Transaction FTR Full Funding Guarantee Amount FTR_FFG Guarantee FTR Guarantee Uplift Amount FTR_GUL Guarantee ARR Transaction Amount FTR_ARR_ARR_TXN ARR ARR Infeasible Uplift Amount FTR_ARR_INF_UPL ARR ARR Stage 2 Distribution Amount FTR_ARR_STG2_DIST ARR FTR Market Administration Amount FTR_ADMIN Admin 153

154 Financial Transmission Rights Annual Transaction Amount FTR_ARR_FTR_TXN

155 FTR_ARR_FTR_TXN - Purpose Financial Transmission Rights Annual Transaction Amount FTR Transaction charge types credit or charge Market Participants for the transfer of FTR ownership Nets credits or charges of an Asset Owner s FTR Purchases and Sales from each Season of the Annual Auction Who gets paid? Asset Owners with more FTR Sales than Purchases in the Annual FTR Auction Who pays? Asset Owners with more FTR Purchases than Sales in the Annual FTR Auction 155

156 FTR_ARR_FTR_TXN - Hierarchy 156

157 FTR_ARR_FTR_TXN - Formula *FTR_ARR_FTR_TXN = ( ) x ) FTR_TXN_AMT AO ( 1 / FTR_DUR FTR_DUR = FTR Duration (Months) The number of months between the Start Time and Stop Time of an FTR purchased and/or sold in the Annual FTR Auction by an AO FTR_TXN_AMT = FTR Transaction Amount ($) Purchase or sale price of an FTR in the Annual FTR Auction 157

158 ARR/FTR Charge Types Example Results of Annual FTR Auction CPNode shadow prices are as shown ARR Target credit for Market Participant A held ARRs Assumed values as a result of the Annual ARR Allocation and FTR Auctions ARR FTR Source CPNode Source CPNode Sink CPNode Sink CPNode MW Qty MW Qty ARR Target Charge(-) Credit (+) 1 A B 42 $32,340 2 B E 15 -$7,800 3 A D 23 $11,500 FTR Price Charge(+) Credit (-) 1 A C 20 $12,400 2 C E 10 -$3,700 CPNode Shadow Price A $1000 B $230 C $380 D $500 E $750 FTR Price Calculated as: =(SP SOURCE SP SINK ) x FTR MW 3 A D 23 $11,500 Negated due to Self Schedule of ARR SP = Shadow Price of CPNode 158

159 FTR_ARR_FTR_TXN - Example *FTR_ARR_FTR_TXN = ( ) x ) FTR_TXN_AMT AO ( 1 / FTR_DUR *Note: This is from the SS ARR FTR 1 FTR 2 FTR 3 (1/3) x (12,400) (1/3) x (-3,700) (1/3) x (11,500) $4, $1, $3, = $6, Charge for the Month 159

160 FTR_ARR_FTR_TXN - Summary The FTR Annual Transaction Amount is used to settle and invoice FTR purchases and sales from the Annual FTR Auction. The transaction amount includes the results from the on-peak and off-peak auctions for each of the four seasons. During the settlement of these transactions, only a portion of the AO s total settlement is processed, depending on the duration of the FTR. This calculation is performed upon settlement or resettlement of the first calendar day of the month. Questions? 160

161 Financial Transmission Rights Monthly Transaction Amount (FTR_MO_TXN)

162 FTR_MO_TXN - Purpose Financial Transmission Rights Monthly Transaction Amount FTR Transaction charge types credit or charge Market Participants for the transfer of FTR ownership Nets credits or charges of an Asset Owner s FTR Purchases and Sales from each Monthly Auction Who gets paid? Asset Owners with more FTR Sales than Purchases in the Monthly FTR Auction Who pays? Asset Owners with more FTR Purchases than Sales in the Monthly FTR Auction 162

163 FTR_MO_TXN - Hierarchy 163

164 FTR_MO_TXN - Formula *FTR_MO_TXN = *MO_FTR_TXN AO ( )= FTR Purchases + ($)# FTR Sales ($) # # Note these are not determinants 164

165 FTR_MO_TXN - Example Now we will look at what happens if Market Participant A participates in the Monthly FTR Auction. For simplicity, we will assume they participate only in the March FTR Auction. They decide to purchase the following: 10MW FTR from CPNode F to CPNode G for $650 75MW FTR from CPNode B to CPNode F for -$3,482 10MW FTR from CPNode E to CPNode G for $980 CPNode B CPNode F CPNode A CPNode D Note: FTR Purchase/Sale $ amount could be Positive or Negative. CPNode If the Purchase $ amount is negative, you are being paid to C take responsibility for the future FTR obligation. If the Sale $ amount is positive, you are paying someone to take responsibility for CPNode the future FTR obligation. CPNode E G 165

166 FTR_MO_TXN - Example ( *FTR_MO_TXN = *MO_FTR_TXN )= AO FTR Purchases + ($)# FTR Sales ($) # # Note these are not determinants *FTR_MO_TXN = $ ( $3,482) + $980 = $1, 852 *FTR_MO_TXN Results in a $1,852 Credit for the Month 166

167 FTR_MO_TXN - Example As shown on the S7 FTR Statement for March 2010 Asset Owner Determinants Market Participant XYZ Determinant Type VALUE STARTTIME STOPTIME Seasonal FTR Transaction ID: FTR_AUC_BUY_ _ Transaction Date: 05/15/2009 FTR ID: Asset Owner Total Yearly FTR Shortfall Amount for 2010: Asset Owner Total FTR Shortfall Amount for March: /1/2010 0:00 5/31/ :59 Financial Transmission Rights Monthly Auction Amount Transaction ID: FTR_AUC_BUY_ _ Transaction Date: 02/25/2010 FTR ID: Financial Transmission Rights Monthly Auction Amount Transaction ID: FTR_AUC_BUY_ _ Transaction Date: 02/25/2010 FTR ID: Financial Transmission Rights Monthly Auction Amount Transaction ID: FTR_AUC_BUY_ _ Transaction Date: 02/25/2010 FTR ID:

168 FTR_MO_TXN - Summary The FTR_MO_TXN amount is used to settle monthly FTR auction purchases and sales for Asset Owners. These amounts are available under the AO determinants section of the Settlement Statement for the first of each month. Questions? 168

169 Financial Transmission Rights Hourly Allocation Amount (FTR_HR_ALC)

170 FTR_HR_ALC - Purpose Financial Transmission Rights Hourly Allocation Amount The FTR_HR_ALC charge provides either a charge or credit to the FTR holders for each hour When it is a charge, responsible to pay for 100% Credits to FTR holders are based on the product of (1) the quotient of (a) the available Day-Ahead Congestion fund and (b) the MISO total FTR target and (2) the individual FTR target for each hour. Who gets the charge/credit? Asset Owners with FTRs Where does it go? AOs with FTRs AOs that pay Day-Ahead Congestion 170

171 FTR_HR_ALC - Hierarchy FTR and FGR options are not currently available 171

172 FTR_HR_ALC - Formula *FTR_HR_ALC = ( ) FTR_PTP_ FTR_PTP_ + + FTR_PTP_ FGR_OPT_CR + H OBL_CHARGE OBL_CR OPT_CR FTR_PTP_ OBL_CHARGE = Total Hourly PTP Obligation FTR Charge for an AO ($) Σ AO { MAX [ ( *DA_LMP_CG SO *DA_LMP_CG SI ) x AO_FTR_ADJ_PRF, 0 ] } FTR_PTP_ OBL_CR = Hourly PTP Obligation FTR Credit for an AO ($) Σ AO-FTR { *FTR_HR_ALC_FCT x MIN [ ( *DA_LMP_CG SO *DA_LMP_CG SI ) x AO_FTR_ADJ_PRF, 0 ] } FGR_OPT_CR = FTR_PTP_ OPT_CR = Hourly FGR (Option) Credit for an AO ($) Σ AO-FG [ *FTR_HR_ALC_FCT x (-1) x MAX ( *DA_LMP_EN FG x AO_FTR_ADJ_PRF, 0 ) ] Hourly PTP (Option) FTR Credit for an AO ($) Σ AO-FTR [ *FTR_HR_ALC_FCT x MIN [ ( *DA_LMP_CG SO *DA_LMP_CG SI ) x AO_FTR_ADJ_PRF, 0 ] } 172

173 FTR_HR_ALC - Example Now let s assume Market Participant A participated in the Annual FTR Auction and purchased the following FTRs: CPNode A to CPNode C 20 MW CPNode C to CPNode E 10 MW Market Participant A also decided to self-schedule their 23MW ARR from CPNode A to CPNode D in the Annual FTR Auction CPNode B CPNode F CPNode A CPNode C CPNode D CPNode E CPNode D 173

174 FTR_HR_ALC - Example Now let s look at the effect of Day-Ahead Market transmission congestion on Market Participant A Results of the Day-Ahead Market CPNode Locational Marginal Prices (LMP) affect the credit or charge to an FTR holder Marginal Congestion Component (MCC) determines the value of an FTR Hour Ending 1 FTR Source CPNode MCC Sink CPNode MCC 1 A C MW Qty FTR Target Credit FTR_HR_ ALC_FCT FTR_PTP_OBL_ CHARGE FTR_PTP_OBL_CR FTR_HR_ALC_HR $20 $30 20 $ (200) 0.75 $ (150) $ (150) 2 C E $30 $26 10 $40 $40 $ - $ 40 3 A D CPNode LMP MCC A $75 $20 B $83 $33 C $55 $30 D $46 $36 E $45 $26 $20 $36 23 ($368) 0.75 $ (276) $ (276) FTR Target Credit Calculated as: =(MCC SOURCE MCC SINK ) x FTR MW MCC = Marginal Congestion Component at CPNode Total for HE 1 $ (386) 174

175 FTR_HR_ALC - Formula *FTR_HR_ALC = ( ) FTR_PTP_OBL_ + FTR_PTP_OBL_CR H CHARGE Total Hourly PTP Obligation FTR Charge for an AO ($) FTR_PTP_OBL_ CHARGE = Σ AO { MAX [ ( DA_LMP_CG SO DA_LMP_CG SI ) x AO_FTR_ADJ_PRF, 0 ] } FTR_PTP_OBL_ CHARGE = Σ AO { MAX [ (30 26 ) x 10, 0 ] } FTR_PTP_OBL_ CHARGE = $

176 FTR_HR_ALC - Formula *FTR_HR_ALC = ( ) FTR_PTP_OBL_ + H CHARGE FTR_PTP_OBL_CR Total Hourly PTP Obligation FTR Credit for an AO ($) FTR_PTP_OBL_CR = Σ AO-FTR { FTR_HR_ALC_FCT x MIN [ ( DA_LMP_CG SO DA_LMP_CG SI ) x AO_FTR_ADJ_PRF, 0 ] } FTR_PTP_OBL_CR FTR1 = {.75 x MIN [ (20 30 ) x 20, 0 ] } = -$150 FTR_PTP_OBL_CR FTR2 = {.75 x MIN [ (20 36 ) x 23, 0 ] } = -$ 276 ( ) -$386 = + -$426 FTR_PTP_OBL_CR = (-150) + (-276) H $40 = -$

177 FTR_HR_ALC - Summary The FTR is a financial instrument that entitles the holder to receive compensation or possibly pay charges, depending on the type of FTR, for congestion along an energy flow path. This instrument can be used to help hedge against Day-Ahead congestion costs. Currently all FTRs represent an obligation, option FTRs do not current exist in our market. The FTR_HR_ALC charge type accounts for all FTRs, which are settled Hourly and can be a charge or credit based on the available congestion funds collected in the Day-Ahead Market. Questions? 177

178 Financial Transmission Rights Monthly Allocation Amount (FTR_MN_ALC)

179 FTR_MN_ALC - Purpose Financial Transmission Rights Monthly Allocation Amount The Financial Transmission Rights Monthly Allocation Amount represents the distribution of excess congestion dollars collected during a calendar month, but not allocated in the FTR Hourly Revenue allocation process, to FTR holders that did not receive their full hourly credit revenue allocation. The FTR Monthly Revenue Allocation Amount is only calculated when the last Operating Day of the month is settled for S7, S14, S55, and S105. Who gets Paid? Asset Owners with FTRs Where does it come from? Monthly FTR Auction Revenue Accumulated Excess Day-Ahead Congestion for the Month 179

180 FTR_MN_ALC - Hierarchy 180

181 FTR_MN_ALC - Formula *FTR_MN_ALC = IF { *FTR_MN_ALC_FL = "Y", THEN [ FTR_MN_ALC_FCT x *AO_FTR_MN_SHORTFALL x ( -1 ) ], ELSE 0 } *FTR_MN_ALC_FL FTR_MN_ALC_FCT *AO_FTR_MN_ SHORTFALL = = = Monthly FTR Revenue Allocation Flag ("Y" or "N"); IF ( Operating Day = Last Day of the Calendar Month, THEN "Y", ELSE "N" ) Monthly Midwest ISO FTR Allocation Factor MIN { ( MISO_MN_CG_FND / MISO_FTR_MN_SHORTFALL ), 1 } Total FTR and FGR Shortfall Amount for the calendar month for an AO ($) Σ Month { Σ H [ Σ AO ( AO_FTR_TARG_CR - FTR_PTP_OBL_CR - FGR_OPT_CR - FTR_PTP_OPT_CR ) ] } x ( -1 ) 181

182 FTR_MN_ALC - Example Feb 28, 2010 Month End For Market Participant XYZ S105 Statement Market Wide Determinants Determinant Type VALUE MISO Monthly FTR Credit Target Allocation Amount MISO Monthly Full Funding Guarantee Amount Yearly FTR Allocation of Excess Congestion Fund Occurred: N N MISO Accumulated Excess Congestion for 2010: MISO Total FTR Shortfall Amount for 2010: Monthly FTR Allocation of Excess Congestion Fund Occurred: Y Y MISO Accumulated Excess Congestion for February: MISO Total FTR Shortfall Amount for February: Market Participant XYZ Determinant Type VALUE Asset Owner Total Yearly FTR Shortfall Amount for 2010: Asset Owner Total FTR Shortfall Amount for February: Asset Owner Monthly FTR Credit Target Allocation Amount Asset Owner Previous Monthly Guarantee Uplift Amount

183 FTR_MN_ALC - Example *FTR_MN_ALC = IF { *FTR_MN_ALC_FL = "Y", THEN [ FTR_MN_ALC_FCT x *AO_FTR_MN_SHORTFALL x ( -1 ) ], ELSE 0 } = = $38, = SHORTFALL *AO_FTR_MN_ *FTR_MN_ALC_FL "Y" FTR_MN_ALC_FCT MIN { ( MISO_MN_CG _FND / MISO_FTR_MN _SHORTFALL ), 1 } = MIN { (1,888, / 8,829,986.33, 1 } x 38, x (-1) = x 38, x (-1) = -$8, Results in a $8, Credit for the Month 183

184 FTR_MN_ALC - Summary The FTR_MN_ALC amount allocates any excess congestion funds available at the end of the month to all AO FTR holders who did not receive their full FTR Hourly allocation target based on the pro-rated share of available Market excess congestion funds and the total Market shortfall target. Settled on the last day of each month. Questions? 184

185 Financial Transmission Rights Yearly Allocation Amount (FTR_YR_ALC)

186 FTR_YR_ALC - Purpose Financial Transmission Rights Yearly Allocation Amount The Financial Transmission Rights Yearly Allocation Amount represents the distribution of excess congestion funds collected during a calendar year, that were not allocated in the FTR Monthly allocation process, to FTR holders that did not receive their full target revenue during the prior year. The FTR Yearly Allocation Amount is calculated only once each year on the S105 for the operating day of December 31 st. Who gets Paid? Asset Owners with FTRs Where does it come from? Accumulated Excess Day-Ahead Congestion for the Year 186

187 FTR_YR_ALC - Hierarchy 187

188 FTR_YR_ALC - Formula *FTR_YR_ALC = IF { *FTR_YR_ALC_FL = "Y", THEN [ *FTR_YR_ALC_FCT x *AO_FTR_YR_SHORTFALL x ( -1 ) ], ELSE 0 } *FTR_YR_ALC_FL *FTR_YR_ALC_FCT *AO_FTR_YR_ SHORTFALL = = = Yearly FTR Revenue Allocation Flag ("Y" or "N"); IF ( Operating Day = Last Regular Settlement Day of the Calendar Year, THEN "Y", ELSE "N" ) Yearly Midwest ISO FTR Allocation Factor MIN { ( MISO_YR_CG_FND / MISO_FTR_YR_SHORTFALL ), 1 } Total FTR and FGR Shortfall Amount for a Calendar Year for an AO ($) Σ Year ( AO_FTR_MN_SHORTFALL + FTR_MN_ALC ) 188

189 FTR_YR_ALC - Example Dec. 31, 2009 Year End For Market Participant XYZ S105 Statement Market Wide Determinants Determinant Type VALUE MISO Yearly FTR Credit Target Allocation Amount MISO Yearly Full Funding Guarantee Amount Yearly FTR Allocation of Excess Congestion Fund Occurred: Y Y MISO Accumulated Excess Congestion for 2009: MISO Total FTR Shortfall Amount for 2009: Monthly FTR Allocation of Excess Congestion Fund Occurred: Y Y MISO Accumulated Excess Congestion for December: Use S14 for estimate MISO Total FTR Shortfall Amount for December: Market Participant XYZ Asset Owner Determinants Determinant Type VALUE Asset Owner Total Yearly FTR Shortfall Amount for 2009: Asset Owner Total FTR Shortfall Amount for December: Asset Owner Yearly FTR Credit Target Allocation Amount Asset Owner Previous Yearly Guarantee Uplift Amount

190 FTR_YR_ALC - Example *FTR_MN_ALC = IF { *FTR_YR_ALC_FL = "Y", THEN [ *FTR_YR_ALC_FCT x *AO_FTR_YR_SHORTFALL x ( -1 ) ], ELSE 0 } = = 177,375 = SHORTFALL *AO_FTR_YR_ *FTR_YR_ALC_FL "Y" *FTR_YR_ALC_FCT MIN { ( MISO_YR_CG _FND / MISO_FTR_YR _SHORTFALL ), 1 } = MIN { (2,217, / 46,090,217.97, 1 } x 177,375 x (-1) = x 177,375 x (-1) = -$8, Results in an $8, Credit for the Year 190

191 FTR_YR_ALC - Example Market Participant XYZ S105 Settlement Statement Statement Line Items Settlement Type S7 S14 S55 S105 Total Financial Transmission Rights Market Administration Amount Auction Revenue Rights Transaction Amount Financial Transmission Rights Annual Transaction Amount Auction Revenue Rights Infeasible Uplift Amount Auction Revenue Rights Stage 2 Distribution Amount Financial Transmission Rights Full Funding Guarantee Amount Financial Transmission Guarantee Uplift Amount Financial Transmission Rights Hourly Allocation Amount Financial Transmission Rights Monthly Allocation Amount Financial Transmission Rights Monthly Transaction Amount Financial Transmission Rights Transaction Amount Financial Transmission Rights Yearly Allocation Amount

192 FTR_YR_ALC - Summary The FTR_YR_ALC amount allocates any excess congestion funds available at the end of the year to all AO FTR holders who did not receive their full FTR allocation target based on the pro-rated share of available Market excess congestion funds and the total Annual Market shortfall target. Settled only once per year on the S105 of the last OD of the year April 15 of the following year. Questions? 192

193 Financial Transmission Rights Market Administration Amount (FTR_ADMIN)

194 FTR_ADMIN - Purpose Financial Transmission Rights Market Administration Amount Referred to as Tariff Schedule 16, the Financial Transmission Rights Yearly Administration Amount is used to remunerate the Midwest ISO for the cost of operating the FTR market. Based on a flat monthly rate which is assessed per megawatt of FTR Profile volume and per megawatt of scheduled, validated Option B FBT volume. This rate is adjusted monthly and posted on the Market Settlements webpage on or about the first of each month. Who gets the charge/credit? Asset Owners with FTRs Where does it go? To the Midwest ISO to recover the cost of operating the FTR Market 194

195 FTR_ADMIN - Hierarchy 195

196 FTR_ADMIN - Formula *FTR_ADMIN = Σ ( x ) *FTR_ADMIN_RATE *FTR_ADMIN_VOL H *FTR_ADMIN_RATE *FTR_ADMIN_VOL = = Hourly FTR Market Administration Rate ($/MWh) The administration charge rate is subject to change based on costs incurred by the Midwest ISO. The allocation rate is set for each calendar month. Hourly FTR Market Administration Volume (MWh) Σ ( AO_FTR_PRF ) + FTR_DA_GFAOBBuyer + FTR_DA_GFAOBSeller 196

197 FTR_ADMIN - Example Feb 28, 2010, Market Participant XYZ has two FTRs: one On-Peak FTR for MW and one Off-peak FTR for 16.1 MW; also, it has one GFAOB Seller for 25 MW that has been scheduled and validated. 197

198 FTR_ADMIN - Formula FTR Market Administration Fee Amount per AO; = *FTR_ADMIN ΣH ( FTR_ADMIN_HR ) = $ Results in a $43.83 Charge for the OD FTR_ADMIN_HR = Hourly FTR Market Administration Amount per AO ($); FTR_ADMIN_RATE x FTR_ADMIN_VOL 198

199 FTR_ADMIN Summary The FTR Market Administration Amount is calculated by multiplying the FTR and cleared GFAOB volume by the FTR Administration Rate. This charge type is designed to recover the cost of operating the FTR Market under Tariff Schedule 16. Questions? 199

200 Question 19 ARR/FTR Review True/False ARR volume is used in the FTR_ADMIN calculation. False 200

201 Question 20 ARR/FTR Review True/False FTR_HR_ALC always gets a percentage of the available Day Congestion relative to the FTR target. False 201

202 Question 21 ARR/FTR Review True/False I will know my FTR_YR_ALC amount on the S7 or 7 days passed Dec 31 of each year. False S

203 BREAK 203

204 Question 23 ARR/FTR Review Where does the Excess Monthly FTR Auction Fund go to? ARR holder Transmission Holders Excess Congestion Fund - FTR Reduce Midwest ISO Operating expense 204

205 Question 22 ARR/FTR Review True/False - I purchased 100 MW of FTR in the Monthly Auction, these 100MW auction transaction volume is used in the FTR_ADMIN calculation False 205

206 Financial Transmission Rights FTR FFG and FTR GUL

207 FTR Guarantee Charges Overview Tariff Requirements FTR Full Funding Guarantee Amount FTR Guarantee Uplift Amount Example of FTR FFG and GUL Example MP - HCHU Summary 207

208 FTR Guarantee Charges Tariff Settlement of FTRs a) Calculation of the Transmission Congestion Credit Target Allocation b) Settlement of FTRs c) Determination and Disposition of Excess Congestion Charge Funds. 208

209 FTR Guarantee Charges Tariff Settlement of FTRs The Transmission Provider shall compare, for each Hour, the total of all Target Allocations for the Transmission Congestion Credit to the Hourly Transmission Congestion Charges collection. 209

210 FTR Guarantee Charges Settlement of FTRs b.i.(Target < Collection) If the total of all Target Allocations for the Transmission Congestion Credit for a given Hour is less than the Hourly Transmission Congestion Charges collection for that same Hour, the Transmission Provider shall pay to each FTR Holder an amount equal to its Target Allocation for the Transmission Congestion Credit for that Hour (Transmission Congestion Charge). The difference between the total of all Transmission Congestion Charges for a given Hour and the Hourly Transmission Congestion Charges collection for that same Hour shall accrue in the Excess Congestion Charge Fund. After the end of a given Month, the Excess Congestion Charge Fund shall be distributed to fund any deficiency in the share of Transmission Congestion Credits received by each FTR Holder as described in Section c. 210

211 FTR Guarantee Charges Settlement of FTRs b.ii.(Target = Collection) If the total of all Transmission Congestion Credit Target Allocations for a given Hour is equal to the total of the Hourly Transmission Congestion Charges collection for that same Hour, the Transmission Provider shall credit to each FTR Holder an amount equal to its Target Allocation for the Transmission Congestion Credit for that Hour. 211

212 FTR Guarantee Charges Settlement of FTRs b.iii.(Target > Collection) If the total of all Target Allocations for the Transmission Congestion Credit for a given Hour is greater than the total of the Hourly Transmission Congestion Charges collected for that same Hour, the Transmission Provider shall credit to each FTR Holder an amount equal to its share of the Hourly Transmission Congestion Charges collected for that same Hour in proportion to its Target Allocation for the Transmission Congestion Credit, concurrent with an FTR full funding guarantee credit which, when summed with the discounted Transmission Congestion Credit, will equal the Transmission Congestion Credit Target Allocation. The cost of the full funding guarantee within each Hour is allocated to FTR Holders on a pro-rata basis based upon the portion of the Transmission Congestion Credit Target Allocation associated only with FTRs representing a credit to the FTR Holder. 212

213 FTR Guarantee Charges Settlement of FTRs C. Determination and Disposition of Excess Congestion Charge Fund. i. The Transmission Provider will distribute the amounts accumulated in the Excess Congestion Charge Fund collected for Operating Days during the Month in question after the end of each Month to each FTR Holder in proportion to the difference between Transmission Congestion Credits received by the FTR Holder during that Month and its total Transmission Congestion Credit Target Allocations for the Month. Amounts distributed to FTR Holders will be accompanied by an equal and opposite reduction of the FTR full funding guarantee credit accumulated over the Month in hourly funding processes as set forth in the Business Practices Manuals. The cost of the FTR full funding guarantee credit allocated to FTR Holders will be reduced such that the remaining total of funds for all FTR Holders is distributed pro-rata on the basis of the sum total of the portion of the Transmission Congestion Credit Target Allocation associated only with FTRs representing a credit to the FTR Holder over the entire Month. If insufficient funds exist in the Excess Congestion Charge Fund to satisfy all deficiencies, then deficiencies will carry forward to the end of the Year. 213

214 Financial Transmission Rights Full Funding Guarantee Amount (FTR_FFG)

215 FTR_FFG - Purpose Financial Transmission Rights Full Funding Guarantee Amount Complements the FTR Hourly Allocation Amount in order to bring it closer to the FTR target credit value Designed to keep an Asset Owner fully funded through all Allocation Charge Types (Hourly, Monthly, Yearly) Who gets paid? Asset Owners with FTRs Who pays? Asset Owners with FTRs 215

216 FTR_FFG Overview FTR Full Funding Guarantee For those hours where: Then: Total Hourly Congestion Revenue Fund Customer Hourly Target Credits = Total Hourly Target Credits (Positively Valued) FTR Credits Customer Target Charges (Negatively Valued) An FTR Holder is always obligated to pay the full amount of an FTR obligation during those hours where it is negatively valued = FTR Charges 216

217 FTR_FFG Overview FTR Full Funding Guarantee For those hours where: Then: Total Hourly Congestion Revenue Fund < Total Hourly Target Credits (Positively Valued) Total Hourly Congestion Revenue Fund Total Hourly Target Credits X Customer Hourly Target Credits (Positively Valued) = FTR Credits (Positively Valued) Customer Target Charges (Negatively Valued) = An FTR Holder is always obligated to pay the full amount of an FTR obligation during those hours where it is negatively valued FTR Charges 217

218 FTR_FFG Overview FTR Full Funding Guarantee Monthly Allocation Amount (*FTR_MN_ALC) Determine month-to-date excess revenue Determine deficient hours in the month Apply Excess congestion to deficient hours Transaction will appear on Settlement Statement following the Settlements Month Yearly Allocation Amount (*FTR_YR_ALC) Determine year-to-date excess revenue Determine deficient hours in the year Apply Excess congestion to deficient months Transaction will appear on Settlement Statement following the last day of the Settlement Year Shortfalls will be written off by Market Participant Any excess dollars distributed to owners of Firm Transmission 218

219 FTR_FFG - Hierarchy 219

220 FTR_FFG - Formula H *FTR_FFG = FTR_FFG_HR ) ( + FTR_FFG_MN FTR_FFG_YR + FTR_FFG_HR FTR_FFG_MN FTR_FFG_YR Financial Transmission Rights Full Funding Guarantee Hourly Amount for an AO ($) = = = AO _ FTR _ TARG _ CR + FTR _ HR _ ALC _ HR) FTR _ PTP _ OBL _ CHARGE Financial Transmission Rights Full Funding Guarantee Monthly Amount for an AO ($) ( 1 ) FTR _ MN _ ALC Financial Transmission Rights Full Funding Guarantee Yearly Amount for an AO ($) ( 1 ) FTR _ YR _ ALC 220

221 FTR_FFG - Formula ( + FTR_FFG_MN FTR_FFG_YR ) + *FTR_FFG = FTR_FFG_HR H FTR_FFG_HR = AO _ FTR _ FTR _ TARG _ CR + PTP _ OBL _ CHARGE FTR _ HR _ ALC _ HR Determinant AO_FTR_TARG_CR Formula =Σ AO-FTR {MIN [(DA_LMP_CG SO DA_LMP_CG SI ) x AO_FTR_ADJ_PRF,0]} + Σ AO-FG [(-1) * MAX (DA_LMP_EN FG * AO_FTR_ADJ_PRF, 0 )] FTR_PTP_OBL_CHARGE =Σ AO {MAX [(DA_LMP_CG SO DA_LMP_CG SI ) x AO_FTR_ADJ_PRF, 0]} *FTR_HR_ALC_HR = FTR_PTP_OBL_CHARGE + FTR_PTP_OBL_CR 221

222 FTR_FFG - Formula FTR_FFG_HR = AO _ FTR _ FTR _ TARG _ CR + PTP _ OBL _ CHARGE FTR _ HR _ ALC _ HR = = AO _ FTR _ TARG _ CR + FTR _ PTP _ OBL _ CHARGE ( FTR _ PTP _ OBL _ CHARGE + FTR _ PTP _ OBL _ CR) ( AO _ FTR _ TARG _ CR FTR _ PTP _ OBL _ CR) Therefore, this charge is taking the difference between an Asset Owner s FTR target credit and any credits already received via congestion funds. 222

223 FTR_FFG Example March 31, 2010 HE CG SO CG SI MW Qty AO_FTR_TARG_CR FTR_PTP_OBL_CHARGE FTR_HR_ALC _FCT FTR_HR_ALC_HR Total ($2,033.20) $ ($1,705.80) 223

224 FTR_FFG - Example FTR_FFG_HR = AO _ FTR _ FTR _ TARG _ CR + PTP _ OBL _ CHARGE FTR _ HR _ ALC _ HR This results in a Monthly running total for each Market Participant on its Settlement Statement, similar to a checkbook register. FTR_FFG_HR = AO _ FTR _ TARG _ CR + FTR _ PTP _ OBL _ CHARGE FTR $ 2, $ ( $1,705.80) ( ) _ HR _ ALC = = $ _ HR 224

225 FTR_FFG - Example FTR_FFG_MN = (( 1) FTR _ MN _ ALC) This charge reduces each Asset Owner s share of FTR credits: By the ratio of all Congestion dollars collected to the total MISO shortfall, if the total congestion dollars don t cover the shortfall There is no reduction if enough congestion dollars are collected FTR_FFG_MN = ( FTR _ MN _ ALC _ FCT AO _ FTR _ MN _ SHORTFALL ( 1) ) = MISO _ MN _ CG _ FND MIN,1 MISO _ FTR _ MN _ SHORTFALL [ ( AO _ FTR _ TARG _ CR FTR _ PTP _ OBL _ CR) ] AO { } ( 1) Month H 225

226 FTR_FFG - Example Day FTR_FFG_HR FTR_MN_ALC _FCT AO_FTR_MN_SHORTFALL FTR_MN_ALC FTR_FFG_MN Total ($4,830.20) 0.21 $4, ($1,014.34) $1,

227 FTR_FFG - Example H *FTR_FFG = FTR_FFG_HR ) ( + FTR_FFG_MN FTR_FFG_YR + *FTR_FFG $ = ( ) + $ FTR_FFG_YR = $ *FTR_FFG Results in a $ Charge for the Month The process for FTR_FFG_YR is the same as for Monthly 227

228 FTR_FFG - Summary Daily, the FTR_FFG amount receives a credit that is equal to the FTR daily shortfall. Monthly and Yearly, the FTR_FFG amount receives a credit reduction equal to the monthly or yearly true-up process. Questions? 228

229 Financial Transmission Rights Guarantee Uplift Amount (FTR_GUL)

230 FTR_GUL - Purpose Financial Transmission Rights Guarantee Uplift Amount Charges/Credits Asset Owners based on the pro-rata share of their total target credit FTR value Only Monthly and Yearly adjustments will impact the cost distributed to Asset Owners Who gets paid? Asset Owners with FTRs Who pays? Asset Owners with FTRs 230

231 FTR_GUL - Hierarchy 231

232 FTR_GUL - Formula H *FTR_GUL = FTR_GUL_HR ) ( + FTR_GUL_MN FTR_FFG_MN FTR_GUL_YR FTR_FFG_YR + FTR_GUL_HR FTR_GUL_MN FTR_GUL_YR Financial Transmission Rights Guarantee Uplift Hourly Amount for an AO ($) = Financial Transmission Rights Guarantee Uplift Monthly Amount for an AO ($) = Financial Transmission Rights Guarantee Uplift Monthly Amount for an AO ($) = ( 1 ) FTR _ FFG _ HR AO _ FTR _ M _ TARG _ CR MISO _ FTR _ M _ TARG _ CR ( 1) ( MISO _ FTR _ FFG _ M ) AO _ FTR _ M _ PVS AO _ FTR _ Y _ TARG _ CR MISO _ FT _ Y _ TARG _ CR ( 1) ( MISO _ FTR _ FFG _ Y ) AO _ FTR _ Y _ PVS 232

233 FTR_GUL - Example H *FTR_GUL = FTR_GUL_HR ) ( + FTR_GUL_MN FTR_FFG_MN FTR_GUL_YR FTR_FFG_YR + FTR_GUL_HR = ( 1 ) FTR _ FFG _ HR = (-1) x ( ) = $ From result of Financial Transmission Rights Full Funding Guarantee Amount example 233

234 FTR_GUL - Example H *FTR_GUL = FTR_GUL_HR ) ( + FTR_GUL_MN FTR_FFG_MN FTR_GUL_YR FTR_FFG_YR + FTR_GUL_MN = MISO _ FTR _ FFG _ M MISO _ FTR _ M _ TARG _ CR ( 1) ( AO _ FTR _ M _ TARG _ CR) AO _ FTR _ M _ PVS = = (( (-5,000,000) ) ) (-1) x x (-25,044) - (4,604) (-10,000,000) $7,

235 FTR_GUL - Example H *FTR_GUL = FTR_GUL_HR ) ( + FTR_GUL_MN FTR_FFG_MN FTR_GUL_YR FTR_FFG_YR + FTR_GUL_YR = MISO _ FTR _ FFG _ Y MISO _ FT _ Y _ TARG _ CR ( 1) ( AO _ FTR _ Y _ TARG _ CR) AO _ FTR _ Y _ PVS = (( (-25,000,000) ) ) (-1) x x (-250,000) - (11,000) (-75,000,000) = $72,333 ( FTR_FFG_YR ) + + $80, = FTR_FFG_MN $7,918 $72,333 H 235

236 FTR_GUL - Summary On an Hourly Basis, The FTR_GUL charge is equal to and opposite the FTR_FFG credit received. On a Monthly and Yearly basis the uplift is adjusted such that the amount paid/charged by a MP is proportional to its Midwest ISO available fund to total FTR credit target for the period. Since the Monthly and Yearly FTR funding true-ups have an equalization component, this may result in an AO bearing a larger portion of the cost or revenue than it received in the FFG for the period. Questions? 236

237 FTR FFG and FTR GUL Exercise Calculate FTR_FFG For MP-HCHU for OD Calculate FTR_GUL For MP-HCHU for OD

238 FTR FFG and FTR GUL Exercise 238

239 FTR FFG and FTR GUL Exercise 239

240 FTR FFG and FTR GUL Exercise AO: Previous Monthly Guarantee Uplift Amount AO: Monthly FTR Credit Target Allocation Amt MP AO: Total FTR Shortfall For Feb. AO: Monthly FTR Allocated Amt Date HCHU (734.23) (568.76) 2/1/2010 HCHU 3, , (11,728.52) (7,881.31) 2/2/2010 HCHU 1, , (15,167.81) (13,933.30) 2/3/2010 HCHU 3, , (13,965.15) (10,357.15) 2/4/2010 HCHU 6, , (26,564.14) (20,365.52) 2/5/2010 HCHU (335.10) (309.11) 2/6/2010 HCHU (104.45) (93.82) 2/7/2010 HCHU (6,023.32) (5,206.38) 2/8/2010 HCHU 1, , (47,000.89) (45,514.22) 2/9/2010 HCHU (3,185.62) (2,737.23) 2/10/2010 HCHU (1,817.24) (1,089.08) 2/11/2010 HCHU (342.49) (270.82) 2/12/2010 HCHU (0.38) (0.33) 2/13/2010 HCHU 1, , (6,822.87) (5,715.90) 2/14/2010 HCHU 2, , (8,696.18) (5,858.98) 2/15/2010 HCHU 2, , (7,195.54) (4,453.67) 2/16/2010 HCHU (151.86) (124.66) 2/17/2010 HCHU (2,027.47) (1,546.18) 2/18/2010 HCHU (5,111.99) (4,541.37) 2/19/2010 HCHU (199.58) (161.12) 2/20/2010 HCHU (144.36) (126.87) 2/21/2010 HCHU 2, , (14,379.95) (11,472.54) 2/22/2010 HCHU 5, , (35,734.37) (30,662.31) 2/23/2010 HCHU 1, , (7,353.41) (6,131.12) 2/24/2010 HCHU 1, , (10,721.79) (8,987.06) 2/25/2010 HCHU (1,303.31) (888.79) 2/26/2010 HCHU (1,388.67) (1,303.82) 2/27/2010 HCHU (575.65) (418.80) 2/28/2010 Total 38, , (228,776.34) (190,720.22) 240

241 FTR Full Funding Guarantee Amount ( + FTR_FFG_MN FTR_FFG_YR ) + *FTR_FFG = FTR_FFG_HR H AO_NAME BILL_DET HE 1 HE 2 HE 3 HE 4 HE 5 HE 6 HE 7 HE 8 HE 18 HE 23 HE 24 Total = AO _ FTR _ TARG _ CR + FTR _ PTP _ OBL _ CHARGE FTR _ HR _ ALC _ HR FTR_TARG FTR_FFG_HR HCHU _ALC_CH HCHU FTR_TARG - _ALC_CR FTR_FFG_HR AO _ FTR _ TARG _ CR( ) + = FTR _ PTP _ OBL _ CHARGE( ) FTR _ HR _ ALC _ HR( ) FTR_FFG_HR = $

242 FTR Full Funding Guarantee Amount ( + FTR_FFG_MN FTR_FFG_YR ) + *FTR_FFG = FTR_FFG_HR H = FTR_FFG_MN ( -1 ) * FTR_MN_ALC (-$8,172.73) FTR_FFG = -$ $8, FTR_FFG = $8,

243 FTR Full Funding Guarantee Amount Reconciliation Of Monthly Allocation and FTR FFG for Feb 10 MISO Accumulated Excess Congestion for February: MISO Total FTR Shortfall Amount for February: = / Asset Owner Total FTR Shortfall Amount for February: Calculation For Financial Transmission Rights Monthly Allocation Amount ( * ) $ 8, Last day of Short fall $ (156.85) Calculation for Financial Transmission Rights Full Funding Guarantee Amount $ 8,

244 FTR Guarantee Uplift Amount H *FTR_GUL = FTR_GUL_HR ) ( + FTR_GUL_MN FTR_FFG_MN FTR_GUL_YR FTR_FFG_YR + FTR_GUL_HR = ( 1 ) FTR _ FFG _ HR = ( 1) *( ) = $ From result of Financial Transmission Rights Full Funding Guarantee Amount example 244

245 FTR_GUL Example H *FTR_GUL = FTR_GUL_HR ) ( + FTR_GUL_MN FTR_FFG_MN FTR_GUL_YR FTR_FFG_YR + FTR_GUL_MN = MISO _ FTR _ FFG _ M MISO _ FTR _ M _ TARG _ CR ( 1) ( AO _ FTR _ M _ TARG _ CR) AO _ FTR _ M _ PVS = = -6,910,285.63/-36,850, , , $

246 Impact of FTR GUL What is the Bottom Line Impact? 246

247 Impact of FTR GUL on HCHU Before FTR GUL - Net Revenue Asset Owner Monthly FTR Credit Target Allocation Amount $ 228, Asset Owner Total FTR Shortfall Amount for February: $ -38, Asset Owner FTR Monthly Allocation Amount $ 8, Net Income before GUL $ 198, Percentage Funded = (198,892/228,776) = 87% 247

248 Impact of FTR GUL on HCHU After FTR GUL - Net Revenue Reduction Asset Owner Monthly FTR Credit Target Allocation Amount $ 228, Asset Owner Total FTR Shortfall Amount for February: $ (38,056.12) Asset Owner FTR Monthly Allocation Amount $ 8, Asset Owner FTR Full Funding Guarantee $ (8,015.87) Asset Owner FTR Guarantee Up Lift Amount $ (5,001.87) Net Income After GUL $ 185, Percentage Funded = (185,875 /228,776) = 81% 248

249 Impact of FTR GUL All Market Participants will have the same percentage of funding at the end of the month. This percentage is the MISO-wide funding percentage. MISO Monthly FTR Credit Target Allocation Amount $ 36,850, MISO Total FTR Shortfall Amount for February: $ - 8,800, MISO Accumulated Excess Congestion for February: $ 1,889, MISO Available Funds $ 29,939, Percentage Funded = (29,939,759/36,850,045) = 81% 249

250 Impact of FTR GUL on HNEW Before FTR GUL - Net Revenue Asset Owner Monthly FTR Credit Target Allocation Amount $ 171, Asset Owner Total FTR Shortfall Amount for February: $ -45, Asset Owner FTR Monthly Allocation Amount $ 9, Net Income before GUL $ 135, Percentage Funded = (135,091/171,028) = 79% 250

251 Impact of FTR GUL on HNEW After FTR GUL - Net Revenue Addition Asset Owner Monthly FTR Credit Target Allocation Amount $ 171, Asset Owner Total FTR Shortfall Amount for February: $ ( 45,923.11) Asset Owner FTR Monthly Allocation Amount $ 9, Asset Owner FTR Full Funding Guarantee $ (7,049.82) Asset Owner FTR Guarantee Up Lift Amount $ 11, Net Income After GUL $ 139, Percentage Funded = (139,080 /171,028) = 81% 251

252 Impact of FTR GUL Summary The month-end FTR GUL will adjust MP FTR revenue upward or downward toward the Midwest ISO wide FTR fund percentage. There will be no adjustment if a particular month is fully funded. Questions? 252

253 Question 24 ARR/FTR Review True/False FFG and FGUL are reciprocal of each other value. True for Daily Settlement False for Month end Settlement 253

254 Question 25 ARR/FTR Review True/False FGUL allocates the Monthly Excess Congestion Fund False The FTR_MN_ALC 254

255 Question 26 ARR/FTR Review When would FGUL have no impact to MP Settlement at the end of the month? When the Market was fully Funded. 255

256 Question 27 ARR/FTR Review Scenario: 1. Midwest ISO market-wide Funding percentage for March 2010 is 75%. 2. Market Participant HCHU s funding percentage is 80% just prior to the end of the month. Question: What percentage would HCHU expect for the Monthly FTR funding after settlement on the last day of the month? 75% 256

257 FTR/ARR Summary

258 ARR/FTR Charge Types FTR Charges Charge Type Acronym Type FTR Hourly Allocation Amount FTR_HR_ALC Allocation FTR Monthly Allocation Amount FTR_MN_ALC Allocation FTR Yearly Allocation Amount FTR_YR_ALC Allocation FTR Transaction Amount- Pre 2008 FTR_TXN Transaction FTR Monthly Transaction Amount FTR_MO_TXN Transaction FTR Annual Transaction Amount FTR_ARR_FTR_TXN Transaction FTR Full Funding Guarantee Amount FTR_FFG Guarantee FTR Guarantee Uplift Amount FTR_GUL Guarantee ARR Transaction Amount FTR_ARR_ARR_TXN ARR ARR Infeasible Uplift Amount FTR_ARR_INF_UPL ARR ARR Stage 2 Distribution Amount FTR_ARR_STG2_DIST ARR FTR Market Administration Amount FTR_ADMIN Admin 258

259 ARR/FTR Review FTR Transaction Buy/Sell FTR Annual Transaction Amount FTR Monthly Transaction Amount 259

260 ARR/FTR Review FTR Funding Allocation FTR Hourly Allocation Amount FTR Monthly Allocation Amount FTR Yearly Allocation Amount 75 % 85 % 88% The percentage varies from month to month but should not be decreasing 260

261 ARR/FTR Review FTR Full Funding and Guarantee Uplift Daily FTR Full Funding Guarantee Amount FTR Guarantee Uplift Amount During the Daily Settlement, the FTR Full Funding Guarantee and the FTR Guarantee Uplift Amount are equal and opposite of each other. 261

262 ARR/FTR Review ARR Transaction Amount FTR ARR Full Funding Guarantee Amount FTR Guarantee Uplift Amount The Month-End Settlement FTR Full Funding Guarantee and FTR Guarantee Uplift Amount ensure that all Market Participants receive the same Market-Wide percentage of funding. 262

263 ARR/FTR Review Auction Revenue Rights Transaction Amount Auction Revenue Rights Transaction Amount = 1/3 Seasonal Auction Amount Receivable +/- Impact of Retail Load Shift (MW 263

264 ARR/FTR Review Q&A 264

265 Quiz

266 ARR/FTR Quiz Question 1 Name one Day-Ahead Settlement Charge that affects FTR Revenue: Day-Ahead Asset Energy Amount (DA_ASSET_EN) Day-Ahead Financial Schedule Congestion Amount (DA_FIN_CG) 266

267 Question 2 ARR/FTR Quiz Do MPs receive FTR Admin charges when settling ARR transactions? No, the FTR Admin charge does not apply to ARR volumes. 267

268 ARR/FTR Quiz Question 3 Which two types of volumes does the FTR Admin charge type use? FTR Volume FSS Option B Volume 268

269 ARR/FTR Quiz Question 4 When will the impacts of a Retail Load Shift reach the Settlement Statement? S55 Note: S105 is used as necessary for true-ups 269

270 ARR/FTR Quiz Question 5 How do MPs get an FTR? Monthly Auction Annual Auction Self-schedule ARR Secondary Market OASIS request 270

271 ARR/FTR Quiz Question 6 Why do funding shortfalls occur in the FTR Market? Timing FTR horizon is Annual and/or Monthly. The DA Market is Daily. Modeling Change to Commercial Model and/or changes to Constraint Modeling 271

272 Question 7 ARR/FTR Quiz Scenario: 1. Midwest ISO market-wide Funding percentage for March 2010 is 95%. 2. Market Participant HCHU s funding percentage is 80% just prior to the end of the month. Question: What percentage would HCHU expect for the Monthly FTR funding after settlement on the last day of the month? 95% 272

273 ARR/FTR Quiz Question 8 Regarding the FTR_HR_ALC charge type, the FTR hourly allocation factor applies to both Credits and Charges. True or False? False it only applies to Credits; charges must pay 100% 273

274 Helpful Resources

275 Helpful Resources Day-Ahead Charge Comparison 275

276 Helpful Resources Real-Time Charge Comparison 276