Transmission Congestion Contacts - NYISO · Transmission Congestion Contracts ... TCC Auctions...

FOR TRAINING PURPOSES ONLY©COPYRIGHT NYISO 2018. ALL RIGHTS RESERVED

Transmission Congestion Contacts

Horace HortonSenior Market Trainer, Market Training, NYISO

New York Market Orientation Course (NYMOC)October 16-19, 2018Rensselaer, NY 12144

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Transmission Congestion Contracts SESSION OBJECTIVES: attendees will be able to…

1) Describe the fundamentals of TCCs2) Identify the process to obtain TCCs3) Calculate TCC Congestion Rent and Settlement4) Compare the two roles of TCCs

• Hedging against DA congestion costs• As a financial instrument

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© COPYRIGHT NYISO 2018. ALL RIGHTS RESERVED. FOR TRAINING PURPOSES ONLY 3

TCCs Fundamentals


1. TCC Fundamentals - AcronymsTCC Transmission Congestion ContractTUC Transmission Usage ChargeDAM Day-Ahead MarketPOI Point of Injection (aka Source)POW Point of Withdrawal (aka Sink)ETAs Existing Transmission Agreements

ETCNL-Existing T. Capacity for Native Load, RCRR-Residual Capacity Reservation Rights, GFR-Grandfathered Right

OPF Optimal Power FlowTOs Transmission Owners

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TCC Fundamentals – Constraints and Congestion Transmission transfer limits create constraints on the

optimum economic flow of energy in the power system.

When Transmission limits are reached, generators from different buses are dispatched to meet load.

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Total Transfer Capability = Min(Thermal Limit, Voltage Collapse Limit, Stability Limit)


Gen ‘Power Up’ 310 MWBid $30

East ZoneLoad B

360 MW

West ZoneLoad A40 MW

Gen ‘Full Steam’ 350 MWBid $40

Gen ‘Energy’ 100 MWBid $25

Gen ‘Lights On’ 350 MWBid $35

West Zone LBMP = $30 East Zone LBMP = $35

TCC - Congestion Example from LBMP

190 MW 100 MW 110 MW

150 MW

Energy $30.00

Losses $0.00

Congestion - $0.00

LBMP $30.00

Energy $30.00

Losses $0.00

Congestion - $5.00

LBMP $35.00

Limit 150 MW

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TCC Fundamentals – Previous Concepts

Congestion Paid

By LBMP/TUC

Congestion Revenue

Primary Holders of TCCs

Congestion Paidto/from Generators

(LBMP)

TransmissionOwners

TSC

TCC Auctions (NET)Purchases/Sales

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TCC Fundamentals - Defining TCCsA TCC = 1 MW transmission flow between a Point of Injection (POI) and a Point of Withdrawal (POW)

• Unidirectional !

one-way flowPOI POW

(Source) (Sink)

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TCC Fundamentals - Defining TCCs

($ DAM Congestion @ Source) ($ DAM Congestion @ Sink)

one-way flowPOI POW

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TCC Fundamentals - Defining TCCs

• Power Suppliers • Load Serving Entities• Transaction Holders • Transaction Traders• Transmission Owners • Financial Institutions

A TCC is a Financial Instrument obtained through a NYISO Auction or other source

• Energy Market Participation NOT Required to hold a TCC

TCC Holders can be any qualified Transmission Customer, including:

Primary Holder of TCC• Each Buyer that is awarded a TCC in the Auctions becomes the

Primary Holder of that TCC for the effective period10


TCC Fundamentals Defining TCCs; any combination of the below..except

Scheduled Line Proxies

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•Gen Bus

•Proxy Bus

•Zone

•Reference Bus

•Gen Bus

•Proxy Bus

•Zone

•Reference Bus

POI POW


TCC Fundamentals Defining TCCs

• Identifying PTIDs allowed to be TCC Points

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Let’s Review

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TCC FundamentalsIdentify the statement that best describes a TCC.

a) A contract used to cancel transmission congestion costs

b) A financial instrument that may be used to hedge against Day Ahead transmission congestion costs

c) A financial instrument used to hedge against transmission service charges

d) None of the above


Let’s Review

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TCC Fundamentals

TCC Congestion Rent Settlements are settled against the DAM and RT Market.

a) Trueb) False


Let’s Review

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TCC Fundamentals

In order to participate in the TCC Market, a TCC Holder must also participate in the Energy Market.

a) Trueb) False


Obtaining TCC’s


2. Obtaining TCCsAt a glance:

TCCs Procured through… • NYISO TCC Auction(s); either the twice-annual

Centralized Auctions or Monthly Reconfiguration Auctions

Direct Sale by Transmission Owner

“Secondary Market”, Assignment17


Obtaining TCCs - Auction Process Pre-Auction Activity

• Market Participant Responsibilities• Pass TCC Competency Exam

• Before NYISO activates bidding rights for MP• Self learning training available on line

• Establish Creditworthiness• OATT Attachment W• MST Attachment K

• Post Collateral– TCC Manual Section 3.2.5

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FOR TRAINING PURPOSES ONLY©COPYRIGHT NYISO 2018. ALL RIGHTS RESERVED 19

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1NYISO Home Page


Obtaining TCCs - Auction Process Pre-Auction Activity (detail to follow)

• NYISO Responsibilities • Develop TCC Auction Model

– Optimal Power Flow*• Post the Auction Timeline• Post # of Rounds, % capacity to be sold per round• Verify Scheduled Transmission Outages*The Power Flow representing the transmission system and upon

which the NYISO TCC Auction is administered to determine the most efficient simultaneously feasible allocation of TCCs to bidders.

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Obtaining TCCs - Auction Process Pre-Auction Activity- NYISO Responsibilities

• Post Auction Timeline– Posted w/ TCC Manual – Attachment D Updates

• Post Auction Rounds– Posted w/TCC Manual – Attachment C Updates

• Verify Scheduled Transmission Outages– TCC Manual, Section 4.5.6, see “Info & Announcements”

• Post also: – Allowable POIs and POWs for this Auction (Att. E TCC Man.)– Prohibited Groups of POIs and POWs for this Auction (Att. F)– Bidding Rules for the HQ Proxy Bus (Att. G)

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Obtaining TCCs - Auction Process Pre-Auction Activity-NYISO Responsibilities

• Include TCCs still valid for the auction period as fixed injections and withdrawals - affects capacity available for sale in auctions.

Existing Transmission Agreements (ETAs) • Impacts amount of capacity available for auction

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Transmission CableSteel Conductors

Aluminum ConductorsTransmission Reliability Margin Capacity BenefitMargin

Existing Transmission Agreements

TCC Sold Previously –Auction or Direct

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Obtaining TCCs - Auction Process What are ETAs ?

• Pre-NYISO, wholesale loads like municipal power systems arranged for the delivery of power through Transmission Agreements with the Transmission Providers – e.g. the vertically integrated utility companies.

• These Existing Transmission Agreements or ETAs were preserved when the NYISO came into existence through awards of TCCs over the same paths as the power deliveries that were contemplated in the ETAs.

• These ETAs are listed in the Tariffs together with the number and path of the TCCs that arose as a result of each ETA.

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Obtaining TCCs - Auction Process Available Capacity

• Existing Transmission Agreements - where to find them -OATT Att. L

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Obtaining TCCs - Auction ProcessPre-Auction Activity SummarySnapshot NYISO Update Transmission

Available Capacity For each auction

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Obtaining TCCs - Auction Process NYISO TCC Auction(s) - Detail to follow

• Centralized – Long Term• 2 Year Sub-Auction (or Duration); NYISO optional to hold

• 1 Year Sub-Auction - NYISO required to hold

• 6 Month Sub-Auction - NYISO required to hold

» Nov - Apr

» May – Oct

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Obtaining TCCs - Auction Process NYISO TCC Auction(s) - Detail to follow

• Centralized – Long Term• Usually multiple rounds per Sub-Auction (Duration)

» % of available capacity in each round» Price discovery» Unanimous TO agreement required to hold less

than 4 rounds in any Sub-Auction• Effective Period – All TCCs sold through the Centralized

Auction are valid for all hours of each day of the duration of that TCC and will be identified in Att. C

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Obtaining TCCs - Auction Process -Collaborative Process Autumn Centralized Auction – Example

• Eight Auction Rounds• The NYISO would offer:

• 5% of System Capacity as two-year TCCs with one auction round; and• 25% of System Capacity as one-year TCCs across four auction rounds; • 45% of System Capacity as six-month TCCs across three auction rounds

• The remaining 25% of System Capacity was sold earlier as one-and two-year TCCs in prior Centralized Auctions

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% System Capacity (S.C.) Offered

Sub-Auction(Duration) Round # % Split / Round

5% of S.C. 2-Year Round 1 100%

25% of S.C. 1-Year

Round 2Round 3Round 4Round 5

20% 24% 28% 28%

45% of S.C. 6-MonthRound 6Round 7Round 8

27% 33%40%

25% of S.C. System Capacity already spoken for from prior Centralized Auctions’ 2-yr & 1-yr TCCs (fixed injections)

100% of System Capacity

Centralized Auction Example3 Months Prior to Capability Period

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Obtaining TCCs - Auction Process

S M T W T F S 1 2 3 4

5 6 7 8 9 10 11

12 13 14 15 16 17 18

19 20 21 22 23 24 25

26 27 28 29 30 31

Centralized Auction Round Example

Always refer to posted timeline (TCC Manual Att. D)

Offering and Bidding PeriodFri 0800 toMon 1700

NYISOPerforms Analysis

In 2 days

NYISO Posts Awards on TCC

Automation site no later

than 2100 hrs32


Obtaining TCCs - Auction Process NYISO TCC Auction(s)

• Reconfiguration Auctions• Single Round for a Reconfiguration Auction• Opportunity to adjust your position• Captures Short Term changes in Capacity

• Reconfiguration Auctions – Two Types• Balance-of-Period Auction* • Single-Month Reconfiguration Auction

*The Balance-of-Period Auction is the current type of reconfiguration auction being conducted

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Obtaining TCCs - Auction Process NYISO TCC Reconfiguration Auctions

• Balance-of-Period Auction – A Balance-of-Period Auction covers the month or combination of months

remaining in the Capability Period beginning with the month that follows the month in which the auction is conducted.

• Two Modes– Decoupled Mode

• Simultaneous single-period solution within a single auction for all remaining months of the Capability Period. Multi-period bids/offers not allowed.

– Coupled Mode – for future implementation• Simultaneous multi-period solution within a single auction for all

remaining months of the Capability Period. The periods selected need not be contiguous.

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Obtaining TCCs - Auction Process NYISO TCC Reconfiguration Auctions Single-Month Reconfiguration Auction

• A Single-Month Reconfiguration Auction is conducted in the month preceding the month for which TCCs will be effective.

• Primary Holders of TCCs that are effective for the entire Auction period may offer those TCCs for sale in the Single-Month Reconfiguration Auction.

• In addition, Market Participants may submit bids to purchase TCCs in a Single-Month Reconfiguration Auction.

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S M T W T F S 1 2 3 4 5 6 7 8 9 10 11 12 13 14

15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

Reconfiguration Auction Balance-of-Period Example

Always refer to posted timeline (TCC Manual Att. D)

Offering and Bidding PeriodFri 0800 toMon 1700

NYISOPerforms Analysis

NYISO Posts Awards on TCC Automation site no later than 2100 hrs

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Obtaining TCCs - Auction Process Buying & Selling TCCs

• Offer Parameters to Sell• MPs Provide Information per set of TCCs

– Inventory ID (TCC Contract #)– # of TCCs Offered for Sale– Minimum Offer Price ($/TCC)– Period ID for Balance-of-Period Auction

• Bid Parameters to Buy• MPs Provide Information per set of TCCs

– POI & POW– # of TCCs Desired– Maximum Bid Price ($/TCC)– Bundle or Unbundle - next slide– Period ID for Balance-of-Period Auction

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Obtaining TCCs - Auction Process Bundle vs. Unbundle; the three deltas = the one delta

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Obtaining TCCs - Auction Process Bundle vs. Unbundle

• Does not change… • Capacity• Value• Market Clearing Price

• Unbundling Option• Allows new TCC Holder to Sell Components of TCC @

Future Auctions• Has an impact on credit exposure at time of bidding and

after if awarded

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Obtaining TCCs - Auction Process and Clearing Prices TCC Auction Clearing Price

• Upfront Cost for Obtaining TCCs• Established through Auction Clearing Price

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• Total Capacity Available = 200 MW• 200 MWs of TCC to be offered for sale

• Four Rounds with capacity equally divided• 50 TCCs/round

Auction Clearing Price Example

Two Year Duration

Available Capacity from Gen A to Zone B = 200 TCCs

Round 1 50

Round 2 50

Round 3 50

Round 4 50

TCC Market Clearing Price

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• Four MPs have requested a total of 60 MWs from Gen A to Zone B• Bids are for $ per MW for the duration of the TCC

• Fill request from the highest price until available TCCs or requests are exhausted


50 MWs/Round – Requests for TCCs from Gen A to Zone B

Company # MWs Bid

Trans IT 20 $5/MW for 2 yrs

L&D Power 20 $4/MW for 2 yrs

EMC 15 $3/MW for 2 yrs

New Power 5 $2/MW for 2 yrs


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• The Clearing Price is the price for the next TCC• TCCs can be requested with negative bids

•Purchaser is paid to accept the TCCs, same MCP rules apply


Round 1 awards of TCCs from Gen A to Zone BPaid toNYISOCompany # MWs

Requested Bid # MWsAwarded

Trans IT 20 $5/MW 20

L&D Power 20 $4/MW 20

EMC 15 $3/MW 10

New Power 5 $2/MW 0


43MCP

$3/MW x 20 MWs = $60

$3/MW x 20 MWs = $60

$3/MW x 10 MWs = $30



70 MWs/Round – Round requests for TCCs from Gen A to Zone B

Company Requested Awarded Bid

Trans IT 30 30 $5/MW for 2 yrs

L&D Power 20 20 $4/MW for 2 yrs

EMC 15 15 $3/MW for 2 yrs

New Power 6 5 $2/MW for 2 yrs

What is Market Clearing Price?

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Auction Awards

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TCC Auction Process Re-Cap

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Available Transmission Capacity

NYISO Manages Auction

MPs Provides Bids and

Offers

TCCs AwardedMCP EstablishedSettlement Process Takes Place $

Awards


Let’s Review

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TCC Auction Process

Unbundling a TCC allows the Holder to:a) Sell Components of the TCC at Future Auctionsb) Adjust the Capacity MWs of the TCCc) Obtain Grandfathered Rights for the TCCd) None of the Above


Non-Auction Procurement Methods Alternate TCC Procurement Methods

• Secondary Market• Primary TCC Holder arranges sale w/Secondary Party• Primary holder can change ownership to Secondary Party• NYISO settles w/Primary Holder

• ***See TCC Automated Market System User’s Guide***

• Direct Sale• Transmission Owner can sell (or purchase) TCCs directly, such

offers must be posted on NYISO OASIS

• Historic Fixed Price, Non-Historic Fixed Price, Incremental TCCs ==>

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Non-Auction Procurement Methods Historic Fixed Price TCCs

• Awarded to LSEs with expiring Grandfathered TCCs or Grandfathered Rights; LSE can choose between a 10 Yr Duration or a 5 Yr Duration with an opportunity to renew for another 5 years at a reset price.

• 12 yr duration available to LSEs with unexpired NYPA power contracts.

Incremental TCCs• Awarded at no cost to MPs that increase the transfer

capability of the system by constructing new, or improving existing, transmission facilities.

• Minimum of 20 years Duration.49


Non-Auction Procurement Methods Non-Historic Fixed Price TCCs

• LSEs with qualifying amounts of average load can purchase NHFPTCCs that sink in their load zone.

• Original term is 2 Yrs with prices based off 2 Yr TCC auction prices; LSE has opportunity to renew in 1 Yr increments up to a total maximum duration of 10 years.

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TCC Settlement and

Congestion Rent


Auctions-MP settles with NYISO: and subsequently is paid, or pays, the difference between congestion at the sink and congestion at the source, going forward. Settled in (against) Day Ahead Market Only.

• DAM Congestion Rent is, for each hour…• (DAM Congestion$ @ POW less DAM Congestion$ @ POI) x #TCCs, or:

[(-1 x DAM Cong Sink Price$) – (-1 x DAM Cong Source Price$)] x #TCCs

3. TCC Settlement and Congestion Rent

SinkPOW

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Source POI


TCC Settlement and Congestion Rent DAM Congestion Rent Example (hourly)

$35 LBMP Components @ A= Energy $30Losses $0

Congestion -$5

$40 LBMP Components @ B = Energy $30Losses $0

Congestion -$10

Company ‘Power Tower’ Holds 20 TCCs from A to B

Source POI

SinkPOW

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LBMP$35/MW

LBMP$40/MW


TCC Settlement and Congestion Rent DAM Congestion Rent Example

[( -1 x -10) – (-1 x -5)] x 20(10 – 5) x 205 x 20=$100 Holder collects rent

Source POI

SinkPOW

LBMP$35/MW

LBMP$40/MW


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TCC Settlement and Congestion Rent DAM Congestion Rent Exercise

$20 LBMP Components @ A= Energy $20Losses $0

Congestion $0

$27 LBMP Components @ B= Energy $20Losses $0

Congestion -$7

Company ‘Power Tower’ Holds 10 TCCs from B to A

SinkPOW

Source POI

LBMP$20/MW

LBMP$27/MW

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TCC Settlement and Congestion Rent DAM Congestion Rent Exercise


[(-1 x 0) – (-1 x- 7)] x 10(0 – 7) x 10-7 x 10= - $70 Holder Pays!

SinkPOW

Source POI

LBMP$20/MW

LBMP$27/MW

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TCC Settlement and Congestion Rent

TCC DAM Congestion Rent

• DAM Congestion Rent Settlements• Paid/Charged through Consolidated Invoice

Process

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Flow versus Counterflow TCCs “Flow” or positively-priced TCCs

• In direction of historical prevailing flow

“Counterflow” or negatively-priced TCCs• Opposite direction of historical prevailing flow

Note that LBMPs do not always reflect direction of flow!

LBMP$35/MW

LBMP$40/MW

Rent = $5

LBMP$20/MW

LBMP$27/MW

Rent = $-7

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TCC Settlement and Congestion RentsExample - Positively Priced TCCs – TCC Cashflow (CF)

LBMP$35/MW

LBMP$40/MW$ Auction Cost (- CF)

To Holder

+ CF

+Rent $

- Rent $

+Rent $+Rent $

+Rent $

+Rent $

+Rent $ +Rent $+Rent $

+Rent $

+Rent $

240

- CF

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Counterflow TCCs - Example

+ CF

- CF

$ Auction Payment (+ CF) to Holder

+Rent $+Rent $

- Rent $ - Rent $ - Rent $- Rent $

- Rent $

- Rent $- Rent $

- Rent $ - Rent $

LBMP$20/MW

LBMP$27/MW

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Congestion Rent Additional Information

Congestion Revenue

TransmissionOwners

Over Collection

Under Collection

TCC Market is Fully Funded

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Congestion Paid

By LBMP/TUC

Congestion Revenue

Primary Holders of TCCs

Congestion Paidto/from Generators

(LBMP)

TransmissionOwners

TSC

TCC Auctions (NET)Purchases/Sales

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Let’s Review

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DAM Congestion Rent is Always a Credit to the TCC Holder.

a) Trueb) False


Let’s Review

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TCC Holders forego DAM Congestion Rent when not enough Congestion Revenue has been Collected from the Energy Market.

a) Trueb) False


TCCs in Action


You are awarded Transmission Congestion Contracts (TCCs) in a TCC auction; what are they used for ?

1. Using Congestion Rents to hedge against Day-Ahead Market congestion costs (price uncertainty);

2. Recognizing potential for revenue via congestion rents

4. TCCs in Action

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TCCs in Action - Hedging Mechanism for LSE Marcy to Zone G TCC

Energy $30.00 x 20 = 600Losses $5.00 x 20 = 100Cong. - (-100.00) x 20 = 2000 LBMP = $135.00 x 20 = $2700less: TCC Rent Collected -$2000

Net Cost/MWh* = $700

*always read The Fine Print - plus the cost of the TCC

Buying Energy-LSE Buys 20 MWh DA Power @

Zone G LBMP of $135$100 is congestion…..to be exactly offset w/ TCC rent creditPOI of Ref Bus, POW of Zone G

[( -1 x -100) – (-1 x 0)] x 20(100 – 0) x 20100 x 20=$2000 TCC Holder Collects Rent

LBMP$30

LBMP$135Marcy Zone G

Source POI

SinkPOW


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TCCs in Action - Hedging Mechanismfor a Transaction

• TCCs hedge against Transmission Cong. Costs• Offset Congestion Costs, do not cancel Congestion

Transmission Usage Charge[(-1 x -10) – (-1 x -5)] x 20 x -1=(10 – 5) x 20 x -1= 5 x 20 x -1= - $100 TUC expense**

**Assume Losses are $0

LBMP$35/MW

LBMP$40/MW

TUC expense will be offset by TCC collected rent68


TCCs in Action - the big picture for hedgers

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Cost of TCC

e.g., AuctionDirect Sale

$ Outflow

Cost of Congestion

e.g., related to

Transaction TUCs

$ Outflow

Return on TCCs

Via Congestion

Rents

$ Inflow

TCC as a Hedge$$$$

Cost ofHedge


TCCs in Action TCC Purchasers

• No participation in other markets required.• Any entity who meets the credit requirements

can be part of the TCC Market.• It is not necessary to have an

exposure to congestion costs in the DAM to participate.

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TCCs in Action - Investment

Cost of TCC

e.g., AuctionDirect Sale

$ Outflow

Return on TCCs

Rents, Resale

$ Inflow

TCC as a Financial Instrument

$$$$

Profit{….could be a loss!

Return on TCCs

Rents, Resale

$ Inflow

Loss{

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TCCs in Action - March 2014 Reconfiguration

If you bought this TCC @ $12,889.50, you would have received $8,643.92 in Congestion Rents over the month (or 744 DAM hours), for a loss of $4,245.58*sign reversed from posted number

Highest Auction Clearing Price (positively-priced TCC):$12,890/MW (TCC)*

POI @ Dunwoodie Zone to POW @ Sandy Pond (ISONE-NPX)

or (Loss)

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Largest Negative Clearing Price (counterflow TCC):$-22,243/MW (TCC)*

POI @Sandy Pond (ISONE-NPX) to POW @Genesee Zone

TCCs in Action - March 2014 Reconfiguration

If you received $22,243.25 in the Auction for this counterflow TCC, you would have paid $16,597.82 in Congestion Rents over the month, for a gain of $5,645.43*sign reversed from posted number

or (Loss)

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Let’s Review

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TCCs in Action

TCCs are a perfect hedge for the cost of congestion on a DAM transaction if both have the same POI and POW and duration.

a) True b) False


Let’s Review

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TCCs in Action

TCC Auction awardees are guaranteed a profit with respect to the associated Congestion Rents. a) Trueb) False


Transmission Congestion Contracts Summary

• TCCs• Financial, not physical • Settled against DAM Only

• Procuring TCCs• Auction Process• Alternate Procurement Methods

• DAM Congestion Rent• Settled through invoice process

• Fully Funded by Transmission Owners• Over or Under Collection

• TCCs in Action• Used as a hedging mechanism or financial instrument

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Transmission Congestion Contacts - NYISO · Transmission Congestion Contracts ... TCC Auctions...

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Transcript of Transmission Congestion Contacts - NYISO · Transmission Congestion Contracts ... TCC Auctions...