Market Monitor Joseph Bowring last week released an analysis that he said proves his contention that up-to congestion (UTC) transactions are increasing shortfalls in Financial Transmission Rights funding.
“There’s no reason to believe up-to congestion transactions help price convergence,” Bowring said in presenting his monthly report to the Members Committee webinar. “But they do increase day-ahead congestion.”
The monitor’s analysis was based on a simulation of market results with and without UTC bids for a five-day sample in May.
The analysis found that UTCs affect unit commitment and dispatch in the day-ahead market, increasing the number of binding constraints and negative balancing congestion.
For the five days examined, the FTR funding deficit was $4.4 million with UTCs versus a surplus of $22,000 with UTCs removed — a difference of $4.6 million.
In its 2012 State of the Market report, the monitor called for eliminating UTC transactions or making them responsible for day-ahead and balancing operating reserve charges.
The monitor said the RTO deviation rate for 2012 would have been reduced by 59% percent if UTC transactions had been included in the calculation of operating reserve charges.
The average cleared volume of UTC trades increased 73% between 2011 and 2012.
