Abstract-Financial transmission rights (FTRs) are complementary to the locational marginal pricing of energy. The basic aim of the FTR mechanism is to guard forward contracts from uncertain congestion charges. FTRs are also useful to individual generators and loads for selling and buying power, respectively, at the prices of other locations. The concept has evolved, encompassing many features such as a simultaneous feasibility test, various ways to conduct auctions and allocations and secondary trading. FTRs also have a close relation to market power and transmission investment. This paper reviews most of the landmark research papers on the evolution of the FTR concept. It reports a comprehensive assessment of various facets of FTRs and allied issues. Financial transmission rights and flowgate rights (FGRs) are compared. The concept of long-term FTRs is discussed. The paper also touches upon future proposals in this area.

The objective of this work is to design a suitable rule for the energy reference selection in the AC optimal power flow (ACOPF)-based locational marginal price (LMP) calculation. In the case of the ACOPF model, the congestion component of the LMP vector exhibits strong dependence on the energy reference. This in turn makes the hourly values of financial transmission rights (FTRs) to be reference dependent, and, thus, is a source of dispute. In order to resolve this dispute, a direct optimization framework is developed in this work exploring the interrelationship between the congestion components of locational marginal prices at individual buses. The objective function and the constraints of this optimization model are carefully designed looking at the true motive of the LMP decomposition. At the same time, necessary attention is paid so as to ensure revenue adequacy in the FTR settlement. The optimization problem that is ultimately to be solved is a simple quadratic programming problem with only one variable and two constraints. The effectiveness of the proposed methodology is verified through a case study on a modified IEEE 30-bus system. The framework developed also unveils several interesting features of the LMP components that were under cover until now. Index Terms-Congestionmanagement, energy reference, financial transmission right, LMP decomposition, locational marginal price, revenue adequacy. NOMENCLATURE Slack weight vector. Vector containing bus voltage angles. Total number of bids and offers. Total number of different FTR paths. Angle of . nodal LMP vector. Congestion component of . Energy component of . Loss component of . LMP difference (sink LMP minus source LMP) over the th FTR path.

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Abstract-In order to guard forward contracts from the locational marginal price (LMP) volatility, financial transmission rights (FTRs) are issued in the centralized power markets. However, the current FTR system can provide hedge only against the congestion components of LMP differentials. Consequently, the loss components remain unhedged. To bridge the gap, a framework is developed in this paper to implement an FTR system that will provide hedge against the loss prices. The availability of loss-hedging FTRs in addition to the congestion hedging FTRs further reduces the exposure of the forward market participants to the LMP volatility. The loss-hedging framework developed is carefully designed to fit the practical environment. All the primary issues for the implementation of loss-hedging FTRs, such as the revenue adequacy test, auction, and auction revenue rights, are carefully addressed. Revenue adequacy of loss-hedging FTRs can be ensured by means of a test called as the offset capacity test. Some efficient policies are also designed for the successful functioning of loss-hedging FTRs. At the end of the paper, a case study is carried out to assess the effectiveness of the methodology developed.

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