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2009 State of the Market Report

Transmission Congestion

Figure 61: FTR Profitability Monthly Purchases, 2007 – 2009

$1.20

$0.80

$0.40

Profitability ($/MWh)

$25

$0.00

Profitability ($ Millions)

$20

$15

$10

$5

$0

Profitability in Off-Peak Hours Profitability in Peak Hours Average Profitability

  • -

    $5

07

08

09

J

F

M

A

M

J

J

A

S

  • O

    N

D

J

F

M

A

M

J

J

A

S

  • O

    N

D

2008 2009

Average FTR profits in the seasonal auctions have declined from more than $1.50 per MWh when the markets were first introduced in 2005 to $0.21, -$0.02 and $0.01 per MWh in 2007, 2008, and 2009, respectively. The reduction in profitability indicates that the performance of the market has improved over time as liquidity has increased and participants have gained experience, causing FTR prices to more accurately reflect their value. Peak-hour FTRs were considerably more profitable in 2009 ($29.8 million) than off-peak-hour FTRs (loss of $15.2 million).

Figure 61 shows average profits in the monthly auction have decreased from more than $1.30 per MWh in 2005 to $0.31, $0.21 and $0.18 per MWh in 2007, 2008, and 2009, respectively. These results confirm that the liquidity and overall performance of the FTR markets has improved over time, causing FTR prices to accurately reflect their value.

To provide further detail on the performance of the FTR markets, our next analysis compares the monthly FTR prices to day-ahead congestion that are payable to the FTR holders. As noted above, a well-functioning market should produce FTR prices that reflect a reasonable

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