A joint energy and transmission rights auction for RTO markets

This paper introduces a general design for regional transmission organisations (RTO) markets, which we call the joint energy and transmission rights auction (JETRA). This design encompasses both forward and dispatch markets for energy and transmission. It can include other electricity services as well, such as installed capacity or operating reserves. JETRA is a trading system that ensures physical reliability and financial feasibility of executed trades. JETRA allows parties who desire to buy or sell financial rights to bid for their preferred mix of point-to-point and flow-based rights and energy forwards, and then modify their holdings through subsequent iterations of the auction or through bilateral transactions. Except for the final iteration, JETRA is a linear or nonlinear program that allocates financial rights for point-to-point transactions and flowgate rights to the highest bidder, while maintaining revenue adequacy. The auction allows for both point-to-point options and obligations; further, point-to-point rights do not have to be balanced. Some general features of the auction are described. A linear-programming implementation of JETRA is then presented using the DC load flow approximation. Finally, the issue of revenue adequacy is discussed, and some conclusions offered.