Efficiency of financial transmission rights markets in centrally coordinated periodic auctions
Electricity market design in the United States is increasingly dominated by locational marginal pricing (LMP) of energy and transmission. LMP markets are typically coupled with periodic auctions of financial transmission rights (FTRs) to hedge transmission price risks. While LMP designs offer considerable advantages, forward price discovery in these markets requires participants to form efficient expectations on spot congestion price differences. In this paper, we examine trends in the efficiency of one of the early LMP markets, the New York Independent System Operator (NYISO), analyzing a panel data set of over 9000 contracts over a six-year period beginning September 2000. We show that NYISO FTR markets were inefficient in their early years, but that market participants learned to predict forward prices and thus efficiency improved for FTRs not solely within the New York City/Long Island sub-region. FTRs within this sub-region, which has a number of special characteristics, remain relatively inefficient.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Charles J. Corrado & Tie Su, 1996.
"Skewness And Kurtosis In S&P 500 Index Returns Implied By Option Prices,"
Journal of Financial Research,
Southern Finance Association;Southwestern Finance Association, vol. 19(2), pages 175-192, 06.
- Corrado, Charles J & Su, Tie, 1996. "Skewness and Kurtosis in S&P 500 Index Returns Implied by Option Prices," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 19(2), pages 175-92, Summer.
- Charles Engel, 1995.
"The Forward Discount Anomaly and the Risk Premium: A Survey of Recent Evidence,"
NBER Working Papers
5312, National Bureau of Economic Research, Inc.
- Engel, Charles, 1996. "The forward discount anomaly and the risk premium: A survey of recent evidence," Journal of Empirical Finance, Elsevier, vol. 3(2), pages 123-192, June.
- Hogan, William W, 1992. "Contract Networks for Electric Power Transmission," Journal of Regulatory Economics, Springer, vol. 4(3), pages 211-42, September.
- Hadsell, Lester & Shawky, Hany A., 2009. "Efficiency and Profit in the NYISO Transmission Congestion Contract Market," The Electricity Journal, Elsevier, vol. 22(9), pages 47-57, November.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
- Rietz, Thomas A., 1988. "The equity risk premium a solution," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 117-131, July.
- Bessembinder, Hendrik, 1992. "Systematic Risk, Hedging Pressure, and Risk Premiums in Futures Markets," Review of Financial Studies, Society for Financial Studies, vol. 5(4), pages 637-67.
When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:32:y:2010:i:4:p:771-778. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.