Following the requirement expressed by the regulatory authorities and the request of the Latvian and Estonian electricity market participants, as from 1 January 2014, JSC Augstsprieguma Tīkls (AST) together with the Estonian transmission system operator Elering AS (Elering) ensure granting of the cross-border interconnection capacity on the Estonian-Latvian border by organising the financial transmission rights option auctions on the Estonian-Latvian border in the direction Estonia-Latvia. This product is also known in the Baltic electricity market under the name PTR-Limited.
PTR-Limited or the financial transmission rights option is a financial instrument, by means of which the electricity market participants can limit the risk of price fluctuations between the Estonian and Latvian electricity trade areas. Currently, operation of the PTR-Limited auction is also based on the provisions of European Commission Regulation 2016/1719 of 26 September 2016 establishing a guideline on forward capacity allocation (GFCA Regulation) and is a financial transmission rights option product that follows from the requirements of Regulation No. 714/2009 and the GFCA Regulation.
In accordance with a mutual agreement, since 1 January 2019, organising of the auction platform of both transmission operators is carried out by Joint Allocation Office.
Due to insufficient transmission capacity, the structure of production sources and the market supply and demand ratio, the electricity prices on the exchange may differ in different electricity trade areas. Transmission system operators are obliged to ensure transmission of the required amount of electricity in the requested volume and provide for the grid balance at the current point in time. According to the electricity model established in the European Union, electricity from cheaper electricity areas flows to the more expensive electricity areas. If the cross-border connection throughput capacity or the line transmission capacity is not sufficient for the electricity from the cheapest area to cover the demand in the area where the price is higher, congestion is formed. It is due to congestion that prices in neighbouring areas differ.
In the event of congestion, when different prices are formed on either side of the border, the operators are gaining so-called congestion management revenue by dividing the electricity price difference between the two electricity trade area operators. Pursuant to EU Regulation No. 714/2009, such revenue may be used to reduce such congestion (new line construction, elimination of bottlenecks) or for the reduction of the transmission rate in accordance with the decisions of regulatory institutions.
By participating in the PTR-Limited auction and purchasing the auctioned capacity (in PTR-Limited form), the electricity market participants have the opportunity to limit the risk of price fluctuation, that is, to receive money from the congestion management revenue of the operators or to fully or partially pay the purchase price for the capacity purchased if the redemption price (price difference between Latvian and Estonian trading areas) is less than or equal to the offered amount.
Settlements between the organisers of the auction (AST and Elering) and the auction participant take place in the form of clearing by comparing the bidding price that the auction participants undertake to pay for the purchased capacity (in PTR-Limited form) and the redemption price:
- the auction organisers are obligated to pay the participant of the auction the difference between the redemption price and the purchase price, if the redemption price is higher than the purchase price;
- the participant of the auction is obliged to pay the auction organisers the difference between the purchase price and redemption price if the purchase price is higher than the redemption price; or
- the auction participant is obligated to pay the full bidding price to the auction organisers if the redemption price equals 0, that is, if the electricity price in Latvian and Estonian trading areas is the same;
- none of the parties have mutual payment obligations if the purchase price and the redemption price is the same.
The purchased capacity (in the form of PTR-Limited) shall not grant the participant of the auction the right to use it for the physical transmission of electricity.
All communications with potential and registered participants of PTR-Limited shall take place in English. All required information and documentation for participation in PTR-Limited auctions is available here:
- EU HAR
- Regional Annex
- Information System Rules
- Auction Specification
- Participant Agreement
- Bank Guarantee Template
- Bid sheet
- Example Collateral Calculation
- List of registered participants for 2018 PTR-Limited
- The Request for the Modification in the Collateral
- The Request for the Contestation of the Auction Results
- The Request for the Amendments in the Participation Agreement
The PTR-Limited auction results for year 2018
For any queries related to PTR-Limited auctions, please contact us: