An auction to procure capacity in a load pocket

This paper presents a novel feature of the use of financial transmission rights (FTR) auction that is used to solve market power and other problems. The goal is to identify the least-cost resources to provide the level of required reliability in the load pocket via the purchase of additional transmission capability or generation capacity. The design complications confront are lump resources, market power in the auction and in the load pocket after auction and competition between resources: transmission lines, baseload generators and peakers. Three auctions have been suggested to solve this problem but at the end FTR subsidy auction approach with bottom capped has proved advantageous over the other two.