Financial Engineering Seminar Series - The Profitability of Congestion Revenue Rights in California's Electricty Market

Thursday, February 21, 2013 ( 5:00 pm to 6:00 pm )

Location: Babbio 122

The Profitability of Congestion Revenue Rights in California's Electricty Market
Peter H. Griffes
Director of Comprehensive Market Structure
Pacific Gas & Electric, Co.

ABSTRACT: Centralized electricity markets with locational marginal pricing (LMP) over a transmission network replace physical transmission rights with purely financial rights.  These financially-derived transmission rights are known by different names depending on their associated market.  In California, they are known as Congestion Revenue Rights (CRRs), and were introduced in 2009 when California adopted its LMP market.  This paper discusses CRRs in the California electricity market.  Simple examples are used to illustrate the basic concept of CRRs, and the paper further explores the strategies market participants have used to hedge and speculate.  Finally, data from the early CRR market in California is used to illustrate the effectiveness of these strategies. 

BIO: Peter Griffes has over 20 years of experience working on complex economic issues in a variety of areas, including regulation of regulated utilities, intellectual property, forward and spot markets for energy. He has specialized in restructured electricity markets, including locational marginal pricing (LMP) and associated market features.   Peter has worked in California, PJM, New York, New England, the United Kingdom, Spain, Ireland and Hong Kong on market design and restructuring issues.    He has been at the forefront of market design issues in the electric utility industry for over 15 years. Peter currently is working on designing forward capacity markets for flexible resources in California as the Director of Comprehensive Market Structure at Pacific Gas & Electric, Co.  He has been with PG&E for more than five years in positions involving market design and market monitoring.  At PG&E he has provided leadership in developing PG&E’s market monitoring function as well as lead PG&E’s market design efforts.    Prior to joining PG&E, Peter worked as a consultant with Deloitte Financial Advisory Services, Analysis Group, and National Economic Research Associates (NERA).  He also has worked at Argonne National Laboratory as a research economist.   He holds a PhD in economics from the University of Chicago.