Archive - FTR development

Information published by the FTR manager is available on EMS’ website or on the FTR web portal.

EMS website

FTR web portal

Information on FTR clearing and settlement is available at NZX’s website and on the FTR clearing web portal.

NZX Group website

FTR clearing web portal

As the start dates are set out in the FTR allocation plan, the Authority proposed a one-month delay by proposing a variation to the plan.

The FTR manager consulted on the plan change and received five submissions, all in support of avoiding an overlap with pole 3. The submissions and summary of submissions have been published on the EMS website and the latest version of the FTR allocation plan, and the altered FTR calendar, are also available on the EMS website.

FTR Consultations

EMS Library

The first FTR auction will be in June 2013 offering July 2013 FTRs.

Participant registration opened on 29 January 2013. More information is available on the FTR registration page.

FTR registration page.

The latest methodology (December 2012) is available on the clearing manager’s website.

NZX Group's website

The clearing manager has also published more information for FTR participants on its website, including file formats and sample invoice files.

NZX Group's website

The Authority requested this ruling from IRD on behalf of participants to help provide clarity regarding how to treat FTRs in income tax returns. This ruling may save the need for participants to individually seek advice from the IRD. The ruling applies to FTR participants who prepare their accounts in accordance with International Financial Reporting Standards.

The ruling states that FTRs are not “the same as” or “similar to” other derivative instruments (with reference to a particular aspect of tax law). Therefore participants will not be required to use the same spreading method for FTRs as for other derivative instruments.

On 5 December 2012 the Authority approved a minor variation to the FTR allocation plan submitted by the FTR manager, EMS. The latest FTR allocation plan (December 2012) is available on the FTR manager’s library page.

FTR Library.

The clearing manager will develop its approach to setting initial margins in consultation with industry participants and submit the approach to the Authority to be approved and added to the FTR prudentials methodology before December 2012.

To view the FTR prudentials methodology, submissions, and other FTR clearing and settlement information, go to the clearing manager's website.

NZX Group website

The rulings mean that payments made by or to purchasers under the terms of FTRs are not subject to GST. In addition, assignment payments are also not subject to GST. The rulings expire on 18 October 2015. The rulings are attached here:

The regulations:

• identify the FTR manager as a market operation service provider, having all the rights and obligations of market operation service providers under the Act, the Regulations, and the Code;
• establish a liability limit for the FTR manager of $500,000 from any one event or series of closely related events, and $2 million from all events in any one financial year; and
• make the clearing manager liable to holders of financial transmission rights (FTRs) who suffer loss that occurs as a result of any failure by the clearing manager to comply with its obligations under the Code.

The Authority consulted on these proposed regulations in October and November 2011. Submissions can be viewed on the consultation page.

The regulations can be viewed at:

Electricity Industry (Participants and Roles) Regulations 2012

Electricity Industry (Enforcement) Amendment Regulations 2012

Under the Code, the FTR manager is required to set out the FTR auction rules, describe the FTR products and the FTR design in the FTR allocation plan. The FTR manager consulted with industry on a draft plan in April and May 2012 before submitting it to the Authority for approval.

The plan, submissions, and other related information can be accessed on the FTR manager's website.

FTR manager's website

The Authority selected EMS via a competitive open tender. EMS has engaged Nexant Inc, a US supplier of FTR auction software, to run FTR auctions on its i-HEDGE system.

The Financial Markets Authority (FMA) has gazetted two notices:

• The Futures Contracts (Financial Transmission Rights) Notice 2012 defines FTRs as futures contracts that are regulated under the Securities Markets Act 1988.
• The Authorised Futures Dealers (Financial Transmission Rights) Notice 2012 identifies what kind of persons may trade in FTRs (approved participants'), and authorises the FTR manager and the clearing manager to deal in futures contracts that are FTRs.

The Authority sought these declarations as part of the establishment of the FTR market. As a financial product, FTRs are regulated under the Securities Markets Act 1988 and are subject to FMA scrutiny.

These gazette notices can be views at:

The Futures Contracts (Financial Transmission Rights) Notice 2012

The Authorised Futures Dealers (Financial Transmission Rights) Notice 2012

The FTR manager will be a new market operation service provider who will establish and operate an inter-island FTR market in New Zealand. The Authority seeks proposals from parties who have experience in the operation of financial markets and the ability to deliver an IT solution to create the FTR product and run auctions. 

Prototype source code

As part of the RFP, on this page the Authority provided the source code for prototype software applications that fulfil a subset of two of the FTR manager's functions. This source code is referred to in Appendix 6 of the RFP.

 For the function of FTR grid design files include:

For the function of determining FTR rentals:

Note - shift factors are referred to in the software as participation factors or pfactors.

The FTR manager has published key dates for the opening of participant registration, participant user acceptance testing, dummy auctions, and more.

FTR Key Dates

The FTR manager has published draft FTR policies including:

• FTR calendar of auction dates
• FTR registration process
• FTR grid and auction rules
• FTR prudentials policy.

FTR Library

The clearing manager industry training plan is published under Resources.

NZX Group Website

The FTR manager and clearing manager are authorised futures dealers in respect of FTRs under the Authorised Futures Dealers (Financial Transmission Rights) Notice 2012. However, the FTR manager and clearing manager may only deal with approved participants, as set out in the Authorised Futures Dealers (Financial Transmission Rights) Notice 2012. The FTR manager and clearing manager will not deal in FTRs with any person, other than an approved participant. FTRs are not being offered outside New Zealand.

The information on the Electricity Authority website relating to FTRs is of a general nature only and does not constitute personalised financial advice. While the Authority has made every effort to ensure that the information provided is accurate, you should not rely on this information to make any financial decision. If you are an approved participant and are considering purchasing or trading FTRs, you should carefully consider the risks and benefits and, if necessary, seek professional advice.

Money paid for FTRs will be held in [name of account], and does not represent a liability of the Authority, the FTR manager or the clearing manager. None of the Crown, the Authority, the FTR manager or the clearing manager (or any of their directors, officers or managers) nor any other person guarantees the performance or returns of any FTR or the repayment of capital.