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This paper introduces the fundamental features of the financial transmission rights (FTR) auction market and the implementation of the market clearing system in PJM. With the FTR auction market, PJM electricity market participants can more readily buy or sell FTRs to hedge their financial exposure to price risks caused by transmission congestion which is inherent to the LMP based market mechanism. The FTR Auction market bid-clearing system follows a rigorous optimization-based framework and has the capability to handle various types of sophisticated security constraints, such as reactive transfer limits and contingency constraints. Numerical examples, including the one using the PJM network model, are included to demonstrate the various aspects of the FTR auction mechanism.
Ma et al. (Wed,) studied this question.