The Financial Transmission Contract market has a net harm to electricity rate payers. The market cost New York State rate payers over $100 million dollars between 2010 and 2016 without providing a benefit beyond that which could be provided by private markets. The Financial Transmission Contract (FTC) market makes ratepayers liable for payments without providing a means for ratepayers to trade the liability or collect rent, much less become aware of this liability. The FTC market has been setup within a regulatory framework to provide a means for generators, buyers, and private financial firms to hedge against volatility. However, a private market would allow for hedging without the forced obligations upon rate payers. The FTC market should be eliminated.
A Capital Asset Pricing Model (CAPM) is used to determine if the market has normal returns. A Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model is used to determine a contracts volatility in relation to overall market volatility. Abnormal rates of return are found within the the market and are skewed toward significant positive returns.
