FTR Funding & Revenue Adequacy in MISO

What Is FTR Funding (Revenue Adequacy)?

Revenue adequacy measures whether Day-Ahead congestion revenue is sufficient to fully pay all FTR Target Allocations. Each hour, a given FTR's Target Allocation equals FTR MW × (DA Congestion Component at Sink – DA Congestion Component at Source). When total positive Target Allocations exceed collections, there is a shortfall — commonly called "underfunding."

FTRs settle only in the Day-Ahead market; Real-Time congestion does not contribute to or offset FTR funding. Additionally, counterflow FTRs — positions that run opposite to the expected direction of congestion — generate payments from the holder back into the congestion revenue pool when congestion materializes in the prevailing direction. Revenue adequacy therefore depends on the net of prevailing-flow credits and counterflow charges across the entire awarded portfolio.

How FTR Settlement Works

Each hour, MISO compares total positive Target Allocations against congestion revenue and applies one of three outcomes.

Surplus. Collections exceed Target Allocations. Each holder is paid in full. The surplus accrues into the Excess Congestion Charge Fund (ECF).

Exact Match. Collections equal Target Allocations. Each holder is paid in full.

Shortfall. Collections fall short. Each holder receives its pro-rata share of available revenue plus an FTR full funding guarantee credit that brings the total to the full Target Allocation. However, the guarantee is a zero-sum mechanism — its cost is allocated back to the same holders with positive Target Allocations, pro rata. The net collective shortfall remains unchanged; the guarantee simply redistributes who bears it while creating an offsetting obligation resolved through the ECF.

The Excess Congestion Fund Timeline

The following determines whether underfunding is temporary or permanent.

Hourly. Shortfall hours accumulate and await monthly distribution. Surplus hours within the same month offset shortfall hours.

Monthly. After each month, ECF funds are distributed to holders proportional to the gap between credits received and Target Allocations owed, with corresponding reductions to full funding guarantee credits. Remaining deficiencies carry forward to year-end, where surplus months later in the year can still provide offset.

Annual. After each calendar year, the ECF is distributed pro rata to holders not fully paid. Deficiencies are not carried forward. Any remaining shortfall becomes permanent underfunding.

Year-End Surplus. If FTRs are fully funded and a surplus remains, excess revenues are distributed to all Transmission Customers taking NITS or Firm PTP service pro-rata regardless of whether they hold FTRs. FTR holders who bore underfunding risk during the year receive no preferential claim on the surplus. This constitutes final settlement and is not subject to subsequent resettlements.

Why Revenue Adequacy Could Fall Short Despite the SFT

All awarded FTRs must satisfy the Simultaneous Feasibility Test (SFT), meaning the combined positions cannot violate any transmission constraints in the auction model. However, the SFT only holds if real-world conditions match what the auction model assumed.

Loopflow assumption changes. Auction capability is reduced for loopflow — unscheduled power flowing across MISO's borders. If actual loopflows differ from assumptions, realized congestion patterns won't match the model.

Outage assumptions changes. Transmission outages implemented in the Day-Ahead market may not be submitted in time for inclusion in the FTR network model. Additionally, transmission outages assumed within an FTR auction may not be implemented in the Day-Ahead market.  Either scenario can produce system conditions inconsistent with those assumed within the SFT.

Model update timing. Network and commercial model changes must be submitted in advance. Changes after this deadline or during the operating year create divergence the SFT could not have anticipated.

How to Monitor FTR Funding
The ECF Report shows net FTR funding obligations by season (Quick Links > Market Reports > Market Settlements > SRW Excess Congestion Fund). FTR funding drivers are discussed at monthly Market Subcommittee meetings. Settlement Statements at the Asset Owner level display each charge type and billing determinants.