Congestion Revenue Rights
A Congestion Revenue Right (CRR) is a financial instrument that results in a charge or a payment to the owner, when the ERCOT transmission grid is congested in the Day Ahead Market (DAM). CRRs may be used as either a financial hedge, or a financial investment. When used as a hedge, a CRR locks in the price of congestion at the purchase price of the CRR. When purchased as an investment, it may be used as a financial tool to speculate whether the congestion rent will be greater than the purchase price.
The main purposes of the ERCOT CRR market are to:
- Support a liquid energy market by providing tradable financial instruments for the hedging of transmission congestion charges
- Allow market participants to eliminate or greatly reduce the cost uncertainties resulting from transmission congestion charges
- Encourage competitive energy trading, where the costs of congestion might otherwise be an impediment