Peak Reliability and PJM join the scramble to create wholesale power markets in the West
Energize Weekly, December 20, 2017
Peak Reliability, the reliability coordinator for the majority of the Western Interconnection, is teaming up with PJM Interconnection, operator of the nation’s biggest wholesale electricity market serving Mid-Atlantic and Midwest states, to explore creating a wholesale power market in the West.
The move by Vancouver, Washington-based Peak, which oversees grid reliability in an area that stretches from British Columbia to Baja California, Mexico, comes as there are multiple initiatives underway for developing a western wholesale electricity market.
The West and the Southeast are the only two regions in the country without such a market operated by an independent system operation (ISO) or a regional transmission operator (RTO)—60 percent of the country is served by an ISO or RTO.
“The West is clearly at the point where competitive markets are a possibility,” said Pete Hoelscher, Peak’s chief strategy officer. “It’s been a real sea change in the West in the last five or six years.”
About two years ago, the California Independent System Operation (CAISO) began exploring turning its statewide market into a regional one. That effort stalled when the California legislature adjourned in the fall without passing legislation opening the management and board of directors to out-of-state interests.
The California governor appoints the CAISO board with legislative approval, and states such as Utah were reluctant to join a market in which they had no say.
Meanwhile, seven utilities and transmission operators, who cover all or parts of eight states centered in the Rocky Mountain region, have formed the Mountain West Transmission Group and are negotiating to join the Southwest Power Pool (SPP), an RTO that covers all or parts of 14 states from the Texas Panhandle to the Canadian border.
Mountain West includes the North Dakota-based Basin Electric Power Cooperative, investor-owned utilities Black Hills Energy and Xcel Energy, wholesale power providers Tri-State Generation and Transmission Association and the Platte River Power Authority, the federal Western Area Power Administration (WAPA) and the Colorado Springs municipal utility.
SPP already has about 100 member utilities, energy traders and state power authorities.
The move to join the SPP has been the focus of a series of information hearings at the Colorado Public Utilities Commission, where regulators have said they are wary about the move.
“There are still a lot of unanswered questions,” said Bryce Freeman, administrator of the Wyoming Office of Consumer Advocate.
A second group of Southwestern utilities also has a study underway on the value of joining SPP. This group, the Southwest Market Alternatives Group (SMAG), covers most of New Mexico, a chunk of Arizona and smaller portions of Texas, Nevada and California.
SMAG includes three investor-owned utilities, two generation and transmission groups, and one federal power marketing administration.
The members are: Arizona G&T Cooperatives; El Paso Electric; Public Service Company of New Mexico (PNM); Tri-State Generation and Transmission Association, Inc.; UNS Electric, Inc.; Tucson Electric Power; and WAPA.
In a filing to the New Mexico Public Regulation Commission, PNM said that it had joined SMAG in order to “identify costs and benefits of potential participation in a regional transmission organization.”
As the regional independent reliability coordinator for the West, Peak charges member utilities for its services, but most RTOs bundle reliability services in with their wholesale marketing. That was one impetus for teaming up with PJM, Peak officials said.
“PJM has an established track record as an innovative and cost-effective provider of system operations and market services,” Marie Jordan, Peak’s CEO and president, said in a statement. “Our partnership seeks to leverage Peak’s West-wide system model, PJM’s markets expertise, and our combined processes, people and tools.”
“Both Peak and PJM share a strong commitment to developing solutions, tailored to the Western Interconnection,” Jordan said.
PJM is the reliability coordinator and marketer for the high-voltage power system that serves 65 million people in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.
PJM coordinates and directs the operation of the region’s transmission grid, which includes more than 82,000 miles of transmission lines. It also administers a competitive wholesale electricity market, as well as planning regional transmission expansion improvements to maintain grid reliability and relieve congestion.
Currently, Peak monitors and manages reliability for an area covering 1.6 million square miles, with 37 balancing authorities and 56 transmission operators with 110,000 miles of transmission lines.
“PJM has extensive experience developing and implementing markets in a timely, cost-effective manner,” Andrew L. Ott, president and CEO of PJM Interconnection, said in a statement. “We believe that our partnership will lead to a viable and credible alternative structure in the West, and we’re looking forward to working with the Peak team to develop that option.”
The two companies said they plan to meet with stakeholders around the West in the next three months to determine “potential reliability services, market design, governance, product suites, rules, technology and organization.” Peak and PJM expect to report the results of the review by the end of March 2018.