By - Jim Vess

Southwest Power Pool approves terms for western utilities to join its wholesale market

Energize Weekly, March 21, 2018

The Southwest Power Pool (SPP) board of directors on March 13 approved the terms for utilities and transmission operators from eight Western states to join their wholesale electricity market.

The proposal deals with issues of cost sharing, governance, operations and, in a number of areas, gives the Mountain West Transmission Group region some separate consideration or independence.

The SPP operates a market that stretches across all or parts of 14 states from the Texas Panhandle to the Canadian border with about 100-member utilities, energy traders and state power authorities.

Mountain West Transmission operators, roughly aligned from New Mexico to Wyoming, include investor-owned Xcel Energy, rural cooperative wholesale power provider Tri-State Generation and Transmission Association, and the federal Western Area Power Administration.

Municipal utilities are represented by the Platte River Power Authority and Colorado Springs Utilities.

Mountain West and the SPP have been negotiating for more than a year after studies by the group of Western operators, none of whom are currently served by a regional transmission operator, concluded that they could save $80 million to $154 million by joining the wholesale market.

SPP calculated that there would be $500 million in savings in the first 10 years for its members, who collectively share the costs of operating the market, in part from a reduction in administrative costs due to a larger customer rate base.

The Mountain West will be adding 21 gigawatts of generating capacity to the SPP and that will help create cost savings from the optimization of energy exchange between the east and west, a reduction of required generation contingency reserves and savings due to load diversity achieved by operating across two time zones.

SPP said in a statement it expects the integration of the Mountain West group to take two years.

Among the elements in the terms and conditions approved by the SPP board are:

  • Fees for the Mountain West will be phased in over four years.
  • The Western region will get three seats on the SPP members committee and four seats on the strategic-planning committee.
  • The voting structures of SPP’s Markets and Operations Policy Committee and Corporate Governance Committee will be modified to allow West participants separate consideration of issues including cost allocation for new and existing transmission facilities in the West and not shared with the East.
  • SPP will establish East and West planning regions. SPP’s standard planning processes will govern planning in each region and across the combined SPP footprint.
  • The cost for operating the four direct-current (DC) transmission ties that link the Mountain West and the SPP will be allocated across all members. After seven years, cost allocations will be benefit based.
  • Revenues resulting from point-to-point transactions that span DC ties will be shared between the East and West on a load-ratio share basis.

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