Southwest Power Pool takes a first step in creating a western wholesale electricity market

Southwest Power Pool takes a first step in creating a western wholesale electricity market

Energize Weekly, April 12, 2023

A group of 26 utilities and organizations representing power producers – ranging from the Rockies to the Southwest to the Pacific Northwest – agreed to join the initial phase of the Southwest Power Pool’s (SPP) attempt to create a western wholesale electricity market.

The West is one of only two regions in the country, along with the Southeast, that does not have a wholesale electricity market run by a regional transmission organization (RTO) or an independent system operator (ISO).

The California ISO has been trying to push east in extending its operations and the Southwest Power Pool, an RTO serving all or parts of 15 states, primarily in central U.S., has sought to move west.

A stumbling block for the California ISO has been governance. The system operator’s board is appointed by the governor and utilities in other states are reluctant to join a system run solely by California.

The SPP also faced governance questions as well as ones of cost for new members.

A group of eight western power producers – the Mountain West Transmission Group – explored joining SPP, but in 2018, Xcel Energy, Colorado’s largest electricity provider, decided to pull out of the group saying joining the SPP was “not in the best interest” of its customers or the company.

In 2021, SPP launched its Western Energy Imbalance Services (WEIS) market, which enables a power producer to balance its load in real-time – essentially being able to shed or top off electricity as needed.

WEIS won western adherents, including Xcel Energy, the Tri-State Generation and Transmission Association, which serves 42 rural electric cooperatives in four states, and the Western Area Power Administration.

SPP’s new initiative Markets+ builds on the balancing market with the aim of adding a day-ahead market as well.

Initially, the project will develop a fully independent governance structure. Signing on to the first phase does not commit any of the participants to joining a market.

“From the outset of its exploration of the potential benefits of regional, real-time and day-ahead electricity markets in the west, SPP has worked to ensure its market design would reflect the perspectives of all western stakeholders,” SPP said in a statement.

To broaden participation, Markets+ also includes groups like The Interwest Energy Alliance, a renewable energy trade association, and Western Resource Advocates, an environmental organization. In all, there are 31 participants.

“We’re encouraged to see such a varied group of entities taking an active role in the development of Markets+,” Antoine Lucas, the power pool’s vice president of markets, said in a statement. “There’s room for all of those voices to have a say in the design and implementation of our market.”

The effort has attracted some of the major electricity producers and utilities in the West, including Xcel Energy, Arizona Electric Power, the Bonneville Power Administration (BPA), Tri-State, the Salt River Project in Arizona, and the Tucson Electric Power Company.

“Markets such as this are the future of operations in the West, and this ensures BPA and its customers will keep pace and help shape these important initiatives,” John Hairston, the authority’s administrator and CEO, said in a statement.

Robert Kinney, the CEO of Xcel Energy’s Colorado subsidiary, said that while the company “looks forward to working with SPP” that doesn’t mean it will join the RTO or a future market.

“We will make that decision following our extensive review of the Markets+ design,” Kinney said in a statement.

To learn more about the SPP market initiatives, check out EUCI’s Maximizing Value of Assets in SPP Markets course coming up on July 20-21.

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