By - Jim Vess

Western utilities eye joining Southwest Power Pool, state regulators are wary

Energize Weekly, July 19, 2017

The Mountain West Transmission Group, which represents utilities in eight western states, is considering joining the Southwest Power Pool’s (SPP) wholesale market, a move that is raising cost and reliability questions among state officials.

More than 60 percent of the nation’s electricity moves through regional wholesale markets, operated by Regional Transmission Organizations (RTOs) or Independent System Operators (ISOs). The only areas lacking such markets, which are considered more efficient and cost effective, are the West and the Southeast.

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.

While the West doesn’t have a regional wholesale power market, it does have a highly integrated and complex reliability assurance plan operated by an independent reliability coordinator, or RC, Peak Reliability.

One of the tensions around the prospect of 10 percent of the western system leaving to joining SPP is the impact it will have on the overall system. These issues were aired at special meeting of the Colorado Public Utilities Commission (PUC) in late June.

“The West is a really complex machine,” said Marie Jordan, CEO of Peak. “It runs as one large machine.”

For example, about a quarter of the electricity coming from hydropower plants in the Pacific Northwest bound for Los Angeles swings east and then south through lines in the mountain states rather than heading south through Oregon and California, Jordan said.

“What happens in Colorado doesn’t stay in Colorado,” she said.

The Western Electricity Coordinating Council (WECC)—which is responsible for compliance monitoring and enforcement for the 14 western states, and the Canadian provinces of British Columbia and Alberta—has remained neutral. “We don’t have a dog in this fight other than to ensure reliability is preserved,” said Jim Robb, WECC’s CEO.

The character of the western electricity system is different from that of the East, said Bob Cummings, senior director of engineering and reliability initiatives for the North American Electric Reliability Corp.

“You can characterize the East as having a lot of short lines with local load centers,” Cummings said. “In the West, you’ve very long lines and remote centers.”

The West has 110,129 miles of transmission lines, including 2,500 miles of high-voltage lines of 500kV or more, compared with a total of 60,944 miles of lines in the SPP, with 90 miles of high-voltage lines, according to Jordan.

Peak monitors the entire western grid from security centers in Vancouver, Washington, and Loveland, Colo. “It reduces the risk having one set of eyes,” Jordan said, adding that Peak’s “single focus” was reliability, and it has no market involvement.

That, however, is one of the problems with the western system, according Mountain West Transmission members.

“The one absent tool in the Peak tool chest,” said Steve Beuning, director of market operations at Xcel Energy, “is an interconnection-wide security constrained economic dispatch.” The missing piece is an “economic component.”

Having the reliability controls, electricity balance authority and the market operations combined “improves efficiency and reduces cost,” said Carl Monroe, SPP chief operating officer.

In many cases when there is a reliability problem, the system can “activate the market to constrain it,” Monroe said. “The market can respond in five minutes.”

Monroe said in some cases SPP will even do “market-to-market” deals to relieve supply shortages. “We will pay another market to resolve our problem . . . if it is cheaper,” he said.

Denton McGregor, reliability center manager at the investor-owned utility Black Hills Energy, a Mountain West Transmission member, said that when a generating unit goes down in Colorado and more power is needed, he has to manually call around to other utilities to see what is available and at what price.

In a wholesale market, that demand is filled by a computerized market. “Markets can solve some of the problems we struggle with in real time,” he said.

In the last eight years, Monroe said SPP has successfully integrated Nebraska, North and South Dakota into its system and on its eastern border, coordinates reliability with the Midcontinent Independent System Operator (MISO), a wholesale market that stretches across 15 states from the Gulf of Mexico to the Canadian province of Manitoba.

“We have to exchange and work with MISO. It would be the same with Peak,” Monroe said.

Participating in a wholesale market allows for more efficient resolution of transmission congestion; allows individual utilities to reduce the amount of reserve generation, so-called spinning reserves, they must have; and gives market access to the cheapest electricity available.

A preliminary study found Mountain West Transmission members could save $50 million to $70 million a year by joining a large wholesale market. A more complete cost-benefit analysis is underway.

The question of cost and benefit, along with that of public oversight, were the ones that state officials honed in on.

“Will the cost increase with two RCs?” asked Bryce Freeman, the administrator of the Wyoming Office of Consumer Advocate.

WECC’s Robb said that Peak’s costs will not decline, while there is new investment second reliability coordinator.

“How confident are you that you have adequately valued the cost of taking this on,” Kara Brighton Fornstrom, deputy chair of the Wyoming Public Service Commission, asked the Mountain West Transmission representatives.

Fornstrom asked what if Mountain West Transmission stayed with Peak for reliability and joined SPP just for the market. They might then end up paying twice for some services, Monroe said.

Colorado PUC Chairman Jeffrey Ackermann raised questions about what oversight state regulators will have on budgets and expenses. “We are concerned how these costs are allowed and which ones are going to come back here in the future,” he said.

Frances Koncilja, a Colorado PUC commissioner, said that it boils down to two questions. “Is this going to benefit Colorado ratepayers and what is it going to cost them . . . We need to see some numbers soon.”

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