SPP and stakeholders will consider RTO expansion to the west; study anticipates $49M in annual savings for current and new members
Little Rock, Ark. — Southwest Power Pool (SPP) has received letters from several western utilities committing to evaluate membership in the organization. An SPP Brattle study found that the move would be mutually beneficial and produce $49 million a year in savings. Additionally, SPP anticipates its wholesale electricity market, resource adequacy program and other regionalized services can help western members achieve renewable-energy goals, reinforce system reliability and leverage new opportunities to buy, sell and trade power.
If they pursue membership, Basin Electric Power Cooperative, Deseret Power Electric Cooperative, the Municipal Energy Agency of Nebraska (MEAN), Tri-State Generation and Transmission Association, and Western Area Power Administration (WAPA) would become the first members of SPP’s regional transmission organization (RTO) to place facilities in the Western Interconnection under the terms and conditions of SPP’s Open Access Transmission Tariff. WAPA’s evaluation of RTO membership will consider the participation of its Upper Great Plains-West (UGP-West) region and Loveland Area Projects. This would extend the reach and value of SPP’s services — including day-ahead wholesale electricity market administration, transmission planning, reliability coordination, resource adequacy and more — and the synergies they provide when bundled under the RTO structure.
Basin Electric, MEAN, Tri-State and WAPA’s UGP-East Region are already members of SPP, having joined the RTO in 2015 when they placed their respective facilities in the Eastern Interconnection under SPP’s tariff. Along with Deseret, each is also a customer of at least one of SPP’s contract-based Western Energy Services, which includes reliability coordination and a real-time market scheduled to launch in February 2021. The companies’ letters indicate they will now work with SPP to evaluate the terms, costs and benefits of putting western facilities under the RTO’s tariff.
“We are extremely excited to pursue this opportunity to bring increased value to our membership,” said Paul Sukut, Basin Electric CEO and general manager. “Our experience with SPP with our east-side operations has been overwhelmingly positive and proven to Basin Electric the value of a full RTO membership and specifically the value of SPP’s stakeholder process. In addition, the involvement of state regulatory commissions, specifically with their authority in cost allocation and resource adequacy, has proven invaluable in SPP’s ability to reliably integrate diverse resources and keep wholesale prices the lowest of any RTO in the country.”
“Tri-State’s participation in a Western Interconnect RTO is essential to advance our members’ reliability, affordability and clean energy goals,” said Duane Highley, CEO of Tri-State Generation and Transmission Association. “With our western utility peers, we will take the time necessary to evaluate the expansion of SPP’s RTO into the west. While the issues are complex, we remain optimistic that together we are on a path that can capture the full benefits of an organized market in the west.”
“Participating in SPP’s exploratory effort for the Loveland Area Projects and Upper Great Plains-West is consistent with our commitment to evaluate alternative ways of doing business that will retain and increase the value of WAPA for customers,” said Mark A. Gabriel, administrator and CEO of WAPA. “We have explored every market option and construct in our footprint for nearly 30 years, and we look forward to contributing to this next chapter of the energy industry in the west. As always, we are committed to collaborating with our customers and stakeholders as we assess this opportunity. If it continues to show promise, we will work through our formal processes with customers and others before any decisions are made.”
A recent SPP Brattle study found that WEIS participants’ membership in the SPP RTO would produce approximately $49 million in savings annually for SPP’s current and new members. The western utilities joining SPP would receive $25 million a year in adjusted production cost savings and revenue from off-system sales, and SPP’s members in the east would benefit from $24 million in savings resulting from the expansion of SPP’s market, transmission network and generation fleet. SPP’s prior calculations of the value of RTO membership suggest that these benefits are only a portion of those current and new members will derive. There is additional value not considered by the Brattle study in five-minute real-time economic dispatch, achievement of public policy goals, lowered reserve-margin requirements, consolidation and regionalization of planning and other processes and more.
“We’ve enhanced electric reliability while integrating more renewable generation than many in our industry ever thought possible, modernized the grid, built and operated a dependable and economic market, and equitably allocated the costs and revenues associated with these and other services,” said Barbara Sugg, SPP president and CEO. “What’s more, we’ve done it all while staying true to our collaborative and member-driven business model, and now we’re excited for the opportunity to bring the value of RTO membership to new customers in the west.”
In the Eastern Interconnection, SPP formed in 1941, implemented operating reserve sharing in 1991, became a certified reliability coordinator in 1997, and earned its RTO designation from the Federal Energy Regulatory Commission (FERC) in 2004. It launched its first real-time balancing market in 2007 then transitioned to a day-ahead market and became a single, consolidated balancing authority in 2014. This experience and toolset has enabled SPP to operate reliably even as it has set numerous North American records for renewable integration, serving as much as 75% of its total system’s demand with renewable generation at certain points in time. SPP also expects wind to be its number-one fuel source for the first time in 2020. It first began serving customers in the west in December 2019 when it launched its Western Reliability Coordination service on a contract basis. SPP is awaiting FERC approval to implement a western energy imbalance service market that it plans to launch in February 2021.
“We’ve seen a pattern of incremental growth and ever-increasing value among our customer base in the east,” Sugg said. “We launched a small, real-time market in 2007 that immediately exceeded expectations regarding the savings it would provide. That led us to develop a day-ahead market, the value of which earned us the trust and business of new customers that helped us grow our service territory. We’re now seeing that pattern repeat itself in the west in fast-forward. Many of our Western reliability coordination customers will soon become the first participants in the WEIS market, and the trust we’ve earned in that process has now led many of those customers to consider RTO membership. We’re grateful for their partnership and look forward to providing continually more savings, value and reliability to the west.”
About SPP: Southwest Power Pool, Inc. is a regional transmission organization: a not-for-profit corporation mandated by the Federal Energy Regulatory Commission to ensure reliable supplies of power, adequate transmission infrastructure and competitive wholesale electricity prices on behalf of its members. SPP manages the electric grid across 17 central and western U.S. states and provides energy services on a contract basis to customers in both the Eastern and Western Interconnections. The company’s headquarters are in Little Rock, Arkansas. Learn more at SPP.org.