Out-of-State Utilities Join Forces to Consider Western Market

By Published On: October 11, 2021

Updated Oct. 13

A dozen utilities from Puget Sound to Colorado have announced they’re exploring the formation of a western-wide trading market amid the shifting energy landscape. Such a market could give the California Independent System Operator a run for its money since it is also currently trying to expand its real-time Western Energy Imbalance Market into a far larger regional day-head market.

A regional market is “key to transforming the electricity system throughout the West, integrating more renewables onto the system, while reducing costs and maintaining reliability,” Alice Jackson, president of Xcel Energy-Colorado, said in statement.

Gary Ackerman, founding Executive Director of the Western Power Trading Forum that represents generators, utilities, energy companies and investors, said the exploration will give the 12 energy companies some breathing room “between the two dominant [Regional Transmission Organizations] that wish to expand their respective footprints.” Those are CAISO and Southwest Power Pool; the latter is based in Arkansas and reaches into eastern Colorado. It “is a matter of deciding an equitable way to share the costs” of expanding transmission paths, Ackerman said.

Despite the potential competition, the California grid operator said it welcomed the western utilities’ exploration of options. “At the ISO, we will continue to advance pragmatic, actionable market enhancements that optimize transmission and resource diversity across the widest geographical footprint possible and enable our many partners to continue to evolve together toward a fully-integrated Western electricity market,” said Elliot Mainzer, CAISO chief executive officer, and president, in a statement.

Eight of the 12 companies in the new Western Markets Exploratory Group already participate in the CAISO western real-time market, including PacifiCorp, which helped create this energy balancing market back in 2014. The others are Arizona Public Power, Idaho Power, NV Energy, Portland General Electric, Puget Sound Energy, Salt River Project, and Seattle City Lights. The other coalition members are Black Hills Corp, Platte River Power Authority, Xcel Energy, and Tucson Electric Power, with the latter planning to join the EIM next year. Xcel Colorado “has decided to pause work on joining EIM for now,” said CAISO Spokesperson Vonette Fontaine

The utilities that participate in the EIM agree that a fully developed western trading market could help lower customer costs and increase efficiencies and renewable integration locally and regionally, by taking advantage of different time zones and clean power that waxes and wanes at different times.

Exploring opportunities for greater diversification and maximization of Western energy resources, “will help bring cost savings, improved reliability and carbon reduction benefits to not only Nevada but to the entire region,” said Doug Cannon, NV Energy president and chief executive officer.

“No timeline”

Xcel spokesperson Julie Borgen told Current the exploration is in its early stages. There “is no timeline, but we expect this to be a multi-year process.”

Utilities in Nevada and Colorado are required by law to join an RTO by 2029.

Meanwhile, CAISO is working to extend its EIM real-time market, which makes up only a small slice of energy trading, into the far larger day-ahead market. It held a key meeting on its Extended Day Ahead Market on Wednesday.

Last month, the CAISO Board approved giving its Energy Imbalance Market Governing Body a bigger role. Decisions that affect both the EIM real time market and the larger CAISO day-ahead market will now require majority approval from each authority. The new rules also provide procedures for settling disputes when interests diverge.

A couple of years back, legislation introduced via a gut and amend process sought to turn CAISO into a regional entity but it failed to pass because of controversial governance issues. Specifically, some objected to California ceding control to a regional entity governed by federal regulators. An expanded market that takes in different weather and time zones is expected to lower costs, make better use of variable wind and solar energy resources, and drive down emissions.

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