The Federal Energy Regulatory Commission (FERC) on July 31 rejected the Southwest Power Pool (SPP) proposal for a Western Energy Imbalance Service (WEIS) market. At the same time, FERC offered guidance for a modified proposal should SPP choose to submit one.
While APPA has been monitoring developments related to the SPP WEIS, it has not taken a position on SPP’s proposal.
In its order, FERC cited a number of reasons for rejection of the proposal and provided guidance for a new submission if SPP chooses to do so.
Use of transmission
SPP said that the proposed tariff would allow all unused transmission capability within participating Balancing Authority Areas (BAAs), whether reserved or otherwise unused on an intra-hour, as-available basis, to be made available to the WEIS market – including non-participating entities’ transmission.
FERC said that such use of non-participating entities’ transmission is inconsistent with the requirements of Order Nos. 890 and 890-A.
If SPP resubmits the proposal and is not able to reach an arrangement with non-participating entities to use their transmission capacity, the Commission said SPP would need to include constraints in its market model to appropriately respect the transmission rights of non-participating entities when calculating the market solution.
FERC also recognized protesters’ concerns about the need for transmission and congestion management coordination with neighboring BAAs and encouraged SPP to coordinate proactively with its neighbors prior to resubmitting any proposal.
Provision of information on transmission availability
Meanwhile, FERC found that SPP has not shown that its proposal to rely on reliability coordinators and transmission operators to communicate the availability of transmission and congestion to SPP in real-time will ensure accurate information is provided.
In addition, FERC expressed the concern that SPP may be imposing an obligation on reliability coordinators to provide market-related information in a manner that is outside of the responsibilities of a reliability coordinator.
SPP is the Reliability Coordinator for a portion of the Western Interconnection.
FERC recommended that if a new proposal is submitted, the grid operator should include a better explanation of why congestion information should be communicated by the reliability coordinator or transmission operator, and how such actions are consistent with the reliability coordinator’s role.
Alternatively, SPP could propose a different arrangement to obtain needed information on transmission availability and other system conditions.
SPP should also explain how it will incorporate transmission availability and congestion information into its market optimization, how its proposed approach will ensure accurate information, and, if applicable, why WEIS market participants will not be required to provide known transmission availability being made available for WEIS use prior to SPP running its market optimization.
With respect to resource adequacy, the Commission said that it is not clear how the SPP proposal will properly incent market participants to maintain supply adequacy and not lean on other market participants.
If SPP submits a new proposal, it should consider including a mechanism that provides incentives to maintain supply adequacy.
For example, the Commission noted that the CAISO-operated Energy Imbalance Market (EIM) places a limitation on the imbalance imports of EIM entities that fail a resource sufficiency test.
SPP’s proposal does not include marginal losses in the calculation of locational marginal prices or in the security-constrained economic dispatch, and instead uses an average loss calculation.
FERC said that this exclusion prevents production costs from being minimized and could result in a less efficient market solution, especially in a geographically large market such as the proposed WEIS Market.
Although parties did not directly comment on this issue, the Commission recommended that a new proposal should consider including marginal losses in dispatch.
Market power thresholds
SPP in its original proposal established thresholds below which energy offers are not subject to mitigation of market power.
In its response to FERC’s deficiency letter, SPP reduced those thresholds while also proposing to increase the thresholds over time.
FERC found that SPP did not provide any justification for the automatic increase, and states that if a new proposal is submitted, SPP should either remove the automatic increase provisions or otherwise justify their inclusion.
Additional details on SPP WEIS
When the WEIS proposal was filed with FERC, SPP had said that it would administer the WEIS on a contract basis beginning February 2021 and that utilities do not have to be a member of the SPP regional transmission organization (RTO) to participate.
If implemented, according to SPP, the market would centrally dispatch energy from participating resources throughout the region every five minutes, enhancing both the reliability and affordability of electricity delivery from utilities to their customers
Additional details on the SPP WEIS are available here.
CAISO Western EIM
Earlier this year, CAISO signed an implementation agreement with Xcel Energy-Colorado, which paves the way for its participation in the CAISO Western EIM in 2022.
The agreement also provides for participation of three other utilities: Black Hills Energy Colorado Electric Colorado Springs Utilities, and Platte River Power Authority.
The four utilities currently share resources and balance demand for electricity during peak periods through a Joint Dispatch Agreement (JDA).
These utilities launched a study in 2019 to determine which market, the WEIS proposed by SPP or CAISO’s Western EIM, would provide greater benefits to customers.
The Colorado utilities also report that the Western EIM has lower administrative costs and is exploring adding day-ahead market services, which could help participants to make wider use of renewable energy resources.