By Tom Kleckner

DENVER — Out in the wild, wild West, four different entities are offering reliability coordination (RC) or market services, Mountain West Transmission Group members are pursuing RTO membership with SPP, and CAISO is pressing the California legislature to allow it to become an RTO.

That was the backdrop of another Colorado Public Utilities Commission public information session last week, its fifth, on the potential marriage between SPP and Mountain West.

“We here are in control of the dowry. We have to be persuaded before this can go any way you want it,” Commissioner Frances Koncilja said, reminding her audience that the PUC has jurisdiction over Mountain West members Black Hills Energy and Public Service Company of Colorado (PSCo).

The March 20 session, “What is Going on with Reliability and Market Services in the West?”, brought together SPP, Mountain West, CAISO, PJM and Peak Reliability, all of which are considering offering RC services or setting up markets in the West.

SPP and Mountain West have been working on their combination since January 2017. Mountain West members in January 2018 signed a nonbinding letter of intent to explore getting RC service from SPP by Sept. 1, 2019. In February, they sent revocable notices of withdrawal to Peak, effective that same date.

Just after New Year’s Day, CAISO gave Peak, the Western Electric Coordinating Council’s (WECC) RC, 20 months’ notice that it is leaving Peak to offer its own reliability services for half the price. Peak, meanwhile, is continuing with its plans to offer market services in the Western Interconnection through a joint effort with PJM called PJM Connext. (See Peak, PJM Detail Western Market Proposal.)

“Clearly, we’re interested in how this region is shaking out,” said PUC Chair Jeffrey Ackermann. “People are keeping their feet in different prospects. Where are the points of no return from the Mountain West perspective, in terms of SPP? Are we having basically sidebar conversations, or are we still in a state of flux?”

Peak CEO Marie Jordan’s comments seemed to imply that SPP’s integration of Mountain West is a done deal. She referred to sharing data with SPP, which she called a “good operator,” and working to ensure that Peak smoothly coordinates the transition of its RC responsibilities to SPP and CAISO.

Peak and SPP already have a seams agreement in place that Jordan said has “worked great” over the years. The entities share four DC ties, over which they are capable of exchanging 720 MW of energy.

“It’s going to be important [that SPP] gets to the data, so they can start building their model,” Jordan said. “They need to be able to interface with our model to have a really good strong handoff for reliability coordination. There will be a tremendous amount of interaction between us.

“The horse is out of the barn,” she said. “CAISO set this in motion when they issued the notice to leave Peak. Our intention is to ensure [that] as we make this transition, we do this well for the reliability of the Western Interconnection.”

Between CAISO and the Mountain West members, Peak stands to lose almost 40% of its $45 million annual operating budget. Jordan said Peak’s core RC costs are estimated at 5.5 cents/MWh, or about 60 cents/MWh per customer annually. To protect its investment in RC support tools, she said Peak must separate those costs from its RC-only costs to take on its new competition.

“As it relates to the overall reliability of the West, I’m a little bit concerned that it’s a race to the bottom with a focus on costs,” she said. “But if we’re going to compete, that’s an important step.”

Enter, then, PJM, and its collaboration with Peak.

“We are proposing an alternative that provides an opportunity for entities in the West to participate in a market that is for the West and by the West,” said PJM’s Stu Bresler, who also serves as board chair for PJM Connext. “They can determine what they want on their own, including a potential pathway or roadmap to an RTO, if that’s what they want.”

Bresler and Jordan proclaimed PJM Connext to be a perfect fit. Bresler pointed to Peak’s expertise in the West and its existing infrastructure as presenting the “fundamental foundation” in establishing a market, while Jordan noted PJM’s market has a 20-year history and low costs.

“They’re the largest market in world, but also the lowest cost,” Jordan said.

“We think leveraging the expertise of Peak with PJM’s expertise in markets represents a true value proposition,” Bresler said. “We believe we can deliver a market the stakeholders in the West want. We’re not plopping down PJM’s market design in the West. The idea is that the stakeholders will determine the market that is implemented, as opposed to joining one that already exists.”

Peak and PJM hope to complete a business case for PJM Connext by March 30 that “sets expectations for Day 1” and projects the cost of standing up the market and ongoing operations.

CAISO is taking a similar approach, saying it will work with Western companies to determine what level of market or RTO services to offer. The ISO has begun a rate design project with its stakeholders as it works at getting WECC RC certification by August 2019. It also is continuing development of its Energy Imbalance Market (EIM).

“Out of the gate, we think there is value in leveraging the EIM market,” said Stacey Crowley, CAISO’s vice president of regional and federal affairs. “Is there potential to expand that authority into certain day-ahead rules? We want to find out if that’s enough, or if that’s the right way to go.”

Koncilja asked what she called the “ultimate question” — “Why do you think your proposed services are the best option for Colorado utilities and their ratepayers?”

Mark Rothleder, CAISO’s vice president of market quality and renewable integration, responded that his organization is offering an incremental way of developing a market.

“From that perspective, we can structure our proposal so maybe you start with an energy imbalance market, then move to a day-ahead market,” he said. “Then, we’ll see if there’s a need, a value, to full RTO participation.”

Koncilja then asked SPP COO Carl Monroe what Colorado would lose out on “if we say we want to ease into this?”

Monroe said that question was better suited for the Mountain West entities, who first began looking at RTO membership in 2013 to collapse their multiple rates into one system tariff. They also will realize additional benefits through the efficient exchange of energy over the DC ties, regional transmission planning and SPP’s other RTO services, he said.

“You would give up the benefits that you could get by going the full length with a RTO,” Monroe said. “The EIM is just part of the CAISO proposal. They haven’t solved all the issues. You still see them trying to plan that. In some regards, you’re leaving money on the table.”

Koncilja has emerged as the PUC’s most vocal skeptic of Mountain West’s move into SPP. She opened the meeting by questioning the integration’s value to her state.

“Is this the best fit for Colorado? Is now the best time to do it, and what will it cost?” she said. “There are allegedly millions of dollars in savings, but I haven’t seen a cost-benefit study since Brattle, which is almost a year old.”

She was referring to a 2016 Brattle Group study, which indicated that Mountain West participants would see an $88 million annual reduction in production costs by moving to a regional market without must-run generation.

Mountain West and SPP also commissioned The Glarus Group to conduct a second study on the economic benefits from scheduling power over the four DC ties. Glarus said Mountain West and SPP could expect to see net production cost savings ranging from $11.7 million to $28.8 million yearly.

“That’s not a big number, in light of what we’re talking about,” Koncilja said of the Glarus study. She said she would like to see the studies supplemented, “because they don’t give me the information I want.”

“You’re talking about two studies that I think have holes in them,” Koncilja said.

Monroe said the Glarus study doesn’t consider the benefits that members get from participating in the market and its diverse resources. Glarus said its results did not reflect real-time market optimization, ancillary services or regional through-and-out transmission revenues that may be available because of better use of the ties.

“Our transmission planning reduces the cost of transmission, because we can do it more effectively regionally, and find projects that reduce the cost of energy to our customers,” Monroe said.

SPP has conducted its own 10-year cost-benefit analysis of the integration, which indicates its existing members could see benefits as high as $548 million in net present value from 2020 through 2029. Members will see a phased-in, reduced administrative fee that drops from 48 cents/MWh to 43 cents for 2020.

FERC Filings to Begin in August-September

Monroe said Friday that SPP intends to bring a “whole package” of proposed Tariff changes to the RTO’s July leadership meetings, with FERC filings beginning as soon as August or September. He said the changes will be batched together as appropriate.

“It will rely on us keeping FERC involved throughout this process,” Monroe said. “We will spend more time with FERC than we would normally do at this point in the process.”

Monroe said FERC is revising its filing processes following the D.C. Circuit Court of Appeals’ ruling last year that the commission had overstepped its authority in undoing a PJM compromise on its minimum offer price rule. (See On Remand, FERC Rejects PJM MOPR Compromise.)

“We anticipate multiple filings, but we want them treated together,” Monroe said.

His comments came during a webinar reviewing the recently approved 18 policy statements that will guide Mountain West’s pending membership into SPP. The RTO’s Board of Directors approved the statements during a March 13 executive session, and directed staff and stakeholders to begin revising SPP’s Tariff, bylaws, membership agreement and other governing documents. (See SPP Begins Work of Integrating Mountain West.)

The first Tariff changes related to Mountain West’s integration have already begun bubbling up through the stakeholder process, with a revision request updating day-ahead make-whole payment charge types going out for comment.

Stakeholders were a little taken aback by an offhand comment during a discussion about the possibility of a Mountain West member pulling out of the integration.

“We’ve talked about how intertwined [Mountain West’s members] are. That’s why they are working together on this. If one wanted to [withdraw], and it was a small enough entity, and it didn’t affect the others,” it might not hurt the effort, Monroe said. “But we won’t know until we get to that point.”

“That would affect the entire analysis we have been working on,” Oklahoma Gas & Electric’s Greg McAuley said.