An SPP executive closely involved with developing Markets+ said recent Brattle Group studies on Western day-ahead markets appear to be aimed more at swaying utilities in favor of CAISO’s Extended Day-Ahead Market than providing an unbiased assessment of the two offerings.
“We’ve observed a lot of statements and assertions — and even studies — that really seem more like attempts to pressure Western entities into a market selection rather than work directly with those Western entities to truly understand what their issues and concerns are, and also work to try and accommodate them and address those issues so they want to choose to be within that market,” SPP Vice President of Markets Antoine Lucas said during an interview.
Brattle’s John Tsoukalis, the lead author on the studies, objected to that depiction of his group’s work, saying the company’s clients “are looking for solid analytical support for their decision making, not a biased analysis or advocacy.”
RTO Insider spoke with Lucas and SPP Senior Director of Seams and Western Services Carrie Simpson on Oct. 16 to discuss Brattle’s Oct. 1 comparative white paper on Markets+ and EDAM, which Lucas said “misrepresented” aspects of SPP’s day-ahead platform. (See Brattle Study Likely to Fuel Debate over EDAM, Markets+.)
That study, which compared seven key features of the two markets — such as transmission optimization, fast-start pricing and seams management — offered a more favorable assessment of the CAISO market but stopped short of endorsing it.
Vancouver, British Columbia-based Powerex, the first entity to tentatively commit to Markets+ two years ago, quickly published a rebuttal to the study, with SPP following up with its own set of “corrections” shortly after. (See Powerex Contests Brattle’s EDAM/Markets+ Comparative Study.)
Lucas said SPP has tried to stay outside the fray of Western market debates but felt compelled to respond directly to the comparative study because “there were certain things or statements” made about Markets+ “where we felt it necessary and appropriate to address and try to clarify with facts. And then there were other areas where we just felt like there was either a lack of information or characterization of certain things that misrepresented the product.”
The SPP response criticizes the Brattle study in four areas, including its conclusions around “look ahead” unit commitment design, fast-start pricing, greenhouse gas accounting design and congestion rent allocation.
Regarding the first subject, SPP faults the study for conflating the real-time unit commitment design used in RTO’s Western Energy Imbalance Service with the different one to be implemented in Markets+. On the GHG issue, SPP contends the study overlooks the full set of methods Markets+ uses to reduce “leakage” when accounting for emissions from generating resources.
On the last subject, SPP contends Brattle “grossly oversimplifies the complex policy considerations behind fair congestion revenue allocation” by concluding the two markets’ differing models will yield similar results.
Lucas said SPP finds Brattle’s conclusions “concerning” because third-party studies are “typically intended to bring trust to the process.”
“We wanted to make sure that people were aware of the mischaracterizations of Markets+ and also recognize that in every one of those cases, those errors and mischaracterizations tended to depress the anticipated value proposition for Markets+,” he said. “We know that a lot of people are looking at these studies and then using them in different ways to inform themselves around either decisions that they’re going to make or positions that they’re going to take on the markets.”
‘Equitable Distribution’
Lucas said SPP was not yet prepared to comment on a more recent Brattle study zeroing in on benefits for the Bonneville Power Administration (another Markets+ supporter) and the Pacific Northwest at large.
That study, which focused on adjusted production costs (APC), found BPA could earn an estimated $65 million in annual benefits from joining EDAM while facing increased yearly costs of $83 million in Markets+. Similarly, the Northwest could reap $430 million from widespread participation in EDAM but might see net revenues decline by $18 million in Markets+, according to the study. (See Brattle Study Finds EDAM Gains, Markets+ Losses for BPA, Pacific NW.)
Lucas questioned why Brattle produced a study trying to estimate BPA’s benefits “rather than BPA themselves being able to conduct those assessments and if those [benefits] provide what they see as value to them and their customers.”
Asked whether Western utilities’ day-ahead market decisions should come down to estimates of economic benefits based on APC or other factors, Lucas said the discussion should extend beyond the notion of calculating “regional benefits” to considering how those benefits are distributed.
“What we constantly wrestle with in policy development is we’re finding policies that benefit the overall region, but also do it in a manner where there is equitable distribution of value among the participants who are bringing the assets into that market,” he said, adding that APC estimates, while important, are just one component of overall market benefits.
Lucas responded with good humor to a hypothetical question about whether Markets+ could ensure an equitable distribution of benefits in a footprint that included California and the CAISO area or if, as some Markets+ supporters believe, participants would do better to negotiate with the larger entity from behind a market seam.
“Under a scenario where California was part of Markets+, they would be another [balancing authority], just like the other BAs. They would be a very large BA, and from our standpoint as SPP, our approach to facilitation doesn’t change. You just have another BA who’s participating in that stakeholder process that’s advocating for the things that they believe are best for them and their consumers,” he said.
Simpson said the “independent, inclusive” Markets+ governance framework is designed to accommodate a BA the size of CAISO.
“I think the design, the actual market design, in addition to the governance, would support that equity that we’re talking about. So that hypothetical, I think, would work,” Simpson said.
“And in the alternative, then you have market operators representing their respective customers’ interests at the seam on a peer-to-peer basis, and so that is also really helpful, too, if you’re an entity in Markets+, in having that representation by your market operator to look out for the interests of that market,” she said.
No ‘Preconceived Notions’
Reached for comment, Tsoukalis said Brattle “appreciates all responses” to its Western markets work and is “always open to input on our analyses, assumptions, and our understanding of the market options.”
“We do not engage in advocacy work and do not take on work on preconceived notions of what our results will look like. Rather, we strive to do unbiased, high-quality work to support well-informed decision making by our clients, who in this case are Western utilities, cooperatives and public power entities,” Tsoukalis said in an email.
Tsoukalis said he wanted to ensure other “key points” aren’t lost in the Western debate, including the fact that both Markets+ and EDAM represent an improvement over the status quo; that most “market-related benefits to specific entities will be driven by the transmission capabilities, and diversity of loads and generation resources of market participants;” and that Brattle recognizes that estimated cost savings in either market are not the only — or even most important — factor affecting market participation decisions.
He noted that Brattle has found that each market includes design elements that are “more attractive” than the other market.
“The availability of (and competition between) two market options has benefited the development of both EDAM and Markets+ as both markets have worked harder to offer an attractive and efficient market design. The benefit of this competition is expected to continue as both markets evolve over time,” Tsoukalis said.