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FERC rejects SPP’s proposed energy imbalance service market [free access]

August 5, 2020

The Southwest Power Pool (SPP) will have to revise elements of its plan for launching a new Western Energy Imbalance Service (WEIS) next year, as the Federal Energy Regulatory Commission (FERC) rejected the grid operator’s proposal for implementing the WEIS, slated to serve entities in the Western Interconnection (one of the two major power grids in US, the second being Eastern Interconnection).


SPP operates as a regional transmission organisation in the Eastern interconnection, where it administered a separate energy imbalance service market (buying and selling of electricity in real-time market and sub-hourly dispatch of participating resources, to balance supply and demand) before launching its integrated marketplace for that region in 2014. It is currently negotiating with the California Independent System Operator (CAISO) to offer energy imbalance services across Western US.


The existing Western Energy Imbalance Market (WEIM) started in 2014 by CAISO and PacifiCorp, has since added nine participants and plans to add ten more by 2022. SPP's WEIS would be an alternative to the WEIM, and has commitments from seven entities, including Tri-State Generation and Transmission Association Inc. It is scheduled to start up February 1, 2021; conditional to SPP securing timely necessary approvals from FERC.


While the Commission recognised the potential benefits the WEIS market could bring to utilities and customers, it reflected that deficiencies in SPP's proposal for administering the market, such as SPP's proposed use of transmission capacity and the role that the reliability coordinators would have to play in the WEIS market, could not be overlooked.


FERC also provided guidance on supply adequacy, marginal losses, and market power issues that SPP would need to address in a new filing, should it choose to submit another proposal. The Commission also highlighted that SPP would need to revamp the way transmission capacity from non-participants is used, if it still plans on introducing the WEIS.


As currently proposed, SPP intends to facilitate energy transfers within the WEIS market by using transmission that is reserved and contributed by participating entities. However, SPP's proposal also asked FERC to allow unused transmission capability within balancing authority areas, whether reserved or otherwise unused, on an intra-hour (as-available) basis, to be made available to the WEIS market's least-cost dispatch. This proposal was rejected by FERC, stating that intentionally using the transmission capacity of non-participating entities that have not elected to provide joint dispatch transmission service in the WEIS market, would be inconsistent with the requirements of the Orders 890 and 890-A, which mandate that transmission service be reserved and paid for.


FERC recommended that the future proposal (if any) should include the mechanisms or agreements that will ensure that the SPP WEIS market respects the transmission capacity of non-participating entities, with appropriate constraints in its market model when defining its market solution.