The Bonneville Power Administration on May 9 issued its long-awaited decision on joining a day-ahead market, confirming its choice of SPP’s Markets+ over CAISO’s Extended Day-Ahead Market, marking a major milestone for Little Rock, Ark.-based SPP’s push to expand into the Western Interconnection.  

BPA’s final record of decision (ROD) will come as little surprise to those who’ve been following market developments in the West. In March, the agency released a draft “policy direction” stating that the SPP market “is the best long-term strategic direction for Bonneville, its customers and the Northwest,” which followed by a year a staff “leaning” expressing similar determination. (See BPA Selects SPP Markets+ in Draft Policy.) 

“Day-ahead market participation, specifically in Markets+, is in the best interest of our customers and the region, as it offers the opportunity to ensure a reliable, abundant and affordable energy supply for consumers in the Northwest,” BPA Administrator John Hairston wrote in a letter announcing release of the decision. 

“BPA’s final policy direction toward participation in Markets+ represents significant effort by BPA staff and stakeholders to evaluate market options that support the region’s ability to share affordable and reliable energy,” said Carrie Simpson, SPP vice president of markets. “SPP thanks BPA for their engagement during Phase 1 of Markets+ development, and we look forward to their continued collaboration as we work together to implement a Western market that improves grid efficiency and values the needs of all participants.” 

The ROD represents a big win for SPP and is likely a key to the viability of Markets+, given that BPA manages the output from 31 hydroelectric dams in the Federal Columbia River Power System with a combined capacity of about 22,440 MW, while also operating more than 15,000 miles of transmission lines — about 75% of the Northwest grid.  

The decision also is likely to influence the decisions of other entities in the region. 

“Puget Sound Energy appreciates BPA making the choice to participate in the Southwest Power Pool’s Markets+ program,” Phil Haines, the utility’s director of energy supply and trading, told RTO Insider. “As BPA’s largest transmission customer, it’s important to us to have a clear view. We expect to make a decision of our own very shortly.” 

The ROD was the culmination of a two-year stakeholder process conducted by BPA, an effort often marked by tensions between supporters of each day-ahead market, with some EDAM backers contending the process appeared to be working to a foregone conclusion. (See Rising Tensions Evident at BPA Day-ahead Markets Workshop.) 

The process even drew the attention of key Northwest political figures, including members of the Pacific Northwest’s U.S. Senate delegation, who largely were critical of the agency’s leaning in favor of the SPP market. (See In Letter to Senators, BPA Tempers Markets+ Leaning.) 

In his letter, Hairston said the federal power agency reached its decision “through thorough policy analysis, extensive input from customers and stakeholders, careful consideration of current market dynamics, and thoughtful attention to the principles that guided our assessment.” 

The ROD seems to anticipate potential complaints about how BPA conducted its day-ahead markets process, saying the agency “has held one of the most open and transparent public processes to evaluate day-ahead market participation.” 

“In comparison, electric utilities that have indicated they will or have taken steps to join EDAM did so largely without public process or transparency. They are now rapidly implementing EDAM despite serious concerns about potential unjust and unreasonable transmission OATT terms and conditions in their BAAs,” BPA wrote. 

As in the “policy direction” issued in March and staff leaning published last year, BPA’s ROD emphasized the importance of Markets+’s independent governance framework. While recognizing the “qualitative” nature of the issue, BPA reiterated its oft-stated opinion that the SPP market’s governance structure is “superior” to that of EDAM, despite ongoing efforts by the West-Wide Governance Pathways Initiative to relax the state of California’s oversight for CAISO’s EDAM and Western Energy Imbalance Market (WEIM). 

“Independent governance does not factor into a strict formula where the risk of negative governance-related outcomes is quantified or weighted against other criteria,” BPA wrote in the ROD. “There is unmeasurable uncertainty regarding what issues will confront day-ahead markets in the future. In addition to past disputes and known current challenges, there will surely be issues that arise that no one has yet fully contemplated, and governance will surely impact market decisions that impact financial outcomes. … Bonneville would be accepting great risk if the process is biased toward certain entities, does not allow issues of concern to be prioritized or is not durable enough to provide fair representation in crisis situations.” 

The ROD also rebuffed requests by EDAM supporters that BPA at least delay its decision until developments play out this year related to California legislative bill that would implement the recommendations by the Pathways Initiative to bring greater independence to the EDAM and WEIM. 

“Bonneville does not find merit in waiting for EDAM to incrementally improve its governance,” BPA wrote. “First, Bonneville has determined that the existing Markets+ governance is superior even to the Pathways Step 2 governance revisions currently proposed for EDAM, which still require legislative approval. Second, the Pathways Step 2 governance does not sufficiently address Bonneville’s concerns regarding independence and EDAM governance independence would continue to be insufficient, even under Pathways Step 2.” 

BPA also pointed to the “strategic benefit” of deciding on a market now, including “better coordination” with other agencies and establishing an “early seat at the table” for participating in Markets+.   

‘Special Problems’

In his letter, Hairston acknowledged the work that remains before BPA can begin participating in Markets+, including the agency’s own “tariff and rate proceedings to determine cost allocations and the terms and conditions for transmission service.” 

BPA — and other Markets+ participants — also can move on to deal with the market’s Phase 2 implementation stage, which begins this summer.  

Participants presumably will need to begin addressing challenges stemming from the non-contiguous nature of the Markets+ footprint, which likely will consist of three isolated pockets concentrated in the Pacific Northwest, Arizona and Colorado, as well as a smaller segment in El Paso Electric’s New Mexico service territory. Chief among those challenges will be the lack of transmission capacity connecting the market’s zones, which will require making energy transfers through the larger EDAM, where possible. 

During an April 9 meeting of CAISO’s Western Energy Markets Regional Issues Forum (RIF) in Portland, Ore., Grid Strategies’ Richard Doying, one of the architects of MISO’s market, said the situation in the West will be unique in that the Eastern Interconnection does not contain any markets where market zones are “in their own isolated zones without physical transmission connected.”  

“And that is, in fact, the case for what we have right now in the Markets+ region. It’s not clear, based on all of the announcements, whether EDAM will be contiguous. We have to see where everyone goes at the end of the day. … But it does introduce special problems,” Doying said. 

The creation of separate day-ahead markets in the West will result in more issues at the seams of the two markets, although BPA and other Markets+ participants have played down the importance of seams in their market decisions.  

During the April 9 RIF meeting, Todd Kochheiser, senior electrical engineer at BPA, noted the agency already manages a non-contiguous balancing authority area that spans six states and is adjacent to 18 other BAAs. He said BPA has more than 75 years of experience managing operations across seams, although he acknowledged day-ahead markets would add a new layer of complexity. 

“While seams present complexities, Bonneville and other utilities have successfully managed seams in the Western Interconnection for decades,” Hairston wrote. “Based on this experience, and as part of our day-ahead market implementation plan, Bonneville will reach out and collaborate with entities to mitigate seams.” 

Reactions

Reactions from across the region were mixed. 

“We respect BPA’s decision to join Markets+ and recognize the valuable contributions from diverse stakeholders across the Pacific Northwest during this evaluation process,” CAISO CEO Elliot Mainzer — BPA’s previous administrator — said in an email. “CAISO continues to focus on the success of the Western Energy Imbalance Market (WEIM) and the Extended Day-Ahead Market (EDAM) to ensure inclusive and efficient energy market solutions. Our commitment to maintaining reliability and delivering economic value to our customers in the West remains unwavering, and we look forward to continued collaboration with all parties involved.”  

“I have repeatedly stressed that BPA should take its time to get this decision right, which will impact Oregonians for decades,” Sen. Jeff Merkley (D-Ore.) said in an email. “Despite concerns from my fellow senators and the governors of Oregon and Washington, BPA has made a rushed decision. BPA still needs to go through a ratemaking process, and I remain laser-focused on prioritizing the needs of Oregon families to have affordable and reliable energy.” 

“It’s disappointing BPA has chosen this route now, when evidence suggests waiting for both day-ahead market options to mature could provide the most benefits to ratepayers,” Sen. Ron Wyden (D-Ore.) said. “I’ll keep pressing BPA to make decisions that prioritize affordable, reliable and clean electricity in the Northwest.”

Leah Rubin Shen, managing director at Advanced Energy United, called BPA’s decision “premature,” contending it could “entrench costly market seams and inefficiencies.” Rubin Shen pointed to the production cost study commissioned by BPA in 2024 that showed Markets+ would deliver the agency fewer economic benefits than EDAM. (See BPA Sticks to Markets+ Leaning Despite Study Showing EDAM Benefits.) 

“The West has the potential to come together and build a broad, unified market for the whole region,” she said. “Unfortunately, this decision takes us away from that vision, cementing a narrower path that could lock us into a fragmented market structure and undermine the immense reliability and cost-savings benefits of sharing resources across the region.”

“BPA’s participation in Markets+ is a win for the Northwest,” said Scott Simms, executive director of the Public Power Council. “This market was designed with BPA’s unique role in mind, and the result reflects a strong, collaborative effort among public power, SPP and other Western entities. We support BPA’s timely decision which comes at the end of a rigorous public process. Making this decision now will allow the agency to pursue participation in a day ahead market that has the confidence of its customers.” 

The Northwest Energy Coalition (NWEC), a strong EDAM supporter in the region, expressed disappointment over BPA’s decision and also pointed to the BPA analysis showing the greater financial benefits stemming from the larger footprint of the CAISO market.  

“Yet BPA has chosen Markets+, a smaller market footprint. When BPA joins Markets+, it will decrease net benefits to customers by $108 million each year. If BPA joins EDAM, it will increase net benefits to customers by $57 million each year,” NWEC wrote. “BPA’s decision to pursue a market with less economic benefits for customers and less direct interconnection with other utilities across the West will reduce the potential for all electricity users in the region to benefit from a unified day-ahead market. This decision is not in the best interest of the region.” 

“We greatly appreciate Bonneville’s continued leadership during this pivotal moment in the evolution of western energy markets,” said Jeff Spires, managing director of power at Powerex. “Bonneville’s choice to participate in Markets+ is the result of an extensive and comprehensive evaluation process in which Bonneville prioritized the foundational governance and market design elements that will provide benefits for Bonneville, its customers, and the broader Northwest region for years to come.” 

“BPA’s decision to join Markets + is a significant milestone in providing confidence for other Northwest utilities to join,” said Laura Trolese of The Energy Authority, chair of the Markets+ Participants Executive Committee. “I expect other announcements to follow.”  

Seattle City Light said it is “deeply disappointed” in the decision. “BPA’s decision to join Markets+ is inconsistent with its responsibility to maximize customer benefits in accordance with sound business principles. BPA’s own record and analysis shows that Markets+ will increase costs for BPA and its customers.” The decision “will negatively impact the utility in two significant ways — as a market participant and as one of BPA’s largest customers. Our ratepayers will bear the burden of this decision as we spend $20 [million to] $40 million more every year on energy. This is especially burdensome with the rising costs to meet growing energy needs.”

“As BPA’s largest individual customer, Snohomish PUD appreciates the administration’s thorough and transparent evaluation of a complex decision with significant regional impact,” said Adam Cornelius, power analyst at the PUD. “We expect that BPA’s participation in a day-ahead market to result in more efficient usage of the Northwest’s hydropower resources and transmission system, driving improved reliability and cost savings. Snohomish values the independent governance and market design of Markets+ and believes it strikes the right balance for our customers and the region.”

“We continue to work collaboratively with other Markets+ members and look forward to providing APS customers more savings opportunities and continued reliable service through a larger market footprint,” said Kent Walter, Arizona Public Service, director of Western market affairs. “Bonneville Power Administration joins a group of diverse utilities and generation providers who benefit from the regional diversity of the northwest and southwest participants. Together, we are developing a market structure that enables market choice for future participants.”

Tom Kleckner contributed to this article.