Although one aim of Western day-ahead markets in the West is to fix a fragmented transmission landscape, some islanded entities will have a tough time navigating seams issues likely to arise as markets take shape, analysts at Aurora Energy Research said during a July 1 webinar. 

The webinar, titled “Western Regionalization: EDAM, Markets+ and RTO West,” covered the separate initiatives launched by SPP and CAISO to create day-ahead markets in the West.  

One of the issues discussed was the market seams likely to arise as entities enter either SPP’s Markets+ or CAISO’s Extended Day-Ahead Market (EDAM). Seams arise from the differing policies and separate dispatch between neighboring markets, resulting in additional costs for transferring energy across the boundary. 

The Western Interconnection contains 38 balancing authorities serving about 82 million customers across 14 states, Canada and Mexico. Though BAs operate under an Open Access Transmission Tariff, transferring power through the footprints in the West still can be “incredibly complex given the vast geographic spread and sheer fragmentation of this transmission landscape,” said Gaurav Sen, market lead at Aurora. 

“That legacy fragmentation is part of that impetus driving BAs toward Western regionalization,” Sen said. 

Despite those efforts, seams will remain as BAs have signed with different day-ahead markets, creating non-contiguous footprints. Seams and wheeling costs will have a particular impact on the cost of energy in the Pacific Northwest, according to Susanna Lofvander, data analyst at Aurora. 

With the Bonneville Power Administration sitting on about 22 GW of hydro resources and having the second-largest transmission mileage of any BA in the West, BPA is a crucial resource for its neighboring BAs, Lofvander noted. 

“BPA has signed an implementation agreement with Markets+, and in doing so, they have islanded a couple of their neighboring balancing authorities, which have previously committed to EDAM, namely Seattle City Light and Portland General Electric,” Lofvander said. (While Seattle City Light has expressed that it heavily favors EDAM, it has not yet formally committed to the market.)  

Seattle City Light and PGE are surrounded by territories that have committed to Markets+, and if the two utilities want to continue to import from BPA, they will have to pay seams costs or wheeling costs from EDAM territories, which will have an upward pressure on energy costs, according to Lofvander. 

“This is particularly impactful for these two regions, as they sit on two large load centers, namely Seattle and Portland, that are expected to have significant population growth and electrification that will continue to drive load,” Lofvander said. 

‘Comprehensive and Inclusive’

BPA staff has argued the agency is not solely responsible for creating seams and consistently has expressed confidence in SPP and the agency’s ability to manage energy transfers across seams based on its own history of doing so within the Northwest. This point most recently was reiterated by BPA Administrator John Hairston during a keynote at the Western Conference of Public Service Commissioners on June 2. (See Day-ahead Issues Could Take Years to Resolve, BPA Staff Says and BPA Chief to Regulators: Industry Needs ‘New Planning Paradigm’.) 

“BPA completed one of the most comprehensive and inclusive public processes in the West regarding its policy direction toward Markets+,” agency spokesperson Nick Quinata told RTO Insider in an email. “BPA stands by its analysis and does not agree with the assertion that any utility is ‘islanded’ because of BPA’s policy direction. BPA will work collaboratively with all neighboring utilities to proactively address and manage any seams.” 

However, the Pacific Northwest is not the only region where potential seams could cause headaches. A similar situation is expected in the Desert Southwest, specifically in Arizona and New Mexico, “where some of these territories are surrounded by other balancing authorities that are committed to the opposing day-ahead market and therefore are exposing themselves to those wheeling costs and seams costs,” Lofvander said. 

Proponents of both Markets+ and EDAM each have argued that their respective preferred market choice provides a better solution for resolving seams. (See Seams Concerns Won’t Drive Day-ahead Market Decision, BPA Says.) 

City Light asked for more details about the webinar before responding to a request for comment. PGE did not respond in time for publication of this article.