By Hudson Sangree

One of the biggest blank spots on CAISO’s Western Energy Imbalance Market map could be partly filled if four Colorado utilities join the West’s expanding real-time trading market.

Or SPP could score a coup if those utilities opt to join its nascent Western Energy Imbalance Service market, set to launch in December 2020 to compete with CAISO’s effort. (See SPP’s Western EIS Market Poised to Challenge EIM.)

Xcel Energy, the state’s largest load-serving entity, and three partners — Black Hills Energy, Colorado Springs Utilities and Platte River Power Authority — announced Friday they were evaluating joining one of the markets with the help of a consulting firm. If that eventually happens, they’d be the first entities in Colorado to join an energy imbalance market.

“Working together, we have the potential to drive down fuel costs and provide customers with more energy from wind and solar resources,” Alice Jackson, president of Xcel Energy – Colorado, said in a news release. “We’re pleased to continue this regional collaboration and urge other power providers to consider joining us.”

The four utilities already share resources and balance peak demand through a joint agreement, but they see “value in joining a larger market to expand opportunities to exchange energy with neighboring utilities and be able to reliably integrate more clean energy into their systems,” Xcel said.

Motivating Factors

Political and financial factors likely influenced the decision.

Colorado Gov. Jared Polis signed a bill in May that reauthorized the Public Utilities Commission and implemented a host of new environmental requirements for it and utilities. SB19-236 requires utilities to submit greenhouse gas-reduction plans and instructs the PUC to investigate the potential benefits of joining a regional energy market.

“This exploration is in keeping with the passage of [the bill],” Xcel said.

A prior effort by Colorado utilities to join an RTO went south in April 2018, when Xcel upended a plan for the Mountain West Transmission Group to join SPP. Xcel, the group’s largest member, pulled out, saying it wasn’t in its best interests. (See Xcel Leaving Mountain West; SPP Integration at Risk.)

Xcel has also been engaged in a long-running turf battle with the city of Boulder over the city’s efforts to acquire the utility’s local assets and form a municipal utility intended to supply carbon-free energy by 2030. The city filed condemnation proceedings in June while simultaneously engaging in a separation proceeding with Xcel before the PUC, with both proceedings still playing out.

Boulder’s efforts were seen by some as spurring Xcel’s pledge in December to become the first major investor-owned utility to supply its customers with 100% carbon-free energy. The company said it would cut carbon emissions by 80% in 2030 and go all-green by 2050.

Polis, in his policy “roadmap” to achieving 100% renewable energy by 2040, has set similar goals for the state.

Reaction and Predictions

Xcel’s announcement was met with general praise from supporters of regional markets, including CAISO.

“The Western EIM has proven it can deliver as we enter a new era in the energy industry,” the ISO said in a statement sent to RTO Insider. “We support the efforts of these four Colorado utilities to join the Western EIM, which includes some of the largest electric utilities in the West. The current Western EIM participants have realized nearly three-quarters of a billion dollars in total benefits while reducing more than 400,000 metric tons of carbon emissions.”

CAISO’s latest figures show its continually expanding EIM saved its participants more than $736 million since it started in November 2014. Its current nine members include Arizona Public Service, PacifiCorp and NV Energy. Nine other entities scheduled to join include Arizona’s Salt River Project, in 2020, and the Los Angeles Department of Water and Power, in 2021.

The Bonneville Power Administration is well along the path to joining the EIM, filling in the second big gap in CAISO’s EIM map in the Pacific Northwest. (See Customers Probe BPA on EIM Impact.)

SPP said it, too, welcomed the interest.

“SPP has been working with several Colorado and regional utilities interested in participating in a wholesale electricity market,” a spokesman said in an email. “Having studied and observed the value of our energy imbalance and day-ahead markets over the last several years, we’re confident we can enhance the affordability and reliability of electricity in Colorado and across the west today and in the future. We stand ready to serve potential customers in the west if and when they determine the value of SPP’s services is right for them.”

Jennifer Gardner, senior attorney with Western Resource Advocates and chair of the committee that nominates leaders for the Western EIM, said Xcel and other Colorado utilities joining a regional market makes sense, especially to facilitate trade of Rocky Mountain wind energy with solar power from California and the Desert Southwest.

“We’ve seen a lot of market activity taking place in the last two to four years,” Gardner said. “These utilities realize there are more benefits to be gained with renewable energy integration … if they expand their footprint.”

Transmission connections to SPP or CAISO could be difficult with limited pathways, but a western connection may be more practical, she said.

Leaning Toward CAISO or SPP?

To perform the EIM study, Xcel and its partners selected the Brattle Group, a firm not usually associated with those intending to join that market. That led to some speculation that the Colorado utilities were leaning toward SPP.

An Xcel spokeswoman said in an email that wasn’t the case.

“At this time, we are waiting for the results of the study and are not leaning in any particular direction,” Michelle Aguayo said.

Gardner said it’s true that EIM entities have generally used another firm, E3, but she doubts the choice of Brattle signals a preference for SPP.

“The choice of who’s doing a study isn’t so important. This is just a personal preference” on the part of utilities, some of whom have used Brattle before, she said.

In energy conferences across the West in recent years, representatives of the intermountain states have expressed concern that California would dominate a regional market controlled by CAISO. They’ve been hesitant to go along with the ISO’s desire to form a Western RTO but have joined the EIM because its board is made up of members from other states and because participation is wholly voluntary.

Moreover, California’s huge population and demand for electricity is enticing.

Will financial calculations win out, or is a loathing of California and greater affinity for SPP more likely to control?

Carl Zichella, Western transmission director for the Natural Resources Defense Council and a strong supporter of regional markets, suggested that it could go either way but that CAISO might be the better choice because of its established track record and better connections.

“The power and efficiencies of wholesale energy markets are becoming increasingly clear to all load-serving entities in the West,” Zichella said in an email. “The CAISO’s Western EIM has surpassed $720 million in benefits for market participants and is continuing to grow. SPP’s Energy Imbalance Service has worked well for its members in the Eastern Interconnect.

“Colorado utilities must now decide whether their best deal is obtained by looking east — across the Eastern Interconnect’s limited DC ties — or West, toward the Western EIM.”