SPP attempted to allay concerns about its ability to dispatch power among various Western regions during a July 11 webinar intended to illustrate its experience with seams management. 

RTO staff discussed how they address seams issues in the Eastern Interconnection and how power is transacted and delivered between neighboring entities. It’s part of SPP’s effort to differentiate its Markets+ services offering from CAISO’s Extended Day-Ahead Market (EDAM) as both organizations seek to sign up participants for their markets. 

As Western Freedom Executive Director Kathleen Staks said last month during an Infocast conference in Arlington, Va., “We do not have an organized market … we kind of have a mud-wrestling match going on right now.” 

SPP’s outreach was a result of NV Energy’s recent decision to join EDAM, despite the utility’s participation in SPP’s stakeholder-driven effort to set market rules and governance structures. The Nevada utility said EDAM’s expected lineup “provides a significant degree of interconnectivity and supports a diversity of resources.” (See NV Energy Confirms Intent to Join CAISO’s EDAM.) 

Antoine Lucas, SPP’s vice president of markets, told RTO Insider that recent news articles and conversations about connectivity between Western markets following NV Energy’s announcement pushed the grid operator to offer its perspective on seams issues and how Markets+ will dispatch service between the Pacific Northwest and Desert Southwest.

“We wanted to be able to provide a little bit of clarity around what we see and why we feel like the connectivity within the market pretty much remains unchanged,” Lucas said. “I think intuitively, when people look at a map and just focus on geography, the state of Nevada is between the Pacific Northwest and Arizona and the rest of the Desert Southwest. But what really creates that ability to transfer in the market is the availability of firm point-to-point transmission rights that Markets+ participants actually have the right to.” 

He said staff’s initial analysis indicates that the right to transfer between the West’s subregions will not be “materially affected” by NV Energy’s decision to commit to EDAM. 

“What we found is that [transmission rights] remain relatively unchanged without NV Energy’s participation in the market,” Lucas said.  

He told stakeholders during the webinar that establishing effective seams policies will take many parties working together but that SPP is willing to take a leadership role. 

“We just believe it’s in the best interest of Western consumers,” he said. “So, although we don’t know where our market seams will be, nor do we know what the specific seams hurdles that we will need to scale, our priority is to entities formally making their choices on which markets they decide to join.” 

‘One Way or Another’

SPP defines seams as neighbors performing the same function, such as acting as balancing authority, transmission service provider (TSP), reliability coordinator, market operator or, particularly in the West, greenhouse gas area.  

Carrie Simpson, SPP’s senior director of seams and Western services, said during the webinar that after questions arose over the different seams that exist today in the West, “we found that people were using the words interchangeably.” 

With 33 TSPs and BAs in the West, seams will be an issue. Simpson said the current proposal is to retain CAISO’s BA and place EDAM over it, which in turn means the interconnection’s longest seam is retained.  

“We’re going to have seams in the West, one way or the other,” she said. 

“We have a massive geographic footprint [in the West] and the resources are really far away from where the population centers are, so transmission and the coordination between states is imperative,” Staks said at Infocast. 

SPP has largely ported its Markets+ proposed design from its RTO design in the Eastern Interconnection. It includes an independent governance structure and a decision-making process that relies on stakeholder consensus. 

“We largely took the Eastern marketplace rules … and modified them to accommodate the differences and the fact that there are BAs and there are TSPs and there are just unique Western differences,” Simpson said. “Our approach is to optimize the dispatch of these markets, the SPP market, across all those BAs and TSPs using their full capability. 

“This is an important context for how the markets are developing because we’re putting markets on top of the seams, instead of getting rid of the seams first and adding markets,” she added. “I say that not because it needs to happen that way but more because it’s part of the evolution and what’s different about the West and the East.” 

Seams are reduced when BAs or TSPs consolidate their facilities into joint tariffs, such as joining an RTO. Agreements between neighbors coordinating on certain processes can also eliminate seams. 

“We’re trying, as a market operator, to optimize the seams that do exist in such a way that really minimizes them,” Simpson said, noting it will manage the system like an RTO or single BA area. Imports and exports to the market are priced based on footprint needs as a whole and not individual BA areas.  

She warned that without optimized seams, Western markets could see revenue and cost allocation equity undermined by internal seams. Equity is a big deal when you are settling $30 billion in market transactions, as SPP did last year. 

The seams require intentional policies between BAs and TSPs and market design decisions to reduce the effect of internal seams on market dispatch, Simpson said. She said SPP’s marketplace rules have evolved over the last 10 years to “refine equity in cost-allocation principles,” and it will continue to do so in the Markets+ design. 

JOAs

Joint operating agreements (JOAs) are one option for reducing friction on the seams. SPP has such agreements with MISO, ERCOT and Canadian utility SaskPower. During last January’s winter storm, the grid operator was able to rely on JOAs to import about 7 GW of generation to meet unexpected demand. 

Lucas said SPP’s position remains that Markets+ participants will be incented to strike JOAs that will facilitate trade “above and beyond” 1,000 MW of point-to-point rights that will support the market. 

“It can be Markets+ and neighboring markets that really take advantage of the reliability, sustainability and economic benefits that are associated with trade between regions,” Lucas said. “We are always focused on taking steps to add value for our participants and their customers and we think that seams and joint operating agreements are a great way to create efficiencies. We believe that anyone who’s operating the market will see value in joint operating agreements that allow participants in respective markets to be able to trade effectively, to capture those reliability, economic and sustainability benefits.” 

As Western markets and their footprints continue to evolve, Simpson said all staff and potential market participants can do is identify “friction points” that may reduce market optimization or make it difficult to move power from one point to another, a market footprint.  

“By identifying those things, at least we have a path and a framework for how we can reduce that friction,” she said. “The reality is we can start with what we know now. But once we get a better idea of the footprints, that’s really when we can engage. We’ll know who our neighbors are and how to manage that.”