New findings from a much-anticipated study have “not shifted” Bonneville Power Administration staff’s recommendation that the agency choose SPP’s Markets+ over CAISO’s Extended Day-Ahead Market (EDAM), BPA said Oct. 31 — despite results showing greater financial benefits from EDAM.

“Right now, the economic analysis from production cost model studies leans toward EDAM and the additional analysis from E3 [Energy and Environmental Economics] provides more context and nuance that will be factored into our final decision,” Rachel Dibble, BPA vice president of bulk marketing, said in a press release announcing publication of the study, which is posted on the agency’s website.

Release of the E3 analysis comes three weeks after The Brattle Group published a study — not commissioned by BPA — estimating that, by 2032, the agency would earn $65 million in benefits from participating in EDAM versus an $83 million net loss in Markets+. (See Brattle Study Finds EDAM Gains, Markets+ Losses for BPA, Pacific NW.)

“We continue to believe Markets+ is a superior market design for Bonneville and our customers, which includes a truly independent governance model,” Dibble said, reemphasizing a point agency staff made in issuing its “leaning” in favor of the SPP market in April. (See BPA Staff Recommends Markets+ over EDAM.)

Dibble said BPA “understands the gravity” of its day-ahead market decision “and remains committed to an open and transparent evaluation of market options.”

BPA plans to discuss the results during its Nov. 4 day-ahead market participation workshop, the first such meeting since announcing it would delay its market decision until 2025 and since the resignation of the executive leading its day-ahead efforts, former Director of Market Initiatives Russ Mantifel. (See BPA Markets+ Support Intact Despite Exec’s Resignation, Agency Says.)

The new study consists of “supplemental production cost modeling analysis and sensitivities of cost benefit results regarding BPA’s potential participation” in either market, BPA said in its release.

The analysis builds on the 2023 Western Markets Exploratory Group (WMEG) study E3 performed for BPA last year. (See Study Shows Uneven Benefits for California, Rest of West in Single Market.)

The 2023 study offered a mixed picture, with BPA expected to incur financial losses compared with the status quo from participating in either market due to an expected sharp reduction in wheeling revenues. BPA questioned that finding, contending that most of those revenues derive from long-term contracts likely to be maintained for the foreseeable future. By restoring those wheeling revenues into the study’s modeling, BPA found it would realize gains from participating in either market and that its net benefits from EDAM would exceed those in Markets+ by nearly $106 million annually.

Supplemental Scenarios

The 2023 WMEG study for BPA examined two scenarios, including an “EDAM Bookend” case in which the entire West participates in the EDAM, and a “Main Split Footprint” scenario, which assumed EDAM membership for only PacifiCorp, Los Angeles Department of Water and Power, Balancing Authority of Northern California, Turlock Irrigation District and Imperial Irrigation District, with the rest of the West joining SPP’s Markets+. Both scenarios were measured against a “Business as Usual” (BAU) case in which CAISO’s Western Energy Imbalance Market retains its current membership and day-ahead trading in the West outside CAISO continues to occur in the bilateral market.

A presentation prepared by E3 for BPA’s Nov. 4 workshop shows the new supplemental study retains the BAU and Main Split cases, while the EDAM Bookend case is renamed “Westwide Market” and refers to a scenario in which nearly all of the Western Interconnection, excluding British Columbia and Alberta, participates in a single, unspecified market.

The supplemental also includes three other scenarios:

• “Alt Split 2NV,” in which the EDAM includes California, NV Energy, PacifiCorp and the entire Pacific Northwest, including BPA.
• “Alt Split 4A,” in which the EDAM includes California, NV Energy, PacifiCorp, Portland General Electric, Seattle City Light and Idaho Power, all of which either have committed to or are likely to join the CAISO market.
• “Non-CA Westwide M+,” in which only California entities participated in EDAM while the rest of the West joins Markets+.

The study estimates BPA’s benefits under each scenario for 2026, 2030 and 2035.

In its press release, BPA said the analysis shows “a wide range of outcomes, with results pointing to Markets+ providing lower load costs and EDAM providing greater generation revenue potential driven by higher prices.”

The agency said the results show “EDAM having greater volatility in benefits than Markets+, although most scenarios still pointed to EDAM having the greatest generation revenue potential. The results also show market benefits declining for both markets in future timeframes, with EDAM depicting a greater decline in benefits, but still maintaining more net benefits than Markets+.”

Slide 18 in the E3 presentation plots out those findings, showing that under the Westwide Market scenario, BPA would realize $251 million in net benefits in 2026, declining to $192 million in 2030 and to $147 million in 2035.

Under the Alt Split 2NV scenario, BPA would earn net benefits of $196 million in 2026, falling to $169 million in 2030, but returning to close to the 2026 level in 2035.

The Non-CA Westwide M+ scenario shows BPA realizing $207 million in benefits in 2026, $182 million in 2030 and $177 million in 2035, although that scenario is unlikely given utilities’ existing and tentative commitments to EDAM.

BPA’s worst outcomes occur in the Alt Split 4A scenario, in which it would see $30 million in benefits in 2026, but incur $23 million and $28 million in costs, respectively, by 2030 and 2035.

The study also includes sensitivity cases for each scenario in 2026 to estimate benefits under “dry hydro” and “stress load” conditions.

“Dry hydro regional conditions reduce quantity of generation that BPA has to sell but increases regional prices; BPA net costs are least sensitive to these changes in Alt 4A,” E3 notes in its presentation.

E3 said also stress load conditions are applied for only two weeks a year and have only “modest impact” for BPA’s net annual costs, although estimated prices “may not reflect full potential scarcity conditions.”

Other sensitivity cases cover improved market-to-market (M2M) coordination between EDAM and Markets+ over time and increased transmission availability between the Northwest and Southwest in the future.

“The results provide BPA with another data point in its day-ahead market decision and will be shared at a Nov. 4 workshop,” BPA said. “Other factors the agency is evaluating include governance, attribution of greenhouse gas emissions to the federal system, statutes and reliability.”

Initial Reactions

Michael Linn, director of market analytics for the Public Power Council (PPC), which has urged BPA to join Markets+, told RTO Insider that while the PPC still is reviewing results of the supplemental analysis, its “preliminary view” is that BPA’s participation in a day-ahead market will provide benefits to the agency’s customer base of publicly owned utilities.

Linn said the various scenarios show “the production cost benefits to BPA can vary wildly depending on a range of assumptions.”

“Varying market footprints and hurdle rates appear to show a two-market footprint with BPA in Markets+ can produce benefits at levels similar to BPA participating in EDAM,” he said. “These results reinforce PPC’s perspective that while production cost studies are important and show directional benefits of day-ahead market participation, when determining the best path for BPA and preference customers, it is equally important to place significant emphasis on real-world differences in market design and governance that have real impacts but may not be readily quantified or reflected in production cost studies.”

Seattle City Light (SCL), which largely has been alone amongst Northwest publicly owned utilities in urging BPA to join EDAM, had a different take.

“BPA has a fiduciary obligation to carefully weigh the variables and impacts to its customers before making any market decision,” an SCL spokesperson said in an email. “BPA’s own analysis shows that Markets+ is $221M in fewer benefits for BPA and its customers. BPA’s statement that the updated E3 results have not shifted its recommendation to join Markets+ indicates that customer benefits impacts are not an important consideration in its [day-ahead market] decision.”

The spokesperson said SCL, which operates its own balancing authority area, has yet to decide on a day-ahead market and will make a choice only after receiving its own benefits study results from The Brattle Group later this year.