By Tom Kleckner

Xcel Energy, the Mountain West Transmission Group’s largest member, said late Friday that it is withdrawing from the Rocky Mountain group and its efforts to join SPP — potentially dooming the planned integration.

Executive Vice President David Eves, group president for Xcel’s utilities, said in a press release that the company recently completed a review of the Mountain West’s proposal to join SPP and determined that “continued engagement in Mountain West is not in the best of interests of our customers or the company.”

Xcel said “limited benefits” for the company’s Colorado customers, a lack of “market expansion opportunities” for the Mountain West and increasing “uncertainty over the costs of the RTO” led to its decision.

The Mountain West entities sit in the Western Interconnection, which has seen several market-related developments in recent months. CAISO is pressing the California State Legislature to allow it to become an RTO and is planning to add a day-ahead market to its Energy Imbalance Market. In addition, Peak Reliability and PJM are offering market services through a joint effort called PJM Connext. (See Multiple Entities, Markets Now Beckon in West.)

Friday’s announcement caught SPP and Mountain West off guard. Xcel spent much of Friday alerting Mountain West members, state and federal regulators and other interested parties before issuing the release.

In an emailed statement, SPP CEO Nick Brown said the RTO was “surprised and disappointed.”

“SPP has spent significant time and effort attempting to bring organized wholesale markets and their many benefits to the West,” Brown said. “We’re hopeful there will still be opportunities to do so.”

Brown addressed the issue at the Regional State Committee meeting in Kansas City on Monday. “Obviously, we were shocked Friday by the announcement of [Xcel] pulling out of the Mountain West initiative,” he said. “In my initial discussions with other participants of Mountain West, they’re meeting to determine what their next steps are, and we will certainly do the same.”

Members of the RSC, which comprises regulators from most of the 14 states in SPP’s footprint, have also expressed reservations about the integration’s cost allocations. (See Mountain West, Cost Allocation Top SPP RSC Concerns.)

The decision left several of Mountain West’s entities pondering their next steps. With 1.4 million customers, Xcel’s Public Service Company of Colorado subsidiary represents about 40% of Mountain West’s base.

Lee Boughey, senior manager of communications and public affairs for Tri-State Generation and Transmission Association, said the cooperative would “take time to review its options and determine the best approach to move forward.”

“Ultimately, any decision to participate in a regional transmission organization will be dependent on whether it benefits our members,” Boughey said.

Tri-State is a member of both Mountain West and SPP, having joined the RTO as part of the Integrated System’s membership in 2015.

Theresa Donnelly, senior communications manager for Black Hills Corp., said her company is also “evaluating the impact” of Xcel’s departure from the SPP integration effort.

“We will continue our discussions in the coming days and weeks,” Donnelly said. “We respect Xcel Energy’s decision to end their participation in Mountain West, as the benefits and costs of RTO membership differ for each company based on their unique business situation and interests.”

Mountain West, which primarily services Colorado, Wyoming and Nebraska, began discussing RTO membership in 2013. It announced in January 2017 that it was pursuing membership in SPP, and in March, the RTO’s Board of Directors approved a set of policy recommendations intended to govern the terms of Mountain West’s membership. (See SPP Begins Work of Integrating Mountain West.)

Xcel said “a variety of interrelated items” drove the company to its decision:

• The limited overall benefits to Xcel’s customers, “given the relatively small size of the MWTG footprint.”
• The few opportunities for westward expansion of the RTO, “which might have added to the value proposition.”
• A recent increase in the costs of forming an RTO, with “less certain” benefits that are “highly dependent on both the footprint, generation flexibility and composition of” Mountain West.
• Recent developments with RTOs have “introduced an increased risk of more significant changes to state-regulated retail electric service than Xcel Energy had anticipated.”

“Xcel Energy will continue to focus on initiatives that will benefit our customers, keep bills low and facilitate the addition of renewable resources on our system,” Eves said. “Our customers and the state of Colorado benefit when states control their own energy policy.”

Colorado’s Public Utilities Commission, which has jurisdictional authority over Xcel and Black Hills, was thought to be the primary stumbling block to completing the Mountain West’s integration. The PUC declined to comment Saturday.

Denver-based attorney Abby Briggerman, who represents consumer groups before FERC, said in a statement: “We appreciate Xcel’s efforts to ensure meaningful savings for ratepayers and hope that whatever the alternatives considered, there will be a transparent stakeholder process to allow for comprehensive consideration of the best course forward.”

The Western Area Power Administration issued a statement saying it “appreciates the strong collaborative partnerships” within Mountain West and “is assessing [its] next steps” following Xcel’s withdrawal.

“WAPA maintains its commitment to working with neighboring entities across its 15-state footprint to develop strategies to adapt to the evolving electricity industry,” said Chief Public Affairs Officer Teresa K. Waugh. “We will continue to evaluate and pursue opportunities to optimize the utilization of generation and transmission resources across multiple utility systems.”

In recent weeks, a growing number of SPP stakeholders have pushed back against the Mountain West integration. A group of five members filed a letter April 6 asking the RTO’s board to reconsider its decision to move forward with the integration until “there is more consensus within the SPP membership as to how to proceed.” (See SPP Group Balks at Mountain West Concessions.)

On Wednesday, Lincoln Electric System (LES) issued its own letter, saying it agrees with the April 6 missive that the board should reconsider the approved MWTG policy recommendations.

LES said it is concerned about the recommendation proposing regionwide cost allocation for the Mountain West DC ties. “The expectation that existing SPP members would pay for DC tie legacy facilities is unprecedented and in contravention to the SPP Tariff,” wrote LES CEO Kevin Wailes.

LES also said there is no policy justification for the proposed three-year phase-in administrative fee discount for Mountain West members. “lf the purported benefits of the [Mountain West] integration have been accurately represented, there should be no need for one subset of SPP transmission owners to subsidize another subset during this period,” Wailes said. “Like others, we are in support of efforts to strategically bring in new entities that aren’t at the unnecessary expense of SPP’s existing members,” he added.

On Friday, the Missouri Joint Municipal Electric Utility Commission and the municipal utilities of Springfield and Independence, Mo., filed a joint letter outlining their concerns in language almost identical to that of LES.

SPP’s board and its Members Committee are scheduled to meet Tuesday in Kansas City, Mo. The agenda includes a Mountain West update and a president’s report, which will likely generate much discussion.