The Bonneville Power Administration should be allowed to decide on a day-ahead market without outside federal interference, a group of Northwest publicly owned utilities (POUs) that favor SPP’s Markets+ told the U.S. Department of Energy in a Nov. 12 letter. 

The letter, addressed to DOE Deputy Secretary David Turk, seems intended to head off any DOE attempt to lean on BPA to either delay the agency’s May 2025 market decision or withhold its $25 million share of funding for the Phase 2 implementation stage of Markets+ as developments play out around the governance of CAISO’s Extended Day-Ahead Market (EDAM). (See Pathways Backers Express Confidence on Calif. Legislation.) 

“We respectfully request your support for BPA’s independent decision-making as it considers market options. Enabling BPA to act without external pressures will ensure its continued alignment with its statutory responsibilities and enduring mission to serve the Northwest,” the utilities said in the letter. 

As a federal power marketing administration, BPA is housed within DOE but self-funds its operations from the revenue it earns from selling low-cost power from Northwest’s extensive, federally owned hydroelectric system and operating around 70% of the region’s transmission. The letter’s signatories include the vast majority of BPA’s base of “preference” customers for that power, composed mostly of rural municipal utilities and public utility districts.

A representative for the signatories told RTO Insider the “primary intent” of the letter is “to remind DOE and the [Northwest] Congressional Delegation of the important role of BPA customers in BPA decision-making.”

“Although many are interested in BPA’s decision on markets and count themselves among BPA’s stakeholders, not all stakeholders are similarly situated,” the representative said in an email, which noted that BPA is unlike other taxpayer-funded federal agencies because it is “financed entirely” through funding from customers who have “invested heavily in the agency and the Federal power system to ensure that BPA can continue to provide power and transmission services to its customers and timely repay its Treasury obligations.”

“BPA’s customers – and not other stakeholders – will ultimately bear the economic consequences of BPA’s decisions on market participation,” the representative said.

The letter comes nearly two weeks after BPA released the results of a production cost model study conducted by Energy+Environmental Economics (E3) showing that, under most scenarios across multiple market footprints, the agency stands to realize significantly greater financial benefits from participating in CAISO’s Extended Day-Ahead Market (EDAM) than SPP’s Markets+. (See BPA Sticks to Markets+ Leaning Despite Study Showing EDAM Benefits.)  

BPA officials have played down the significance of those findings, saying production cost models don’t provide the full picture of market benefits that are harder to predict or quantify. 

While the officials noted the study results will weigh in BPA’s final decision, they’ve said they’re holding to a staff recommendation that the agency choose Markets+ over EDAM for more qualitative reasons, such as a governance framework independent from California state influence and a market design BPA contends is rooted in that independence — a stance causing increasing consternation among the Northwest’s EDAM supporters. (See Rising Tensions Evident at BPA Day-ahead Markets Workshop.) 

The Nov. 12 letter to Turk reiterates BPA’s perspective and elaborates further by pointing to “unforeseen” consequences the POUs could face from the agency’s decision. 

“While production cost models can offer some broad insights, they also suffer considerable deficiencies,” the letter says. “First, they are limited in scope because they cannot assess critical governance and market design risks that impact BPA’s long-term reliability and cost-effectiveness. Second, production cost models that rely on oversimplified inputs produce imprecise results, failing to capture the complete costs and benefits of day-ahead market decisions. A risk-informed governance evaluation is essential to protect BPA and its customers from unforeseen risks.” 

The letter reinforces another repeated contention by BPA officials: that the agency must continue to fund Markets+ so BPA — and the rest of the West — have two “viable” markets from which to choose.  

The POUs note that they have encouraged the agency to fund the next phase of Markets+ “as a prudent investment for BPA’s long-term strategic goals and the only path that aligns with BPA’s mission. Only Markets + offers both a competitive, independently governed structure and a fair market design alternative to CAISO EDAM.” 

New Angle?

The letter’s signatories also see an apparent longer-term benefit in two Western markets sitting side-by-side. 

“The existence of both Markets+ and CAISO EDAM fosters a competitive environment in which governance and market design can evolve in ways that will ultimately yield more balanced outcomes for Western utilities and their customers,” the utilities said. 

But the letter makes clear that for the POUs, the key element comes down to governance — and continued “autonomy” for BPA within a market framework.  

“Markets+ is uniquely positioned to support BPA’s autonomy while addressing these governance factors,” the letter says. “It also offers fair market design elements that ensure durable and equitable outcomes for BPA’s preference customers and the region. This has been evident throughout the development of Market+; stakeholders have adopted design elements that enable BPA to meet its statutory obligations yet remain accessible to all participants.” 

The letter appears to introduce an angle to the Western market debate that has not been publicly aired before: that BPA’s preference customers would reexamine its relationship with BPA if they are dissatisfied with the agency’s market decision. 

The letter contends that the publicly owned utilities “have been the foundation of BPA’s funding, entirely supporting the agency through rates” for 80 years.  

“This historic partnership has enabled BPA to fulfill its mission and meet statutory commitments to its customers, the region and the U.S. Treasury. BPA’s sensible stewardship of our investments that aligns with our communities’ needs is critical to our continued willingness to sustain the agency financially,” the utilities wrote. 

Asked whether that meant the POUs would seek alternative power supplies if BPA chose EDAM, a representative of the letter’s signatories said, “Not at all. The statement emphasizes the foundational role of BPA’s alignment with the priorities and needs of its preference customers in sustaining a strong, collaborative partnership.”

“It does not suggest that we are considering other sources of generation if BPA were to join EDAM. On the contrary, we are focused on ensuring the long-term stewardship of BPA’s resources for the benefit of our ratepayers for generations to come,” the representative said.

Seattle City Light, a POU and BPA preference customer that has publicly supported the agency joining EDAM rather than Markets+, told RTO Insider that it disagrees with the letter’s assertion that BPA customers will be better served in Markets+.   

Noting the results of the recent E3 study, the utility said in an email that “BPA’s analysis found that EDAM or opting for WEIM-only participation would result in considerably greater economic benefits than Markets+, and it is unlikely that Markets+ governance or market design will produce better outcomes.”   

“City Light continues to believe our customers are best served with an efficient, well connected and integrated market, and should not rely on misrepresentations about the risks of EDAM market design and governance to obscure the results of its economic analysis. BPA’s end-use customers deserve a day-ahead market decision that does not ignore the physics and economics of the grid, and the impacts on their rates,” the utility said.