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Southeast Energy Exchange Market is 'a stumbling block' to true reform – critics

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Southeast Energy Exchange Market is 'a stumbling block' to true reform – critics

A new energy exchange market proposed by some of the biggest electric utilities in the U.S. Southeast has run into stiff opposition at the Federal Energy Regulatory Commission.

Rules for the intrahour, bilateral trading platform — dubbed the Southeast Energy Exchange Market, or SEEM (ER21-1111, et al.) — were filed with FERC in February by 14 different utilities, including the Tennessee Valley Authority, subsidiaries of Southern Co. and Duke Energy Corp., and several municipal utilities and electric cooperatives.

As proposed, the SEEM would build on an existing system where buyers and sellers contract bilaterally for excess power sent over spare transmission capacity. Instead of a trading system that at times relies on phone calls, the SEEM would use a modern algorithm to execute energy trades depending on criteria set by its participants.

A third-party analysis estimated the SEEM will eventually save affected ratepayers about $40 million annually, an improvement over the status quo but far less than the billions in savings projected to accrue under a more sophisticated, centralized energy market run by a regional transmission organization.

'A stumbling block'

TVA filed comments in support of the proposal, reasoning that the new market would benefit its customers. It noted that the SEEM is expected to help avoid the curtailment of an increasing amount of renewable energy generation in the Southeast, aligning with the federally owned wholesale power authority's goal of reducing its carbon footprint.

A coalition of rural electric cooperatives similarly said the SEEM will "provide a vehicle" to deliver low-cost energy to over 910,000 co-op customers located throughout Missouri, Iowa and Oklahoma.

However, multiple public interest groups and trade associations argued the SEEM proposal is unjust and unreasonable in its current form.

The consumer advocacy group Public Citizen, for example, argued that FERC should require SEEM membership that includes "bona-fide consumer advocates, environmental organizations, and other public interest perspectives."

"Concentrating all management authority for the new market only among utilities is unjust and unreasonable, as the lack of balanced decision-making will lead to uncompetitive outcomes," Public Citizen asserted.

A number of other parties raised a range of technical concerns.

In joint comments filed with the Solar Energy Industries Association and a coalition of corporate renewable energy buyers, the clean energy trade group Advanced Energy Economy, or AEE, lamented that the algorithm and the methodologies SEEM's participants will employ are completely absent from the proposed rules filed with FERC.

The group further asserted that the SEEM meets the definition of a loose power pool because it is a multilateral arrangement "that explicitly or implicitly contains discounted and/or special transmission arrangements, that is, rates, terms, or conditions.” As such, AEE asserted that the participants must propose a single pool-wide tariff with nondiscriminatory governance and membership rules to prevent certain members from being given preferences over others.

AEE further asserted that given the lack of sufficient details on many important issues and that "many of these missing details could have significant cost, transparency, and market implications for customers and stakeholders," the proposal "could end up moving the region further away from the competitive options that states and consumers increasingly seek."

The Natural Resources Defense Council also assailed the proposal's lack of detail and argued that the SEEM's participants have yet to demonstrate the market's algorithm will actually work. Among its constraints, the SEEM's algorithm allows participants to choose who they contract with and enables "block bids" that must be accepted in full or otherwise rejected, the council noted. Moreover, the group said the applicants apparently have not yet chosen a vendor to develop the algorithm nor have they provided a prototype of the program.

The Environmental Defense Fund urged FERC to take a closer look at the potential for participation by demand response and distributed energy resources. The group also asked the commission to mandate that the SEEM board and operating committee meetings be open to the public.

The Southern Renewable Energy Association, or SREA, expressed concern that the SEEM "will become a stumbling block on the longer journey towards true market reform."

"Compared to the rest of the country, the Southeast is behind on incorporating wholesale market competition," the SREA asserted. The association pointed to a list of "massive infrastructure failures," including the failed V.C. Summer nuclear reactor in South Carolina, a failed carbon capture project at Plant Ratcliffe in Mississippi, and the failed Plains and Eastern high-voltage transmission project, among other examples.

"The lack of wholesale market reform in the Southeast has cost ratepayers billions of dollars in failed projects and lost opportunities," the SREA said. "While SEEM will allow a few additional wholesale trades, it is an inadequate response to protect ratepayers from future infrastructure failures."

In a limited protest, Entergy Corp. said it "does not generally oppose" the SEEM filing but argued that the proposal needs to be amended to account for excess power flows between the Midcontinent ISO, Southwest Power Pool, and transmission facilities controlled by SEEM participants.

Multiple parties also asked FERC to hold a technical conference to further explore competitive market structures in the Southeast.