latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/utilities-with-11-million-customers-eye-power-market-integration-in-us-west-66935167 content esgSubNav
In This List

Utilities with 11 million customers eye power market integration in US West


Despite turmoil, project finance remains keen on offshore wind

Case Study

An Energy Company Assesses Datacenter Demand for Renewable Energy


Japan M&A By the Numbers: Q4 2023


See the Big Picture: Energy Transition in 2024

Utilities with 11 million customers eye power market integration in US West

  • Author Zack Hale
  • Theme Energy

SNL Image

Wholesale power market expansion in the U.S. West has become a hot topic for the region.
Source: David Maran/Getty Creative via Getty Images

A new coalition of electricity suppliers in the U.S. West with about 11 million combined customers is exploring further power market integration as the drought-ravaged region seeks to slash greenhouse gas emissions while boosting grid reliability.

The informal group, dubbed the Western Markets Exploratory Group, or WMEG, was announced Oct. 5 by some of the region's top publicly traded and publicly owned utilities.

Lawmakers in Colorado and Nevada passed bills this year that require their states' electric utilities to join regional transmission organizations, which are overseen by the Federal Energy Regulatory Commission.

Existing RTOs such as the Midcontinent ISO and PJM Interconnection typically save customers billions of dollars annually by coordinating least-cost generation dispatch across wide geographic footprints. They are also responsible for transmission system planning and operations.

An Oct. 5 news release cautioned that discussions within the informal group are still in the "early stages." But the group is exploring a potential "staged approach" to new market services such as day-ahead energy sales, transmission system expansion, "and other power supply and grid solutions consistent with existing state regulations," according to the release.

The group's publicly traded members are Xcel Energy Inc. subsidiary Xcel Energy-Colorado, known legally as Public Service Co. of Colorado; Pinnacle West Capital Corp. subsidiary Arizona Public Service Co.; Black Hills Corp. subsidiary Black Hills Colorado Gas Inc., which does business in Colorado as Black Hills Energy; Idacorp Inc. subsidiary Idaho Power Co.; Berkshire Hathaway Inc. subsidiaries NV Energy Inc. and PacifiCorp; Fortis Inc. subsidiary Tucson Electric Power Co.; Portland General Electric Co.; and Puget Holdings LLC subsidiary Puget Sound Energy Inc.

The group's public power utilities are the Platte River Power Authority, the Salt River Project and Seattle City Light.

SNL Image

Market approach, timing still unclear

Grid reliability in the U.S. West already has the attention of federal regulators. In June, FERC convened a two-day technical conference on resource adequacy in the Western Interconnection after fierce winds, extreme heat and wildfires during the summer of 2020 triggered blackouts affecting more than 1 million residents across seven states.

During the conference, some panelists argued that a voluntary resource adequacy program aimed at averting future blackouts in the region may need a single operator.

The California ISO already operates the Western Energy Imbalance Market, or EIM, which is seeing its ranks swell as a megadrought saps the region's traditionally robust hydropower capacity. The 15-minute real-time market construct coordinates the sale of low-cost, excess electricity that would otherwise be curtailed.

Many members of the WMEG coalition are either participating in or plan to join the EIM, the Oct. 5 release noted.

"WMEG's discussions will not impact participation in or evaluation of those markets in the short-term, as the group is focused on long-term market solutions," the release said.

In an Oct. 5 email, Xcel Energy spokesperson Julie Borgen said the WMEG coalition agrees on several core principles.

"Any market or potential RTO that it would join (or establish) must outweigh the costs, and provide more value than the existing Energy Market Imbalance designs," Borgen said. "It's essential that the companies involved are able to meet their state and local carbon reduction targets, while also maintaining reliable, affordable service for customers."

SNL Image

'Incrementalism will not get it done'

Transitioning to a single RTO in the U.S. West would produce about $2 billion in gross annual benefits by 2030 compared to maintaining a status quo approach, according to a U.S. Energy Department-funded study released last month.

"It's nice to see utilities in the West publicly acknowledge the value of regional market expansion," said Amisha Rai, who oversees the trade group Advanced Energy Economy's clean grid strategy in California, Colorado and Nevada.

But Rai said power market expansion in the Western U.S. must focus on an RTO approach as the ultimate outcome.

"From our perspective, incrementalism will not get it done," Rai said in an interview. "If we're serious about achieving decarbonization goals, grid reliability needs, and addressing challenges to the system through extreme weather events and other climate change impacts, then we have to get serious about [an] RTO."

That point was echoed by Colorado Sen. Chris Hansen, a Democrat and lead sponsor of the state's legislation requiring RTO participation. Hansen noted in an interview that a proposed merger agreement between Avangrid Inc. and Albuquerque, N.M.-based PNM Resources Inc. includes the same 2030 deadline.

"We're reaching a critical mass now in the interior West," Hansen said. "What you saw from the [investor-owned utilities] today was a recognition of that. They're great intermediary steps, but we really need to move to a fully organized wholesale market."

Meanwhile, a coalition of utilities in the vertically integrated U.S. Southeast is facing criticism over an alleged lack of stakeholder engagement as they seek FERC approval for the proposed Southeast Energy Exchange Market, a more limited intra-hour, bilateral power trading platform.

Rai said groups such as Advanced Energy Economy will be watching closely to see how WMEG members convene themselves and whether state regulators and other groups are invited to participate.

Borgen noted Oct. 5 that the group does not have a specific timeline, "but expects this to be a multiyear process."

"As talks progress, there will be ample opportunity for external stakeholders to be engaged in the process," Borgen said.