This document describes an idea of central importance to Colorado’s energy future: a statewide unified transmission grid managed by a non-profit Independent System Operator (ISO) under a common transmission tariff.
The purpose of this document is to explain the concept and attract the attention of one or more legislators who are knowledgeable about energy and might appreciate how transformative a Colorado ISO could be, and then discuss running a bill in the 2020 session to bring it about.
The envisioned 2020 legislation would require transmission owners in Colorado to pool those resources and relinquish control over their individual systems to allow a non-profit ISO to schedule transmission access according to principles of fairness, cost-minimization, maximum renewable energy utilization, and/or other principles established in the legislation. The ISO would also oversee transmission planning and generator interconnection. Transmission owners would still own their systems and earn revenue for their use, and they would have input to the ISO. The ISO would establish a common transmission tariff for the unified grid, as opposed to multiple (“pancaked”) transmission tariffs when power is wheeled across the systems of multiple owners.
WHY AN ISO IS NEEDED, AND ITS RELATION TO WHOLESALE MARKETS
The Colorado Public Utilities Commission (PUC) will be considering the options for Colorado utilities to pursue wholesale electricity markets and/or a pooled transmission system, including either joining/forming a Regional Transmission Organization (RTO) or a lesser real-time Energy Imbalance Market (EIM), as mandated by SB19-236. In a cursory sense one can view a full FERC-jurisdictional RTO as consisting of two pieces: a unified transmission grid managed by an ISO, and a full wholesale electricity dispatch market that includes a real-time balancing market (EIM) as well as “day-ahead” and “ancillary services” markets.
The markets piece of the equation and the transmission piece of the equation can largely be considered separately, with a unified regional transmission grid being implemented first in order to greatly improve the operation of a market solution. Thus, moving forward on legislation for a Colorado ISO in 2020 is not in conflict with the consideration of wholesale markets at the PUC, and in fact would lay the groundwork for optimization of any market solution.
The existing CAISO EIM and the planned SPP EIM (called the WEIS – Western Energy Imbalance Service) do not operate on a unified transmission grid, and in these cases a unified grid is not a necessity, but is certainly desirable in order to simplify power wheeling across the state (or larger region), reduce costs through efficiencies, improve fair and non-discriminatory transmission access, and other benefits. A unified grid becomes even more desirable if/when a real-time market is expanded to include a day-ahead market, as is likely for both EIM scenarios, eventually.
Xcel Energy has a central position of control over transmission in Colorado, and all signs are that the company wants to keep it that way, which is a detriment to renewables integration, wholesale markets, independent power producers and power marketers, and also to the idea of Community Choice Energy (CCE), which is currently being studied by the IOU Review Interim Committee.
Transmission access under an ISO would be assigned in a logical manner according to predictable principles and rules by an independent operator acting in the interests of efficiency, cost minimization, ratepayer interests, and state policy goals (or whatever interests the legislation mandates). Renewables developers, large energy users, potential future CCEs, and others need TRUE non-discriminatory access if they are to thrive. Large transmission owners like Xcel Energy and Tri-State wouldn’t really lose anything, except a monopolistic stranglehold that prevents development of a dynamic 21st century grid hosting many innovative players.
Support could likely be garnered for a Colorado ISO from large energy users, renewables developers and Independent Power Producers, and it would be good for CCE as a potential solution for the dozen “Ready for 100” cities and two dozen Colorado Communities for Climate Action (CC4CA) that have ambitious near-term renewable energy goals and would then have access to alternative wholesale energy suppliers. The increased efficiency of transmission asset use would also be good for ratepayers in general. Transmission owners in neighboring states may also want to join, and their participation could be accommodated.
SOME BACKGROUND AND SUGGESTIONS
Other states have legislated the formation of an ISO, including New York, California and Texas. This idea of pursuing a Colorado ISO is not new, as the majority of Colorado utilities have evaluated options for market and ISO development through an initiative that called itself the Mountain West Transmission Group, but that initiative stalled. However, Colorado’s legislature does have the authority to require the formation of a Colorado ISO. Many people who have been involved in the transition to a renewable energy supply believe that the state should address some of the institutional obstacles that have slowed progress, one of which is transmission access and efficiency.
FERC’s Order 2000 set the national regulatory landscape for Regional Transmission Organizations, which provide independent grid operations and wholesale electricity markets. The order provides that the independent grid operation (including delivery tariff access, generator interconnection process, reliability oversight) can be managed through a separate institution from the wholesale market. While most RTOs provide both functions, the western states have developed their market structures differently, with the CAISO now providing some form of wholesale market dispatch in most of the west but not providing the grid access services in the areas outside its original footprint. A Colorado ISO could interface with a separate functional wholesale market operator, such as CAISO, for example, on a contract-for-service basis to enable both a unified transmission grid plus a wholesale electricity market.
In conversations with wholesale electricity
market experts, many share the opinion that with any RTO or wholesale electricity
market the devil can be in the details. The first iteration of deregulation in
California was heavily prescriptive from a legislative perspective and yielded
disastrous results. The statutes directed the “how” rather than the “what” or
the “goal”. From this experience, we suggest that a key element to legislative and
operational success in forming an ISO (or RTO) is to promote a general
framework that invites the perspectives of stakeholders toward attaining goals
rather than mandate specific engineering designs.
Interested legislators on the Energy Legislation Review Interim Committee will have the opportunity to engage with stakeholders on this topic. The committee might elicit specific feedback from stakeholders about establishing a Colorado ISO. Perhaps based on this feedback, appropriate legislation could direct the PUC to oversee a stakeholder process to design an ISO for Colorado, subject to goals and parameters specified in the legislation.
Representative Edie Hooton, firstname.lastname@example.org
Larry Miloshevich, larry@EnergyFreedomCO.org
Dan Greenberg, dan@EnergyFreedomCO.org
ptdoe writes: what is Hansen’s bill really about? Looks like we already have load balancing being evaluated if not fully accomplished–the thing they don’t have in the don’t-mess-with-me state. Is giving the monopolies a free hand to build more transmission lines really a good idea if CCA is approved for use in CO?. And what about the U.S. effort to integrate the entire grid? Isn’t public ownership of that grid better than Xcel and Try-state owning it? This is a 2019 article from the DBJ. See today’s article below it.
Colorado power companies join new regional electricity markets
Greg Avery, Denver Business Journal Sep 10, 2019
A trio of power suppliers in Colorado the West is joining a regional market to buy and sell electricity in early 2021, and four utilities serving the biggest cities on the Front Range may follow suit.
Tri-State Generation and Transmission Association, a Westminster-based not-for-profit providing wholesale electricity to 43 rural cooperative utilities, announced that in February, 2021 it will join the Southwest Power Pool’s Western Energy Imbalance Service that matches utilities with excess electricity with those needing more power to meet demand.
Tri-State, Basin Electric Power Cooperative, which supplies electricity to 141 small utilities across nine states in the Rockies and Midwest, and the Western Area Power Administration, which oversees the distribution of power generated by 57 federal government hydropower plants, are the first three organizations to sign contracts participating in the regional energy market being established by the Little Rock, Arkansas-based Southwest Power Pool.
“Through the WEIS, our regional utilities are moving forward together with a cost-effective solution that quickly increases market efficiencies, reduces expenses for our members and electric consumers, and supports Tri-State’s rapid transition to cleaner energy,” said Duane Highley, Tri-State’s CEO, in a written statement. “Our entry into the WEIS advances the goal to provide utilities across the west options to participate in a real-time, beneficial market solution.”
Tri-State member co-ops sell electricity to 1.5 million customers in Colorado, Nebraska, New Mexico and Wyoming.
The contracts to join the Southwest Power Pool’s imbalance market last four years.
On Aug. 30., Xcel Energy Colorado (Nasdaq: XEL), the largest Denver-metro area utility, and three utilities that serve Colorado Springs, Pueblo, Fort Collins, Longmont, Loveland and Estes Park, announced they’re studying whether to join the Southwest Power Pool’s market too, or join a different regional market known as the Western Energy Imbalance Market, run by the California Independent System Operator.
The power pools should benefit customers and the environment, said Alice Jackson, president of Xcel Energy Colorado.
“Working together, we have the potential to drive down fuel costs and provide customers with more energy from wind and solar resources,” she said.
The four utilities’ expect to wrap up the study this month, and a final decision made about whether to join one of the imbalance markets as a group reached by the end of the year.
Establishing a regional market allows for more efficient movement of electrical power to where it’s needed. That’s becoming more important as utilities move away from burning coal and natural gas and lean more on intermittent renewable energy from wind and solar projects.
Other Western states have passed similar laws, and the increasing reliance on renewable sources is expected to make imbalance markets and other forms of regional collaboration over power supplies more important, said Jennifer Gardner, a senior staff attorney with Western Resource Advocates who specializes in regional energy markets.
Neighboring utilities in the West can and do call on each other to provide excess electricity when they need it now. But having a broader geographic market that’s more efficient makes sense as renewable energy creates more mismatches between where energy is being generated and where it’s most in demand, she said.
“If the wind’s not blowing in Colorado, maybe there’s other resources in California or maybe Arizona that can be tapped into that’s still renewable and provides reliable power,” she said.
Imbalance markets also tend to reduce times when utilities have to shut off or turn down wind or solar power generation because there’s too much electricity being generated for the local grid, which can be a fairly common occurrence in the West today, Gardner said.
Now the question is which of the imbalance markets will Xcel Energy and the other Front Range utilities decide to join.
SPP, a not-for-profit organization, manages electrical power for 99 members who cover all or parts of 14 states roughly from North Dakota south into Texas.
Since 2007, it has run an imbalance market to balance electrical supply and demand among utilities and power suppliers in the eastern U.S., and it has eyed establishing one in the West for several years.
“WAPA, Basin and Tri-State are the first customers signed on to take that service from us,” said Derek Wingfield, a spokesman for SPP.
Several Colorado utilities, collaborating as the Mountain West Transmission Group, announced the intention to start participating in a Southwestern Power Pool-managed imbalance market until the effort collapsed after the surprise withdrawal of Xcel Energy in 2016.
Utilities have to weigh cost, transmission concerns and other factors when joining an imbalance market.
Such markets are considered a half-step toward regional transmission organizations, which manage moving power around a large area and also ensures reliability of power supplies.
Such organizations are common around the U.S., but concerns about retaining control of transmission lines and other factors have kept Colorado utilities from joining or forming one. The Colorado Public Utilities Commission is starting to look at what RTO membership could mean for utilities in the state.
Colorado’s main utilities have this advantage as they adopt more…