The administrator of the Western Area Power Administration (WAPA) on Jan. 9 authorized the organization’s Upper Great Plains Region to pursue formal negotiations for membership in the Southwest Power Pool (SPP).
The decision to pursue membership was based on an operations study, the unique marketing and transmission footprint of the region, as well as the responses received during the comment period, the agency said in a statement announcing the decision. Notably, of the 237 comments received, none was opposed to the move.
“The vast majority … explicitly said, ‘We support the proposal’, which is unusual, and the ones that didn’t say that didn’t express an opinion,” a WAPA spokesperson told TransmissionHub Jan. 10. “We didn’t get anybody that said, ‘No, don’t do it.’”
The Upper Great Plains Region markets Pick-Sloan Missouri Basin power to preference customers in Montana east of the Continental Divide, North Dakota, South Dakota, western Minnesota, Iowa and eastern Nebraska. WAPA operates the integrated transmission system (IS), which is owned by WAPA, Basin Electric Power Cooperative, and Heartland Consumers Power District.
WAPA began investigating membership in a regional transmission organization (RTO) because of its region’s unique characteristics, transmission constraints and seams issues.
Because the region is not a member of an organized market, the Midcontinent ISO (MISO), which serves as the region’s reliability coordinator, is limited to using transmission loading relief mechanisms (TLRs) to manage constraints on congested flowgates, meaning that the WAPA region must reduce the power intended for delivery to its customers. Membership in SPP and its organized markets would make more tools available to mitigate congestion, including security-constrained economic dispatch.
In addition, many of the region’s trading partners have joined markets operated by either SPP or MISO, making it difficult for the region to buy needed power or sell excess generation.
“We no longer have trading partners so that, when we’re short of hydropower and need to purchase some, or if we have extra and need to sell it, there’s nobody we can have a bilateral agreement with, because they’re already tied in to the market,” the spokesperson said. “We used to have around 50 potential trading partners; now, it’s down to about two.”
Because the WAPA region is situated between MISO and SPP, the agency evaluated both RTOs as part of its decision-making process before choosing to pursue membership in SPP.
“We did a couple of fairly extensive studies and … it would have cost more to join MISO,” the spokesperson said. “We also analyzed the risk factors, and our exposure to risk was less going with SPP. In the end, it just seemed to be a good business decision.”
In addition, the rules under which WAPA operates mandate cost containment.
“It’s not only that we sell power at our cost, we’re also under an obligation to keep that cost as low as possible,” the spokesperson said.
Before the region can join SPP, the two entities will have to enter into negotiations and SPP will likely need to amend its tariff and/or bylaws to accommodate some legal restrictions under which WAPA operates.
“Because [WAPA] is a federal entity, it creates some areas where we have to have some considerations that a normal utility wouldn’t have,” the spokesperson said.
Specifically, WAPA will seek a federal service exemption for three impacts of joining SPP: SPP marketplace congestion charges, marginal losses and regional cost allocations from Schedule 11 of SPP’s tariff. WAPA will seek to have those charges allocated to the entire SPP region rather than just the zone in which the WAPA region is located.
Any agreement as well as tariff changes will have to be worked through the normal SPP committee processes, approved by SPP’s board of directors, then filed with FERC. The agencies are bound by a “join by” date of October 2015.
WAPA membership in SPP could lead to changes by other RTO members.
WAPA’s IS partners have been evaluating RTO membership since 2011. In April 2013, Basin Electric’s board authorized its staff to begin discussions, negotiations and contract development with SPP regarding possible RTO membership within that organization. However, the board did not authorize Basin Electric to join SPP. A final decision will not be made until 2015, a Basin Electric spokesperson told TransmissionHub.
Montana-Dakota Utilities (MDU), whose service territory is within the boundaries of the WAPA region, is evaluating whether to switch RTOs.
“We are looking at the options available through MISO and SPP to determine what will be the best course for our customers,” an MDU spokesperson told TransmissionHub. “As a part of that, we did submit a letter of intent to withdraw from MISO … in order to preserve all our options.”
MISO’s transmission owners agreement allows members to withdraw at the end of the year following the year in which written notice is received. MDU submitted its letter shortly before the end of 2013 to preserve its right to withdraw at the end of 2014 if it ultimately decides to do so.