FERC accepts joint dispatch service from Xcel’s PSCo

FERC on Feb. 18 accepted the joint dispatch transmission service of Public Service Company of Colorado (PSCo) and a joint dispatch agreement to facilitate intra-hour dispatch of generation resources within PSCo’s balancing authority area (BAA).

The order followed an earlier rejection of the plan, a deficiency letter and a conference to bring the parties together to try and reach agreement, with the decision culminating a couple years of work by PSCo, Black Hills Corp. (NYSE:BKH) and Platte River Power Authority, FERC Commissioner Cheryl LaFleur said at the Feb. 18 commission meeting.

The result “has the potential to bring significant benefits to a bilateral market region of the country,” LaFleur said. “Congratulations to everyone involved.”

PSCo, a subsidiary of Xcel Energy (NYSE:XEL), has had a long-standing interest in participating in a broader energy market and the efficiency benefits of operating in a regional market, FERC related in the order.

In rejecting a previous proposal that set a price for resources based on a system-wide marginal cost, FERC concluded that the joint dispatch agreement would not result in just and reasonable rates and that there were insufficient protections to mitigate the potential for PSCo to use market power in the relevant BAA.

“The parties have renegotiated the joint dispatch agreement to address the commission’s concerns that resulted in the rejection” of the agreement last year, FERC said.

PSCo said that the purpose of the joint dispatch agreement is to implement a more efficient mechanism for the provision of ancillary energy among the parties, according to the order. Each party will continue to commit sufficient generation resources to meet its own native load needs, plus operating reserves, but they will also determine how much or how little they want to designate for joint dispatch and compensation at the system-wide marginal price. That price is the incremental cost of the next most economic megawatt of electricity capable of being generated by a party’s dispatchable unit, FERC said.

The commission said that its concerns about the potential for market power and that the matter of PSCo’s access to customer load data and non-public transmission information were addressed in revisions made to the agreement following a conference among the parties.

In addition, the parties have agreed to create a web-based portal through which they will enter the unit cost information for their resources, which will prevent each party’s merchant function personnel from accessing the confidential dispatch data that is subject to FERC standards of conduct rules, the order said. PSCo altered the agreement to ensure that its merchant function would not have access to specific customer load data.

The parties structured the joint dispatch agreement so that any load-serving entity in the PSCo BAA that commits to contributing generation resources and whose transmission provider agrees to the joint dispatch transmission service may become a party to the joint dispatch agreement, FERC noted.

“The parties will be able to realize substantial cost savings through the dispatch of their collective resources in a more efficient manner,” FERC said. “These cost savings will be passed on to their customers.”

FERC took PSCo up on its commitment to file annual reports on the joint dispatch agreement for the first two years of operation. The commission directed the company to submit a report within six months  of the conclusion of each of the first two years of joint dispatch operations, including a summary of the costs and savings each of the participants experienced, transmission path information and comparisons of the cost for the cost for the last marginal unit of energy under the agreement and the year preceding the implementation of the agreement.