Colo. regulator wants CAISO, SPP to 'clean up their act' as states eye RTOs

Western U.S. states with laws requiring their electric utilities to join a regional transmission organization will likely pursue more incremental reforms as discussions around wholesale power market expansion in the region continue to intensify, a top Colorado regulator said Nov. 3.

Wholesale power market expansion in the U.S. West and Southeast has become a hot topic of late.

On Oct. 5, a coalition of publicly traded and publicly owned utilities serving 11 million customers across eight states in the U.S. West announced an informal group focused on pursuing further market integration as the region seeks to bolster grid reliability while slashing greenhouse gas emissions.

The announcement followed recently passed laws in Colorado and Nevada that require electric utilities in those states to join a regional transmission organization by 2030.

A study funded by the U.S. Energy Department and released in September estimated that consumers in the U.S. West could save between $1.4 billion and $2 billion annually by 2030 by adopting a one- or two-RTO approach.

RTOs, which serve about two-thirds of U.S. electricity consumers, achieve cost savings by coordinating least-cost generation dispatch and transmission operations and planning across wide geographic footprints.

However, Colorado Public Utilities Commission Chairman Eric Blank said the state will need to see governance reforms at the California ISO and interconnection queue reforms within the Southwest Power Pool Inc. before settling on an RTO approach.

"In the meantime, we're going to do everything we can on energy imbalance markets and day-ahead markets to try and grab as much of the benefits as we can," Blank said Nov. 3 during the American Council on Renewable Energy's annual Grid Forum.

Participation in CAISO's energy imbalance market, which matches buyers and sellers of excess electricity, has been growing in recent years as drought-ravaged western states grapple with hydropower shortfalls and extreme wildfires. SPP is also looking to expand its own smaller energy imbalance market, which began operations in February.

The CAISO market is unique from six other U.S. RTOs with independent boards in that it is governed by a five-member board appointed by California's governor. SPP is also seeking to address an interconnection queue backlog comprising roughly 100,000 MW of potential renewable energy projects, Blank noted.

"For us, we just need to see either CAISO governance improve or we need to see SPP solve its interconnect and cost allocation" issues, the chairman said. "I think the RTOs need to clean up their act in critical areas."

Peter Freed, head of energy strategy at Facebook, recently rebranded as Meta Platforms Inc., added during the Nov. 3 event that the social media giant, hungry for renewable energy to power its growing portfolio of data centers, will continue to urge grid operators and states to move faster.

"We're still talking about a decade hence," Freed said. "I think there's a real opportunity cost here. The faster we can move, the better."

'Duplicative' new gas-fired generation in Southeast

A more limited bilateral trading market, dubbed the Southeast Energy Exchange Market, or SEEM, became effective by operation of law Oct. 12 after members of the Federal Energy Regulatory Commission reached a 2-2 deadlock on the proposal.

A coalition of electric utilities led by Southern Co. and Duke Energy Corp. proposed the new market, which would build on an existing bilateral trading framework, amid a push by clean energy advocates to move states such as North Carolina and South Carolina toward RTO membership.

SEEM is estimated to save 50 million consumers up to $150 million annually by 2037, while an independent study released in August found that consumers in the Southeast could save a cumulative $384 billion by 2040 by establishing an RTO.

FERC could still require further reforms to SEEM if FERC nominee Willie Phillips, a Democrat who chairs the District of Columbia Public Service Commission, is confirmed by the U.S. Senate, noted Maggie Shober, director of utility reform at the Southern Alliance for Clean Energy.

Shober said most of the potential consumer savings in the Southeast would come from avoiding excess gas-fired generating capacity.

"We have a number of utilities that have investments planned over the next five to 10 years to build out a significant amount of new gas generation," Shober said. The Southern Alliance for Clean Energy sees that new capacity as "duplicative" across the region because vertically integrated utilities are seeking to meet relatively high individual reserve margins, Shober said.

Shober said the advocacy group will work to educate local leaders about the benefits of organized wholesale power markets as the SEEM proceeding (ER21-1111, et al.) continues to play out before FERC.