Colorado utilities may plug into regional electricity network serving 14 states
Southwest Power Pool participants could see $1.4 billion in net benefits.
Utilities serving Colorado and most of Wyoming are inching closer to joining the Southwest Power Pool, an electricity transmission network stretching across 14 states from north Texas to North Dakota.
Some say it could bring more than $1 billion in benefits to regional utilities, although what that might mean to ratepayers is unknown.
“We see this as an opportunity to shape our future,” Mary Ann Zehr, senior manager of transmission contracts, rates and policy at Tri-State Generation & Transmission, said during an informational meeting organized by the Colorado Public Utilities Commission on Tuesday.
Tri-State is part of the Mountain West Transmission Group, which includes Xcel Energy’s Colorado operations, Black Hills, Colorado Springs Utilities, the Western Area Power Administration and others.
The informal coalition is studying ways to lower costs and improve reliability by smoothing the movement of electricity across transmission grids controlled by a host of utilities in the region, which includes northern New Mexico and small areas of Arizona, Montana, Utah, Nebraska and South Dakota.
Initially, one option the group studied was forming its own unified transmission network, known in the utility world as an Independent System Operator, or ISO, or a Regional Transmission Organization, or RTO.
But starting from scratch requires a steep learning curve and would cost much more than joining an existing network with systems and tariffs in place.
Enter the Southwest Power Pool, or SPP, an RTO with 185 participants, 726 power plants generating 50.6 gigawatts of peak capacity, and 60,944 miles of transmission lines serving 18 million people.
“If you are smart about how you plan transmission, you can improve reliability and lower the wholesale cost of electricity,” Carl Monroe, chief operating officer of the SPP, said at the informational meeting.
Utilities in an RTO hand off operational control over their individual transmission grids to an independent operator that is responsible for getting power where it’s needed and balancing supply and demand across the entire system.
In return, utilities can move power across the network at a lower cost versus paying the multiple tariffs required to move electrons across different grids.
RTOs also run marketplaces that make it easier for utilities to buy and sell electricity with others in the network, either in real-time or in day-ahead contracts. That can make power generation more efficient.
“Transmission congestion is accommodated differently, economically instead of physically,” said Suedeen Kelly, a partner in Akin Gump Strauss Hauer & Feld, of the benefits that come with joining a larger network.
For example, if a power plant in an isolated system unexpectedly finds itself with too much electricity given demand, it can’t easily unload that excess, apart from shutting down generation. But if it is part of a large transmission network, that plant could sell surplus power on the open market and move it more affordably to a buyer.
Even if that sale is at a discount, it may end up costing less than shutting down power generation and later starting it back up again.
Likewise, if a plant goes down in a given area, belonging to a larger network makes it easier to bring in replacement power to keep the lights on. The SPP has about four times the peak generating capacity of the Mountain West Transmission Group.
Steve Beuning, director of market operations at Xcel Energy, said the reason for joining the Southwest Power Pool or any RTO comes down to one word — efficiency.