By Mark Jaffe | Colorado Sun
Xcel Energy must join wholesale electric market to meet Colorado law. Execs say big upfront cost is best economic and operational choice.
Xcel Energy’s plan to join a short-term, wholesale electric market is drawing fire from critics who, in hearings before state regulators this week, said that the price tag is too high and the benefits are minimal.
The market for purchasing day-ahead power Xcel Energy wants to join, Markets+, is run by the Southwest Power Pool, or SPP, whose grid stretches across all or parts of 14 states from Texas to North Dakota.
In hearings before the Colorado Public Utilities Commission, business and consumer groups are challenging the $30 million in upfront costs to join Markets+ and Xcel Energy executives are defending it as the best economic and operational choice.
A 2021 Colorado law requires utilities with transmission lines to join a wholesale electric market by 2030. A study done for the PUC estimated joining an integrated wholesale market could generate $230 million in annual savings for Colorado utilities.
Those savings, however, depend upon a range of variables including full participation in a regional grid run by either a regional transmission organization, like SPP, or an independent system operator, such as California’s CAISO.
Most Colorado utilities — including the Tri-State Generation and Transmission Association, Colorado Springs Utilities and the Platte River Power Authority — are set to join SPP as full members.
Xcel Energy is only joining the day-ahead market and Joe Taylor, Xcel Energy’s senior director of Western markets, said in testimony Tuesday that the company was reluctant to hand over transmission planning and operations to a regional transmission organization, or RTO
Taylor said that the company was concerned about the project queues building up in RTOs. There is a six-year wait for projects to connect with the SPP grid, according to Enverus Intelligence Research.
“It gives us pause to turn over those activities to an RTO,” Taylor said. “The ability to plan and build are important considerations.”
Just to join Markets+ Xcel Energy will have to pay administrative fees, entry fees, put up market collateral and need multimillion-dollar software and IT upgrades.
Xcel Energy estimated its share of SPP’s one-time market implementation costs to be approximately $20 million, and its allocation of ongoing administrative fees to be approximately $10 million per year.
But those administrative fees are based on how many utilities join Markets+. If fewer utilities are in the market the administrative fees for each will rise. “It’s arithmetic,” Taylor said.
SPP estimates the total cost of starting Markets+ at $150 million, with an additional $75 million per year to administer the market.
Xcel Energy customers would not see any benefits from the utility joining Markets+ for at least five years.