Rainbow Over Bonneville

Bonneville Dam.

The Bonneville Power Administration has reaffirmed its internal analysis showing the benefits of joining the Western Energy Imbalance Market in March 2022, and is now asking for public comment on joining the real-time market.

Bonneville will take comments until Aug. 23, and is expected to make its final decision on joining the EIM in September.

So far, BPA customers have shown general support for the agency participating in the EIM, but have expressed concerns with how costs and benefits from BPA's participation would flow back to them in rates.

Meanwhile, talk of forming a centralized day-ahead market in the Northwest is growing louder, and public comments received on BPA's participation in the EIM could be an early gauge of Northwest public power's opinions on centralized markets.

Participation in the EIM stands to deliver a range of benefits for both power and transmission operations and is consistent with Bonneville's 2018-2023 Strategic Plan objective of delivering on its public responsibilities through a commercially successful business, John Hairston, administrator and CEO of BPA, said in a draft close-out letter to the region on the EIM, released July 29.

"Bonneville's EIM participation is expected to contribute to the agency's financial strength, help it preserve its competitiveness in the evolving marketplace for power products and services, and enhance transmission reliability," Hairston said.

By participating in the EIM, BPA would be able to monetize its unused spinning reserves, which is capacity set aside in case of an unexpected generation shortfall. Access to the intra-hour market would "optimize the value of federal hydropower," Hairston said in the letter.

The EIM would also allow Bonneville to purchase power in the market when it's more economical. Bonneville's participation would also give customers the option of bidding their nonfederal resources into the EIM, meaning they could benefit by bidding and maximizing the value of their own resource flexibility, he said.

Joining the EIM would also allow for more efficient use of BPA's transmission system by dispatching least-cost generating resources across a much broader footprint than BPA's single balancing authority, and could help alleviate curtailments of customers' transmission schedules, BPA's main tool in congestion management.

"The EIM increases visibility on the transmission system and automatically determines the least-cost dispatches that result in generation increases and decreases to precisely address congestion, offering both economic and reliability benefits," Hairston said.

An independent third-party analysis of Bonneville's proposed participation in the Western EIM, by Energy and Environmental Economics, forecasts a $29-million to $34-million annual net dispatch benefit, against ongoing annual expenses of $6.9 million. That benefit level would allow for quick recovery of an estimated $30 million to $35 million in startup costs.

Roger Gray, CEO of PNGC Power, a Portland-based electric generation and transmission cooperative owned by 15 Northwest cooperative utilities with service territories in seven Western states, told California Energy Markets his group is not "anti-EIM," but has concerns about how the benefits and risks from joining the EIM will flow back to BPA's customers.

In a statement emailed to CEM, Gray said PNGC is still digesting Bonneville's EIM letter, but continues to have concerns about BPA's participation.

"The EIM has proved to be an innovative and useful market tool that can meet regional needs given that the Northwest and West in general cannot figure out an RTO/ISO. It is part of what should be a broader solution. Our concerns are not any fundamental objection to the EIM," Gray said. "Our continued concerns lie with how BPA's costs, benefits and importantly risk flow through to customers. BPA's business case argues that there is an expected net positive result. However, that is not what ultimately flows through to customers in BPA's ratemaking."

Grays said the "blank check" nature of BPA's power contracts, combined with its financial reserves policy and revenue financing, "essentially means the business case is divided."

"Benefits other than limited amounts largely stay with BPA while costs and risk will, I expect, flow to customers," he said. "That is not a good business case for customers in my judgment. We think it is essential that there is some accountability to deal with this situation."

The Northwest electric sector has generally and historically been averse to joining any kind of centralized market, largely over fears of giving the Federal Energy Regulatory Commission more jurisdiction over publicly owned utilities. But the success and popularity of the EIM may have changed some minds around the region. BPA released its record of decision on joining the EIM in September 2019, after the agency received 28 comments from stakeholders, all in favor of continuing to study joining the market (see CEM No. 1556}.

Currently, seven Northwest utilities participate in the market: PacifiCorp, Puget Sound Energy, Portland General Electric, Powerex, Idaho Power, Seattle City Light and NorthWestern Energy, which entered the market in June.

Avista, Tacoma Power and BPA are on deck to join in 2022, with Avangrid scheduled to join in 2023.

The EIM now counts 15 members, serving consumers in 10 states, including portions of Arizona, California, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington and Wyoming. By 2023, the EIM expects to have 22 utilities and power marketing agencies participating in the market that represent more than 83 percent of load in the Western Interconnection.

Since its launch in 2014, the Western EIM has achieved $1.28 billion in cumulative gross benefits for its participants, including a record-setting $101 million in first-quarter benefits for 2021, according to the California Independent System Operator, which manages the market.

While Bonneville will consider input from its customers, the agency has been studying and discussing EIM participation for three years, and has completed much of the work necessary to link the federal hydro system with the real-time market.

BPA and CAISO signed an implementation agreement in September 2019, and BPA says the software, systems and processes necessary for bidding, base scheduling, operations and settlements have been developed and are being tested, according to the draft letter.

CAISO and Bonneville have scheduled "day-in-the-life" testing during the month of September, to assure Bonneville's ability to perform sequentially all the functions and processes necessary to participate in the EIM. In October, CAISO will run market-simulation testing using structured and unstructured scenarios to test the robustness and integration of the systems and processes necessary for market participation.

In December 2021, Bonneville and CAISO will transition to "parallel operations," using duplicated live production data feeds with the hope of going live in March 2022.

In the letter to the region, Hairston said that over the three years since BPA began studying membership in the EIM, "discussions about other market opportunities have emerged," and BPA's "participation in the EIM would not exclude its participation in these future opportunities."

"We have been participating in initial development phases of the Northwest Power Pool's Resource Adequacy program, which is a first step at establishing common resource adequacy measurements and definitions," Hairston said. "In addition, discussions are underway about forming an organized day-ahead market in the West. Both the California Independent System Operator and Southwest Power Pool have presented initial concepts on how these markets would form."

Hairston said participation in the EIM would give BPA "valuable experience and insights to inform new market discussions."

© Copyright 2021 NewsData, LLC, 5625 NE Elam Young Pkwy, Ste 100 Hillsboro, OR | Terms of Use | Privacy Policy Powered by BLOX Content Management System from TownNews.com.

Editor - Clearing Up

Steve began covering energy policy and resource development in the Pacific Northwest in 1999. He’s been editor of Clearing Up since 2003, and has been a fellow at the Institute for Journalism and Natural Resources and University of Texas.