UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION

Transcription

1 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Southwest Power Pool, Inc. ) ) Docket No. ER MOTION FOR LEAVE TO INTERVENE AND PROTEST OF THE ELECTRIC POWER SUPPLY ASSOCIATION Pursuant to Rules 211, 212 and 214 of the Rules of Practice and Procedure of the Federal Energy Regulatory Commission ( FERC or Commission ), 18 C.F.R , & (2010), the Electric Power Supply Association ( EPSA ) respectfully files for leave to intervene and protest in the above-captioned proceeding. On February 29, 2012, the Southwest Power Pool, Inc. ( SPP ) submitted its revisions to its Open Access Transmission Tariff ( OATT ) revisions which embody the SPP Integrated Marketplace proposal. 1 EPSA supports the proposal because it represents a move to a day-two market for SPP with important wholesale market attributes such as independent daily unit commitment, transparent commodity pricing, consolidated balancing authorities, and markets for new ancillary service products. While EPSA supports the bulk of the SPP proposal, there is concern that the proposed must-offer requirement undermines reliability and will not accurately reflect day-ahead market resource needs. 1 Southwest Power Pool, Inc. Submist Tariff Filing on Integrated Marketplace, Docket No. ER (February 29, ( SPP Tariff Filing ) 1

2 I. MOTION TO INTERVENE & COMMUNICATIONS EPSA is the national trade association representing competitive power suppliers, including generators and marketers. Competitive suppliers, which collectively account for 40 percent of the installed generating capacity in the United States, provide reliable and competitively priced electricity from environmentally responsible facilities serving power markets. EPSA seeks to bring the benefits of competition to all power customers. 2 Many of EPSA s members are interconnected with and/or are pursuing interconnection to the grid in SPP, and as such represent a significant portion of the supply capacity in that region. EPSA members have been active participants in SPP s stakeholder processes and EPSA has participated in many of the Commission s proceedings on SPP issues. As a result, EPSA has a direct and substantial interest in the instant proceeding that cannot be adequately represented by any other party, and allowing EPSA to actively participate in this proceeding would be in the public interest. Accordingly, EPSA respectfully requests that the Commission grant this timely motion to intervene. All pleadings, correspondence and other communications concerning this proceeding should be directed to: Nancy E. Bagot, Vice President of Regulatory Affairs Electric Power Supply Association 1401 New York Avenue, N.W., 12th Floor Washington, D.C (202) NancyB@epsa.org 2 The comments contained in this filing represent the position of EPSA as an organization, but not necessarily the views of any particular member with respect to any issue. 2

3 II. BACKGROUND On February 29, 2012, SPP filed tariff revisions to implement a new integrated marketplace for the region, moving SPP to a locational marginal price ( LMP ) energy markets model similar to PJM and the other established regional transmission organizations ( RTOs ). To date, SPP had been the lone outlier among RTOs as the only RTO not employing a full suite of transparent energy, congestion, and ancillary service markets. The proposed integrated SPP marketplace will include day-ahead and real-time energy and operating reserve markets and transmission congestion rights markets. In addition, the marketplace will determine the most cost-effective generating units to use the following day, allow increased access to reserves, increase the balancing of regional supply and demand, and aid in the integration of renewable resources. A key element that will improve the SPP marketplace will be the consolidation of the SPP region s 16 Balancing Authorities into a single balancing authority operated by SPP. In addition, SPP will implement an Operating Reserve market that will offer 5 different ancillary service products. SPP estimates that the new marketplace will result in net benefits of $45 $100 million per year. Once the tariff revisions are implemented and the new market is in place, SPP will serve as the reliability coordinator, balancing authority, transmission service provider, planning coordinator, reserve sharing group administrator, interchange authority and market operator. 3

4 III. COMMENTS EPSA has long advocated that competitive electricity markets benefit consumers; competitive suppliers vigorously support the evolution of wholesale electricity markets administered by Regional Transmission Organizations ( RTOs ) and Independent System Operators ( ISOs ) as they have evolved over nearly two decades to serve more than two-thirds of the country. Independent operation of the transmission grid and administration of various regional markets for electricity products and services continue to produce valuable benefits for consumers, the economy and the environment. Therefore EPSA strongly supports SPP joining the other RTO/ISO markets by taking this critical step to implement day-two markets. Competitive suppliers are encouraged that SPP will be consolidating its Balancing Authorities and introducing new Operating Reserve market products that will support efficient pricing and increase market effectiveness. However, in order to achieve the full benefits of competitive markets, the market details must be crafted correctly. An important aspect of a robust market design is an efficient Day-Ahead Market that helps drive price convergence as it moves into the operating day and provides market operators with an effective, stable approach to the operating day. A. Must-Offer Requirements A key proposed SPP Integrated Marketplace design element is the mustoffer requirement for market participants in the Day-Ahead Energy Market. SPP 4

5 links the Day-Ahead Energy Market must-offer requirement with other elements of the Integrated Marketplace proposal by stating that the provisions represent a consensus view that the stakeholders believed struck the right balance and was tailored to meet the region s specific needs. 3 SPP s current must-offer requirement obligates each market participant to offer all resources into the Reliability Unit Commitment ( RUC ) and Real-time Balancing Market ( RTBM ). SPP proposes to obligate each load-serving market participant to offer sufficient resources (including load plus its operating reserve obligation) into the day-ahead energy market for the next day. However, the requirement for a Load Serving Entity ( LSE ) is imprecise regarding capacity and the source of that capacity because it can vary day to day (at the discretion of the LSE), and therefore may be inadequate to support the actual load of the LSE. This discretion for load-serving market participants results in a must-offer requirement that differs from other market participants and remains overly vague. This introduces unnecessary uncertainty and inconsistency into the market, in addition to creating difficulty for the SPP Market Monitoring Unit or independent monitors to oversee the process from day-to-day. Regarding market oversight, SPP periodically requires load-serving entities to provide information to demonstrate compliance with Section 2.0 of the SPP s Tariff s Criteria and Appendices, Capacity Margin. Those LSE resources are, by definition, committed to meeting the SPP region s resource adequacy requirements. As a result, those LSE resources should be subject to the mustoffer requirement for the RUC and RTBM, as well as the day-ahead energy 3 SPP Tariff Filing, 21. 5

6 market, to the extent that its resources are physically available. This requirement would benefit the SPP marketplace by: (1) assuring adequate resource adequacy to meet the LSEs load for each day in the day-ahead market, (2) resulting in more effective market operations once the market moves into the operating day, (3) ensuring adequate liquidity in the day-ahead market, and (4) preventing physical withholding of LSE s resources in the day-ahead market. All of this additionally provides a better market design for market monitors and other responsible entities to oversee. EPSA is concerned that SPP s proposal regarding the must-offer requirement on LSE resources veers too far from market principles that have ensured reliability and protected against possible market manipulation in other markets. SPP admits as much by acknowledging that its proposed requirement is not consistent with other effectively working market designs: SPP has not imposed the must-offer requirement on, for instance, all Designated Resources as in other RTO markets. 4 Other markets have a centralized process that requires all resources which are contracted to support LSE load to offer into the Day-ahead Market. SPP s mustoffer requirement should be the same as that in other proven markets unless it can offer substantial support for a different approach. An additional and critical concern is that the discretion allowed by the SPP must-offer requirement as proposed could potentially undermine reliability. Under the proposal, LSEs do not have specific rules that require them to align demand with adequate supply. Instead, LSEs may decide how they will cover 4 SPP Tariff Filing, 22. 6

7 load and reserves for the next day without sufficient oversight from an independent market operator responsible for maintaining reliability. Further, the requirement does not mandate that all network resources designated by the LSE to support its load will provide an offer into the day-ahead market. Under this structure LSEs can potentially under-forecast their next day needs, which could create power supply shortages in real-time. This proposed market structure creates an untenable potential reliability gap. Another concern is that the must-offer requirement as proposed could have unintended but adverse consequences for market fundamentals. Because SPP is at a critical juncture as it moves from an imbalance market to day-two markets, it is critical to establish a strong market framework which supports market fundamentals. If, as SPP proposes, some resources previously committed to serving load do not have to offer in to the day-ahead energy market, then energy and ancillary service prices are based only on a subset of resources that may be needed to meet the LSEs load. This results in inefficient dispatch, by design, and creates inaccuracies between day-ahead and real-time prices. A well-functioning market should have accurate price convergence based on supply and demand fundamentals between day-ahead and real-time. Therefore, for appropriate price convergence to occur, it is necessary for all resources that have been obligated to serve load through LSE ownership or contract to offer into the day-ahead market, consistent with every other organized market. 7

8 IV. CONCLUSION Wherefore, EPSA respectfully requests that the Commission grant its motion for leave to intervene in this proceeding and consider the comments herein. Specifically, the Commission should direct SPP to change its must offer requirement so that it ensures reliability, promotes appropriate price convergence and provides market operators with an effective approach to the operating day. Respectfully submitted, Nancy Bagot, Vice President of Regulatory Affairs Jack Cashin, Director of Regulatory Affairs Electric Power Supply Association 1401 New York Ave, NW 12 th Floor Washington, D.C April 6,

9 CERTIFICATE OF SERVICE I hereby certify that I have served a copy of the comments by via upon each person designated on the official service list compiled by the Secretary in this proceeding. Dated at Washington, D.C., April 6, Nancy Bagot, VP Regulatory Affairs 9