When it comes to electricity markets and transmission, the West has been wild — the largest region in the country without a wholesale electricity market or a regional grid operator to oversee it.
Now, not one but two regional operators are racing across the West signing up utilities to create new markets.
From the East, the Little Rock, Arkansas-based Southwest Power Pool, or SPP, is reaching as far as the Bonneville Power Administration in Oregon, and from the West, the California Independent System Operator, or CAISO, is stretching to New Mexico.
In most of the country, wholesale electricity markets and grids have been run since the 1990s by regional transmission organizations, known as RTOs, or independent system operators, called ISOs. The West and the Southeast are the only regions without such a market.
California has had a market in place since the 1990s run by CAISO. The rest of the West has been in fend-for-yourself mode.
Large wholesale power markets have the ability to quickly provide the cheapest power available to a utility. An algorithm can simply match buyers and sellers based on price and the amount of power needed.
RTOs also can plan and finance transmission projects. Southwest Power Pool, whose grid stretches across all or parts of 14 states from Texas to North Dakota, in 2024 approved 89 transmissions projects worth $7.7 billion.
Chris Pink, the senior vice president for operation at the Tri-State Generation and Transmission Association, which serves rural electric cooperatives in Colorado and three neighboring states, explained the benefit of RTO planning this way:
“Let’s say Tri-State has a problem between A and B and PSCo (Xcel Energy’s Colorado subsidiary) has a problem between C and D. We’d each do a project to take care of our problem.
“But if we were in an RTO, it might say we’re going to build a new line between A and D, and it’s going to fix both the problems, and it will be two-thirds the cost of those two individual projects, so you can better optimize the transmission,” Pink said.
Tri-State has decided to join SPP as a full member.
Joining up could yield savings for Colorado electricity providers
A study done for the Colorado Public Utilities Commission estimated that joining an RTO could produce $230 million in annual savings for electric utilities in the state.
Colorado utilities with transmission assets are mandated to join a wholesale market by 2030 and it looks like two big markets are emerging: those run by SPP and CAISO.
Since 2014, there have been “energy imbalance markets” in the West, shifting power in real time to help avoid the overloads and power drops that can disrupt the grid.
CAISO runs one imbalance market and SPP another. The next step is joining a day-ahead market, which buys and sells power short-term: from the West Coast there is CAISO’s Extend Day-Ahead Market, or EDAM, and from the East SPP’s Markets+.
“These markets are only about the dispatch of generation onto the existing grid,” said Johannes Pfeifenberger, a principal focusing on electricity wholesale markets at The Brattle Group, a consulting firm.
“It is only in an RTO that you get full transmission and generation planning and financing,” Pfeifenberger said. The day-ahead markets, however, may be a prelude to full membership.
This map from the Federal Energy Regulatory Commission shows the country’s regional transmission organizations, known as RTOs, or independent system operators, known as ISOs,.and the big gaps in the West and Southeast.Most Colorado utilities, including Colorado Springs Utilities and the Platte River Power Authority, are set to join SPP as full members on April 1, 2026.
Xcel Energy has submitted a plan to the Colorado Public Utilities Commission to join Markets+, although it is reluctant to give up its transmission planning and join SPP as a full member.
The PUC staff, the Colorado Office of the Utility Consumer Advocate and Western Resource Advocates all raised objections to Xcel Energy joining Markets+, arguing that the utility had not adequately shown the benefits compared to the $30 million in upfront costs to join.
All of SPP’s service territory is currently in the Eastern grid, the Eastern Interconnection, and there are only seven small ties between the East and the Western grid, the Western Interconnection.
Colorado utilities joining SPP face the challenge of the limited transmission between the grids. Three existing ties would be used to link to SPP. There is room to operate as only 20% of the ties’ capacity is being used, according to Bruce Rew, SPP vice president for operations.
“The market will show the price divergence and allow us to determine what levels of new transmission would be beneficial,” Rew said. “We would look at it as a whole … and optimize over a bigger area.”
Critics, however, say that trying to bridge the gap to SPP will be more costly than heading West. An analysis by the Environmental Defense Fund calculated that Xcel Energy would save $4.2 million a year more by joining EDAM.
“We think that becoming part of a wider Western market, with more resources, is a better option,” said Alex DeGolia, EDF’s Colorado director of legislative and regulatory affairs.
Xcel Energy doesn’t see it that way. “We’re a long way from California,” said Joe Taylor, the utility’s senior director for Western markets. “We’re a long way from the CAISO system and the limited amount of transmission that we have outside of our region would limit our capability to trade with the CAISO in the EDAM market.”
“We’re physically and transmission-wise, closer to the SPP market,” Taylor said.
Mark Gabriel, the CEO of Brighton-based United Power, an electric cooperative serving some 300,000 people in an area from Commerce City through Adams and Weld counties, agrees. United Power is set to join SPP as a full member.
“We need markets now,” Gabriel said. “SPP is the logical choice.”
Staying out of California politics is top of mind
California has the highest electricity rates in the region, and CAISO is overseen by the governor and state legislature. “The politics in Wyoming and California are very different,” Gabriel said.
The Brattle Group’s Pfeifenberger said: “I don’t think it is realistic to form a single organized market for the West. There are parts of the region with only partial transmission coverage and some utilities may not want to join a California-dominated ISO.”
There is an effort under way to create a RTO across the West that is not governed by CAISO called West-Wide Governance Pathways Initiative.
“They’ve been talking about this for 25 years and it hasn’t happened,” said Gabriel, who previously was the CEO of the Western Area Power Administration. “I don’t think it will happen in another 25 years.”
Two separate markets, however, will create a gap or “seam” a barrier between them creating limitations and inefficiencies on the grid.
“Seams are the point where two parties have different approaches to the same functions,” said Antoine Lucas, SPP executive vice president and chief operating officer, “so we have to smooth those out. … It is something we know will be an important thing as we expand into the West.”
Debra Lew, director of the Energy System Integration Group, a nonprofit focused on grid transformation, said: “My original thought was, ‘Oh, the people closest to California will go with California. People closest to SPP will go with SPP. But what we are seeing is these two markets create a new seam. It is going to be a bit of a mess.’
“It’s a huge issue for folks in the West right now that there are two markets and seams between those two markets.”
And so, for the moment the West is being balkanized, with Colorado going to SPP and its neighbor New Mexico going to EDAM. The Bonneville Power Administration, serving the Pacific Northwest, is joining Markets+, and Nevada’s NV Energy and PacifiCorp — which operates in parts of Oregon, Utah and Wyoming — are joining EDAM.
Still, Pfeifenberger said two markets are better than none.
“Two markets covering the footprint of the West is better than partial coverage, though it does create a seam,” he said. “But what you have now is many seams in the West.”
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