On March 1, the Southwest Power Pool (SPP), transitioned to a more sophisticated electricity market design that, according to SPP, is expected to realize up to $100 million in annual net benefits. SPP is a FERC-regulated Regional Transmission Organization that administers the grid across a 370,000 square mile, nine-state footprint in the south central part of the U.S and serves more than 15 million customers. FERC gave final approval to SPP’s market in January.
Grid operators must assure that electricity supply and demand is balanced at all times. Previously, SPP assured this balance by securing resource commitments in a “real-time” auction market an hour before the system is dispatched. Under the new “integrated marketplace,” SPP will also operate a financially binding “day-ahead market” that secures commitments for each hour of the next day. This market helps assure the lowest-cost resources will be available and gives participants a heads up regarding the next day’s prices, which allows them to make desired adjustments in the real-time market to their day-ahead bids or offers. SPP will also administer a “congestion hedging” market for financial instruments that hedge against congestion costs (measured as price differences between locations on the grid).
SPP’s new market design is generally characterized as a “day-2 market.” All of the other RTOs and ISOs in the nation operate under a day-2 market design. Unlike the three RTOs in the northeast, however, SPP will not operate a forward capacity market to secure future resource commitments further into the future than the next day.