August 27, 2024
DENVER – Western Resource Advocates commends the Colorado Public Utilities Commission for adopting rules that establish a transparent process for any utility to join a day-ahead energy market or Organized Wholesale Market (OWM) – a Regional Transmission Organization (RTO) or Independent System Operator (ISO) that meets certain statutory requirements. The new rules implement a 2021 law that requires utilities in Colorado to join a qualifying RTO by 2030 and represent a critical step toward establishing efficient, effective solutions to meet the increasing demand for reliable, affordable, and clean energy in Colorado and the West.
Since 2020, WRA and a diverse coalition of customer advocates, environmental organizations, large energy customers, and clean energy trade groups worked with the Commission to adopt rules that facilitate joining a day-ahead market or qualifying RTO.
These robust market participation rules are the first of their kind in the West and will help improve grid operations and decarbonization in Colorado and across the Interior West. The sustained efforts of a diverse coalition contributed substantially to the strength of these rules, and we hope other states in the region follow Colorado’s example.
In a day-ahead market, participants purchase and sell energy for next-day operations. The coordination of resource supply with forecasted demand reduces the number of generators that must be started at the beginning of each day, thereby cutting fuel costs and reducing fossil fuel emissions. Utilities in a day-ahead market benefit from expanded transmission connectivity, increased reliability benefits, and access to diverse renewable resources that extend beyond state borders.
Utilities looking to join a day-ahead market currently have two choices: the Extended Day-Ahead Market (EDAM), established by the California Independent System Operator (CAISO), and Markets+, operated by Southwest Power Pool (SPP).
EDAM will connect PacifiCorp into CAISO – two largest grid operators in the West – potentially unlocking large amounts of clean energy resources with an expanded transmission network. CAISO expects to begin EDAM operations in spring 2026. Markets+ aims to connect Pacific Northwest hydropower to the Interior West and is anticipated to begin operations in 2027.
Some Colorado utilities are currently evaluating day-ahead market options; others have committed to join the SPP RTO in 2026 in an expansion of the RTO that currently operates in the Central U.S.
BRINGING COLORADO CLOSER TO A REGIONAL WHOLESALE ENERGY MARKET
In 2019 Colorado passed the Transmission Coordination Act, which directs the state to investigate potential advantages and disadvantages of joining a wholesale energy market. Then, in 2021, Colorado passed Senate Bill 21-72, which directs non-municipal electric utilities to join organized wholesale electricity markets by 2030, unless those utilities can demonstrate certain exceptions are met and a waiver is warranted.
Within the Western Interconnection, our region’s grid, the only system managed by a centralized market operator is CAISO, which covers most of California and a small part of southern Nevada. The remaining region is managed by approximately 37 independent Balancing Authorities, each responsible for ensuring supply meets demand to maintain reliability within their footprint. In any RTO, all the Balancing Authorities within that geographic footprint get consolidated into one, allowing for greater information sharing and efficient energy transfers. RTOs can transmit large amounts of electricity from different places across the West as a consolidated operator with automated dispatch of power and multiple buyers and sellers of energy.
The Commission’s new rules require each Colorado utility to seek Commission approval prior to beginning operations in a particular market, based on a Commission determination that market participation is in the public interest. Those public interest requirements include having a system for greenhouse gas emissions accounting, interconnection rules and managing seams – the boundary areas between different markets.
While WRA is pleased that the Commission adopted our recommendations for investor-owned utilities to conduct comparative analyses of markets before joining an RTO, WRA is disappointed that the Commission ruling excluded our recommended requirement for utilities to conduct comparative analyses before opting to select even a particular day-ahead market.
Thorough modeling and reporting of market participation will be critical to ensuring any market a Colorado utility joins delivers benefits including cost-savings, reliability, and decarbonization. A well-designed RTO with inclusive stakeholder participation will maximize these benefits. Day-ahead markets will be a valuable incremental step for many utilities to gradually increase regional coordination.
WRA looks forward to the market evaluations and future proceedings that will include the review of applications by Colorado utilities to join day-ahead markets or RTOs.
Media Contact:
James Quirk, 908-902-3177, james.quirk@westernresources.org
