Xcel Energy ditches effort to join regional network as potential cost savings evaporate

Source: By Aldo Svaldi, Denver Post • Posted: Wednesday, April 25, 2018

Utility cites smaller than expected benefits

Xcel Energy, the state’s largest utility, is pulling out of the Mountain West Transmission Group, which likely will derail an effort by Colorado utilities to join the Southwest Power Pool.

“After much deliberation, Xcel Energy has determined that continued engagement in Mountain West is not in the best of interest of our customers or the company,” said David Eves, the company’s executive vice president and group president for utilities, in a statement issued Friday.

Xcel joined with several other utilities in the state in 2013 to study creating a regional transmission organization, or expanded networks designed to ease the movement of electricity across service boundaries by removing tariffs and other barriers.

Concerned about costs and regulatory effort required to form an RTO from scratch, the group in early 2017 shifted its efforts to joining the Southwest Power Pool, a consortium of 100 members stretching from North Dakota to north Texas.

Until last month, it looked like efforts to integrate the Mountain West into the SPP were making progress. By providing utilities in the region with access to a real-time market for electricity free of tariffs, it was estimated consumers in the region could save $154 million and see improved reliability.

Among the considerations Xcel gave for dropping out were: higher than expected cost to form the regional RTO; limited opportunities to expand to the west, the risk of increased state regulation and more limited benefits for customers than first thought.

Eves said the decision to pull out of the group was based solely on those issues, and he called the effort and study that went into exploring a regional RTO “worthwhile.”

“We’re surprised and disappointed by the decision, as SPP has spent significant time and effort attempting to bring organized wholesale markets and their many benefits to the west, and we’re hopeful there will still be opportunities to do so,” said Derek Wingfield, a spokesman for the SPP, which is based in Little Rock, Ark.

An advantage offered for joining the SPP was the ability to spread fluctuations in supply and demand across a wider number of states and power providers. If a Colorado utility found itself with too little power, say a plant outage, or too much, a drop in demand, it could quickly rectify the situation in a cost efficient way.

Xcel recently received multiple bids for future renewable sources, including storage, that were the lowest on record. Another problem is that there was a limited interconnection to move electricity between the two regions. Fixing that constriction would have required a major investment.

Xcel’s decision to leave the group left its former partners such as the Western Area Power Association (WAPA) scrambling on what to do next.

“WAPA appreciates the strong collaborative partnerships within the Mountain West Transmission Group and remains committed to working with neighboring entities across its 15-state footprint to develop strategies to adapt to the evolving electricity industry,” the association said in a statement.