On February 29, 2012, Southwest Power Pool, Inc. (“SPP”) filed tariff revisions to implement a new integrated marketplace for the region, moving SPP to a locational marginal price (“LMP”)  energy markets model, like 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 LMP-based day-ahead and real-time energy markets.  The integrated 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.  SPP anticipates the new marketplace will result in net benefits of $45 – $100 million per year.

Once the marketplace takes effect, SPP will serve as the reliability coordinator, balancing authority, transmission service provider, planning coordinator, reserve sharing group administrator, interchange authority and market operator.

SPP’s day-ahead market is designed to determine the least-cost solution to meet the market’s needs and reserve requirements.  To accomplish this objective, market participants will submit offers to sell and/or bids to purchase energy or sell operating reserves.  SPP will then select the most cost-effective mix of resources to meet the needs of the operating day.  Participants will be able to submit financially-binding virtual energy offers or virtual energy bids for the day-ahead market.  SPP will also include a “must offer” requirement to ensure enough physical resource capacity to satisfy the need of the market.  The “must offer” requirement is limited to participants with load obligations.

Once the day-ahead market is completed, SPP will begin the day-ahead reliability unit commitment process.  This process is designed to ensure there are adequate physical resources to meet SPP’s load forecast and operating reserve requirements.  SPP will start this process one hour after posting the day-ahead market results to determine whether there is adequate capacity for the following operating day.  SPP will then update the operating plan and issue start-up and shut-down orders as needed.

In regards to transmission, SPP will implement auction revenue rights and transmission congestion rights to assist in managing the cost of congestion.  These rights will not manage congestion costs by scheduling based on physical rights, but instead should provide participants with financial tools to protect themselves from congestion costs and sell their rights to other participants. 

Lastly, SPP’s marketplace will include a multi-day reliability assessment.  This will be performed in advance of the day-ahead market to identify resources that must be given commitment instructions in advance of the day-ahead market reliability unit commitment process, due to the long lead times.  The multi-day assessment will be completed three days prior to the applicable operating day.

SPP had requested FERC issue an order on the proposal by June 31, 2012, with final FERC approval by the end of 2012.  SPP anticipates the new marketplace to go in effect on March 1, 2014.

The docket number is ER12-1179 and a copy of the filing can be found here.