Inside the West’s booming market-building movement

For decades, the American West has operated as a patchwork of individual utilities buying and selling power through bilateral contracts—a far cry from the sophisticated, organized markets that have flourished in the eastern United States.

But that’s changing rapidly. Southwest Power Pool’s newly approved Markets+ is the latest step toward bringing coordinated power trading to the region.

Markets+ received Federal Energy Regulatory Commission approval in January, clearing the way for the day-ahead and real-time market to launch in 2027. The approval marks a major milestone in the ongoing transformation of western electricity markets, setting up direct competition with California Independent System Operator’s Extended Day-Ahead Market, which is expected to begin operations next year.

“Organized markets have demonstrated for decades now tremendous value in pooling generation economically to help reduce the costs to serve the customers,” explained Carrie Simpson, vice president of markets at Southwest Power Pool, during a recent interview on the With Great Power podcast. “And the West is still very much separated. You’ve got 38 BAs, and you’ve got to buy and sell power like we did back at the turn of the century.”

Markets+ builds on the energy imbalance markets that currently operate in the West, including SPP’s own Western Energy Imbalance Service and CAISO’s Western Energy Imbalance Market. While imbalance markets help utilities manage real-time discrepancies between planned and actual electricity use, Markets+ offers something more comprehensive.

The new service builds on the foundation of imbalance markets where generation resources are pooled and then dispatched to cover times when utilities have overscheduled or underscheduled their expected hourly electricity needs. Except, instead of just doing this hourly, Markets+ does it for every hour of the following day.

“A full day-ahead and real-time market means I’m preparing for tomorrow, so all day tomorrow, not just this hour, but for 24 hours,” Simpson said. “It might be that my neighbor has more economic power than me for tomorrow…and it may make more economic sense for them to serve my load than for me to serve my own load.”

The market design also recognizes the unique characteristics of western utilities. “There’s the mountain West; there’s the desert Southwest, Pacific Northwest that are all very different, but they all have to work together,” said Simpson. But instead of drafting a tariff from scratch, SPP took an existing marketplace tariff used in the East, and modified it to incorporate the needs of the West.

Arizona Public Service, Salt River Project, Tucson Electric Power and UniSource Energy Services announced in November 2024 that they would join Markets+, with the four utilities expecting to begin participating when the market launches in 2027. The participation is expected to bring enhanced reliability and savings of “almost $100 million above current market participation,” according to their joint statement.

Beyond Arizona, Bonneville Power Administration, Chelan County PUD, Grant County PUD, Powerex, and Tacoma Power have all committed to support the market buildout starting in Q2 2025. Xcel Energy’s Public Service Co. of Colorado has also indicated plans to seek state regulatory approval to join Markets+, with a few contingencies.

However, not all western utilities are on board. SPP has been directly competing with CAISO’s Extended Day-Ahead Market, which Public Service Co. of New Mexico recently committed to joining.

Some decisions to join Markets+ have even faced scrutiny—Arizona Corporation Commissioner Kevin Thompson has publicly questioned whether his state’s four major utilities may have erred in choosing Markets+ over CAISO’s alternative. And five consumer advocate groups have sued BPA for its decision to join.

Still, the competition reflects growing support for broader changes to the western electricity landscape, which Simpson partially attributes to the energy transition. “Before you could use your own generation to serve your own load, there wasn’t a variability factor to the portfolio,” she said.

But now, the market can help move clean energy across different regions instead of curtailing it “If it’s really sunny in the desert southwest and it’s really hot in Colorado, for example, it may make perfect sense now…to sell that excess energy to Colorado.”

Phase two of Markets+ is now underway, following FERC’s January approval of the tariff. Between now and 2027, SPP will focus on implementation, and work with utilities to build and test the technical requirements for participation. Simpson compared the current phase to construction. “We’ve drafted the plans for the house, but now we’ve got to go build the house to live in it.”

For the full conversation with Carrie Simpson, listen to her interview on With Great Power here.

With Great Power is a show about the people building the future grid, today. It’s a co-production of GridX and Latitude Studios. Subscribe on Apple, Spotify, or anywhere you get your shows.

Read the original article from Latitude Media here.