Transmission owners saw increased revenue in SPP market in 2012

Transmission owner revenue in Southwest Power Pool’s (SPP) energy imbalance service market (EIS) increased 18 percent in 2012 over 2011 levels, rising to about $1 billion from $865 million the year before, according to SPP’s 2012 State of the Market Report.

The report, prepared by SPP’s market monitoring unit (MMU) and released May 17, credited an increase in transmission rates and higher use of the transmission system for the increased transmission revenue.

Transmission congestion revenue, by contrast, was down in 2012, dropping about 25 percent from 2011 levels. Low gas prices appeared to be the prime driver of the decline. The average annual price of gas decreased from $3.88 in 2011 to $2.63 in 2012, a 32 percent decrease, according to the report.

Congestion revenue is the difference between what is collected from loads and what is paid out to generators, and represents congestion cost in the EIS market. It is also the revenue that will be used to compensate holders of transmission congestion rights (TCR) when SPP’s integrated marketplace starts in 2014.

Transmission curtailment was down overall in 2012 compared to 2011. In 2012, the total curtailed energy was 0.39 percent of total scheduled energy, a 27 percent decrease from the year before. However, firm curtailed energy increased from 0.03 percent to 0.09 percent of total scheduled energy. Transmission is curtailed in response to a transmission capacity shortage as a result of system reliability conditions.

Throughout 2012, electric demand in the SPP region was similar to demand in 2011 because of similar weather patterns. According to the load and weather analysis, both years were warmer than normal, resulting in higher than normal electric demand both years. SPP’s market system reached a coincident peak load on Aug. 1, 2012 of 47,142 MW, a peak about 2 percent lower than the peak load in 2011.

The SPP market added four new market participants in 2012, and saw capacity increase 5.5 percent to 71,123 MW. The majority of the new capacity was from wind power, whose registered capacity jumped 60 percent in 2012, to 7,790 MW, increasing wind energy’s total contribution to an average of 7.5 percent of total generation, up from 6.2 percent in 2011. That magnitude of wind power is creating operational issues with regard to managing transmission congestion and resolution of ramp constraints, the report noted.

Transmission upgrades should relieve constraints

The Texas Panhandle and Omaha-Kansas City corridors are the most constrained areas in SPP, according to the report. The southern region of the Texas Panhandle typically has higher-cost generation than the north resulting in more economical generation in the north and the western region of Kansas being called upon to serve load in the south. However, there is limited transfer capability between the north and south region, resulting in heavy north to south congestion.

The Omaha-Kansas City corridor is also affected by a large amount of low-cost generation to the north and the limited transfer capability to move that power to the rest of the SPP market. That corridor is also affected by loop flow from outside the SPP system, according to the report.

Planned and recently completed transmission projects will help provide some relief.

In 2011, the ratings of several flowgates on the Omaha-Kansas City corridor were updated. Coupled with the reconductoring of the Randall – Palo Duro – Happy 115-kV transmission line in late 2011, those changes have increased the transfer capability in the Panhandle corridor, the report said.

In addition, the new 345-kV Tuco to Woodward line currently under construction is expected to relieve some of the congestion in the Texas Panhandle when it is placed in service in May 2014.

The 2013 SPP transmission expansion plan (STEP) published in January summarized 2012 activities that affect future development of the SPP transmission grid. In addition, the STEP discussed ten distinct areas of transmission planning, each of which is critical to meeting mandates of either the 2012 SPP strategic plan or the nine planning principles in FERC Order 890, the report noted.

Transmission upgrade projects throughout the SPP region totaled more than $6.7 billion dollars of proposed development, including $4.33 billion for projects coming out of the integrated transmission planning process, $1.4 billion for high-priority projects, $622 million for balanced portfolio projects, $177 million for sponsored projects, $152 million for transmission service projects and $56 million for generation interconnection projects. Wind projects, which totaled more than 26,000 MW, accounted for “the vast majority” of interconnection projects, the report noted.

Overall, market performance was strong in 2012, the report said. Significant near-term concerns with regard to SPP markets appear to be appropriately addressed by SPP, according to the MMU.

However, the report noted that a long-standing seams problem along the SPP eastern border will likely intensify when Entergy (NYSE:ETR) joins the Midcontinent ISO in late 2013. SPP continues to work with affected stakeholders and other regional market operators to address that and other concerns, according to the report.

SPP’s EIS market began operation on Feb. 1, 2007, and settles real-time imbalances between generation and load.

This report was originally published by TransmissionHub. It is republished by permission.

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