Navigating SPP

Southwest Power Pool, Inc. (SPP) is a nonprofit organization founded in 1941 when eleven regional power companies pooled their resources to keep Arkansas’ Jones Aluminum Mill powered around the clock in support of national defense needs during World War II. SPP has since expanded its wholesale power market and reliability coordinator operations across all or portions of the Great Plains region of the country.

SPP became an RTO in 2004. SPP began operating its real-time Energy Imbalance Service (EIS) market in 2007. In 2014, SPP began administering its Integrated Marketplace, which includes a centralized day-ahead market, a real-time energy market, and an operating reserve market with locational marginal pricing and market-based congestion management.

SUSTAINABLE FERC PROJECT PRIORITIES

  • More inclusive stakeholder participation standards.
  • Market enhancements that reduce self-scheduling of fossil resources and support participation of flexible clean energy resources.
  • Meaningful system planning between SPP and other grid regions.
  • Improving SPP’s generator interconnection (GI) process to support renewable energy project deployment.

Check out SPP-focused comments and other filings by the Sustainable FERC Project and other organizations in our library.

TRENDS

SPP has major renewable energy resources, especially wind, in its system. SPP’s membership includes several large public and municipal power entities (like Nebraska Public Power District). SPP has grown in size significantly over the last several years:

  • In December 2019, SPP launched its western reliability coordination (RC) service in the West, taking over RC services from Peak Reliability, which discontinued operations at the end of 2019. SPP is now providing RC services in the West to 12 utilities, including Tri-State, parts of WAPA, Black Hills Energy, and others.
  • SPP is laying the foundation for additional services as part of its Western Energy Services initiative.

FAST FACTS

SPP is responsible for the operation of the bulk transmission system in all or parts of 17 states: Arizona, Arkansas, Colorado, Iowa, Kansas, Louisiana, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Texas, Utah, and Wyoming.

  • Service territory: 546,000 square miles
  • Power plants: 818
  • Miles of transmission: 68,272
  • Peak demand (2019): 50,622 MW  

SPP operates day-ahead and real-time energy and reserves markets. Unlike the RTOs in the east, SPP does not operate a mandatory all-resource capacity market.  Nearly all states within SPP regulate their electric utilities as monopoly service providers, and therefore are primarily responsible for maintaining resource adequacy. SPP also has a significant number of public power and cooperative utilities, and part of the Western Area Power Administration is in SPP.

SPP’s transmission owners are investor-owned utilities, municipals, cooperatives, state agencies and independent transmission companies. Some of the larger entities by installed capacity include:

  • Southwestern Electric Power Co. (AEP West)
  • OG&E Electric Services
  • Westar Energy Inc.
  • Southwestern Public Service Co. (Xcel Energy)
  • Kansas City Power & Light Co. (Great Plains Energy)
  • Omaha Public Power District
  • Nebraska Public Power District
  • KCP&L Greater Missouri Operations (Great Plains Energy)
  • Empire District Electric Co.
  • Western Area Power Administration – Upper Great Plains
  • Western Farmers Electric Cooperative

GENERATION MIX

Installed Capacity (Winter 2019)

Source: S&P Global Market Intelligence

Generation (2019)

Source: S&P Global Market Intelligence

ELECTRICITY MARKETS

SPP’s electricity markets serve different purposes.

  • The energy market transacts power sales over a short-term one-day period and ensures a near-perfect balance between customer demand and supply in most circumstances. It consists of the Day-Ahead and Real-Time markets.
  • The ancillary services markets fine tunes the system over seconds, minutes, and hours to maintain the 60 Hertz frequency, voltage, supplemental power, and larger power reserves necessary to maintain grid reliability during all conditions.

Like MISO, SPP does not have a mandatory capacity market since all of the states and utility companies in its territory other are responsible for maintaining resource adequacy.

Day-Ahead Market

The day-ahead market allows market participants to secure prices for electric energy the day before the operating day and hedge against price fluctuations that can occur in real time. One day ahead of actual dispatch, participants submit supply offers and demand bids for energy. These bids are applied to each hour of the day and for each pricing location on the system.

Generators and offers scheduled in the day-ahead settlement are paid the day-ahead LMP for the megawatts accepted. Scheduled suppliers must produce the committed quantity during real-time or buy power from the real-time marketplace to replace what they did not produce.

Real-Time Market

SPP coordinates the dispatch of generation and demand resources to meet the instantaneous demand for electricity. Supply or demand for the operating day can change for a variety of reasons, including unforeseen generator or transmission outages, transmission constraints or changes from the expected demand. While the day-ahead market produces the schedule and financial terms for most physical transactions, a number of factors usually change the day-ahead result. Thus, SPP operates a spot market for energy, the real-time energy market, to meet actual energy needs within each hour of the operating day.

The real-time market financially settles the differences between the day-ahead scheduled amounts of load and generation and the actual real-time load and generation. In real-time, MISO issues dispatch rates and dispatch targets. These are five-minute price and megawatt signals based on the aggregate offers of generators, which will produce the required energy production.

Ancillary Services

Ancillary services are those functions performed by electric generating, transmission and system-control equipment to support the transmission of electric power from generating resources to load while maintaining the reliability of the transmission system. SPP procures three ancillary services via the co-optimized energy and ancillary services market:

  • Supplemental Reserve – generation that is offline but ready to generate power within ten minutes
  • Spinning Reserve – extra generating capacity available for nearly immediate use by ramping up the power output of the already connected generators
  • Regulation Reserve – generation required to maintain power quality

Operating reserves provide system stability, especially during disruptions such as the unexpected loss of power from a large generating station.

PLANNING

SPP’s planning process, known as the Integrated Transmission Plan (ITP), examines transmission system needs over 5, 10, and 20-year planning horizons. Through the ITP process, transmission project need is assessed through economic analysis. Transmission project and system analyses are conducted as part of SPP’s ITP process as well as its Balanced Portfolio Process, high priority study process, economic planning studies, sponsored upgrades and Inter-regional Projects assessments processes pursuant to the requirements set forth in Attachment O of the Open Access Transmission Tariff (OATT).

The ITP includes forecasts of energy use and peak load, projections of needed capacity and operating reserves, information about available generation and transmission resources, and descriptions of needed transmission solutions. Consideration of transmission projects to facilitate renewables integration typically is addressed in the 20-year ITP, although projects and resources may also be assessed through shorter planning horizons through other study processes.

More information on the SPP planning process can be found here.

GOVERNANCE

SPP is a non-profit private corporation with headquarters in Little Rock, Arkansas. By the design of the Membership Agreement, SPP’s members have significant influence in SPP decision-making. Its members include investor-owned utilities, municipal systems, generation and transmission cooperatives, state agencies, independent power producers, power marketers, independent transmission companies, federal agency, and large retail customers. Also, the states in SPP’s footprint engage with SPP through SPP’s Regional State Committee (RSC). Notably, due to SPP’s high membership fees, none of its members are consumer, environmental, or other public interest entities.

STAKEHOLDER ENGAGEMENT

The SPP organizational chart illustrates its governance and stakeholder structure. Among the key governance groups at SPP are:

Markets and Operations Policy Committee (MOPC) – Responsible for developing and recommending policies and procedures related to the technical operations. The scope of MOPC’s responsibilities is broad, covering system design, planning, resource adequacy, tariff, interconnections, operations, reliability, market design, oversight of standards development, and other responsibilities. All of the activities of the committees listed below are under the oversight of this principal committee. The MOPC reports directly to the Board of Directors.

Corporate Governance Committee of the Board of Directors – Responsible for the overall governance structure, including nominations, for SPP. The Committee recommends appointments to the Board of Directors for Organizational Group representatives and leadership except the Markets and Operations Planning Committee and Members Committee.

Economic Studies Work Group – Reviews and advises on metrics and practices used in the economic studies process, developing recommendations for the improvement of SPP’s economic studies. The ESWG examines the parameters, methodology, inputs, and metrics used in these studies, reviewing the annual data updating process, and ensuring consistency throughout the organization. As needs are identified for guiding principles for economic studies, the ESWG is responsible for their development.

Market Working Group – Responsible for developing and coordinating changes to SPP’s energy markets, congestion management, and market monitoring operations. 

Seams Steering Committee – Responsible for providing direction to SPP staff regarding staff’s negotiation, development, implementation, and maintenance of SPP’s seams agreements, joint operating agreements, or similar agreements with SPP customers or transmission providers. 

Supply Adequacy Group (SAWG) – Responsible for development and implementation of policies and processes to ensure reliable supply of capacity necessary to meet demand and supply adequacy requirements/methodologies in SPP. In addition, the SAWG is responsible for ensuring that these processes and policies meet the compliance obligations of NERC Reliability Standards.

Transmission Working Group – Responsible for planning criteria for evaluating transmission additions, making recommendations on these to the Markets and Operations Policy Committee. The Working Group works with individual transmission owners about oversight of coordination efforts and contingency evaluations.