Heat domes. Cold snaps. Winter storms — even as far away as Texas: extreme weather events are roiling power markets and spiking power prices for energy providers and their customers.
This increasing volatility — and mandates to decarbonize energy supplies, introducing more variable energy sources, such as wind and solar power — is driving big changes for regional utilities, including how they buy and sell power.
In play right now is a new alignment of Northwest utilities into centralized, organized energy markets.
Two power market operators are contending for their business: the Southwest Power Pool’s Markets+, based in Arkansas, and the California Independent System Operator. Both operators are seeking commitments from Northwest utilities.
This is a complex topic, so let’s step back to see what’s new.
Around the region, utilities buy and sell energy to meet customers’ needs, moving power around a connected power grid. That is not new.
What is changing is creation of these larger, centralized pools of utilities over a bigger geographic footprint, with an operator that optimizes trades not just minute to minute but for a whole day. That is intended to help utilities smooth challenges of variability in both weather and energy sources.
As these new market pools shape up, all eyes are on the Bonneville Power Administration.
A nonprofit federal administration, the BPA is self-funded by revenues from selling power and transmission services across 15,000 miles of high-voltage power lines. The juice comes from 31 federal dams and one nuclear plant, which produce about 32% of the power generated in the Northwest, sold wholesale to 142 retail customers — utilities large and small across 300,000 square miles in eight states.
Some get all their energy from BPA. Others, such as Seattle City Light, supplement their own generation with purchases from BPA. Typically, Seattle City Light gets 40% of its customers’ power from BPA — even more in low-water years, such as last year.
BPA has held multiple briefings, and workshops to help lead the process as the region remakes its energy market. BPA staff in a white paper last year recommended BPA jump in the pool operated by Markets+.
But with the players in the two power pools still shaping up, some powerful policymakers are urging BPA to pump the brakes.
Aligning with energy partners in the Southwest Power Pool’s Markets+ initiative is projected to be, under some scenarios, $79 to $129 million more costly in 2026 for Bonneville — and its ratepayers — compared to business as usual, according to a study commissioned by BPA. U.S. senators for the Northwest wrote in a letter to BPA Dec. 13 that there is no scenario evaluated in the study that demonstrated financial benefits in choosing the Markets+ alternative.
BPA counters that while initial costs in the first few years of Markets+ participation are more costly, those costs level out and BPA contends the long-term picture eventually is financially beneficial for customers.
But why eat extra cost? And why the hurry, the senators asked, and urged BPA to do nothing for now, and wait out changes expected in California law this session, that could put to rest concerns about governance of that market pool.
PacifiCorp, PGE, Seattle City Light and three major electrical worker unions in Portland, Tacoma and Seattle also urged BPA to change nothing for now a letter sent to BPA this week, urging BPA to avoid additional costs for customers already facing rate increases.
Heavy hitter customers that guzzle power, including Amazon, Google, Microsoft and Rivian, also in a public comment sent to BPA’s administrator stated Bonneville has not sufficiently taken into consideration the impact to ratepayers and any decision now is premature. A host of environmental groups and green energy advocates have also urged BPA to give this decision more time to more fully consider both economic and environmental impacts before making its move.
But with some area utilities already declaring their market preferences, BPA must make a decision, or will find itself isolated, with limited options, said Rachel Dibble, vice president for bulk power marketing at BPA. “We have to make a choice,” Dibble said. “Or everything will change around us and our options will be limited. Not to make a choice is a choice.”
Chelan, Grant County and Snohomish County PUDs and Tacoma Power have each already indicated a preference for Markets+. For Tacoma Power, the decision came down to reliability and independent governance, said Chris Robinson, general manager and chief operating officer for the utility.
Being hosted by a market run by a California entity didn’t seem like a good deal, Robinson said, and he didn’t want to wait on legislation in California to sort that out, either. “We have this opportunity right in front of us; we think it is important to move forward,” Robinson said.
But Dawn Lindell, general manager for Seattle City Light, isn’t feeling the Markets+ love. She said she is concerned about reliability and affordability for the utility’s customers.
“I want to know, do I have paths by which I can get the energy and send the energy, and is it what makes economic sense?” said Lindell. “We have 113,000 customers at or below 60% of average income, it matters a lot what we charge … I am looking for the least cost, most effective option.”
Weather events of the last four years compared with the previous 20 have gotten the utility’s attention, Lindell said, offering a graph that shows spikes in power prices on the market as jagged as the extreme temperatures that necessitated the power purchases.
“You can see climate change in the graph, it is very impactful over the last four years and every time we have a high (temperature) day or a low day, we have to go on the market and it is very expensive,” Lindell said.
“These weather events are driving the need for a very good and cost effective way of buying and selling energy.”
The larger storms wrought by climate change also make creation of a larger market into which to sell and from which to buy sensible — to escape weather patterns that spike prices. “Storms are stronger, last longer, and affect a much bigger land mass,” Lindell added.
“We need trading markets where the weather is different … I would love a ginormous footprint that covers a lot of ground, north and south, and we want as non-carbon emitting sources as we can find.”
BPA has announced it will make a preliminary decision on market choice March 6 and a final decision in May.
