Wholesale electricity markets (RTO or EIM), and joint transmission tariffs
Wholesale electricity refers to bulk power that is sold by electricity producers to utilities or power marketers, who then sell the electricity at retail rates to residential and business customers.
Regions that have competitive wholesale bidding markets belong to a Regional Transmission Organization (RTO).
Refers to competitive bidding markets for bulk electricity sales to utilities or power marketers in over 30 participating states. Wholesale competition requires belonging to a Regional Transmission Organization (RTO), which operates a regional transmission grid as well as a wholesale market where electricity generating companies bid their generation into the market to meet electricity demand and the lowest bids win. A wholesale market picks the most economical bidders from among competing electricity generating companies that use different energy sources and technologies.
Some of the states with wholesale competition also allow retail competition (consumer choice of electricity provider). Establishing competitive wholesale markets is generally a first step on the path to retail competition. Colorado is a vertically integrated monopoly state that allows neither wholesale nor retail competition (see map of RTO states and map of open market states). The current trend in states with RTOs and wholesale markets is that coal and nuclear power are being priced out of the market by lower-cost natural gas and increasingly by wind and utility-scale solar whose costs continue to decline (see energy cost comparison figure).
[See "How the Price of Power Is Set" (Forbes article)]
An RTO is an independent, non-profit organization that operates the high-voltage transmission lines of a group of utilities over a large region. An RTO also operates a competitive wholesale electricity market where electricity producers bid into the market and the lowest bids are chosen to dispatch their electricity to consumers. Electricity trading over large regions is more efficient and cost-effective, and also allows greater integration of variable renewable energy and reduces curtailment (waste) caused by local oversupply.
Colorado does not currently belong to an RTO, but a group of Colorado utilities called the Mountain West Transmission Group (MWTG) is proposing to join the Southwest Power Pool (SPP), which is the RTO to our east. Hearings on the proposal (Docket no. 16I-0816E) are on-going at the Colorado Public Utilities Commission (PUC). However, there is also an expanding Western RTO called CAISO, as well as one or more new RTO possibilities that may or may not be a better choice for Colorado and the Western Interconnection.
Additional information
- The U.S. electricity system – Our primer on RTOs and how they work.
- Article (Utility Dive) – Why regional wholesale electricity markets are needed in the West.
- Article (Denver Post) – Detail about the Mountain West proposal to join SPP.
- Podcast (Grid Geeks) – Status of grid regionalization and wholesale electricity markets in the West.
- White paper (Johnson, Hewlett Foundation) – "Grid Integration in the West: Bulk Electric System Reliability, Clean Energy Integration, and Economic Efficiency". Excellent overview of Western grid regionalization.
- PUC comment (Energy Freedom Colorado) – Our comments to the Colorado PUC about the MWTG proposal to join SPP. It concerns alternatives to SPP and recommends investigating all the available market/RTO options to ensure that the best choice for Colorado and the rest of the Western Interconnection is chosen.
- Op-Ed (Boulder Daily Camera) – Overview of RTOs, the relationship between wholesale and retail competitive markets, and the case to explore alternatives to joining SPP.
- Distributed Energy Resources (DER) and Non-Wires Alternatives (NWA)
text - Performance-based ratemaking – to align utility interests with consumer & societal interests
text - Distribution System Planning (DSP) – innovation & competition at the distribution level
text - Options for electric co-operatives to reduce costs and pursue energy goals
text - Competitive procurement of generation, storage, and transmission
text - Less utility ownership of generation (but more rate-based distribution investments)
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