Open Letter to Western Energy Leaders on Utilities’ Day-Ahead Market Study

Posted by Leah Rubin Shen on Dec 5, 2023 10:10:28 AM

United Outlines Limitations of WMEG Study in Open Letter

On Monday, Advanced Energy United sent a letter to state energy offices in the West offering our perspective on a study commissioned by the Western Markets Exploratory Group (WMEG) that compares the benefits of several proposed Western day-ahead market scenarios. The study has been filed in multiple dockets in states across the West, but it offers an incomplete view of the benefits that can accrue to the West in a day-ahead market.

Our letter makes the following four points:

  • WMEG is made up of utilities. As a result, the study naturally focuses on what’s best for those utilities and presents the results in that light. The study does not take into consideration many other potential benefits of a day-ahead market, such as shoring up energy reliability, getting more clean energy onto the grid, and addressing energy affordability, especially as inflation and higher fuel prices drive up electricity bills.
  • The study only considers utilities’ operational savings, thus missing out on a category of benefits that are far greater: the capacity savings that accrue over time from coordinating reliability reserves and optimizing resource and transmission development across a wide footprint. Most of the savings associated with regional markets come from the ability to draw on a diverse portfolio of cheaper, cleaner, and more reliable resources across a broad geographic region, not from nominally lower grid operating costs. 
  • The impact the study did find is small compared to the benefits it omitted, and tiny compared to the overall electricity system. The utilities’ operational savings are roughly 1-2%, while the capacity and reliability benefits that weren’t studied are likely 2-10 times greater.
  • Research shows that regional collaboration across the broadest footprint in the West would create better grid reliability, lower electricity bills, and bring hundreds of thousands of jobs.

At United, we know that expanding western energy markets will pay off tremendously for ratepayers, improve energy reliability, increase economic opportunity, and help leaders reach their policy goals. We also know that getting the most of these benefits requires the biggest and deepest market possible. We support state energy leaders’ attention to maximizing this opportunity, and to think critically about studies that would have them settle for anything less.

Click here to view or download the letter.

Learn more about Advanced Energy United's work advocating for the development of a competitive wholesale energy market for the Western U.S.

Topics: Wholesale Markets, Western RTO



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