Changes coming in how utility companies buy electricity

Computers and the internet are not just for buying items from Amazon or Overstock.com. Starting in March, utility companies connected to the Integrated Marketplace will be able to buy and sell electricity electronically, simplifying a system that has been around for many years.

According to Keith Sugg, director of market implementation at the Arkansas Electric Cooperative Corporation, the ability to buy and sell electricity allows regional utilities to be able to meet demand at all times as part of the new smart grid technology that has been rolling out to various utilities in various forms.

Sugg said while power utilities have traditionally operated their own power plans, supplying the desired level of load needed to supply power to customers, the growing interconnectedness of power utilities have allowed the traditional business model to change over time, with various utilities being connected on the grid, able to negotiate over the phone several buys and sells each day between companies so one utility can unload excess supply while another is able to fulfill its needs.

"You commit these units, bring them online and have them running," he said. "And then you've got another utility that's a neighbor. Maybe one of the utilities is Oklahoma. The next one (could be) in Kansas. You maybe have two utilities in Arkansas. But each of these guys are doing their own thing. What we're moving to is a regional market that handles that."

The regional market will be a computerized system known as a real-time balancing market (RTBM) that sets pricing, monitors supply levels and draws any excess inventory automatically from a utility, attempting settlements every five minutes according to Southwest Power Pool in Little Rock.

Not only will SWPP be managing the RTBM, but the organization will also be helping member utilities plan output through its Integrated Marketplace.

"The Integrated Marketplace will determine which generating units should run the next day for maximum cost-effectiveness, provide participants with greater access to reserve electricity, improve regional balancing of supply and demand, and facilitate the integration of renewable resources," the organization said on its website.

Currently, the marketplace is in a testing phase with a go-live date scheduled for March 1. A component of the marketplace, the Transmission Congestion Rights (TCR) Market, went live Oct. 18, 2013, according to a press release.

The TCR Market, according to the release, allows utilities to "hedge" against the market.

"The TCE Market is integral to the Day Ahead Market, which will ensure the next-day's generation within SPP's footprint will be used economically and efficiently," the release said. "TCRs are used as a financial hedge against congestion, allowing market participants to reduce their potential exposure to market-price fluctuations."

The release goes on to say that the TCR Market went live last year "so that participants can hold TCRs before congestion costs are incurred."

Sugg said AECC was unique among Arkansas utilities, as it is a member of not only SWPP's marketplace, but also the Midcontinent Independent System Operator (MISO), a regional transmission organization for which AECC was integrated in December 2012.

He said in the long term, being a member of both markets would be a benefit not just for the AECC, but also for its owners — all cooperative users across the state.

"If you can centralize that process (of buying and selling excess electricity) in one entity that has a much larger (footprint), then you can save significant dollars. So this centralized market is a way to achieve that and it does it through economics."