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April 10, 2017
Report by Brattle Economists Evaluates Production Cost Savings of Regional Market Participation by Mountain West Entities

Brattle Principals Judy Chang and Johannes Pfeifenberger, and Associate John Tsoukalis have authored a report that analyzes how different market structures could alter production costs in the combined service areas of the Mountain West Transmission Group entities.

The Mountain West Transmission Group, made up of ten electricity service providers in the U.S. Rocky Mountain Region, is exploring potential participation with an existing regional transmission organization (RTO) to expand their electricity market operations. The Mountain West regional market would be the first market of its kind in the Western Electricity Coordinating Council (WECC), outside of California. To evaluate the projected market benefits, the group commissioned Brattle for a preliminary analysis of partial gross production cost benefits under a regional market or commission transmission tariff.

The Brattle report, “Production Cost Savings Offered by Regional Transmission and a Regional Market in the Mountain West Transmission Group Footprint,” specifically analyzes the potential generation-related variable costs, or production costs, of serving electricity customers in the Mountain West region under three different market structures: a bilateral market, a joint transmission tariff, and a regional market.

The study finds that the Mountain West entities would collectively experience a significant reduction in production costs by transitioning to a centralized wholesale power market. Specifically, Mountain West participants would collectively experience a reduction in annual production costs of about $88 million per year by moving from the status quo to a regional market without must-run generation. This compares with a $14 million/year production cost savings estimate from implementing only a joint transmission tariff in the Mountain West footprint. The authors note that additional studies would be needed to assess the benefits related to resource adequacy and operation reliability, renewable integration, and regional transmission planning and cost allocation.

The full report can be read on the Western Area Power Administration’s (WAPA) website.