In Oklahoma, the Southwest Power Pool will have an increasingly important role to play in how and where state residents get their electricity. The regional transmission organization, based in Little Rock, Ark., and covering parts of nine states, is taking steps toward a competitive electricity market at the wholesale level.
By early 2014, SPP will launch its integrated marketplace, which will combine 16 separate areas known as balancing authorities into one area to balance supply and demand. The consolidation will offer investor-owned utilities, cooperatives and municipal generators access to electricity from diverse generating sources across the region. It means if the price is right, a utility in Oklahoma could be getting electricity from a nuclear plant in Kansas or a hydropower generator in Missouri.
SPP also pools costs from its member utilities to pay for transmission projects in the region. Each utility member pays allocations based on its customer base, usage and voltage size of the transmission project. In the past, transmission was built at the lowest cost to meet local needs. Now it's planned on a regional basis for the short-term and at 10- and 20-year intervals.
SPP's latest plan shows $1.5 billion in new transmission projects over the next 10 years. Its 20-year plan, which focuses on high-voltage transmission lines of 345 kilovolts, has projects totaling another $560 million.
Oklahoma customers pay among the lowest retail electricity rates in the nation, but the state's per capita income also is below the national average. Generation accounts for roughly 60 percent of a retail customer's electricity rates, while transmission costs account for about 10 percent, according to the Energy Information Administration. The remaining 30 percent goes to distribution, the network of power lines and transformers that serve neighborhoods.
Consumers across the Southwest Power Pool's footprint are expected to benefit from the transmission upgrades and market efficiencies. For example, SPP estimates its implementation of the integrated marketplace will have annual net benefits of up to $100 million across the region. Customers will benefit from the planned transmission projects with fewer line losses, increased reliability, lower emissions and fuel savings.
Still, costs are expected to be passed on in some way to utility ratepayers, said Oklahoma Corporation Commissioner Dana Murphy. Those costs could come in higher overall rates or in separate riders, specific amounts recovered from ratepayers for a single purpose such as a transmission upgrade.
Murphy said those higher costs will come as Oklahoma utilities also do environmental upgrades to meet federal regulations. A recent Corporation Commission report on electric system planning estimated the environmental costs could total more than $839 million in the next decade.
“The bottom line is I think rates for all utility customers will go up; it's just a matter of modulating that, making sure that it doesn't hit all at once and it's not overwhelming,” said Murphy, who also serves as vice president of SPP's Regional State Committee of public utility commission regulators. “That is an incredible challenge.”