Regional power markets in United States

There are three major integrated power grids in the United States:

• Eastern Interconnect --- east of the Rocky Mountains
• Western Interconnect --- west of the Rocky Mountains
• Texas Interconnect --- Texas

Inside each interconnection, all of the transmission lines are synchronized ==> allows power to be transported across long distances within these interconnections.

Electrical prices vary regionally with an interconnection depending on regional population, industries, and weather conditions ==> Long distance transmission of power, called wheeling, between fundamentally different markets is the source of large number of trading opportunities.

Texas Interconnect

• Smallest interconnection in the United States.
• Entirely located within the state of Texas.
• Coordinated by a single ISO, the Electric Reliability Council of Texas (ERCOT).
• There are a number of DC power lines, of limited capacity, connecting the Texas power grid to the Eastern Interconnect and the Mexican power grids.

Western Interconnect

• The West Interconnect is a long line of regional grids stretching from the Pacific Northwest into the Desert Southwest, with California in the middle ==> Much of the trading in the Western Interconnect revolves around the flow of power into or out of the highly populated areas of California.
• The pacific Northwest (MIDC) and Colorado River (Mead) near las Vegas are major sources of hydroelectric power.
• 70% power supplies in Washington and Oregon come from hydroelectricity ==> small changes in water flow can result in substantial changes to regional power supply ==> Snow melts during Spring lead to more power supply than demand in Pacific Northwest, so some power is transmitted to areas of higher demand (usually California).
• California is a densely populated area: in summer it needs import of power from Pacific Northwest and Desert Southwest; in Fall mild temperature makes it possible to export power to still very hot areas of Las Vegas and Phoenix.
• The marginal power producers in California are usually natural-gas-fired plants ==> a steady supply of natural gas is required: southern California imports natural gas from the Rocky Mountains and West Texas, and northern California import natural gas from west Canada.

Eastern Interconnect

• It includes the two most important RTO/ISOs: PJM (originally named the Pensylvania, New jersey, and Maryland Interconnection) and MISO (Midwest ISO)
• The two most liquid trading locations in the Eastern Interconnect are Cinergy Hub (abbreviated MISO-Cin Hub) and PJM Western hub (PJM-W).
• Varieties in fuels and regional weather conditions provide many trading opportunities in the East Interconnect:
• Some important trades are between regions using col-fired plants and those using natural-gas-fired plants
• Other trades are weather related.
• The southern part of Eastern Interconnect has extended summer and mild winter, while the northern part has colder winter and shorter summer air-conditioning season.