Deep freeze and data concerns test Southeast power market

By Miranda Willson | 03/28/2023 06:57 AM EDT

A new electricity market was supposed to help ease costs and bolster renewables in a dozen states. But after a winter storm in December, new questions are emerging.

Solar panels, power plant, transmission lines.

Duke Energy Corp. (solar); Georgia Power (power plant); Gerry Broome/AP Photo (transmission lines)

When several large electric utilities launched a first-of-its-kind energy trading platform in the Southeast last fall, the pitch was simple: Lower energy bills and deliver more solar power to customers.

Now, more than four months after the Southeast Energy Exchange Market began operating, some state regulators and energy analysts are skeptical that those benefits will be realized. Critics say a December deep freeze exposed the platform’s flaws.

SEEM operates in a fast-growing region, extending across parts of 12 states ripe for solar development but still dominated by carbon-emitting coal and natural gas power plants. The electricity trading system was designed to make it easier for utilities to buy and share electricity in real time, something SEEM backers say will be crucial as more solar enters the mix.


But the platform doesn’t disclose what energy sources are being traded, making it largely impossible for outside observers to determine its impact on solar, coal or other resources.

Trading electricity through SEEM effectively halted during a three-day period of extreme cold temperatures and severe weather around Christmas Eve — the same period last year when three major utilities in SEEM’s system enacted rolling blackouts that left hundreds of thousands of customers in the dark.

“The total number of buy offers declined over those couple of days, which is the total opposite of how a real market would function,” said Simon Mahan, executive director of the Southern Renewable Energy Association. “It’s almost as if they gave up on it.”

SEEM began operating in November as a way for electric utilities in the Southeast to trade power every 15 minutes, so long as there are transmission lines available to deliver the power. A participant can offer to sell excess energy, and if another participant is willing to buy it, the sale goes through.

“Right out of the box, it’s creating value and saving money for our customers,” said Noel Black, senior vice president of federal regulatory affairs at Atlanta-based Southern Co., one of the utility architects of SEEM.

Supporters of SEEM have pitched it as a cheaper, simpler alternative to regional transmission organizations, which oversee the flow of power in much of the United States outside parts of the West and Southeast. But skeptics argue that it lacks the transparency and fairness seen in a full-blown regional transmission organization and isn’t up to addressing electric reliability challenges stemming from climate change-fueled extreme weather.

With Florida, Georgia and North Carolina among the states with the most solar energy deployed, the SEEM system could help the Southeast maximize the use of renewable energy, Black said.

In areas of the country with extensive solar or wind power in the electricity mix, there is a risk of renewable energy curtailment, meaning solar or wind power essentially goes to waste because it cannot be used immediately. SEEM’s trading system could help ensure that doesn’t occur in the Southeast, Black said.

“It makes the Southeast renewable-ready,” he said. “We want those solar resources on. We don’t want to end up in a curtailment situation.”

Still, only utility companies that sell energy directly to customers — rather than independent renewable energy companies — can be members of SEEM. Independent energy companies can participate in the market, but none has signed up yet. Members — not participants — also set the rules and approve requests to join.

Backers of the platform say that that framework is justified, given that utilities funded and created SEEM. Renewable energy advocates say it’s unfair.

Members of SEEM can trade power across transmission lines without paying a fee, which is why backers say it will reduce energy bills for consumers.

However, that makes it harder for renewable energy companies that are not SEEM members to be competitive in the Southeast, said Maia Hutt, a staff attorney at the Southern Environmental Law Center. The group represents several environmental and clean energy nonprofits suing the Federal Energy Regulatory Commission for having approved the platform.

“It tilts the playing field in favor of more expensive, dirtier monopoly-owned generation resources by letting SEEM participants get a discount,” Hutt said.

A ‘superior performance’?

SEEM currently has about 20 members, including Southern and units of Dominion Energy Inc., Duke Energy Corp. and other investor-owned utilities, as well as the federally owned Tennessee Valley Authority and some not-for-profit electric cooperatives.

Utility members expect the number of participants and trades to grow in the coming years. Black with Southern said SEEM’s members are in touch with independent generators across the region that may be interested in joining.

“Launch mode is going to be a while. As we figure out how to use [the platform] and other utilities join us in the process, the savings will continue to grow,” Black said.

Nonetheless, some observers saw December’s Winter Storm Elliott as an important test for SEEM. The storm’s below-freezing temperatures led to near-emergencies in many U.S. states. But rolling power outages were largely concentrated in the Southeast.

PJM Interconnection and the Midcontinent Independent System Operator (MISO), for example, were able to adjust their systems and export power to other regional power grids during the storm, said Devin Hartman, director of energy and environmental policy at the R Street Institute.

PJM and MISO are regional transmission organizations (RTOs), which manage electric reliability and facilitate the development of regional transmission lines. The two grid operators’ territories stretch across more than 20 states in total.

Overall, PJM and MISO showed “superior performance” compared to the Southeast during the winter storm that occurred on Dec. 24, said Hartman, whose think tank advocates for free markets and limited government.

“Winter Storm Elliott was a good initial test run for SEEM. The utilities in the Southeast region are supposed to be able to share excess supplies on SEEM,” Hartman said. “When Elliott hit, the buying opportunities on SEEM disappeared.”

Duke Energy Carolinas, TVA and Louisville Gas & Electric Co. were among the utilities that temporarily shut off power for some customers during the storm.

FERC and the North American Electric Reliability Corp. are currently investigating the exact cause of the outages, but preliminary reports indicate that they were due to natural gas plant failures and gas delivery issues due to freezing temperatures that lasted multiple days (Energywire, Feb. 13).

Utilities in SEEM say the lack of trades around the time of the storm should not come as a surprise, since the platform is designed to deal with excess energy — not times when the system is stressed.

Unlike the markets operated by PJM and MISO, SEEM does not include a capacity market, which pays generators to be ready to supply power during times of high demand, said Erin Culbert, managing director of strategic policy communications at Charlotte, N.C.-based Duke Energy.

“The frigid temperatures across the entire Eastern U.S. caused customer demand to outpace the available generation across a wide region. There was very limited generation to share among utilities that morning,” Culbert said in an email, referring to Dec. 24. “If there had been, we would have used our normal capacity transaction process.”

Notably, some state regulators view SEEM as a better option for the Southeast compared to RTOs, which could be more expensive to operate given their wider scope and extensive staff.

“I do believe that SEEM will continue to put downward pressure on rates compared to an RTO,” said Tricia Pridemore, chair of the Georgia Public Service Commission.

Critics, however, said SEEM may not bring as many benefits as expected, as exemplified by Elliott. Some likened the platform to public relations, suggesting it’s a way for utilities to maintain their dominance in the Southeast’s electricity system.

“SEEM is in a sense a PR effort to show that the region is coordinating in its own way, but if you look at the data right now, whatever coordination is happening is pretty insignificant,” said Ari Peskoe, director of the Electricity Law Initiative at Harvard Law School.

A ‘digital bulletin board’

For some observers, the challenge with SEEM is not its structure, but its transparency — or lack thereof.

SEEM has retained the Virginia-based consulting firm Potomac Economics to analyze the platform’s operations and activities. In addition, hourly, daily and monthly information reports show how many successful trades have occurred.

Since the platform’s launch in November through March 1, there have been over 23,000 sales, or “matches,” some of which would not have been possible previously, said Black of Southern Co. Demetrius Sherrod, a spokesperson for the company, added that initial data shows that “the total number of bids and offers, as well as the number of completed transactions, is growing.”

Yet public reports do not disclose whether utilities are trading power from renewable energy facilities, fossil fuel plants or other generators, which has caused some to question the platform’s purported benefits for clean energy.

“Given that a lot of these large monopoly utilities have invested in and own large gas and coal plants, and are using SEEM to exclusively trade with one another, the claim that SEEM benefits renewables strains belief,” said Hutt of the Southern Environmental Law Center.

At the time that SEEM began operating last November, the electric generation mix in the region’s footprint was 40 percent natural gas and 28 percent coal, with “nuclear, wind and other fuels rounding out the remainder,” FERC said in a recent report on energy trends.

Since then, four electricity providers in Florida have also joined SEEM (Energywire, Oct. 13, 2022).

Another concern for some is whether the platform is identifying the most cost-effective “matches” among buyers and sellers to deliver energy savings for consumers.

Kent Chandler, chair of the Kentucky Public Service Commission, said that SEEM’s platform is still relatively new and that he would give the system more time before drawing firm conclusions.

Still, he expressed concern that state regulators such as himself — or any other outside observers — cannot see the price at which electricity is bought and sold or the price of offers that were not matched with a buyer. That makes it impossible to tell whether the transactions are saving consumers money, Chandler said.

“I’ve heard it best described as a digital bulletin board, except you don’t get to see what other people put up on the bulletin board,” he said. “I wonder how long people are going to give it before they give up when they’re not finding matches.”

SEEM’s long-term future may depend on how the U.S. Court of Appeals for the District of Columbia Circuit responds to the pending lawsuit from environmental groups. The court is expected to rule on the challenge within the next several months. FERC could not immediately be reached Monday for comment on the suit.

If the court rejects the legal challenge and allows SEEM to remain in place, it could have repercussions beyond the platform’s current 12-state footprint, said Peskoe, who filed an amicus brief in support of the legal challenges.

Specifically, Peskoe speculated that some utilities in neighboring states that are currently in regional transmission organizations such as PJM or MISO could consider leaving those organizations and joining SEEM. Such an outcome would have broad ramifications for the development of transmission lines and renewable energy.

“My concern is that if this is upheld and considered legally solid, does anybody who’s right now in an RTO now try to switch over?” Peskoe said.