Dive Brief:

• Arizona Public Service and the California Independent System Operator have reached an agreement for the Phoenix-based utility to begin participating in the western Energy Imbalance Market beginning October 2016.
• The utility believes its customers can save up to $18 million annually by joining the new market, and said its participation would create millions of dollars in benefit to the market's other participants as well.
• The new market has experienced unexpected price spikes in the early phases of its operation, promoting federal investigators to investigate the cause.

Dive Insight:

APS has reached a deal to join the growing Energy Imbalance Market in the west, a move which could save customers $7 million to $18 million a year, according to an assessment by Energy and Environmental Economics. Current EIM particiapnts will benefit by $3 million to $6.5 million annually, in addition the benefits they already realize, the analysis also found.

Based in Phoenix, APS serves more than 1 million customers in Arizona and asked the consulting firm to run analysis on what joining the market would mean. The firm has done similar studies for NV Energy, which will join the market later this year, and Puget Sound, which is also considering the move.

Besides economic savings to APS customers, by way of lower generation costs, the utility expects improved "visibility and situational awareness for system operations in the Western Interconnection," as well as improved integration of renewable generation.

The new market allows for rebalancing supply and demand in 15-minute blocks with dispatching every five minutes before  energy is needed.

“We are very pleased to make our state-of-the-art, energy optimization technology available to APS, which has been serving Arizona customers for 125 years, to reduce costs for their customers,” California ISO President and CEO Steve Berberich said in a statement. “The ISO and other EIM participants welcome APS to this regional approach to sharing resources for the benefit of all and appreciate the expertise and insights APS will bring to the Energy Imbalance Market.”

It was not a flawless start for the new market, however. In March, federal regulators opened an investigation into price spikes in the market. The ISO subsequently said it had identified the source of the spikes, citing a failure to recognize capacity held by PacifiCorp.