Keeping lights on takes buying, selling power
Ian Meece, left, and Zach Otto work as associate real-time traders for Arizona Public Service. APS, Salt River Project and other large utilities trade power with one another and with their utility counterparts in the West, Canada and Mexico to meet different supply and demand needs. has different supply and demand needs.
And crazy as it sounds, utilities on occasion will pay others to take energy off their hands.
“Sometimes, we’ll pay to get rid of it,” Beckham said. “Otherwise, you’d have to turn off generation,” which can be more costly.
Buying and selling megawatts
Trades are placed in megawatts, with each megawatt typically providing enough energy to power at least several hundred homes.
Purchases or sales might range from 20 or 25 MWs to several hundred. Depending on the season, demand needs and other factors, a utility might pay less than $30 or $40 on average per megawatt hour of power, or closer to $150 or even $250, Beckham said.
While computer monitors and screens dominate the trading areas — showing generation output, electricity demand, megawatt prices and other information — trades with other utilities are placed over the phone. Prices are negotiated, and trades are typically wrapped up within a few minutes.
“We’re looking to buy megawatts for an hour or two; what’s your price?” Beckham said, mimicking what a trader might ask a counterpart at another utility.
Even when not engaged in a purchase or sale, traders often will call up their counterparts at other regional utilities to check on power needs and supplies. “It’s a little situational awareness,” said Pam Syrjala, SRP’s supply and trading senior director.
On a busy day, a utility might place dozens of trades worth several thousand dollars each, with the power typically scheduled to be delivered or obtained maybe two to four hours later in the day, Beckham said.
Trading can be slowed if many utilities are buying or selling at the same time, as that can clog transmission capacity, delaying deliveries. “It’s like having too many cars on the road at once,” she said.
Sizable annual cost savings
APS takes the money earned on advantageous trades and uses it to adjust, or reduce, the rates paid by customers.
APS said its trading activities last year saved more than $100 million for customers. SRP has a similar focus on reducing expenses and said it too achieved more than $100 million in savings for its customers.
SRP, APS and Tucson Electric Power cooperate with one another, as all three have an interest in maintaining power reliability throughout Arizona, Syrjala added.