The California bill to implement the West-Wide Governance Pathways Initiative’s Step 2 proposal to allow CAISO to relinquish market governance to an independent “regional organization” (RO) passed the state Senate on June 4 on a 36-0 vote, with four members abstaining. 

SB 540 was approved after 40 minutes of floor debate in which several senators expressed concern about the extensive amendments added to the original bill, particularly a provision creating a new Regional Energy Market Oversight Council responsible for ensuring CAISO’s participation in a regional energy market that “serves the interests of the state.” (See Amended ‘Pathways’ Bill Boosts — and Complicates — Calif. Protections.) 

The new council would be authorized to mandate withdrawal if those interests are compromised. 

Those senators sought assurances that the bill’s sponsors, Sens. Josh Becker and Henry Stern, both Democrats, would work with members of the state Assembly to return the bill to something closer to its original form. 

But other senators said they wanted to ensure preservation of an “off-ramp” from the RO, expressing worry that the ISO’s participation could compromise California’s environmental and clean energy policies, particularly in the face of the Trump administration’s efforts to support coal-fired generation. 

Becker assured his colleagues the bill would not increase California’s exposure to federal political interference, but did point to the risks of the state losing potential “partners” on the electricity grid to “a market out of Little Rock” — SPP’s Markets+, the competitor for participants to CAISO’s Extended Day-Ahead Market (EDAM). 

“Make no mistake: if we do not act, we will be worse off,” Becker said. 

‘Strong Coalition’

During the debate, Sen. Tony Strickland (R) called the recent amendments to SB 540 “very problematic” but expressed confidence that Sens. Becker and Stern would “work out some of these problems” as the bill advances through the lower house.  

Strickland pointed to the “strong coalition” backing the bill, including labor and business groups.  

“I haven’t seen a coalition like this in a long time, and I’ve been on [Senate] Energy Committee going back 13, 14, 15 years,” he said. “Because everybody understands status quo is not an option. We need to get this fixed. We need to move forward. We need to make sure energy is reliable for all California residents.”

Sen. Angelique Ashby (D) opened her comments saying she likes to “brag” about the publicly owned utility that serves her constituency, the Sacramento Municipal Utility District (SMUD), and voiced concern that SMUD had changed its position on the bill in light of the amendments.  

Ashby asked the bill’s authors how they will “get from where you are now back to a space where you can earn the support of the one of the most trusted entities in the state of California, which is SMUD.” 

“I know SMUD, other than [having] issues with the bill, would like to see it move forward, and I’m committed to working with them going forward,” Becker said. 

Sen. Christopher Cabaldon (D) said a small portion of his constituents are served by SMUD and echoed Ashby’s concerns, urging “less work” to be done on the bill. 

“Because the problem here is all of the benefits of this bill — and they are numerous and profound — depend on us actually joining with the region and the region joining with us,” he said. “I think the problem that I hope we will work on to resolve in the Assembly is that we cannot replicate all of the state rules and interests and what have you, as though the rest of the world is just waiting for California to allow them to be partners.” 

Sen. Rosilicie Ochoa Bogh (R) said she supported the bill in the Senate Energy Committee “because it reflected a bipartisan, holistic compromise. Literally every group, as mentioned earlier, related to energy, visited my office, and nearly all were in alignment. Not all were pleased, but they were aligned.” 

But Ochoa Bogh said the proposed oversight council in the amended bill “fundamentally alters the governance structure” by giving the body “extraordinary authority” over California’s participation in a regional market. She said that would “inject an uncertainty into what should be a technical, market-driven process” and compromise long-term resource planning if the state were “suddenly withdrawn,” threatening grid reliability and affordability for residents. 

‘Energy Island’

Sen. Thomas Umberg (D) said SB 540 is “a very difficult bill” because it brings up “a clash of interests that is very difficult to reconcile” — namely, the differing views on climate change between California’s leaders and the Trump administration. 

“The challenge is that, once we’re in [the RO], it may be very difficult to leave, either legally or practically, because we become so reliant on the grid. And it also vests California in a place where, potentially, the current administration can wreak havoc on California,” Umberg said. 

Sen. Suzette Martinez Valladares (R) recalled a previous visit to CAISO was a “phenomenal experience” before noting the ISO has “urged” for a “regional approach.” She warned that California faced risking becoming “an energy island” like Texas, but also said she wanted additional clarity around the role of the proposed oversight council. 

Sen. Ben Allen (D) added his voice to supporters of the bill but said inclusion of the oversight council was “bizarre” and represented a “bad direction,” in part because it would make withdrawal from the RO a “governor-dominated” decision. He pointed to a suggestion that the decision should come down to “some sort of supermajority vote in the legislature.” 

Sen. Aisha Wahab (D) expressed the greatest reservations about SB 540, saying creation of the five-member oversight council is “not enough” and that she was concerned “that we’re not going to bring it back to the legislature to have a full picture of what this regional organization will actually look like.” 

“If it is that we have a lot of confidence in a regional organization — the fact that it won’t impact the RPS and won’t take away green jobs and won’t force Californians to subsidize an organization they no longer have control over — then we should be able to review the facts once we have more concrete evidence,” she said, later abstaining from voting on the bill. 

Sen. Anna Caballero (D) said she favored “regionalism” because “I think our weather patterns and the energy that we can create regionally is diverse enough, so it’ll benefit California.” But she also called for the bill to include the option for an “off-ramp” from the RO to avoid tying the hands of a future governor and legislature. 

In his closing speech stumping for his bill, Sen. Becker reminded his Senate colleagues that SPP’s Markets+ has been able to attract more participants in recent months. 

“So, if they’re able to sort of pull something together, we’ll end up isolated — so we need to do this,” he said. “I appreciate everyone who’s had their input and wants to keep working on this going forward.” 

Reactions

Clean energy groups that have backed the Pathways Initiative commended the California Senate for advancing the bill while also urging changes to the bill as it moves through the Assembly. 

“California can’t afford to go it alone when it comes to meeting skyrocketing energy demand while tackling the energy affordability crisis,” Edson Perez, California lead at Advanced Energy United (AEU), said in a statement. “We need to be able to keep the lights on in the fourth-largest economy in the world without charging ratepayers an arm and a leg. Joining a robust Western regional energy market is essential to keeping energy costs under control while still spearheading the transition to clean energy.” 

AEU said bill supporters “remain committed to ongoing collaboration to ensure the final version reflects the shared priorities of the diverse coalition engaged in this effort for regional energy collaboration.” 

“Today’s Senate vote is an important step in a long process to ensure California is at the forefront of a fast-moving revolution in how electricity will be bought and sold across the West,” Katelyn Roedner Sutter, California state director at the Environmental Defense Fund (EDF), said in a statement. “California cannot keep the lights on or solve the climate crisis alone — we need an electricity system with diverse clean resources that can withstand simultaneous extreme weather events.” 

Roedner Sutter said EDF shares “significant concerns about recent bill amendments that undermine the benefits of California’s participation in a Western market and urge California leaders to act decisively to avoid losing more trading partners to a competing Arkansas market.”