The West-Wide Governance Pathways Initiative’s Launch Committee asked CAISO to initiate a stakeholder process to create a funding mechanism for the newly incorporated organization that is to assume governance over the ISO’s energy markets.

In a Feb. 3 letter, Launch Committee co-Chairs Kathleen Staks (Western Freedom) and Pam Sporborg (Portland General Electric) asked CAISO CEO Elliot Mainzer to facilitate discussions about creating mechanisms for ISO market participants to cover the debt financing costs for the Regional Organization for Western Energy’s (ROWE).

“We have received generous financial support from stakeholder and philanthropic contributions but will need additional funding for the ROWE implementation efforts,” Staks and Sporborg wrote.

The Launch Committee seeks approximately $8 million to fund ROWE’s implementation costs until the organization can collect funding from members starting in 2028. The $8 million will go toward seating an initial board, hiring key staff and consulting support, according to the letter.

So far, the committee has collected about $1.1 million in stakeholder contributions and grants. To cover the rest, the committee is exploring debt financing with commercial banks “that could be repaid by market participants in 2028 after the anticipated transfer of governance of the markets to the ROWE,” the chairs wrote. (See Pathways’ ROWE Incorporated in Delaware, Board Search Underway.)

“The commercial banks would require ROWE to have a way of guaranteeing repayment of the loan,” according to the letter. “Therefore, the Launch Committee is requesting [that] CAISO facilitate a stakeholder process to develop a proposal to create a funding mechanism for the ROWE’s debt financed startup costs that would be repaid by market participants.”

CAISO spokesperson Gary Delsohn told RTO Insider in an email that under a straw proposal issued by CAISO, the ISO would provide credit backing for a commercial line of credit for ROWE. Beginning in 2028, when ROWE is scheduled to assume governance over markets, CAISO will recover ROWE costs through surcharges on participation in the markets, enabling ROWE to repay the bank.

“The ROWE would be responsible for making payments on the loan after January 2028, with the CAISO serving as guarantor,” Delsohn said. “This is necessary because the ROWE at that point would not be able to obtain such credit until it has become more established. The ROWE would draw upon the loan on an incremental basis throughout the start-up period to cover initial start-up costs.”

“This approach ensures an equitable and broad-based sharing of the ROWE’s start-up costs among market participants throughout the regional market footprint, including market participants effectively utilizing the ROWE within the CAISO Balancing Authority footprint and throughout the [WEIM and EDAM] regional footprints,” he added. “The rate and collection mechanism would be set forth in the CAISO’s tariff and thus subject to approval by FERC.”

ROWE is the product of California Assembly Bill 825, which implements Pathways’ “Step 2” plan to create an independent organization to oversee CAISO’s Western Energy Imbalance Market and soon-to-be-launched Extended Day-Ahead Market, and authorizes the ISO and California’s investor-owned utilities to join ROWE. (See Newsom Signs Calif. Pathways Bill into Law.)

One goal in establishing ROWE was to remove what some in the Western power sector see as a barrier to wider participation in CAISO-run markets by ensuring they are not governed primarily by officials and stakeholders in California.

ROWE was incorporated in Delaware on Jan. 21. The organization is to assume governance over the markets in 2028.