Supporters and skeptics of a plan to give the Western Energy Imbalance Market’s Governing Body more joint authority with CAISO over changes to the market debated the matter Friday in a webinar hosted by the Western Interstate Energy Board.

Kristine Raper, a member of the Idaho Public Utilities Commission and the EIM Governance Review Committee (GRC), argued for it, as did Scott Bolton, senior vice president of transmission development at PacifiCorp. Carla Peterman, senior vice president of strategy and regulatory affairs with Southern California Edison, voiced SCE’s concerns with the plan, while CAISO CEO Elliot Mainzer played peacemaker among the group.

The joint authority plan is the most controversial part of the GRC’s six broad categories of changes outlined in a draft final proposal on April 12. Five less divisive categories, including the selection of Governing Body members and stakeholder engagement, were discussed in a GRC meeting last week and will  be submitted separately for approval by the Governing Body and the CAISO Board of Governors on Thursday. (See Solid Support for EIM Joint Authority Plan.)

But the joint authority plan warrants more discussion and a separate decision-making process, the GRC determined. It would require both the board and body to approve tariff changes before submission to FERC, with impasses broken by the FERC.

Friday’s webinar continued the debate over the main sticking points.

Raper, a strong proponent of the plan, said it makes sense and should be approved without undue delay.

“The Governance Review Committee has been considering among other topics what amount of delegation of authority is appropriate for the [CAISO] board to be invested in the Governing Body,” Raper said. “The Governing Body currently functions under a primary authority model, which means that changes to real-time market rules that apply uniquely or differently to EIM balancing authority areas — or any changes to generally applicable real-time market rules where the primary driver for change is an issue specific to the EIM balancing authority areas — go first to the Governing Body for consideration and if approved they advance to the [CAISO board].”

In its December 2020 straw proposal, the GRC recommended expanding the scope of delegation from the board to the Governing Body to a joint authority model, which would extend authority over all proposed changes to the EIM’s market design and market rules, unless the rules fall within certain specified exceptions. Both bodies would have to vote on proposals within their shared authority, possibly during joint sessions. A majority vote by each would be necessary for proposals to be approved.

“With that said, it seems to me the proposed change to the governance structure would allow for more collaboration and understanding between the two governing bodies,” Raper said. “It would also provide a better view of the market to the Governing Body. But in reality, the [California] statutes and rules requiring limitations on delegations of the board’s authority would remain in place, because the law requires that.

“So why the fear of a joint authority model by some California entities?” Raper asked. “The board still holds ultimate authority. Agreement on joint authority would be viewed as a gesture of good faith, I believe, on the part of the California entities. Failure to resolve this issue amicably could stall or even foreclose the opportunity for an expanded market under the CAISO umbrella.”

The joint-authority plan comes as the ISO is pushing to expand the real-time interstate EIM market across the West and to establish an extended day-ahead market (EDAM), requiring new market rules covering transmission use, congestion revenues and other issues. (See CAISO Proposal Sets Course for EIM Day-ahead.)

Threats to the EIM and EDAM are among CAISO’s greatest concerns.

Bolton noted that his utility helped launch the EIM in November 2014. It was the first to agree to join after CAISO proposed it, even though a governance structure was not yet in place.

The market has produced $1.28 billion in benefits for its 14 active participants, with eight more scheduled to join over the next two years.

“As an early pioneer there were some risks and some figuring out that had to happen along the way,” Bolton said. “But we’ve clearly been validated, I think, in the assumption that this was a beneficial endeavor and the rising tide of expansion and more participants was definitely going to lift more boats in the region.

“I want to be very clear at the outset that the partnership and work with the California ISO and its staff has been exemplary. There’s been a lot of progress and trust built over our time in this market.”

As the EIM has expanded, however, the “need for equal voices and fair process in the overall power structure has certainly become a much more urgent and, I think, defining need for the rest of the non-California participants.”

He cited an ongoing dispute over wheel-throughs in CAISO as an example of the types of issues that need to be addressed by the EIM and ISO. (See CAISO Approves Controversial Wheeling Limits.)

State and federal decarbonization policies are becoming a bigger EIM market driver, putting more pressure on the real-time market to adapt, he said.

An interstate trading market is necessary, Bolton said, but if CAISO doesn’t show it is willing to share power with out-of-state EIM entities, some may ask: “‘Is this the real-time market operator that will create that durable institution that we can rely on … or is this something that has become a well accepted need, but we’re still in search of what that ultimate institution will look like?’”

SPP positioned itself as a CAISO competitor with the opening of its Western Energy Imbalance Service market in February. (See SPP Successfully Launches Western Market.)

Bolton said PacifiCorp is “optimistic that motivated parties are going to iron this out” but that CAISO must show its willingness to compromise on EIM governance to make sure EDAM succeeds.

“Lack of resolution around EIM governance casts a pretty dark shadow around EDAM,” he said. “And everyone needs to recognize that if we get this right for EIM, we can build momentum and trust to look beyond EIM and create a system that is going to be responsive to the operational policy needs we all see coming around the corner.”

California Perspective

SCE’s Peterman, a former member of the California Public Utilities Commission who recently accepted a new job with Pacific Gas and Electric, said she was speaking only for her current employer.

SCE has seen the benefits of regional trade of renewable resources through the EIM and remains a strong supporter of the market’s expansion, although EDAM likely will create difficulties over transmission and its costs, especially outside of CAISO, she said.

Edison prefers to maintain the “status quo in EIM governance,” Peterman said, because it believes the current approach is working well. That said, SCE is open to discussion and compromise over the joint authority model and has offered an alternative approach to the GRC’s proposal that would retain CAISO control over most core functions while sharing more responsibility for market design, greenhouse gas reduction rules, market power mitigation and other issues.

Peterman said the debate over EIM governance is not about a lack of trust, and she was sorry to hear some might feel that way.

“It’s really about appropriate governance structure and one that we think can persist,” she said.

CAISO CEO Mainzer, who headed the Bonneville Power Administration until last year, said he has had a “front row seat” to the formation of the EIM, its expansion over the last decade and BPA’s successful effort to join the market, starting in 2022.

“Just watching the maturation of the relationships and the development of trust … says we can work with each other in a different way, and we can partner with each other in different ways,” he said.

Mainzer said he understood the Northwestern perspective on the EIM and CAISO, and he now sees the California perspective. The state dealt with capacity shortfalls last summer and now is dealing with the wheel-through controversy as part of its summer readiness plans.

“We’re dealing not with the theoretical elements of resource outages but with the pragmatic on-the-ground aspects of resource adequacy and scarcity in ways that we haven’t had to deal with for a long time,” he said. But amid the difficulties, he said, “I’ve seen the relationships hold together, and I am confident that we’ve built something that can be durable if we resolve these short-term issues.”

CAISO has built its “brand equity” and shown it can be a “transparent, good business partner” in the West.

Getting the EIM governance “issue resolved in a satisfactory fashion … is very important, and I think that if we can get this issue sorted out, and we get it done here in the short term, I think it’s just another bolt in the foundation holding us together as a region.”

All sides are going to have to compromise to reach a resolution, he said. Otherwise, “I worry, having seen various versions of this movie before, about some fragmentation and some tough decisions that will be on folks’ plates.”

“We all have really important reliability responsibilities and resource development responsibilities, and we’re dealing with the changing West — coal plant retirements, different uses of transmission, different forms of hedging,” Mainzer said. “We have to be able to put our heads together [and] come together for regional solutions.”

The EIM will include 83% of the load in the Western Interconnection by 2023, he said.

“If we continue on our current course, I think that’s an amazing foundation for us to continue to coevolve regional collaboration,” he said. “I just don’t want to see that fall apart, so I’m very attuned to the needs across the spectrum. We’re going … to listen as hard as we possibly can.

“This is a very dynamic conversation going on around the GRC,” Mainzer said. “Everybody wants to figure this out. We’re going to be a cheerleader for getting it resolved at the ISO.”