By Robert Mullin

Critics of CAISO’s most recent draft proposal of principles for governing a Western RTO contend the ISO is moving too quickly to get a plan to California lawmakers before the close of the current legislative session in September.

Speaking at a joint state agency workshop in Sacramento on Tuesday, multiple industry participants expressed concern that the ISO’s expedited effort to complete a proposal will result in a governance framework that defers too many issues to be resolved in the future.

The workshop — hosted by CAISO, the California Public Utilities Commission and the California Energy Commission — marked the last public forum in which stakeholders could discuss the proposal before it gets forwarded to Gov. Jerry Brown, who is expected to transmit a final version to lawmakers in August. California law requires the legislature to approve the ISO’s transformation into an RTO, a process that would result in the state losing direct authority over the grid operator.

‘One of the Largest Issues’ in CAISO History

“Regionalization is one of the largest issues facing the ISO in its history,” said Carolyn Kehrein, principal consultant for the Energy Users Forum, which represents large energy customers in California. “Unfortunately, the changes [to the original proposal] were made to meet a quick turnaround.”

Among those changes were provisions that clarify the composition and responsibilities of a transitional committee tasked with creating a final governance plan; reaffirm that any such plan must respect individual states’ sovereignty over electricity matters they currently regulate; and set a specific timeframe for the appointment of a final RTO board (See Revised Western Governance Plan Highlights State Authority.)

The revised proposal defined the makeup of a Western States Committee (WSC), which would consist of state-appointed representatives and two nonvoting members representing publicly-owned utilities and federal power marketing administrations (PMAs). A provision requiring load-weighted voting on the WSC was altered to enable the transitional committee to develop a process that factors in “some form of weighted voting based on load,” such as a supermajority requirement.

An expanded CAISO would first take in PacifiCorp’s service territories, but the ISO is preparing for other transmission owners to join in the near future.

CAISO also added a provision for the RTO to adopt a capacity market at the request of member states, while eliminating a provision for tracking greenhouse gas emissions — a measure the ISO contended was more suited for inclusion in market operations than as a principle in an overarching governance plan. The GHG mechanism would have monitored carbon emissions from all thermal plants participating in the RTO, not just those located in California.

Western States Committee Powers

“Our biggest concern is — how many more revisions will there be before this is final?” said Matt Freedman, an attorney with The Utility Reform Network (TURN), which represents small customers. “This feels like a working draft.”

Freedman said his organization was concerned that the WSC’s powers were reduced in the revised proposal, which now stipulates that the RTO’s board can — in certain circumstances — override the requirement for the committee’s approval for Section 205 filings with FERC.

TURN was also worried about the “watering down” of an earlier prohibition on capacity markets, as well as the removal of the reference to GHG tracking.

Sierra Club staff attorney Travis Ritchie wondered how California would manage its GHG program without making emissions tracking a core principle, saying that the absence of tracking in the Energy Imbalance Market has allowed carbon leakage into the state’s power market.

“We need to agree what our fundamental principles are before opening up this market,” Ritchie said. “We have to set out our clear requirements first.”

Tony Braun, an attorney representing the California Municipal Utilities Association (CMUA), criticized the proposal for deferring the decision to create an RTO market advisory committee to the transitional committee.

“We think the transitional committee scope is too broad,” Braun said. “I don’t think the states are going to go for it.”

He cautioned the ISO not to move too quickly to advance a proposal to lawmakers given the number of “outstanding issues” related to governance.

‘Shouldn’t be Rushing’

“We shouldn’t be rushing forward now. The train is not going to come off the tracks,” Braun said. “Let’s not get embedded in a discussion in the legislature this year.”

“It seems to me that you’re placing a heavy burden on the people in the building just north of this,” said Imperial Irrigation District (IID) General Manager Kevin Kelley, referring to legislators in the nearby state capitol.

Kelley said that his utility, which operates its own balancing authority area in Southern California’s Inland Empire region, is opposed to CAISO’s regionalization because it will require the state to relinquish its oversight over an organization that suffered costly market manipulation during the 2000-2001 Western Energy Crisis. IID last month sued CAISO to force public disclosure of protected information related to the ISO-commissioned studies supporting regionalization.

Kelley suspected the “driver” of regionalization was a “for-profit corporation” — namely, PacifiCorp.

“I would encourage you not to hurry it up because that’s what PacifiCorp wants you to do,” he added.

Supporters Weigh In

The revised proposal also had its supporters.

“We do feel like this process [for creating the proposal] has been very transparent,” said Jennifer Gardner, staff attorney for Western Resource Advocates, an environmental group. “We’ve been pleasantly surprised that recommendations were taken to change the second proposal.”

Gardner called the regional market “the best opportunity to improve business as usual” in the West and said that any proposal taken to the legislature “should be as broad as possible to not tie the hands of the transitional committee.” She said that GHG tracking on a regionwide basis would be important for assessing the environmental benefits of the market.

Jonathan Weisgall, vice president of legislative and regulatory affairs at PacifiCorp parent Berkshire Hathaway Energy, said CAISO’s regionalization studies made it “very clear” that the region’s 2030 GHG reduction goals “won’t happen without a market.”

In the “unlikely event” that regionalization did increase emissions from PacifiCorp’s coal plants, the company would work to mitigate them, Weisgall said.

“In our Midwest utility [MidAmerican Energy], where we’re moving to 80% renewables, we could not do that without a regional ISO,” Weisgall said.

Preserving State Authority

Jan Strack, a transmission planning manager with San Diego Gas & Electric, said his utility has been in favor of expanding the market for a long time. He said the infrastructure for the market is already in place and that it wouldn’t cost much money to expand it. Strack also contended that an expanded market would enable California to achieve its GHG goals at a lower cost.

“We need to avoid some roadblocks [in the governance plan],” Strack said. “The first one is preserving state authority.

“At the same time, we have to recognize that FERC has authority over interstate commerce,” he added. “That’s one area we would be uncomfortable handing over to the Western States Committee.”

“We support regionalization of the ISO and the associated market because, frankly, they work,” said Robin Smutny-Jones, director of California policy and regulations for Avangrid. “That’s why there’s been a proliferation of RTO-like structures across the country and around the world.”

Smutny-Jones acknowledged the RTO would need to work through contentious issues such as transmission access charges and regional resource adequacy, both of which would be left to a newly constituted RTO.

“But other states have done it, and the West can too,” she said.