The debate over a Western RTO has ramped up this month, with discussions focused on the feasibility of an organized market in the West, its pros and cons, and its potential makeup, including whether California’s participation is necessary for success.

Stakeholders and state regulators weighed those factors at a CAISO forum Wednesday and in an Oregon RTO Advisory Committee meeting Oct. 6. This week’s joint meeting of the Committee on Regional Electric Power Cooperation and the Western Interconnection Regional Advisory Body (CREPC-WIRAB) includes an afternoon of panels devoted to the topic, as well as other panels and presentations by FERC commissioners touching on it.

The growing sense of urgency is being driven by state decarbonization mandates, resource adequacy problems and state laws requiring utilities to join RTOs. (See Western Utilities to Explore Market Options.)

“There’s been a convergence of interest in these issues like there has never been before, and I think that’s a very, very good thing,” California Public Utilities Commissioner Clifford Rechtschaffen said during CAISO’s forum. “People are really focused on regional markets, the need for robust rules for resource adequacy and shared reliability efforts. How do we achieve clean energy mandates across the West now that more and more states have gone that way?”

Rechtschaffen called it an “opportune time” for regionalization efforts in the West.

The forum was primarily focused on the ISO’s proposal to expand its Western Energy Imbalance Market from an interstate real-time trading platform to an extended day-ahead market (EDAM), a potentially significant step for Western regionalization. But discussion of the EDAM and the Northwest Power Pool’s creation of the interstate Western Resource Adequacy Program (WRAP) led to talk of a Western RTO. (See CAISO Promotes EDAM Effort in Forum.)

“An RTO market is no panacea,” said Tony Braun, an attorney who represents the California Municipal Utilities Association. “For those that are in one, if you want to talk about funding of financial transmission rights by load and other things that are quite controversial, call me offline. We can talk about it. I think people underestimate the obstacles and, even within an RTO structure, the ongoing struggles of operating within that paradigm.”

EDAM, WRAP and the possibility of an RTO are all under consideration, and “I think we just need to tackle them all at the same time,” Braun said.

“I don’t them see as mutually exclusive, but I do see EDAM as low-hanging fruit. There’s so much work that has been put into EDAM … that it would not be prudent to abandon it just because there’s a myriad of other options. We have to walk and chew gum on this at the same time, maybe a couple different flavors of gum.”

Spencer Gray, executive director of the Northwest & Intermountain Power Producers Coalition (NIPPC), called EDAM a worthwhile initiative but said “it can’t be the end goal of further regionalization.” EDAM and WRAP are incremental approaches that don’t adequately address the clean energy mandates of a growing number of Western states, or the laws that Colorado and Nevada enacted in June requiring transmission owning utilities join an RTO by 2030, he said.

“I don’t dispute that a staged approach to developing regional markets can help us move forward rather than just stalling out,” Gray said. “But I do want to emphasize that we have both statutory and market pressures across the West that hang over this initiative.”

California, New Mexico, Oregon and Washington have 100% clean energy mandates to meet by midcentury, he noted. Nevada established a 100% clean-energy goal it intends to reach by 2050.

“We also have large, sophisticated energy consumers across the West who are committed to going carbon-free, and many of them are convinced, based on actual experience procuring clean power in RTOs, that the model an RTO offers — of not having contract-based transmission anymore, not having pancaked rates, not having balkanized balancing authorities — [is] a better alternative.”

He said he worried the EDAM may be an “incremental step that holds at bay harder conversations about governance and balancing authority consolidation and transmission.”

SPP has been pitching its own RTO in the West. Gray called that a positive move that would allow entities to join an RTO without California having to give up control of CAISO, a state public benefit corporation created by the legislature, with board members appointed by the governor. Prior efforts to turn CAISO into an RTO have fizzled because California lawmakers were unwilling to cede any authority over it to out-of-state interests.

Joining SPP means utilities “can simply sidestep a brick wall of single-state governance that has bedeviled RTO conversations that have revolved around CAISO, so I think collectively we should take both the EDAM initiative seriously, take SPP’s work seriously and try to pick the best course. And we may pick different courses, which is OK. That’s been the experience along many seams in the East between the RTOs.”

Is California Necessary?

Gray’s comments and other discussions taking place in the West suggest industry stakeholders are weighing the need to create a workable RTO rather than an ideal one, forcing the region to consider the “art of the possible,” as Oregon Public Utility Commissioner Letha Tawney put it during a recent meeting of the state’s RTO Advisory Committee, which was charged with helping the state’s Department of Energy prepare a report on the benefits and risks of RTO membership. (See Oregon RTO Committee Ponders Paths to Regionalization.)

That could translate into an effort that sidelines California, the region’s most populous state, biggest load center and burgeoning center of cheap solar energy that can be exported to neighboring states during periods of surplus.

A recent state-led study produced by Energy Strategies found that all states in the Western Interconnection would realize the largest amount of savings — about $2 billion a year — from a single market that includes California, with the biggest beneficiaries being Washington, Oregon and California itself. (See Study Shows RTO Could Save West $2B Yearly by 2030.)

But integrating California into such a market is being seen as increasingly problematic as more states look to use RTO membership as one tool in meeting their decarbonization goals on ambitious schedules that will likely outpace the timeline for development.

Speaking during the Oct. 6 meeting of the RTO Advisory Committee, Tawney pointed to the well known governance issues that have hampered CAISO’s regionalization efforts in the past, with many in-state interests reluctant to allow the state to relinquish its direct authority over the appointment of members of the ISO’s Board of Governors. Resistance to changing that governance structure has made membership in an expanded CAISO a nonstarter for regulators in other parts of the West.

But just as problematic, Tawney noted, is California’s approach to resource adequacy, a process managed not by CAISO but by the state’s Energy Commission.

“It is unusual, but not unprecedented, to have your resource adequacy conversation happening in a different place than your RTO,” Tawney said. “CAISO does it that way. ERCOT sort of does it that way. But I think because of how resource adequacy is handled in California, it makes it very difficult to sort of take the California RA model and spread it across the West. And so then we have the rest of the West say, ‘How could we do RA for ourselves in a way that works for us?’”

Momentum toward a Western RTO could build after Colorado and Nevada passed bills requiring utilities in those states to join an RTO, Tawney said. She compared the potential outcome of that legislation to the expansion of the Western EIM, which eventually crowded out trading in the West’s bilateral markets.

“Where does that leave Oregon customers?” Tawney said.

She acknowledged the Energy Strategies study finding that showed that the biggest market footprint would produce the greatest volume of economic benefits for the West.

“The flip of that is there’s more people you have to work with and figure out how to get along with and manage through,” Tawney said. “So, you have to find that sweet spot, from my perspective, between customer benefits and state policy.”

What About BPA?

The situation in the Northwest is further complicated by the presence of the Bonneville Power Administration, which operates about 70% of the region’s high-voltage transmission and manages its extensive network hydroelectric dams.

Speaking at the RTO Advisory Committee meeting, Northwest Energy Coalition policy analyst Fred Heutte noted that BPA’s “integrated system” relies on a contract-based — rather than flow-based — approach to transmission use.

“I think it’s easy to say [that], in an RTO, you can move to a flow-based approach and it’s all going to be great,” Heutte said. “But we have to look at Bonneville as a unique institution with a really important role, and trying to move from a contract-based approach to a flow-based approach, given Bonneville’s integrated approach, is going to be a big issue to have to unravel and kind of piece together how you do that transmission.

“It’s not just a matter of grandfathering rights and that sort of thing,” Heutte said. “The Bonneville system has some unique features that we have to consider in the transition to an RTO process.”

During the RTO Advisory Committee’s first meeting Sept. 21, BPA Manager Ravi Aggarwal encouraged the group to consider a “staged and incremental” approach to developing an RTO, saying the region’s transmission planning, RA and real-time market are already being served by Northern Grid, NWPP and the Western EIM, respectively.

Speaking at the Oct. 6 meeting, Aggarwal clarified that he was not advocating for the long-term persistence of those looser arrangements in lieu of an RTO but thinks they could provide a “pathway” to an organized market, whether West-wide or in a smaller footprint, such as that covered by the NWPP.

“I think we have to be careful about holding out a perfect RTO as a possibility — or maybe an Eastern-style RTO maybe is the way to put it — because we aren’t starting with a blank slate,” Tawney said.