CAISO’s Board of Governors on Thursday approved a proposal that will allow transmission projects outside California to join the ISO under a new subscriber-funded model that avoids allocating costs to ISO load-serving entities.

Board members praised the “subscriber participating transmission operator” (PTO) proposal, which is intended to help California tap clean energy resources in other parts of the West to meet its ambitious greenhouse gas reduction goals while reducing financial risks associated with new transmission. Modeling from the California Public Utilities Commission (CPUC) shows the state will need to acquire more than 4,800 MW of new out-of-state wind resources to hit its midcentury targets.

“I’ve been here five years. Other than adopting the day-ahead market, I’m trying to think of something as big, and I can’t, so thank you for this elegant solution,” board Chair Mary Leslie told the CAISO executives who presented the plan during Thursday’s monthly board meeting.

“This continues ISO leadership,” Governor Angelina Galiteva said. “We were leaders with policy-driven transmission, and now this as well, so I hope we’re successful. I’m actually confident that we will be.”

Under the proposal, the developer of a transmission project not selected in CAISO’s transmission planning process will have the ability to solicit generator customers to subscribe to service on a line designed to deliver energy into California. The project could then turn operational authority for the line over to the ISO, joining the balancing authority area as a “subscriber PTO” not eligible to recover their costs under the ISO’s transmission access charge (TAC).

The proposal calls for subscribers to have priority use of the line and be exempt from CAISO transmission and congestion costs, including the TAC. Non-subscribers would be required to pay to use the line at a FERC-approved rate that does not exceed the TAC.

The plan also would require subscribing generators to pay the ISO’s existing PTOs to cover upfront costs for any system upgrades needed to facilitate the new lines’ interconnection into California, but they would be reimbursed for those costs over the following five years. Any future network upgrades associated with future generation interconnection or transmission planning requirements would “be recovered by the subscriber PTO through a cost-of-service rate approved by FERC,” the ISO said.

According to Deb Le Vine, CAISO’s director of infrastructure contracts and management, the ISO will study integration of proposed subscriber lines through its transmission interconnection process. She told the board that the grid operator will “set a higher bar” for including subscriber PTO lines in its 20-year transmission base case than it does for lines chosen through the planning process.

“We don’t want to put it into our base case prematurely, assuming that the line is there, and start making solutions based on the line being there,” Le Vine said.

To be included in the base case, she said, a subscriber PTO must execute a transmission applicant agreement with the ISO; have its subscribing generators complete interconnection agreements; and provide the grid operator with a notice to proceed.

Subscribing generators that go through the transmission planning process would be exempt from the ISO’s separate — and currently lengthy — generator interconnection process.

“Obviously, this is a brand-new service,” Le Vine said. “We’re trying to meet the needs of California, [and] we’re trying to come up with solutions that allow load-serving entities to better determine the best-fit portfolios. And we’re trying to use the existing functionality that the ISO already has in its toolkit, and therefore have minimal changes needed to our systems.”

Le Vine said that in allowing for interconnections to other parts of the West, the model will help improve the performance of the proposed extended day-ahead market in CAISO’s Western Energy Imbalance Market, support resource adequacy and “enhance resilience on the grid.”

‘The Best Wind’

The subscriber PTO model already has one participant waiting in the wings: the proposed TransWest Express transmission project, a 700-mile line designed to carry 3,000 MW of wind energy from Wyoming to Nevada, where it will connect to the CAISO grid.

In March, FERC approved an agreement that would allow TransWest to continue its efforts to become a CAISO PTO under the model, pending the commission’s approval of the ISO’s proposal. Among other things, the agreement allowed TransWest’s subscriber, the Power Company of Wyoming — owner of a 3,000-MW wind farm being constructed in south-central Wyoming — to be studied under the ISO’s generator interconnection queue cluster 15, starting April 1. (See FERC OKs CAISO-TransWest Move Toward PTO Status.)

Speaking during the board meeting Thursday, David Fuller, TransWest director of business development, said, “Not only will the [subscriber] PTO model access new resources, it will access the best wind resources in the continental United States — from Wyoming. … This model allows the LSEs and the ratepayers in California to leverage private investment to bring this resource to California, and probably do it sooner and cheaper than other ways and all without increasing the TAC.”

Neil Millar, CAISO vice president of transmission planning and infrastructure development, also pointed to how the model reduces risk for California by making developers such as TransWest responsible for attracting subscribers and ensuring the financial viability of their projects.

“Without that, the project wouldn’t move forward, and the ISO is basically kept whole because we’re not supporting the cost of the TransWest Express project itself,” Millar said.

CAISO CEO Elliot Mainzer emphasized how the model will assist in the “huge lift” facing California, which will need to bring on about 7,000 MW of new clean resources every year for the next two decades to meet its midcentury GHG targets. He said the procurement orders stemming from the state’s integrated resource plan show the need to acquire “a significant fraction” of the state’s needed resources and transmission from out of state “in terms of reaching total supply and for the diversification benefits in terms of reliability and affordability.”

“The subscriber participating transmission owner model is our effort to work with developers out of state to create additional optionality for the utilities inside California,” Mainzer said.

CAISO expects to file the subscriber PTO proposal with FERC in September and anticipates a decision in November.