Labor groups that blocked past California legislative efforts to “regionalize” CAISO told state lawmakers Aug. 6 they “look forward” to working with the legislature next year to pass a bill to implement the governance changes to the ISO being developed by the West-Wide Governance Pathways Initiative. 

The statement by the California Coalition of Utility Employees and the California State Association of Electrical Workers to a key State Senate committee might mark the unofficial start of the legislative campaign to allow CAISO to hand off oversight of its Western Energy Imbalance Market (WEIM) and Extended Day-Ahead Market (EDAM) to the Pathways Initiative’s proposed “regional organization” (RO). 

It also confirms that Pathways has the support of a key constituency needed to advance that change. 

“As you all know, we’ve been the proverbial fly in the ointment and opposed all three of the prior legislative attempts at regionalization,” Scott Wetch, a lobbyist representing the labor groups, told the Senate’s Energy, Utilities and Communications Committee during an oversight hearing on state agency efforts to maintain electric reliability in the face of extreme weather and the transition to emissions-free resources. 

“Those proposals would have transformed … CAISO itself into an RTO. In contrast, the Pathways Initiative would preserve … CAISO and its balancing authority and other functions, except for control over the energy markets,” Wetch said during a public comment period at the end of the hearing. 

Bills to convert CAISO into an RTO failed three years in a row over the 2016-2018 sessions, largely because of opposition from the International Brotherhood of Electrical Workers (IBEW), as well as resistance from publicly owned utilities in California and some environmental groups worried about the impact on the state’s renewable energy goals. 

Those bills would have extended the boundaries of the ISO’s balancing authority area to include states with utilities opting to join the expanded market. Under California law, that could have meant that the portion of projects that California’s renewable portfolio standard requires to be interconnected directly to the ISO’s BAA would be built outside the state, reducing job opportunities for IBEW members — a nonstarter for the union. 

“I also just want to emphasize that the Pathways proposal being developed would preserve California jobs, unlike previous regionalization proposals,” Wetch told senators. He also noted the plan “will enable many more utilities around the West to join” EDAM. 

“I want to emphasize that we foresee that the proposal would not affect California’s or any other state’s ability to protect its policies such as renewable portfolio standards, transmission planning, cost allocation or GHG reduction,” Wetch said. “It could even enhance our ability to decarbonize at lower cost by allowing us to use solar, wind and hydro resources more efficiently.” 

The change of heart among California labor groups became evident last year when Marc Joseph, an attorney for the IBEW, joined the Pathways Launch Committee. 

“Frankly, I wouldn’t be spending this much time [on Pathways] if I thought this was going to crash and burn,” Joseph said during an April meeting of that committee. (See Past Opponents Now See Legislative Pathway to CAISO Regionalization.) 

No Clear Road Map

During a Pathways workshop Aug. 5 to examine issues related to altering the CAISO tariff and migrating ISO functions to the RO, Launch Committee member Evie Kahl, general counsel for the California Community Choice Association, provided clarification on what a proposed bill would seek to achieve. 

“When we talk about the legislative change for any of this, what we’re looking at is not a legislative change to enable the CAISO to become a different entity than it is today, but to provide these [market] services and to allow California’s BA to participate in the RO market,” Kahl said, adding that the legislation will not determine what services the RO can offer. “That’s all independent.” 

Launch Committee members have made clear that the committee itself is prohibited from attempting to influence legislation because Pathways is a nonprofit 501(c)(3) organization, although some of its members could act in that capacity as representatives of their employers. 

Asked how specific the legislation would need to be to allow a scenario in which the RO takes on a larger portion of the ISO’s market functions and legal responsibilities (what Pathways is calling Option 2.5), compared with a more limited assumption of functions (Option 2.0), committee member Spencer Gray, executive director of the Northwest & Intermountain Power Producers Coalition, said he hesitated to “get too far into the weeds” about legislation the group is not directly shaping. 

“I do think there is a pretty plausible legislative route that is permissive and does not get into the specifics of prescribing changes specific to 2.0 or 2.5. In other words, the legislation could look exactly the same,” Gray said. 

“What would be different, potentially in the legislative process, is more clarity from the Launch Committee and stakeholders in support of a particular outcome — 2.0 or 2.5 — that would inform the deliberations,” he said. “But the actual changes to California law don’t necessarily need to be different, and a more prescriptive approach may raise some issues on its own, as opposed to a more permissive approach.” 

The Aug. 5 workshop offered insight into the broad spectrum of issues and level of complexity that participants in the Pathways CAISO Issues and Tariff Analysis Work Group confront as they sort out the future relationship between the RO and ISO, including relative levels of independence, responsibility and liability for market issues, as well as what services each might provide over time. 

“We are really creating something new here,” Kahl said. “Everything that’s being outlined — there have been pieces of this developed across the country with different RTOs, but we’re putting the pieces together differently. In other words, there really hasn’t been a clear road map for us to do what we’ve been doing.” 

In his comments to the senators, Wetch expressed confidence in the outcome. 

“We are pleased with the progress that the [Pathways] Launch Committee has made in the past year. We remain optimistic that the Launch Committee will be able to make a recommendation to create a new regional organization and transfer oversight of the energy markets from the CAISO to the new regional organization,” he said.