The West-Wide Governance Pathways Initiative drew praise from many quarters Nov. 22 when its Launch Committee voted to approve its “Step 2” proposal to create an independent “regional organization” to oversee CAISO’s Western electricity markets. 

But it was quickly apparent the development — over a year in the making — is unlikely to shift views of those entities that remain skeptical about joining a market operated by CAISO and instead favor SPP’s Markets+. (See Pathways Initiative Approves ‘Step 2’ Plan, Wins $1M in Federal Funding.) 

Counted among the strongest supporters of the final proposal, which was released Nov. 15, were the state utility regulators and energy officials largely responsible for launching the Pathways Initiative in July 2023. 

“It was only last summer that my colleagues and I across the West wrote a letter expressing our hope for an independent regional organization to oversee an expanded day-ahead market that includes California,” California Energy Commission Vice Chair Siva Gunda said ahead of the Launch Committee’s vote. “Since then, it’s amazing to watch how some of the brightest and most dedicated experts across diverse sectors in the West have come together to lay the foundations for this regional organization.” 

“The Launch Committee, the stakeholders — you stepped up to the request in the letter, working together, had success for [Pathways] Step 1, and [are] now voting on this foundational document that could really achieve the broad idea that was in our request,” New Mexico Public Regulation Commission Chair Pat O’Connell said. 

Oregon Public Utility Commissioner Letha Tawney said she appreciates the proposal “centers consumers” and provides “the opportunity for benefits in a different way that is exciting.” 

“At the end of the day, we have to be delivering for consumers this essential service at a price they can manage,” Tawney said. “That is what underpins the Western economy, but it also is what delivers for our most vulnerable customers, and I so appreciate the Launch Committee digging in and figuring out how to deliver on that fiduciary duty that the regulators put out to the region and asked you to help us solve.” 

Michele Beck, director of the Utah Office of Consumer Services and a Launch Committee member, said she began participating in the Pathways effort “defensively,” which is how she thinks consumer advocates likely approach any such regional activities. 

“Working with this group helped me to build confidence in the effort and really optimism about the outcome, as I saw a genuine focus on the public interest, which has been mentioned before. I think our proposal really has the greatest public interest protections that we see in any regional proposals out there,” Beck said. 

Beck acknowledged that Pathways still has a lot of work ahead of it in the next year and that Step 2 did not address some “big issues” that “were properly” not within its scope.  

“But this is consistent with the incremental approach that we’ve been taking here in the West, and [Step 2] remains a very important milestone,” she said. 

Committee member Brian Turner, director of Advanced Energy United’s regulatory engagement in the West, said the Step 2 “proposed governance structure recognizes the electric grid is evolving and a greater diversity of resources and customers and load-serving entities and solution-providers all have an essential interest in efficient markets and the affordability and reliability they bring.” 

Nonvoting committee member Crystal Dean, vice president of enterprise portfolio management at the Western Area Power Administration (WAPA), noted that WAPA’s Sierra Nevada region recently announced it will begin negotiations toward full participation in EDAM through its membership in the Balancing Authority of Northern California and that its Desert Southwest (DSW) region will partner with Arizona G&T Cooperatives on a study to assess the CAISO market’s benefits for the DSW balancing authority area. (See WAPA Sierra Nevada Region to Advance with EDAM and Arizona G&T Cooperatives Announces Pursuit of EDAM Benefits Study.) 

“Both of these efforts underscore WAPA’s commitment to exploring new opportunities like those described in this Pathways Step 2 proposal, and we are really excited to see that these steps will help WAPA continue to make decisions that align with our market principles,” Dean said. 

Committee Co-Chair Kathleen Staks, executive director of Western Freedom, said that as a representative of commercial and industrial electricity customers, she’s seen a “remarkable increase in the number of companies that are actively engaged and paying attention and wanting to learn, and so I think they are. We’re seeing a sector that’s getting very excited about the opportunities to participate.” 

‘No Guarantee’

But the Pathways milestone failed to dispel skepticism about the effort from entities still firmly situated in the Markets+ camp. 

Britney Morgan of Arizona Public Service, the sole committee member to abstain from voting on the proposal, said while Step 2 would incrementally improve the independence of the governance of CAISO’s WEIM/EDAM, it “does not achieve independent governance, which was the ask of the regulars more than a year ago.” 

“Under Step 2, … CAISO remains as the market operator, which perpetuates existing inequities between market and state participants,” Morgan said.  

Rachel Dibble, vice president of bulk power marketing at the Bonneville Power Administration, acknowledged “the significant amount of work” the Launch Committee and work group put into the Phase 2 proposal but said the plan fell short of BPA’s expectation for fully independent market governance, administration and operations for CAISO’s markets. 

Dibble reiterated three concerns BPA has recently expressed about the proposal: that it will 1) leave the RO under a single, integrated tariff shared with CAISO; 2) leave market operations, supporting staff and management functions under CAISO board authority; and 3) maintain the ISO as the counterparty in contracts with market participants.  

In an email to RTO Insider, Lauren Tenney Denison, director of market policy and grid strategy at the Portland-based Public Power Council (PPC), voiced a view that aligns with BPA’s. 

“Individual PPC members will evaluate the risks and benefits of this proposal in making their market participation decisions,” Tenney Denison wrote. “That said, for PPC and most of our members, the Step 2 proposal advanced by the Launch Committee falls well short of our expectations for independent governance. The limited creation of a ‘policy setting’ organization that continues to rely heavily on CAISO in many areas — financial, regulatory and staffing, for instance — will not establish a regional organization or market administrator that is independent. While potential future evolution is possible, there is no guarantee this will occur.”