CAISO is moving toward approval of an $8.5 million financing plan for the Regional Organization for Western Energy’s start-up costs, saying the proposal has “widespread support” from stakeholders.

Under the West-Wide Governance Pathways Initiative, CAISO plans to transfer governance of its Western Energy Imbalance Market and soon-to-launch Extended Day-Ahead Market to the ROWE in 2028.

The ROWE has established an initial Formation Board, selected an interim president and secretary, and incorporated in Delaware. (See Pathways’ ROWE Selects Interim Leaders and Pathways’ ROWE Incorporated in Delaware, Board Search Underway.)

Now the ROWE is seeking a commercial loan or line of credit of up to $8.5 million starting in mid-2026 to cover start-up costs. In a Feb. 3 letter to CAISO, Pathways co-chairs Pam Sporborg and Kathleen Staks asked the ISO to develop a funding mechanism for the ROWE’s debt-financed start-up costs that would be repaid by market participants. (See Pathways Asks CAISO to Kickstart ROWE Funding Discussions.)

Sporborg and Staks said start-up costs for the ROWE would be about $8 million. Stakeholder donations and grants are expected to raise about $1.2 million.

CAISO released a straw proposal for the financing plan Feb. 5 and then posted a draft final proposal March 12 addressing stakeholder comments. The ISO held a meeting March 19 to gather additional feedback.

“The ROWE would be responsible for making payments on the loan, with the ISO serving as guarantor,” CAISO said in the draft final proposal. “This is necessary because the ROWE at that point [mid-2026] would not be able to obtain credit.”

Once the loan is in place, the ROWE would access funds periodically for start-up costs such as paying the initial board, hiring staff and consultants, and covering costs for equipment, insurance, travel and office expenses.

The loan would be structured so that the ROWE’s repayment wouldn’t start until 2028. Shortly before then, CAISO would start collecting money from market participants that would be sent to ROWE to repay the loan. The start-up costs would be allocated “in proportion to market participants’ benefits,” CAISO said.

“Although this rate would be allocated in fundamentally the same way the ISO recovers its own market-related costs, the rate would be separate from what the ISO charges to recover its own costs,” CAISO said in the draft final proposal.

Allocation Concerns

Stakeholders expressed support for providing credit backing to ROWE for a commercial loan or line of credit of up to $8.5 million, although some had questions about the specifics.

The California Municipal Utilities Association said it “supports continued progress toward independent regional governance and recognizes that a successful launch of ROWE could enhance regional coordination and market efficiency if designed and funded prudently.”

The Environmental Defense Fund said the ROWE should work to minimize its spending to reduce charges to market participants.

“This approach will allow ROWE to maintain a competitive edge as it seeks to maximize its market footprint while reducing ratepayer impacts,” EDF said.

CAISO responded that the ROWE board would provide “appropriate oversight of spending” and stakeholders can raise concerns about spending with the ROWE.

Several California utilities and the California Public Utilities Commission’s Energy Division voiced concerns about the cost-allocation method. The utilities — including Pacific Gas and Electric, San Diego Gas & Electric, Southern California Edison and a group of six California cities — said ROWE costs should be allocated based on real-time market participation only.

Because day-ahead volumes are much larger than volumes used for real-time balancing transactions, EDAM participants would be paying a larger share of ROWE start-up costs than WEIM-only participants, creating an unfair situation, they said.

But CAISO said real-time-only participation is “a lighter use of the market.”

“Allocating costs based on real-time participation only would ignore the significant day-ahead benefits and result in day-ahead users free riding on them,” the ISO said.

Next Steps

Although terms of the loan haven’t been finalized, CAISO said it expects it to be a variable-rate loan with repayment occurring during 2028. The ISO acknowledged that if the ROWE failed during 2027, the repayment schedule could be earlier.

Any additional comments on the draft final proposal are due April 2. The Western Energy Markets Governing Body and CAISO Board of Governors are expected to vote April 28-29 on the proposal. A tariff revision then would be sent to FERC for approval in early May.

CAISO noted that its proposed financing plan covers only ROWE’s start-up period.

“Issues related to ROWE cost recovery for ongoing post-start-up costs will be addressed in a later stakeholder proceeding,” the draft final plan said.