By Robert Mullin

UNION, Wash. — The California State Assembly bill intended to set CAISO’s regionalization in motion may have died in committee this past summer, but talk of an organized market for the broader Western Interconnection lived on last week during the annual meeting of the Northwest & Intermountain Power Producers Coalition (NIPPC).

That talk was tinged with a mixture of resignation, skepticism and optimism — and humor.

“For the moment, it appears to me regionalization in the West is dead, at least from the CAISO perspective,” said Steve Rodgers, director of FERC’s Division of Electric Power Regulation-West.

“There’s not going to be regionalization anytime soon, it appears. Some states perceive that California has a desire to export its policies to other states. I’m sure nothing like that would ever happen,” Rodgers joked.

Rodgers noted that some California groups opposed to regionalization fear it will allow “free riders” in the rest of the West to take advantage of infrastructure paid for by California ratepayers, while some in other parts of the West worry about increased costs for their ratepayers.

“I had one experience back in the spring where in consecutive weeks I had two of these diverse groups come to meet with my staff to express their concerns,” he said. “I felt like saying, ‘You guys should get together, because some of these fears are not adding up.’”

Rodgers said that while FERC was closely monitoring developments around regionalization, it would not put pressure on any of the region’s players because “that surely would be the kiss of death” for the effort.

FERC Commissioner Richard Glick said that some California opponents of regionalization have argued that an “evil FERC is going to come in and they’re going to reverse California’s greenhouse gas emissions program.”

“First of all, at least with regard to the California ISO, we already do have a significant amount of authority. If we wanted to engage or use certain words that could inhibit California policy, I think we could do that, but I’m not saying we’re going to do that and we certainly shouldn’t do that,” Glick said. “And secondly, I think the evidence is out there already if you look at the other regions with RTOs that the commission is generally pretty deferential in terms of regional preferences.”

“We need a big bipartisan win, and I don’t think we’ll get it on carbon tax in the short term, but I’ll tell you a place where we can get it. We can get it on enhanced regional grid integration,” said Ralph Cavanagh, co-director of the energy program at the Natural Resources Defense Council.

Cavanagh recounted this summer sitting before the California Senate Judiciary Committee (which was pondering the regionalization bill), bracketed by the “extreme” left and right.

“I’m trying to get them to vote for a fully independent board for the California ISO, and there were howls of anguish from the extreme left in California on this because of a perception this was going to turn California over to the tender mercies of what is called the Trump FERC, without recognizing that the California ISO is fully regulated by the Trump FERC today,” Cavanagh said.

Cavanagh noted the bill passed the committee with Republican votes, which would have been key to passing it if it had gone to the State Senate floor.

“And I really hope to see that. I really hope to see Democratic and Republican majorities on a tough issue. It’s been controversial, and collectively the will of this room must be ‘We will not give up on this,’” Cavanagh said, addressing his NIPPC audience.

“I tend to agree that that is ideally a place where bipartisan agreement will emerge,” said Montana Public Service Commission Vice Chair Travis Kavulla, who noted he sits on the Western Energy Imbalance Market Governing Body.

“Even in the absence of a kind of fully packaged regionalization of an ISO, which would be ideal, I think you can incrementally build on the regional efforts that are currently underway,” Kavulla said. “Right now, you’ve kind of got a toolbox with only a Phillips-head screwdriver in it, but it would be nice to add some additional tools into the Western regional market.”

Kavulla said he was disappointed to see the tenor of the California debate over regionalization, but that it was “hilarious” to see the NRDC’s Cavanagh associated with regionalization proponent PacifiCorp.

“But, fundamentally, as a non-California Westerner, it’s simply inconceivable that you’d have a workable and productive market for electricity in this region in the absence of a jurisdiction that has half of its load,” Kavulla said.

Lauren McCloy, senior policy adviser to Washington Gov. Jay Inslee, noted the governor supported passage of California’s failed regionalization bill and understands that CAISO and regional stakeholders continue to work on enhancements to the EIM that “could pave the way for a more dynamic regional market in the future.”

“The governor also continues to advocate for resolutions to the two biggest issues for Washington stakeholders participating in these discussions: governance and fair valuation for hydroelectricity,” McCloy said. “In order for Northwest entities to join the regional market, they will have to have a decision-making role in how that market is run.”

McCloy reminded conference participants that Washington produces about a quarter of U.S. hydropower. In establishing a fair value for the resource, a market operator would need to recognize that hydropower “is not only emissions-free, but it’s also flexible and can be coordinated to complement other variable renewable resources such as solar and wind.”

FERC’s Rodgers said the EIM has been a “great success so far.”

“First of all, there’s been great benefits to date of over $400 million. Not only is that a large number, but that number is getting larger all the time as more and more entities join the EIM. The boundaries of the EIM are growing each year,” he said.

Rodgers also pointed out that the possible extension of CAISO’s day-ahead market could increase the benefits of the EIM, but that some observers are concerned it could prevent full regionalization.

NIPPC Executive Director Robert Kahn wrapped up the meeting with a healthy dose of skepticism on the issue: “NIPPC has been working to create an RTO/ISO since 2000, and we will continue to do so, but we’re not holding our breath.”