Utility regulators from Oregon and California discussed their proposal for a new independent RTO covering the entire West for the first time publicly during Tuesday’s summer meeting of the Committee on Regional Electric Power Cooperation (CREPC).

The proposal was first described in a July 14 letter signed by regulators from Arizona, California, New Mexico, Oregon and Washington and sent to the chairs of the Western Interstate Energy Board (WIEB) and CREPC, which has become a forum for discussing Western market development. (See Regulators Propose New Independent Western RTO.)

Mark Thompson, a member of the Oregon Public Utility Commission and a signer of the letter, told CREPC Tuesday that the proposal originated from a desire to pursue the benefits of a full Western market and not see the West “fractured” by competing market proposals by SPP, CAISO and possibly others.

SPP and CAISO have offered competing day-ahead market proposals, and SPP is developing a Western version of its Eastern RTO, called RTO West, to compete with CAISO, which lacks independent governance. (See Western Day-Ahead Markets Debated at CREPC-WIRAB.)

“The idea was that perhaps we can form an entity in the West that would have independent governance shared across all states, and that the entity could eventually become the delivery arm for some of the programs that we already have through the CAISO, including the [Western] Energy Imbalance Market, perhaps the EDAM as well,” Thompson said, referring to CAISO’s proposal for an extended day-ahead market for the WEIM.

“Ultimately, that entity could create an independently governed full market opportunity for the West that all states could join, including California,” he said. “The vision would be that rather than fracture the market, let’s stand up another entity to at least be a vessel that can deliver a full market opportunity and that can have independent governance that all Western states could join in.”

Alice Reynolds, president of the California Public Utilities Commission, also signed the letter and helped develop the proposal, which she called an initial “invitation for all states that are interested to discuss and consider this concept.”

“I really do share the view that the fundamental driver of this working group idea and consideration of the concept is the recognition that customers across the West will benefit significantly from a West-wide market,” Reynolds said at the CREPC meeting. “As regulators, this is a common goal that we share — affordable rates, and increased Western cooperation can help us advance that.”

A June 2021 study found an RTO covering the entire U.S. portion of the Western Interconnection could save the region $2 billion in annual electricity costs by 2030 and cut carbon dioxide emissions by 191 million metric tons. Utah Gov. Spencer Cox’s Office of Energy Development led the study along with energy offices in Colorado, Idaho and Montana. (See Study Shows RTO Could Save West $2B Yearly by 2030.)

The WEIM has produced nearly $4 billion in cumulative benefits for participants since its founding in 2014, she noted.

“The discussion of a new concept, a West-wide entity with independent governance, really gives us an opportunity to build on this and to ensure that customers are getting the benefit of the full range of possible services and benefits that can be achieved through West-wide cooperation,” she said.

Others who signed the letter included Washington Utilities and Transportation Commission members David Danner, Milt Doumit and Ann Rendahl; Oregon Public Utility Commissioner Letha Tawney; Arizona Corporation Commission member Kevin Thompson; Pat O’Connell, chair of the New Mexico Public Regulation Commission; and Siva Gunda, vice chair of the California Energy Commission.

“We have identified a common commitment in seeking the benefits shown in multiple studies that demonstrate the most favorable electricity market for consumers is one that includes a West-wide market footprint,” the letter said. “Such a market would avoid the issue of ‘seams’ from separate markets across major portions in the West and result in optimized use of resources to meet loads across the entire interconnection.”

The new entity could contract with CAISO as a regional transmission operator and assume control of the WEIM and EDAM, it said.

‘Larger Conversation’

CREPC allotted 20 minutes for the presentation by Reynolds and Thompson and a brief question-and-answer session.

One question was whether the Canadian provinces in the Western Interconnection could join the RTO.

“I don’t see any reason to limit it to states,” Reynolds said. “We need a collective term that’s broader” than a Western RTO.

Utah Public Service Commissioner John Harvey asked about the potential costs of establishing a new entity.

“I’m an economist by training, and I’m curious and worried about the idea that if a whole new entity is created, you’re adding a tremendous amount of transaction costs,” Harvey said. “Just looking at CAISO or SPP, there’s a huge infrastructure there to try and settle these markets and determine the pricing and settle the accounts. Duplicating that again could burn up a lot of those benefits.”

He also said states with lower energy costs might not want to join an RTO.

“They would tend to say that the EIM and the day-ahead market give them the opportunities they need, and they don’t really see much benefit to moving beyond that,” he said.

Reynolds replied, “I think that’s part of the conversation that we want to have around this concept. If states are feeling like, ‘Well, wait a minute, we’re good with EIM and EDAM,’ then that’s certainly relevant to next steps.”

To Harvey’s first question, she said, “the idea of this is not to add costs, but to take advantage of investments that have already been made and then build on those.”

There was not time to answer questions from other participants.

CREPC Co-Chair Megan Decker, who is also chair of the Oregon PUC, said the committee would convene a follow-up meeting.

“It seems to me this is something where CREPC could convene a larger conversation to answer some of the questions that we didn’t have time for in 20 minutes today,” Decker said.