Arizona Corporation Commissioner Kevin Thompson on Jan. 24 said he thinks his state’s four major utilities may have erred in committing to joining SPP’s Markets+ instead of CAISO’s Extended Day-Ahead Market (EDAM).

Thompson shared his views during a California Energy Commission workshop exploring the impacts on California of the West-Wide Governance Pathways Initiative’s effort to create an independent “regional organization” (RO) to provide governance to CAISO’s EDAM and Western Energy Imbalance Market (WEIM).

In a joint announcement issued last November, Arizona Public Service, Salt River Project, Tucson Electric Power and UniSource Energy Services said they planned to start participating in Markets+ in 2027, citing the potential to realize a combined $100 million in benefits from the market. (See 4 Arizona Utilities Commit to Joining Markets+.)

Speaking during a panel featuring four Western utility commissioners who signed the July 2023 letter launching the Pathways Initiative, Thompson said he urged his state’s utilities to delay their decisions until developments played out around the initiative’s “Step 2” plan, which include an effort this year to pass a bill in California authorizing CAISO to both hand off its oversight of market rules to the proposed RO and participate in the new entity.

“I think Arizona’s utilities jumped the ball a little bit,” Thompson said. “I think they jumped out there ahead of their skis, and I asked them if they would just allow this to work itself through and see where it ends, because this could be the next best thing since sliced bread. You won’t know if you don’t see it through.”

As a publicly owned utility, SRP is not subject to the jurisdiction of the ACC, while the state’s investor-owned utilities have a relatively free hand in deciding on a day-ahead market. APS, SRP and TEP all currently participate in the WEIM but have been firm supporters of the development of Markets+ as an alternative to the EDAM, in large part because of their concerns about CAISO’s state-controlled governance framework.

New Mexico Public Regulation Commissioner Pat O’Connell echoed Thompson’s comments, saying, “It will be interesting to see if we can overcome this governance issue” and questioned “how well those [Arizona utility] decisions will age.”

“As the economic studies suggest, not well,” O’Connell said, referring to the series of economic studies published over the last year showing most Western utilities would financially benefit more from a single electricity market that includes California than in a scenario in which the region is divided into two markets.

Among those studies was a Brattle Group analysis showing that New Mexico’s utilities would realize greater savings from EDAM even if their larger Arizona neighbors joined Markets+, a finding that prompted Public Service Company of New Mexico (PNM) to commit to the CAISO market. (See Brattle New Mexico Study Shows EDAM Benefits Outpacing Markets+ and PNM Picks CAISO’s EDAM.)

“One of the things you learn by working in the planning world is that — especially in electricity — it’s least-cost if we can share” resources, O’Connell said, referencing his past experience working for utilities, including PNM.

O’Connell pointed out that New Mexico’s potential for developing both wind and solar resources is much larger than its energy demand, which means that “it has a lot to a lot to contribute to California in terms of providing low-cost wind resources.”

“All those things were in my head when we gathered together and started talking about, ‘How can we create the broadest possible footprint for regional coordination?’ And that immediately made sense to me: that that is something worth pursuing,” he said.

None of the Arizona utilities responded to a request for comment on the commissioners’ statements.

Regardless of the direction the Arizona utilities take, Thompson said he is “committed to staying on” with Pathways, an effort he likened to the drafting of the Declaration of Independence.

While acknowledging Markets+ supporters’ concerns that CAISO could have continued outsized influence within the new RO, Thompson expressed hope that Pathways participants can address that when they embark on the effort’s “Step 3” process to refine the RO and possibly broaden its authority.

“As the states and the stakeholders continue to work through Step 2 and move to Step 3, I think you’re going to see a lot of the details work themselves out,” he said.

“This is something that was built from the ground up,” he continued. “You know, it would have been too easy to follow a PJM model or the other models in the north and the east. We’re not PJM; we’re not the east. We’re the West, and we’re unique in that.”