California will not be moving ahead with legislation to explore linking the state’s power grid with utilities and states across the Western U.S. -- at least not this year.
This week, amidst the flurry of last-minute additions and deletions to energy-related bills before the end of the state’s legislative session, Assemblymember Chris Holden announced he would not be moving forward with AB 726 and AB 813.
The two bills were the vehicles for a concept that’s won both favor and opposition from clean energy, environmental and consumer groups: regionalizing the state’s power governance and opening up its operations to a far greater integration of out-of-state utilities and generation resources.
Amendments to the bills introduced last week would have authorized California’s main grid authority, the California Independent System Operator (CAISO), to shift from a governor-appointed board to a fully independent board, open to other utilities and power plant owners, the way the rest of the country’s interstate transmission operators currently function.
Supporters say this move could save the state billions of dollars in costs associated with its push toward ever-higher amounts of renewable energy. Today, 38 separate “balancing authorities” west of the Rockies exchange energy largely through bilateral agreements, an inefficient system compared to the interstate transmission grid markets run by ISOs and RTOs in the Midwest and Eastern U.S.
A CAISO report found that implementing a regional energy market with PacifiCorp alone could reduce power-related carbon emissions by about 12 million tons by 2030, and save California ratepayers up to $894 million, with some $691 million of that attributable to regional renewable procurement savings.
Ralph Cavanagh, energy program co-director for the Natural Resources Defense Council, wrote in a Friday blog post that an independent Western grid operator would “be able to draw cleaner, cost-effective electricity from across the region and send it where it is needed. This would still allow each state to control its own utilities and energy policies, and would reduce costs and improve reliability for electricity customers across the region.”
But opponents say the move would relinquish the state’s authority over CAISO, and open it up to influence from utilities outside its borders -- namely, PacifiCorp, the Rocky Mountain regional utility that gets most of its electricity from coal-fired power plants.
The Sierra Club has objected to the concept of a pan-Western grid market to open additional opportunities for PacifiCorp’s coal-fired generation fleet to postpone retirements. And backers of the city- and county-formed energy trading entities known as community choice aggregators worried that an interstate grid would lead to higher exit fees, longer-term energy contracts between utilities, and other detrimental developments.
Meanwhile, PacifiCorp has said it won’t go forward with a shared balancing authority unless it’s led by a board with a governance structure independent of CAISO and authorized to serve as a regional organization -- facts that stymied efforts between the utility and California to merge their energy markets last year.
CAISO initiated smaller-scale trans-regional energy trading in 2014, when it expanded its Energy Imbalance Market to include PacifiCorp, and has since added NV Energy, Arizona Public Service, Seattle City Light and Puget Sound Energy. Portland General Electric and Idaho Power are also slated to join in the next 12 months.
But the Energy Imbalance Market only trades energy in 5-minute increments to procure the “final few megawatts of power to satisfy demand within the hour it’s needed,” CAISO notes. A day-ahead energy market would offer a far broader opportunity for merging the state’s renewable energy production with demand outside its borders.
Assemblymember Holden's statement noted that neither bill authorized grid regionalization, but only “established the next steps for the ISO to follow. But there is still more to discuss, starting with the role of the legislature in review of any proposed governance structure of a new ISO.”
“We will continue our work on the issues over the fall and likely revisit it in the second half of this two-year session,” he said.