The possibility of forming a Western RTO with or without California was a central topic at this week’s joint meeting of the Committee on Regional Electric Power Cooperation and the Western Interconnection Regional Advisory Body (CREPC-WIRAB).
Held in San Diego and virtually, the three-day summit brought together stakeholders and state regulators from across the West for panels on markets and transmission and to hear from three FERC commissioners.
In his presentation, FERC Chairman Richard Glick restated his opinion that one or more RTOs would benefit the region. (See Glick Says West Should 'Finish the Job' on RTO.)
Utah Public Service Commission Chairman Thad LeVar asked Glick whether California could be part of an RTO given its size. States with loads that “significantly overshadow” neighboring states — California, Florida, New York and Texas — are not in RTOs, he pointed out.
“None of those areas have successfully created multistate RTOs with that kind of load difference,” LeVar said.
Glick acknowledged CAISO’s governance issues had “stunted” an RTO in the West, causing prior attempts to expand the ISO to fail. California’s governor appoints the members of CAISO’s Board of Governors, and state lawmakers have been unwilling to expand CAISO’s governance to include out-of-state representatives or to consider allowing California to join a multi-state organized market.
That might need to change for California to avoid resource adequacy problems like those it experienced during the past two summers, when heat waves and wildfires limited electricity imports from the Pacific Northwest and the Desert Southwest.
“California can’t do it alone,” Glick said in a virtual appearance. “It would be a mistake for people to say, ‘Well, I’m a lot bigger, and therefore we should set our own rules and ignore everyone else. It just doesn’t work that way, at least in the West. It hasn’t worked that way in the past.”
He said other RTOs have been able to cope with a mix of larger and smaller states.
“There are some relatively big states in PJM, for instance, that work with a lot smaller states, and I would argue they get significant benefit from doing that,” Glick said.
“It also won’t work for policymakers in California to continue saying, ‘We’re California. We’re going to appoint our board members and have our own governance,” the FERC chairman said. “I understand why that’s attractive if you're in California, but I don’t think it is sustainable.”
In her in-person presentation, Commissioner Allison Clements said the fact that three of the four sitting FERC commissioners decided to speak at the CREPC-WIRAB meeting showed the importance of events taking place in the West, where multiple regionalization efforts are underway.
The Northwest Power Pool has launched its Western Resource Adequacy Program (WRAP), the topic of a presentation by NWPP and Pacific Northwest utilities at the meeting and a panel discussion of state regulators on its governance. SPP is administering the program. (See SPP to Operate NWPP’s Resource Adequacy Program.)
CAISO is seeking to expand its Western Energy Imbalance Market (WEIM) from a real-time to an extended day-ahead market (EDAM), which CAISO CEO Elliot Mainzer touted in San Diego and in an Oct. 13 stakeholder forum. (See CAISO Promotes EDAM Effort in Forum.)
And a group of utilities have formed the Western Market Exploratory Group (WMEG) to look at “regional market solutions.” (See Western Utilities to Explore Market Options.)
In addition, SPP has been pitching its plan to include Western utilities in its RTO along with its Western Energy Imbalance Service (WEIS). SPP CEO Barbara Sugg promoted those efforts at CREPC-WIRAB and presented a new SPP proposal called “Markets+,” which the RTO says is “more than just a day-ahead market offering.”
“It’s a conceptual bundle of services proposed by SPP that would centralize day-ahead and real-time unit commitment and dispatch, provide hurdle-free transmission service across its footprint and pave the way for the reliable integration of a rapidly growing fleet of renewable generation,” SPP says on its website.
The service is intended to appeal to Western utilities that “aren’t ready to pursue full membership in a regional transmission organization at this time” but instead want “a voluntary, incremental opportunity to realize significant benefits,” more like the WEIM or WEIS.
Adding urgency to RTO talks, Colorado and Nevada passed bills in June requiring transmission-owning utilities to join an RTO by 2030. (See Talk of Western RTO Intensifies.)
Colorado state Sen. Chris Hansen, a main sponsor of the bill, said at the CREPC-WIRAB meeting that the measure was designed to give utilities a “nudge” toward greater regional collaboration as Colorado and other Western states pursue ambitious clean-energy goals.
And Oregon lawmakers last spring passed a bill requiring the state’s Department of Energy (ODOE) to complete a study by year’s end exploring the potential benefits and risks of joining an RTO, a potential prelude to a more serious push for membership. ODOE has this fall convened two meetings with an advisory committee on study design and hopes to have a draft report completed by late November. (See Oregon Group Contemplates RTO for a ‘Decarbonized World.’)
The usual roles of an RTO — operating a wholesale energy market, overseeing transmission and ensuring resource adequacy and reliability — “don't have to all get connected neatly into one box” in the West, Clements said. But the challenges of climate change and a shifting resource mix suggest that “broader integration [and] coordination will better meet the challenges the Western system is facing as well as make it more cost-effective,” she said.
The division that once existed between California and the rest of the West has dissipated as other states have adopted clean energy mandates like California’s and moved to adopt more wind and solar power.
Clements referenced a state-led study funded by the U.S. Department of Energy that showed the development of a single RTO covering the entire U.S. portion of the Western Interconnection could save the region $2 billion a year in energy costs by 2030.
The study — presented in a separate session at the CREPC-WIRAB meeting — also found that a full Western RTO would be more effective at saving money, reducing renewable resource curtailments and cutting CO2 emissions than RTO configurations in which the region is broken up into separate markets, including one that divides CAISO from the rest of the West. (See Study Shows RTO Could Save West $2B Yearly by 2030.)
Should Western states decide to form an organized market or markets, they can learn from the successes and avoid the mistakes of Eastern RTOs, she said.
“I have this desire for you all to take advantage of those lessons learned, which makes me a cheerleader for regional market integration,” Clements said.
Commissioner James Danly, a vocal critic of CAISO’s market design and frequent dissenter at FERC, praised the success of the WEIM and said it had altered perceptions of CAISO in the West.
“The distrust that had developed at one point in this region for interactions with California has, to a very large extent, I think, been modified by the positive experiences people have had in the EIM,” Danly said. “The value that has been delivered to ratepayers is undeniable, and the scale is vast.”
(The latest tally showed the WEIM had saved its 15 participants more than $1.4 billion since its inception in 2014.)
“On top of everything else, I think there’s been a benefit to the EIM that it has allowed utilities that are not typically engaged in complex cooperative endeavors, like this market, to get better and better at it, which I think bodes well for the future for their cooperation, perhaps on a greater scale,” Danly said.
He also lauded NWPP’s WRAP program, which requires FERC approval. (See RA Program will Require Restructuring of NWPP.)
“I've been very deeply impressed by the thoughtful, incremental and deliberate development of the Northwest Power Pool and their desire to establish what appears to be an absolutely positive value proposition and to do so thoughtfully, with as much buy-in from as many people as possible, which I think is key to any type of market system like this,” Danly said. “Having people pushed into it kicking and screaming is the worst possible way of doing it.
“The collaboration that I saw was impressive,” he said. “There is a deep commitment from everybody involved to a cooperative endeavor there, and all I can say is … [that] I am cheering Northwest Power Pool on from the sidelines, and I really hope that that the fledgling effort succeeds as much as it appears that it will.”
Some supporters of a full RTO describe steps such as EDAM and WRAP as too incremental and piecemeal, but Danly said smaller steps that foster cooperation can be a model for the formation of a Western RTO.
“I am a true fan of markets,” Danly said. “I think they deliver immense benefit to ratepayers, and I want to see them executed but … properly executed. I do think that the march toward a full RTO, much like the way the Northwest Power Pool is doing things deliberately and gradually, is something also that should be done with full buy-in from everybody.”
“I'm a big fan of RTOs, but they’re not necessarily right for every region,” he added. “I would just suggest that everything be done as incrementally as possible, with as many people at the table to discuss it as we can get.”