Tuesday, March 19, 2019

Utah Bill Would Require Legislative OK for PacifiCorp RTO Membership

By Robert Mullin

Utah lawmakers plan to draft a bill requiring PacifiCorp to gain legislative approval before joining an RTO based on an expanded CAISO.

Members of the Public Utilities, Energy, and Technology Interim Committee approved a motion to create the proposed law July 13 after listening to more than 90 minutes of testimony from power industry participants — most of whom were wary about the state’s participation in a regional integration effort driven by California.

Specific terms of the legislation were left unclear.

Utah sits squarely inside the PacifiCorp East (PACE) balancing authority area, which also extends into portions of Idaho and Wyoming. It is served by PacifiCorp’s Salt Lake City-based Rocky Mountain Power subsidiary.

Western Interconnection Balancing Authorities (WECC) - pacificorp rto membership utah legislation

The entire state of Utah is contained within the PacifiCorp East (PACE) balancing authority area, which the utility hopes will become part of an expanded CAISO.

“This potential issue is significant from both a policy perspective and a financial perspective,” said Thad LeVar, chair of the Utah Public Service Commission.

LeVar noted that PacifiCorp must go before his agency for a ruling once it makes a determination to join an expanded regional grid. The decision “shouldn’t fall solely to the regulatory arena without some guidance from the legislators in the state,” he said.

Governor Skeptical

Laura Nelson, director of Gov. Gary Herbert’s Office of Energy Development, said the office was skeptical about an RTO but still engaged in the process related to its development.

“Our consistent message has been that any participation in the [CAISO] must protect Utah’s long-term interest and authority over its power system,” Nelson said, citing the state’s role in protecting ratepayers, maintaining system reliability and choosing the generating resource mix.

Nelson told the committee that the state needs to perform an “exhaustive” study to determine if PacifiCorp’s membership is in the best interest of ratepayers. “Any recommendations about joining CAISO are not yet fully informed,” she said.

Ratepayer protections were foremost among the concerns of Michele Beck, director of the state’s Office of Consumer Services. While Beck acknowledged that there are technical benefits to participating in a more centrally operated grid, she questioned who would enjoy them.

“Do the benefits accrue to customers, or will they accrue to just select elements within the industry?” she said. “Are the benefits reasonably distributed across the footprint? Are the modeled benefits durable?”

She said that membership in an expanded CAISO should be conditioned on a demonstration that it has greater benefits than the Western Energy Imbalance Market, in which PacifiCorp currently participates.

“We’re struggling to document that all the benefits of the EIM that have been stated and have been published have been realized,” Nelson said.

Chris Parker, director of Utah’s Division of Public Utilities, said he was concerned about risks as well as benefits — namely the state’s risk in giving up control over its utilities to an RTO, whose backstop authority would be FERC.

Fear of California Dominance

Parker also cited the risk of an RTO being dominated by California interests, saying his agency would seek assurances that policy changes would require the unanimous support of participating states. He said CAISO’s latest RTO governance proposal — which would initially provide California with numerical voting superiority — was unacceptable. (See Governance Plan Fails to Dispel Western RTO Concerns.)

Rocky Mountain Power CEO Cindy Crane called the development of an independent governing structure a “threshold” issue for her company in its decision to participate in an expanded CAISO.

“What we are not doing is joining the California ISO,” Crane said. “We are working to transform an existing operating entity into something that could be a regional operating entity.”

Crane said the requirement that an RTO deliver “risk-balanced” net benefits to PacifiCorp customers in each of its six states was a second condition for the utility.

“If it’s not going to deliver benefits for our customers, there is no reason for us to advance,” she said, adding that regulators in each PacifiCorp state will have the authority to decide whether the utility joins.

Watching California’s Legislature

A few witnesses testifying before the committee said the fate of a Western RTO is now in the hands of California lawmakers, which are slated to begin considering legislation in August that would loosen the state’s authority over CAISO.

“We’re at the point where we’re waiting to see what the California legislature is willing to give up,” said Parker, referring to the concerns about California’s dominance in a governing structure. “If they’re willing to give up enough, then it may be worth it.”

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