Electricity Markets

California lawmakers mull regional grid bill

California state lawmakers recently heard from stakeholders about legislation that could alter California Independent System Operator Board governance and pave the way for the CAISO to expand into a regional grid organization.

At a March 14 informational hearing held by the California Assembly’s Utilities and Energy Committee, CAISO explained why it supports the proposal.

“A multi-state ISO can help meet California’s green energy goals,” said Phillip Pettingill, CAISO director for regional integration. “The regional grid will be good for California.”

California lawmakers are considering a bill (A.B. 813) that would create a pathway for CAISO to form a regional transmission organization. The measure is sponsored by California Assembly member Chris Holden, and seeks to condition participation of California entities in any multistate regional transmission organization on the achievement of numerous conditions.

The idea of forming an RTO is controversial and the effort has been moving slowly, partly over concerns by some California stakeholders that by reducing California control over how the CAISO is governed it could weaken the state’s efforts to cut greenhouse gas emissions and reduce in-state job opportunities.

In a memo to the committee, staff noted that CAISO is the only grid operator out of the nine ISOs and RTOs in the United States that has a politically appointed board that must be approved by the state Senate.

“The unique structure of the CAISO’s governing board and control of its members by the governor and Senate has been a barrier to expansion,” staff said.

A.B. 813 would open the door to change the CAISO’s governance structure so it could have an independent board formed in response to interest from neighboring utilities outside of California. 

The current CAISO Board is appointed by California’s Governor. The specific Board composition is not specified in the bill, but an independent board is one of the governance features required if an entity seeks to join a regional transmission organization.

Among other things, the bill requires that a multi-state regional transmission organization bar a mandatory central-clearing capacity market in California.

The informational hearing by the utilities committee took a broad look at how regional markets could affect California’s green energy goals and costs to consumers. In an effort to slash its greenhouse gas emissions, California is preparing to tighten its cap-and-trade program and is requiring utilities to get half their electricity from renewable resources by 2030.

Currently, CAISO has a peak load of about 50,000 megawatts and has about 21,000 MW of utility-scale renewables connected to its system plus about 6,000 MW of rooftop solar, according to Mark Rothleder, CAISO vice president of market quality and renewable integration.

The state is still adding additional renewable resources to meet its 2030 renewable target of having 50 percent of its electricity from renewable resources, Rothleder said, while rooftop solar is also expected to continue to grow.

The grid operator can handle the state’s growing renewable fleet but it is growing more difficult to do and various tools will be required to get the job done, according to Rothleder.

As an example, CAISO experienced a 13,597 MW late afternoon net load (load minus wind and solar) ramp in mid-February when solar production was falling off, Rothleder said. Imports from other states made up 62 percent of the resources used to meet the ramp, followed by natural gas at 28 percent and hydro at ten percent, he said.

CAISO currently cannot track with complete accuracy what generating sources are behind its imports, but it would have more information if the grid operator was in a regional market, Rothleder said, because of the greater access to generator-specific information available in an RTO construct.

Regionalization alone isn’t enough for handling increasing amounts of renewables, according to Rothleder. Other solutions include energy storage, demand response, time-of-use rates and flexible resources, he said.

While some environmental groups are skeptical that a regional grid operator will be good for California, the Union of Concerned Scientists supports the effort.

The benefits of a regional system include access to a wider mix of flexible resources, the ability to tap lower cost resources in other states and a larger market for offloading excess generation, Laura Wisland, a UCS energy analyst told the committee.

A regional market would expose coal-fired power plants to market competition from less expensive renewables, Wisland said.

The Utility Reform Network (TURN) opposes regionalization because it threatens California’s energy goals and could lead to higher costs, according to Matthew Freedman, a staff attorney for the ratepayer advocacy group.

Expanding the ISO would make California’s policies more susceptible to federal pre-emption and litigation, Freedman said.

Jan Smutny-Jones, Independent Energy Producers Association chief executive officer, said an expanded ISO wouldn’t lead to a weakening of input from California or other states. California would continue to make its own resource decisions and climate change policy, Smutny-Jones said. Tony Braun, counsel to the California Municipal Utilities Association, noted that the CAISO is already subject to federal jurisdiction, and disagreed with TURN’s assertion that states would be relegated to “bit-player” status in policy discussions. 

Braun downplayed concerns that a regional ISO would lead to opportunities for increased coal-fired generation. While other Western public power utilities own significant amounts of coal-fired generation, it seems unlikely that expansion of their plants or construction of new ones would occur in any scenario because of capital costs, he said.

Also, Braun downplayed Freedman’s suggestion that instead of forming a regional grid entity, CAISO should expand inside California by teaming up with public power utilities such as Los Angeles Department of Water and Power. Public power utilities are always studying their options and looking for ways to lower their costs and would have joined the ISO already if that made sense, he said.

Committee member Bill Quirk said he believed lawmakers could craft a bill that would allow California to meet its greenhouse gas goals while working with states that have coal-fired generation.