The California Independent System Operator Board of Governors and the Western Energy Markets Governing Body have approved an important step toward establishing a revised governance model for the ISO’s wholesale electricity markets “designed to improve reliability and reduce the cost of delivering electricity to consumers across the West,” CAISO said on Aug. 13.
The Board and Governing Body approved a proposal from Western state energy regulators known as the West-Wide Governance Pathways Initiative Step 1. The proposal would establish a more independent and broadly regional approach for how market decisions are made for both the Western Energy Imbalance Market and the Extended Day-Ahead Market, CAISO said.
“The interest in broader independent governance has long been at the core of efforts to develop an integrated power market across the West,” said Elliot Mainzer, the ISO’s president and CEO. “We are impressed by and appreciative of the robust stakeholder involvement and support for the Pathways Initiative, and believe their commitment to exploring these additional changes instills even greater confidence in regional energy markets.”
An agreed-upon, more independent and regional governance structure is seen as an essential building block in the progress of the EDAM, the California ISO’s new extended day-ahead electricity market that seeks to build on the benefits utilities and other power providers have realized from participating in the real-time WEIM, the grid operator noted.
The Pathways Initiative Launch Committee was started in 2023 by a group of Western state regulators committed to maximizing benefits of wholesale electricity markets across the entire West. The committee has facilitated extensive collaboration among Western stakeholders, including market participants, regulators, consumer advocates, labor and public non-governmental organizations.
The committee has been taking a phased approach to creating a more independent governance structure, submitting its Step 1 proposal to the ISO Board and Governing Body on June 5.
“Our goal has been to create a governance framework that enhances independence over governance of the markets and is centered on the public interest while preserving California’s Governing Board oversight of the CAISO balancing authority,” the committee said in its submittal letter. “Overall, the proposal serves the interests of consumers by optimizing the reliability and economic efficiency of the Western power grid.”
Since its launch in 2014, the WEIM has demonstrated how integrated markets can leverage resource and geographic diversity to strengthen reliability and affordability for electricity customers. After starting with two participants, the ISO and PacifiCorp, the real-time market has grown to 22 entities in 11 western states and generated nearly $6 billion in cost-saving efficiencies, CAISO said.
"The market has also enhanced reliability for California and neighboring states in the West by making it easier and more economical to transfer energy where and when it’s most needed around the region," CAISO said.
In recent summers, the WEIM has played a pivotal role in moving large amounts of energy among Western states during extreme heat events which increase demand and cause strain on grids. The market has also reduced greenhouse gas emissions for California and other states by enabling the wider use of clean energy, it said.
By allowing WEIM entities to join the extended day-ahead market, where far more energy transactions occur, the cost savings and other benefits would be extended across a broader geographic footprint, it noted.
The Step 1 approval, recommended by CAISO management, sets in motion a process that would give primary decisionmaking authority over the two markets to the WEM Governing Body, whose members are nominated by a committee of Western energy stakeholders.
The new governance model will eventually replace the current joint decisionmaking authority that the WEM Governing Body shares with the ISO Board of Governors, whose members are appointed by the California Governor and must be confirmed by the California Senate.
The proposal endorsed by the two governing bodies also introduces a “dual filing option” to the current process for resolving differences between the two governance bodies, allowing the Board and the Governing Body to make separate filings to the Federal Energy Regulatory Commission if they are unable to resolve a dispute.
The proposal would take effect after the EDAM has commitments from non-CAISO entities that represent at least 70 percent of demand for electricity within the CAISO grid.
The Pathways Initiative Launch Committee and working groups have begun holding public workshops to develop a proposal for a Step 2, which is scheduled to be published later this year and would likely require legislative approval in California.
CAISO staff will begin revising its governance documents and tariff to reflect the Step 1 proposal, and bring the amendments back to the Board and the Governing Body before the proposal takes effect. The CAISO staff will continue to monitor the progress of the Pathways Initiative and offer technical support when needed.
