Since the CAISO’s inception in 1998, it has stayed resolute in its intention to pursue expansion of centralized markets throughout the West. Endless studies have proven this would be beneficial to all western stakeholders. In fact, the CAISO’s stated goal is: “Working with partners from across the West, our goal is to collectively shape regional solutions that will advance an affordable and reliable energy transition, maximize electricity consumer savings, grow environmental benefits, and respect state energy policies and objectives.” But solving the Middle East political problems might be easier than achieving the CAISO’s noble objective! The real issue is governance. Let’s face it, most of our neighbors don’t trust us, don’t like our policies, or are afraid of the CAISO’s size. Recently, a new bill, SB 540, was introduced in the California state legislature. It would allow the CAISO to be part of the regional market but would require it to maintain the necessary technical capability to operate its energy markets. If passed and signed into law, the legislation would allow an independent regional board to set the market policy. The regional market rules may not be in line with California state energy policy, which is more likely to vary from energy policy in, say, Wyoming or Utah. What if the regional market does not want to impose a wholesale energy cap and California does? What if other states want to build gas and coal and California does not want to import these resources, as is the case today? Is California ready to compromise? It is no surprise that the bill requires the CAISO to maintain the necessary technical capability to operate its energy markets and have a backup plan in case California does not like the outcome of the independent regional board. Some may say there is no harm in trying. I say why not focus on a pragmatic approach. Let the West develop its own centralized market, while the CAISO focuses its limited resources on its California customers and on improving market products such as congestion revenue requirements, resource adequacy and continuing its plans for transmission expansion to reach in-state and out-of-state resources. If the CAISO wishes to expand its footprint, then why not focus on integrating into the fold LADWP, the Balancing Authority of Northern California (BANC), and Imperial Irrigation District? During my tenure as CAISO Managing Director of Market Operations, I was repeatedly asked by several of our neighbors why LADWP was not part of the CAISO and why instead the CAISO pursued utilities serving cities such Portland, Seattle or Phoenix. I did not have an answer then and still don’t have one today. I suppose the CAISO direction has shifted from expansion of its footprint to advocating for a centralized market operation under one independent board for the West.
Politics aside, no doubt an independent regional organization would provide better access to shared resources. Grid operators across the western interconnection will be better equipped to address peak demand periods, reduce the likelihood of blackouts, and support the resilience of the grid in the face of growing challenges such as extreme weather events and climate-driven disruptions. There is no doubt that such a regional organization would be better for all ratepayers, market participants, electric reliability and the climate. The question is whether it is doable after two decades of tireless efforts that have not resulted in success. The pragmatic approach that would benefit the CAISO and its stakeholders without solving the governance issue is to get our in-state house in order.