Fallout from the ISO Regionalization Effort

5 Oct 2017

Gov. Jerry Brown created considerable “collateral damage” by attempting to ram through legislation at the end of the last lawmaking session to allow California’s grid operator to expand to western states, said Kip Lipper, the Senate President Pro Tem Kevin De León’s chief consultant.

“It was a drive by shooting,” said Lipper, noting he was expressing his personal view about Brown’s strong-arm tactics.

The state chief’s effort would have removed the Senate’s authority to confirm gubernatorial appointees to the California Independent System Operator board, Lipper said during a Power Association of Northern California luncheon on Oct. 4. The fallout was increased by Brown holding hostage beneficial environmental legislation.

Formally expanding CAISO is a threat to state’s clean energy future and sovereignty, according to some.

Lipper and others fear it could cause California to get “FERC’d” again. During the 2000-01 energy crisis, federal regulators refused to control soaring wholesale prices. They also let Pacific Gas & Electric’s parent isolate itself to keep from having to send back to the utility any of the billions of dollars it reaped from it. That contributed to the utility spiraling into insolvency.

Lipper objected to regionalization advocates’ conclusion that an overhaul of the grid operator’s governance structure is necessary to improve operations and lower costs. “Let’s start with identifying the problem we are trying to fix,” said the chief consultant, who’s worked in the Legislature for 40 years and is referred to by some as the 41st senator.

Matt Freedman, The Utility Reform Network attorney, said the fossil-fuel friendly/anti climate change federal administration would likely sock it to California if the western grid regionalizes. It would give the Federal Energy Regulatory Commission increased power over the state, according to Freedman, who pointed to Energy Secretary Rick Perry’s new proposal to increase payments to coal and nuclear power plant owners at the expense or ratepayers for being “fuel secure.”

Making matters potentially worse is that an expanded governance structure to allow a western grid likely would be headed by retired utility executives, Freedman warned. This would diminish transparency.

A grid expansion, he added, also would undermine California’s ability to track and enforce its greenhouse gas emissions and resource adequacy requirements, as well as its renewable portfolio standard’s required percentages of in-state and imported resources.

The unsuccessful legislation at issue, authored by Assemblymember Chris Holden (D-Pasadena), lacked sufficient votes for passage. Holden’s legislation to create a western grid will be reconsidered next year, though support is shaky at best.

Instead of creating an interstate grid, Lipper and Freedman called for intrastate expansion by incorporating irrigation districts and the municipal power agencies operating outside CAISO’s trading market. That would create economic and environmental benefits, they said.

The planned expansion into Colorado of the Southwest Power Pool— a balancing authority that includes Plains states, such as, Arkansas, Iowa, Kansas and Texas—could be a precursor to further expansion of the pool into states envisioned as part of a regionalized CAISO.

Whether an enlarged SPP expands westward is a non-issue for legislators, according to Kipper.

Freedman sees rushing to create a Western ISO in response “would be a race to the bottom,” tying California to coal power generated in other states.

Elizabeth McCarthy


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