Senate Analysis Sees Legal Risks in Regional Grid

Grid regionalization legislation is advancing through the Legislature despite a bill analysis warning it could pose serious threats to the state’s control over its clean energy laws because of potential federal preemption and conflict.

“Given the current administration and its ever-increasing appetite to usurp state control, it would arguably be dangerous policy to enter California into a regional grid and thereby increase the risk that [the Federal Energy Regulatory Commission] and this administration [could] find a hook to challenge a host of laws in California, not to mention take control over what type of energy is generated and used in California and how much it costs,” states the assessment of AB 813 by the Senate Judiciary Committee.

One obvious conflict with California is the Trump Administration’s effort to subsidize coal-fired generation as the state works to decarbonize its grid.

A western balancing authority and wholesale energy market, as envisioned by the current version of AB 813 by Assemblymember Chris Holden (D-Pasadena), passed out of the Senate Judiciary Committee on a 4-2 vote last week.

According to the 19-page committee analysis, a regionally operated grid “would likely include significant coal and natural gas generation capacity, markedly increasing the likelihood that California, as the largest statewide market in the western region, would be required to purchase coal and natural gas, in contravention of state climate policies and renewable energy goals.”

Highlighting the threat is that just last week a Republican Trump appointee to the commission, who opposes the coal subsidy policy, resigned. Robert Powelson, who was confirmed in August 2017, warned that the subsidy would skew competitive markets. He announced June 28 that he was leaving the agency next month.

The state judiciary committee analysis urges the Legislature to move cautiously towards regionalizing the California Independent System Operator.

It recommends expanding CAISO’s voluntary Energy Imbalance Market. That would lead, it concludes, to improved grid efficiencies and integration of California’s renewable supplies with those across the region without a loss of state control over greening its grid.

The analysis specifically warns of the “Dormant” provision of the Commerce Clause. It extends federal authority into areas of state control where there is no explicit conflict with federal law.

If the Golden State sought “to regulate the type or amount of energy being produced while part of a regional market, there could be a challenge made that such laws either conflict with FERC jurisdiction and are preempted or that the laws unduly interfere with the interstate flow of energy and the energy generation and exchange in other states as part of the regional grid California would be integrated into.”

The analysis also cites relevant case law—including a court decision striking down a Minnesota statute that set carbon dioxide emission standards that impacted MISO’s out-of-state participants—as an example of how the dormant Commerce Clause has been interpreted. — Elizabeth McCarthy

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Senate Analysis Sees Legal Risks in Regional Grid

William J. Kelly

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