Hello! I'm Brian Turner, Western Regulatory Director at Advanced Energy United, filling in for my colleague Leah Rubin Shen.
As a member of the West-Wide Governance Pathways Initiative Launch Committee, I wanted to share the big news this month, which is the release of a Draft Step 2 Proposal. Below, you'll find some key takeaways.
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Today, the Pathways Launch Committee released a draft of Step 2 of its straw proposal, which proposes to establish a new, independent Regional Organization (RO) to oversee Western energy markets. The RO will provide fully independent governance for the CAISO’s existing real-time energy market and soon-to-be-launched day-ahead energy market, WEIM and EDAM, while CAISO will remain the market operator. The RO will also be structured in a way to be able to add additional market services in the future. Here's what to look for in the proposal:
Evolutionary and à la carte
From the start, the Pathways Initiative has pursued a 3-step process towards independent governance for Western energy markets, and eventually "a full suite of RTO services” (quoting the state commissioners' letter that started it all). Step 1, establishing "joint authority" over WEIM and EDAM, has been approved by CAISO and is awaiting implementation when the requisite participation in EDAM is achieved.
For Step 2, the Pathways Launch Committee wrestled with a thorny fundamental question: would the RO "own" the WEIM and EDAM markets (the "tariffs" under federal law) and contract operation back to CAISO, or should the RO exercise its independent governance over those markets while still integrated in the CAISO tariff? The question is rife with legal, cost, and political implications. The Draft Step 2 proposal recommends the latter—the RO exercises sole authority over WEIM and EDAM provisions within the CAISO tariff—while investigating potentially moving to adopt the tariffs in the future.
The Step 3 evolution toward full RTO services is not within the mandate of the Pathways Launch Committee, but the Draft Step 2 Proposal spends some time illustrating how the proposed RO structure could accommodate that evolution in the future. This evolution envisions that the RO could offer additional services—from an ancillary services market to consolidated transmission operation—on an à la carte basis to interested utilities.
Respect for state policy and public interest
Respect for state policies and the public interest is woven throughout the governance and policymaking functions of the RO. The proposal recommends the RO be incorporated as a public interest 501(c)(3)—not a 501(c)(6) industry association like some RTOs—and is corporate documents would further enshrine its public interest obligations. This mirrors CAISO's public interest obligations currently enshrined under California state law.
The draft proposes a 7-member independent Regional Organization (RO) Board of Directors with sole authority over WEIM and EDAM energy markets. Unlike most RTOs, the RO Nominating Committee would be explicitly charged with nominating Board candidates with expertise in public interest, including former government officials and consumer, labor, or environmental executives. The Proposal also recommends a standing Public Policy Committee to maintain communication with state, local, and federal policymakers and ensure tariffs and initiatives do not conflict with states' public policy.
The proposal also recommends adopting the Body of State Regulatorsfrom the existing WEIM. These commissioners, selected from state PUCs, would directly advise the RO Board and have access to independent market expert staff and independent market monitors. The Proposal also recommends a new Consumer Advocate Organization to advise and support each state's consumer advocate organization, and an Office of Public Participation to facilitate public understanding and participation in RO policymaking.
A more level playing field for advanced energy
I'm particularly excited by the potential for clean energy to be fairly represented in the RO's governance and policy making under this proposal. Here are three things worth noting:
First, the proposal envisions strong protections for state policy, including clean energy policy (without letting any state impose its policy on another). Between the RO Board's Public Policy Committee and the Body of State Regulators, state policy would have a big "seat at the table."
Second, the policy initiative process—where proposed changes to tariffs, market rules, and practices are identified and developed— would uniquely empower stakeholders of every type, including clean energy companies and their customers. Throughout the process, stakeholders would have a driving role in deciding which initiatives are taken up, how they are defined, and what a solution would be.
Third, stakeholder "sectors" would be used as an organizational and advisory tool, and would recognize important newer voices from both consumers and industry. Unlike many existing RTOs where voting frequently pits stakeholder sectors against each other, resulting in protracted stalemates or incumbent wins, the Pathways Step 2 Proposal takes a different approach. It moves away from traditional voting and uses indicative voting. Votes would be tallied by individual stakeholders, and could be grouped by sector, geography, generation vs. load, etc. The intent is to provide more flexibility for the RO staff and Board to understand and respond better to stakeholder input. This approach would also provide a stronger voice for clean energy.
I'm hopeful that the organizational benefit of expanded sector definitions will be available to advanced energy stakeholders. The Launch Committee has previously proposed sector representation for Distributed Energy Resource companies, large commercial energy buyers, public interest organizations, and Community Choice Aggregators, that do not commonly have dedicated representation in other RTOs. However, among the many comments the Launch Committee received during the Step 2 Proposal development, sector definitions garnered some of the most voluminous, and consequently the Draft Proposal does not recommend a final list of sectors and seats. Instead, the Launch Committee will hold an additional workshop on October 7. We encourage interested parties to participate and advocate for the importance and usefulness of separate sectors for these newer groups of stakeholders to ensure all stakeholders can be fairly represented.
Next Steps
A public meeting to detail the proposal and answer questions will be held on October 4 at 12:00 p.m. PT, and a workshop to further define stakeholder sectors will be held on October 7. Following the workshop, a proposal specific to sector definitions will be released on October 14. The Launch Committee has requested Step 2 and Sector comments be due by October 25, with the final version of the Phase 2 Proposal due out the week of November 15.
Bonneville Power Administration to Fund Phase 2 of SPP's Markets +
BPAannouncedits plans to fully fund its share of 17.4% for SPP's Markets+ Phase 2. BPA says that it sees the benefits in the independent governance of SPP's day-ahead market.
SPP Markets+ Response to FERC's Deficiency Letter
Late last week, SPP submitted its responseto FERC's deficiency letter. According to RTO Insider, SPP said the deficiency letter is part of the standard process and stated that none of the commission's inquiries posed a "serious risk."
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