Out of everything we've been closely following this year, the West-Wide Governance Pathways Initiative has been our most covered topic. This year, the Pathways Launch Committee made significant strides in advancing the goal of an independently governed regional organization in the West that can include California and maximize the benefits of sharing resources across the largest possible footprint.

As this is our last regular newsletter for the year, I'm happy to share some recent milestones, as well as what we're looking forward to next year. 

The Pathways Launch Committee voted in November to approve its final step 2 proposal, which lays out recommendations for creating an independent regional

organization to govern energy markets for the west. The proposal is well-supported, including by a variety of California energy leaders. This vote also comes just after the U.S. Department of Energy’s Grid Deployment Office announced $1 million for the Pathways Initiative effort, reinforcing that the effort is tangible and backed by funding that will support efforts to advance Western wholesale electricity markets. Full implementation of the step 2 proposal will require legislation in California, which the International Brotherhood of Electrical Workers (IBEW) has said it will sponsor. We'll be continuing to share updates on the progress of the Pathways Initiative, including the legislative effort, in the coming year.

Given that there are two day-ahead markets developing in the West, EDAM and Markets+, the competition for day-ahead market participation has been a defining theme of 2024. Here is where things stand as we close out the year:

EDAM has critical mass, with the Balancing Authority of Northern California (BANC), PacifiCorp, and Portland General Electric formally signing on, and the Los Angeles Department of Water & Power, BHE Montana, and Public Service Company of New Mexico signaling intent to join. Idaho Power and NV Energy have also expressed interest in the market, and Arizona G&T Cooperatives and WAPA Desert Southwest are collaborating on a study of the potential benefits of joining.

Meanwhile, four other Arizona utilities, Arizona Public Service, Salt River Project, Tucson Electric Power, and UniSource Energy Services, announced plans to join Markets+. Bonneville Power Administration (BPA), meanwhile, has expressed a "leaning" towards Markets+ and has committed to continue funding the market's development, but is not expected to issue a draft day-ahead market decision until next March.

The landscape remains very dynamic as we head into 2025. Just this week, CAISO announced that it's considering fast-start pricing for EDAM, which could shape how other utilities across the West view their day-ahead market choices. Fast-start pricing is a mechanism that factors the cost of starting and operating gas-fired peaking plants into wholesale market prices. CAISO is currently the only RTO that does not use it, which has been a sticking point for some utilities in considering EDAM.

Pacific Northwest 

BPA hosted a day-ahead market participation workshop in early November, where participants urged the agency to delay its decision to conduct a more comprehensive evaluation of market options. Despite these concerns, BPA announced that it would be funding Phase 2 of Markets+, reaffirming its commitment to keeping the option viable ahead of its final decision expected in May 2025. Meanwhile, Seattle City Light has called on BPA to reconsider funding for Markets+ Phase 2, pointing to the greater economic benefits expected in EDAM. The next public workshop is scheduled for early January. 

Desert Southwest

Public Service Company of New Mexico (PNM), the state's largest electric utility, has announced plans to join EDAM. This decision follows a Brattle study showing EDAM as the most beneficial option for PNM customers. Already a participant in the WEIM, PNM President and CEO Don Tarry said, "Participating in EDAM is the next step in realizing the value of New Mexico’s renewable energy potential for our customers."

PNM's next-door neighbors, however, are taking a different approach. In late November, four Arizona utilities announced that they would join Markets+, claiming it will provide "more reliable service, greater savings, and increased access to diverse clean energy resources." This announcement has big implications for the region’s market dynamics and raises some questions about whether the utilities have done their due diligence to evaluate all market options. My colleague Brian Turner spoke with RTO Insider about this development, noting that while the landscape is still ever-changing, two Western day-ahead markets will create more seams and market inefficiencies. 

Interior West 

The Nevada Regional Transmission Coordination Task Force approved a biennial report that highlights opportunities for Nevada to advance its transmission infrastructure and strengthen regional cooperation across the West. Next year, the Task Force will be further exploring the economic benefits of joining a Western market, including potential areas where growth in demand for electricity or renewable energy generation would be accommodated by additional transmission or market opportunities for businesses and industries that could be located in the state.

California 

As mentioned above, legislation will be needed in California in order to fully implement the Pathways Step 2 proposal. While an independent regional organization (RO) could be created and operate without any change to California law, statutory change is needed to enable the state's utilities to participate in energy markets governed by the RO and for the CAISO to operate those markets on behalf of the RO. Watch this space for more on the legislation's progress throughout the coming year! And in the meantime, read CAISO's Year in Review blog highlighting its 2024 accomplishments, including the significant strides in building on the foundations of the Western Energy Imbalance Market to further expand Western market opportunities.