Assembly Committee Explores Regionalizing California’s Electricity Grid
California is talking again about the pros and cons of regionalizing the electricity grid in the West, and the California Municipal Utilities Association is urging decision-makers to keep the impacts to consumers at the forefront of the conversation.
CMUA and a broad range of stakeholders joined officials from the California Independent System Operator at a recent informational hearing at the State Capitol examining the impacts of potentially creating a regional, multi-state ISO that would include California and extend to other states.
“We look at this from a consumer-driven perspective since our customers and our citizens own our community utilities,” Tony Braun, counsel for CMUA, testified June 7 in front of the Assembly Utilities and Energy Committee.
While regionalization could be part of the solution, Braun said it’s important to keep in mind that it’s “not a cure-all.”
“How we procure renewables and do it in a balanced way will have a much bigger impact on achieving our policies in our consumers’ pocketbooks, than whether or not we combine with other states in the grid,” Braun explained.
Long-term contractual obligations for infrastructure, existing debt service, the carrying costs of transmission, governance of the proposed multi-state market, interstate competition and differing laws and regulations state-to-state are all factors that could impact consumers if California moved forward with a regionalized energy market, Braun said.
Nonetheless, regionalization has been successful in some instances. Braun noted that the Western Energy Imbalance Market (EIM), formed in 2013 to enable balancing authorities to buy and sell energy in real-time, has grown quickly and is a “huge start” toward regionalization.
There were lessons learned in forming the EIM: It’s voluntary and utilities chose on their own to quickly came together when they realized there was mutual benefit. Now, public power entities such as Los Angeles Department of Water and Power and the Balancing Authority of Northern California, and others, have committed to participate in the imbalance market.
“And as we think about regionalization options, we ought to be, I think, looking at what we’ve got on the table already that’s working,” Braun said, citing the success of the EIM.
CMUA’s balanced perspective was one of many opinions shared at the hearing as state lawmakers and regulators grapple with the potential opportunities and obstacles surrounding the idea of a multi-state ISO, in tandem with California’s pursuit of procurement targets for renewable energy.
Keith Casey, vice president of market and infrastructure development for the California Independent System Operator, said the concept of a regional transmission organization is not unique in North America, but it would be new to the Western states, which mostly operate under a traditional utility paradigm, except for California.
Casey said regionalization would benefit Californians by helping consumers avoid $1 to $1.5 billion annually in utility rates by 2030 — because a bigger regional footprint would help “smooth out” oversupply, curtailment of renewable energy in oversupply situations, the intermittent nature of renewables, and other operational challenges. A recent study also indicates that regionalization also would help create 10,000 to 20,000 jobs in California, Casey asserted.
“Flexibility is a coin of the realm going forward. As we look to manage that ‘duck curve,’” — in reference to the deep drop in energy demand in the midday, due to abundant generation of renewables, and the steep ramp-up starting in the late afternoon — “we need resources that can move quickly, they’re agile, can shut off, start, all of that,” Casey said.
Stacey Crowley, CAISO vice president for regional and federal affairs, added that participation in a regional ISO would be voluntary, and state authority would be preserved. The creation of a regional authority would require statutory changes, she said.
To that end, legislators on the Assembly Utilities and Energy Committee shared their perspectives about the concept of a regional ISO.
“Lately the regionalization conversation has been quiet, but it has not gone away and many of the answers sought last [legislative] session have not gone away,” said committee chair Chris Holden, D-Pasadena.
The committee’s vice chair, Assemblymember Jim Patterson, R-Fresno, said a regional ISO has intrigued him since he took office: “I think the positives certainly outweigh any of the negatives, and I think that if we’re looking for affordability, if we’re looking for reliability, and if we’re looking for an integration of a grid [regionalization] helps us to move forward and modernize,” Patterson said.
Assemblymember Brian Dahle, R-Bieber, said he was concerned about how a multi-state electricity market might impact jobs in California and customers’ rates. Assemblymember Bill Quirk, D-Hayward, meanwhile, said he is supportive of a regional ISO, but he asked how reliability might be affected over such a large balancing area.
The lawmakers also heard viewpoints from a panel of experts. CMUA’s Braun was one of a half dozen who testified.
Laura Wisland, senior energy analyst for Union of Concerned Scientists, said California must take other steps — such as adding more energy storage and implementing variable time-of-day pricing — in addition to a regional grid, in order to efficiently manage its energy portfolio.
“The biggest benefit of a regional grid to California ratepayers and the environment, in a nutshell, is enabling us to achieve our clean energy transition in a much more efficient and cost-effective way, than if California goes it alone,” Wisland added.
Kevin Woodruff, consultant for The Utility Reform Network, cautioned that regionalization, as a concept, should not be equated with a particular proposal and he said oversight from the Federal Energy Regulatory Commission could eventually impact how a regional ISO is governed.
Jan Smutny-Jones, CEO of the Independent Energy Producers Association, and a former chair of CAISO, said that, in reality, regionalization isn’t new and there has been a Western energy market for the past 60 years. He said the energy market needs to be expanded now that California is producing excess power at some points during the day.
“One of the ways to address this challenge is through expansion. It is not the only method that we need to employ, but it is a significant one, and I think one that we can actually better integrate ourselves with our neighbors in a way that actually has benefit,” Smutny-Jones said.
Marc Joseph, attorney for both the Coalition of California Utility Employees and State Building and Construction Trades Council of California, said one of his concerns with a regional energy market is that the “bucket system” for California’s Renewables Portfolio Standard (RPS) be preserved. The buckets are basically procurement and content categories.
“The bucket system is one of the major reasons that our current RPS regime is a success. Because it produces both good environmental policy, and good jobs policy at the same time,” Joseph said. Regionalization without preserving the bucket system would cost 110,000 construction jobs, he asserted.
Dozens of other stakeholders brought forward more comments during the public comment period.
Mario DeBernardo, senior consultant for the Northern California Power Agency, said that as it pertains to regionalization, “building and operating power plants in California has an environmental premium that is not seen in other states. We have more stringent regulations that increases costs and we’re concerned about how we could be at a disadvantage when competing with other plants in other states.”
It was yet another example of what could be real-world consequences if California someday chooses to move forward with regionalization of the Independent System Operator.
As Braun explained, regionalization is not good or bad by its nature; it’s not an abstraction. “It’s good or bad depending on how we do it.”