POWER March 2017 - 60

POWER MARKETS
4. Growing connections. The Celio
high-voltage direct-current converter station
in Oregon is the northern end of the Pacific
Intertie, which moves power between the Pacific
Northwest and Southern California. ABB
recently upgraded its capacity to 3,800 MW.
Courtesy: ABB
tial Western ISO Governance Structures:
The Role of the States " (see http://on.nrdc.
org/2j1H4Qr)-says, " A broader regional
grid operator can provide substantial annual
savings for customers across Western states.
In California alone, for example, benefits
from grid regionalization are estimated to increase
over time from $150 million per year
to more than $1 billion in 2030. It also allows
for even more rapid and cost-effective
integration of wind and solar power than is
already happening and lowers the cost of satisfying
state and federal environmental regulations
with implications for the grid. "
Clements adds, " Developing wholesale
of Redding, City of Roseville, Sacramento
Municipal Utility District [SMUD], City of
Shasta Lake, and Trinity Public Utilities District)
and SMUD itself-had agreed to join
the imbalance market.
Gateway to an RTO?
Is CAISO morphing into a larger integrated
wholesale market for the western U.S.? Berberich
is cautious. " Even a small sliver of
the market has significant value, " he says.
He adds that " collaboration in the West is
growing, " but that the imbalance market " is
not necessarily a gateway drug to a regional
transmission organization. "
The Natural Resources Defense Council
(NRDC) argues that the imbalance market
makes the case for a region-wide operator.
Ralph Cavanagh, co-director of NRDC's energy
program and a long-time participant in
the shape of the California and western markets,
told POWER in a January interview that
CAISO is too timid about the value of a fullfledged
ISO.
Cavanagh says the imbalance market is
helpful in combating California's overgeneration.
" The imbalance market is a baby
step in the right direction, " he said. But a
full-scale regional market is the way to completely
doom the duck (Figure 4).
The imbalance market " demonstrates a
small part of the benefits of full integration, "
Cavanagh said. " There is a strong indication
that this is the direction that everyone is
prepared to go. " He added that CAISO " has
performed very effectively, " and that it " long
ago evolved into a western institution, " not
just a California-centric operation. " We do
have a western grid, " he said. " The question
is whether we should manage it effectively, "
by which he means a regional transmission
organization.
A recent paper by NRDC attorney Allison
Clements- " Making Sense of Poten60
energy
markets also provides an opportunity
for competition in the power industry that has
not existed previously across the Western Interconnection. "
Failure to build a region-wide
wholesale market will " likely cost consumers
billions of dollars over time, require the development
of duplicative infrastructure and
generation because less resource sharing will
be possible, and make regulatory compliance
more difficult and expensive for states in the
Western Interconnection. "
Steep Obstacles
Despite the supposed benefits, implementing
a new Western ISO could face political obstacles
among some of the electric systems
in its ambit and at the Federal Energy Regulatory
Commission (FERC), which regulates
interstate electricity commerce. The NRDC
analysis says Section 205 of the 1935 Federal
Power Act, which gives states the right
to participate in FERC proceedings to establish
that wholesale rates are " just and reasonable, "
is a path for a western ISO. FERC
and the courts have said this provision gives
states the ability to participate in proceedings
establishing an ISO under federal law. The
Midcontinent Independent System Operator
and the Southwest Power Pool used Section
205 to establish who gets to run the systems
in the broader interstate wholesale market for
their regions.
In California, the Imperial Irrigation District
(IID), a public power utility managing
water and electricity in the Southern California
desert with 150,000 electric customers,
opposes a regional ISO. IID says a wholesale
market and integrated grid means that, " California
could be forced to accept 'dirty' [coalfired]
electricity generated in other states,
and federal lawsuits that could destroy years
of clean-energy legislation in California, due
to preemption by the Interstate Commerce
Clause and the Federal Energy Regulatory
Commission. " CAISO nevertheless
argues
that a regional ISO would follow the state's
prohibition of coal-fired power from anywhere,
including out-of-state generation.
www.powermag.com
This year could be crucial for the emergence
of a western system operator, according
to NRDC's Cavanagh. In order for the
fully integrated regional market to work,
governance must be region-wide, divorced
from parochial state politics, he says. California
would have to change its law covering
the ISO, as the governor now appoints the
ISO's board.
The California Legislature returned to
Sacramento in January and will be in session
into September. Cavanagh says the current
session is the time to act on legislation creating
an independent board of governors as the
crucial step for a region-wide transmission
operator. Notably, Gov. Jerry Brown is backing
the plan to build out an ISO.
Meanwhile, a rival western regional
system operator could undercut efforts to
expand CAISO. The Mountain West Transmission
Group-seven Rocky Mountain
transmission-owning utilities working with
the Department of Energy's Western Area
Power Administration (WAPA)-are exploring
their own organized market that could
compete with a California-centric ISO. The
Mountain West footprint would encompass
Colorado, Wyoming, and pieces of Arizona,
Montana, New Mexico, and Utah, according
to the RTO Insider newsletter. The WAPA relationship
makes the proposed ISO attractive
to some utilities that view the CAISO expansion
as too California-oriented and to stakeholders
long wary of trends coming from the
Left Coast.
Utah Associated Municipal Power Systems
(UAMPS), supplying power to eight
western states, is among those viewing a
larger California ISO skeptically and looking
at Mountain West. UAMPS CEO Doug
Hunter told Utah legislators last July that
CAISO " is not the only game in town, " saying
UAMPS likes the model based on WAPA's
footprint. " It runs right through us, " he
said. " It would be much better if the entire
west had access to it. " Sources in California
told POWER that the Mountain West group is
looking at the Southwest Power Pool, headquartered
in Little Rock, Ark., as a leader for
their alternative to the California proposal for
a regional ISO.
The market and political dramas could play
out this year. One outcome could be a new
wholesale independent transmission operator
in the West, built from the CAISO. Or there
could be two regional transmission operators:
a CAISO-oriented system including much of
the Pacific Northwest, and a Mountain West
system encompassing much of the Rocky
Mountain West. Both could compete for dominance
in the Western Interconnection. ■
-Kennedy Maize is a frequent POWER
contributor.
POWER | March 2017
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POWER March 2017

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