The Role of States in a Western Grid Operator

A new issue brief from the Sustainable FERC Project at NRDC describes the ways that states can be involved in and influence the outcomes of a multi-state regional grid operator.

Stakeholders interested in the development of a grid operator across several western states met in Sacramento and Denver this week to discuss what has emerged as a foundational concern in discussions about whether to move forward with a regional grid operator – governance. Representatives of states, industrial customers, utilities, public power companies, independent power companies, environmental advocates and others specifically discussed a recent governance straw proposal issued by the California Independent System Operator (CAISO) – the grid operator for California and the entity under consideration for transformation into a multi-state grid operator. (Currently, the states considering the benefits of joining a regional grid operator are the states in which Pacificorp utilities exist – WA, OR, MT, UT and ID). CAISO based its proposal on a series of earlier stakeholder meetings and several sets of stakeholder principles and other proposals for how governance might work.

These governance discussions are part of a broader conversation about whether Western states should form a multi-state grid operator. Recognizing that a regional grid operator can provide substantial annual savings for customers (studies predict more than $1 billion annually by 2030 in California alone!), support more rapid and cost-effective integration of wind and solar power across the region and lower the cost of satisfying state and federal environmental regulations, we continue to support efforts towards a regional grid.  

CAISO is unique to other grid operators across the country in that it was created by California state statute, but is regulated by the federal agency responsible for the nation’s transmission system – the Federal Energy Regulatory Commission (FERC). California’s governor currently appoints CAISO’s five-member board. The other existing regional grid operators around the country formed pursuant to a FERC process without explicit state legislative involvement. Understandably, concern exists over how a mostly single-state grid operator with a politically appointed board will transform into a several-state platform with sufficient independence to ensure fair representation for all involved states and stakeholders. 

Some stakeholders do not want to move forward with further discussions about a potential regional operator until details about how governance will work are hammered out. States in particular are concerned about their role in a new regional grid system and the potential changes that would come along with it.

To provide additional input on the role of states in regional grid operators, the Sustainable FERC Project has produced an issue brief that describes in some detail the various ways that states can participate. It outlines four categories of potential state involvement:

• Official rights to make filings on behalf of the region at FERC;
• Heightened stakeholder status through the creation of a body of state regulators that can influence grid operator outcomes;
• Other heightened stakeholder status related to transmission system planning and energy market design; and
• Regular participation as stakeholders in regional processes and at FERC.

What is the best combination of tools to ensure that states have adequate representation and protection when it comes to grid organization outcomes? The issue brief concludes that there is no one single answer but many options for states to ensure their concerns are heard and addressed. States should not think of any of their options for participation in isolation – it is the combination of some or all of these options that will bring states (and other stakeholders) comfort that they can succeed in a multi-state grid operator.

The potential cost savings and clean energy benefits that would accompany a regional grid operator are immense – and trying to get critical issues like governance right will ensure those benefits are realized.