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Governance structure seen as key to delivering western RTO benefits

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Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

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Governance structure seen as key to delivering western RTO benefits

Theright governance structure for a regional grid operator covering a broadportion of the western U.S. is a key part of ensuring that potential cost,environmental and reliability benefits are delivered to participants, accordingto group of stakeholders and observers.

TheCalifornia Energy Commission and governor's office hosted a workshop May 6about the topic of governance for a regional grid operator now underconsideration by the CaliforniaISO and others. The five-member CAISO board is now appointed by theCalifornia governor and confirmed by the state Senate, a structure that wouldhave to change should the grid operator move beyond its current border.

Arecurring theme during the event was the need to balance state interests andbuild trust in a governance structure.

MichelFlorio, a commissioner with the California Public Utilities Commission, saidother western states are not particularly interested in having their fatedecided by California lawmakers or regulators, while California is similarlydisinclined to become subject to regulations from other states.

Florio,who presented an overview of a paperabout addressing the political dilemma of regional ISO governance, said it isimportant to recognize that formation of a regional ISO has to be a partnershipthat requires a degree of trust.

"Aspirit of mutual trust and respect for differing state policies will benecessary, albeit challenging to achieve," Florio's paper said. "Absentthis, the regional ISO could become a battle ground of differing philosophiesand objectives, and will likely fail to deliver the expected mutual benefits."

AnnRendahl, a commissioner with the Washington Utilities and TransportationCommission, and Ron Binz, a former chairman of the Colorado Public UtilitiesCommission and serving as a consultant to the Hewlett Foundation, alsopresented an overview of papers outlining how to build a governance structurefor states with different energy policies and interests.

Theimportance of balancing states' ability to set certain energy policies insetting a governing body for regional ISO came up during a discussion aboutpotential governance concepts.

MarkSmith, vice president of governmental and regulatory affairs at , said establishingthe right governance structure is a precondition to getting benefits that areexpected to come from a broader CAISO footprint.

RachelGold, policy director at the Large-scale Solar Association, agreed thatgovernance of a regional grid operator has to be properly set up to gainpotential benefits of help in meeting climate goals, integration of renewables,cost savings and reliability improvements, while making sure that stateinterests are protected.

MarcJoseph, a shareholder with Adams Broadwell Joseph & Cardozo, said aregional ISO is a tool, not an end in itself.

"Itis a tool, which if we can do it right, will protect and advance Californiainterests and not undermine them," Joseph said. "Every other statewill have exactly the same interests. They don't want their interestsundermined."

CarlZichella, director of western transmission for the Natural Resources DefenseCouncil, said other RTOs in the country have recognized the importance ofhaving a proper role for states. Zichella, who recently addressed environmentaland planning benefitsfrom a regional organization, said there has to be trust that the system isworking for everyone and that it is fair.

"Ifyou don't trust the governance of this thing to be operating fairly, reliably,in the best interests of the system to provide the benefits we're talkingabout, I don't think it has much of a future," Zichella said.