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California Governor Puts Push For West Grid, Less Gas-Fired Generation on Hold

California Gov. Jerry Brown and state lawmakers on Monday put on hold the state grid operator's pursuit of a western regional power grid that gradually lessens dependence on natural gas-fired generation among other byproducts called for under a state law passed last year (SB 350). Concerns about the state's ongoing aggressive climate change programs prompted the action.

Last month, the California Independent System Operator (CAISO) issued a 12-volume, 688-page tome analyzing various scenarios to create a multi-state, regional electricity market that would continue to phase out the use of fossil fuels, including gas-fired power generation (see Daily GPI, July 13). The proposal is heavily dependent on inter-state cooperation that is not yet in place.

Despite the setback from the governor and state lawmakers who are unwilling to move forward this year, CAISO CEO Steve Berberich issued a statement praising the state elected officials for supporting the concept and noting that the grid stakeholders have made "extensive progress" to date toward a regional grid.

"While very significant progress has been made, there remain some important unresolved questions that would be difficult to answer in the remainder of this legislative session [ending in early September]," Brown wrote in a letter to state lawmakers.

Although SB 350 recommends the regional grid, additional state legislative action is needed to allow the state to move forward, and some legislative leaders have expressed concerns that the wider grid could dilute California's aggressive ongoing climate change measures for reducing greenhouse gas emissions and switching to more renewable resources.

Brown said the new goal is to develop a strong program to present to state lawmakers next year.

CAISO's Berberich reiterated studies that have shown that a regional grid offers what he called "significant benefits" to California and the West's economies. The next step is to fully flesh out the governance proposal and related issues remaining for the governance proposal that would bind the regional grid together.

He said all the parties need sufficient time to "evaluate the impacts" of a western grid. Berberich said Brown's leadership will be a key to developing the opportunity in the coming year.

Mandated by the California Clean Energy and Pollution Reduction Act (SB 350) enacted last year, the CAISO study released last month was completed by four research organizations. It considered two scenarios tied to 2020 and three with a 2030 time frame. The 2020 combination of CAISO and Berkshire Hathaway's Portland, OR-based PacifiCorp multi-state western utility operations is one of the scenarios examined.

In 2013, the Federal Energy Regulatory Commission approved CAISO and PacifiCorp creating a real-time energy imbalance market (EIM) that is designed to provide substantial efficiencies and cost savings on the overall grid. The approved proposal included stakeholder feedback to the grid operator since it announced EIM earlier that year (see NGI GPI, July 8, 2013).

Belatedly, the ties to PacifiCorp, whose generation comes 62% from coal-fired sources, have caused concerns among California officials, noting the mix could adversely affect the state's generation mix that is increasingly coming from more renewables.

The four research groups involved in the CAISO study -- the Brattle Group, Energy and Environmental Economics Inc. (E3), Aspen Environmental Group and Berkeley Economic Advising and Research LLC -- determined that there would be positive economic and reliability results from the regional market.

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