The Attempt to Regionalize California’s Electrical Grid is Back – Why?

Since 2018, three bills introduced in California’s Legislature have sought to share control of California’s electrical grid with its neighbors. Those touting the concept claim it will advance solar and wind energy – that when it’s cloudy in Oregon, California might profitably export its excess clean energy to the Beaver State (currently, California is often forced to export electricity at negative prices – i.e., pay other states to get rid of it). Conversely, California utilities would be able to buy clean energy from other states when it’s cloudy or calm in the Golden State.

Two prior bills have been rejected by California’s legislature. Though the differences between the bills are minimal, Wyoming coal powerhouse PacifiCorp has been ramping up lobbying in support of this year’s version, Senate Bill 540, to historic proportions. 

One only needs to look back to the first Trump presidency to understand why. In 2018, an analysis by the Senate Judiciary Committee found that year’s regionalization bill, Assembly Bill 819, “would [have placed] control over California’s energy market in the hands of a Western states RTO heavily dominated by coal interests (the largest coal-producing states in the U.S.) and under the direction of the Trump administration…

“California’s policies for transitioning to renewable energy—and initiatives to develop distributed or decentralized energy resources—would be subject to review and revision by a market authority that is not interested in either.”

After 7 years, nothing has changed. So how do bill authors State Senators Josh Becker (D-Menlo Park) and  Henry Stern (D-Calabasas) defend re-introducing the same bill under eerily-similar political circumstances? Here’s how: they don’t. They tout benefits and ignore risks, in nearly identical terms to the ones Assemblyman Chris Holden used to pitch his bill in 2018.

When SB 540 (a.k.a. “the Pathways Initiative”) was introduced in February, the same group of opponents to the 2018 bill – community choice aggregators, the Utility Justice Campaign, and the Center for Biological Diversity – cried out in protest. Notably absent were Sierra Club, Environmental Defense Fund, and Natural Resources Defense Council, which apparently subscribe to the naïve belief that they might be able to stave off influence from Big Coal as a group.

But fearing an early demise of the bill, Senators Becker and Stern introduced a slew of amendments intended to protect California’s interests in the Pathways Initiative’s interstate marketplace. Most amendments are both aspirational, and unenforceable. One amendment, for example, stipulates “The governing board of the independent regional organization [must] maintain a relationship with and seeks input from a body of state regulators or similar body to receive the views of state regulators…”

How a competent judge might interpret requirements to “maintain a relationship” or “receive views” is unknown, but other amendments list obligations which could be legally-binding. Among them is one mandating that California’s ISO (Independent System Operator) could be governed by Pathways only if it “respects…the authority of each state…to set its own procurement, resource adequacy, environmental, reliability, and other public interest policies.”

Such proscriptions face another hurdle, however – they run afoul of the Commerce Clause, which prevents states from impairing interstate commerce. It’s a broad principle upheld in Hughes v. Talen Energy (2016) and other Supreme Court rulings.

Hopes of eager renewable energy proponents aside, the possibility of a strict interpretation of the Commerce Clause looms ever larger. It would require California utilities and Community Choice Aggregators to buy electricity at the lowest possible price – whatever its source. Critics imagine the possibility of PacifiCorp underselling coal-fired electricity for the sole purpose of driving California gas plants, wind and solar entrepreneurs, and its sole remaining nuclear plant, Diablo Canyon, out of business. Market manipulation? You bet. But the possibility of Trump’s Dept. of Justice prosecuting Berkshire Hathaway subsidiary PacifiCorp for the same felony that took down Enron are negligible.

Trump’s tariffs were supposed to free Americans from dependence on China for pharmaceuticals, rare earth minerals, and tens of thousands of other essential products. But given the President’s antipathy toward California (and Californians in general), he would likely welcome the opportunity of making the state dependent on middle America for its electricity. Though that situation might work to the political advantage of Republicans in other states, it would not be advantageous, and could be disastrous, for Californians of any political stripe.