In the West, the benefits of electricity market regionalization appear more attractive than ever. “Regionalization” refers to efforts to expand coordination between Western states to buy and sell wholesale electricity through centralized federal power markets. Increased coordination made possible through regional transmission organizations (RTOs) has the potential to enhance grid reliability while reducing costs and emissions. RTOs are independent non-profit organizations that operate the grid and oversee the operation of centralized energy markets). The California Independent System Operator (CAISO), the only RTO in the West, is expanding the geographic territory of its existing federal power markets from most of California and parts of Nevada into additional Western states. In the long term, Western states have started collaborating on a vision to form a new multi-state RTO in the West.
However, while regionalization offers many benefits, it also comes with legal and policy risks for states. CAISO and all RTOs, including a potential future Western RTO, fall under the jurisdiction of the Federal Energy Regulatory Commission (FERC) and are subject to federal jurisdiction related to electricity markets and other RTO operations.
A survey of over four hundred recent FERC and federal circuit court cases dealing with jurisdictional concerns, conducted during research for this Article, illuminates three key risks to state authority that could arise from regionalization: federal jurisdiction may interfere with state clean energy policy, restrict states’ control over in-state energy resources, and preempt state law.
The Article analyzes each of these risks in the context of Western regionalization and concludes that none pose a significant threat to state authority. Based on these findings, this Article concludes that Western states do not face a significant risk of losing their authority over state electricity decisions if in-state utilities join one of the CAISO markets or take part in a future multi-state RTO. While each state must conduct a case-by-case analysis of the risks of regionalization, this analysis indicates that the risks likely do not outweigh the potential benefits to grid reliability, ratepayers, and the climate.
