CAL-ISO Study: Regional Energy Market Could Yield $1.5B in Savings Annually to Ratepayers

A multi-state, regional electric market would provide environmental and economic benefits to California and the West – and would yield as much as $1.5 billion in cost savings annually to the state’s electricity ratepayers by 2030 – according to preliminary study results released on May 20 by the California Independent System Operator (CAL-ISO).

“Although these are preliminary results, we’re encouraged by the considerable benefits possible with a regional energy market,” said CAL-ISO CEO Steve Berberich, adding, “The findings urge us to continue exploring the advantages and challenges of a regional energy market, while including many voices in a transparent and thorough stakeholder process.”

The research was required by the Clean Energy and Pollution Reduction Act (or Senate Bill 350), which set California’s goal of reaching a 50-percent renewable portfolio standard by 2030.

The preliminary study found that, potentially, an expanded regional energy market would:

• Reduce California’s greenhouse gas emissions by 4 to 5 million metric tons – or 8 percent to 10 percent of the total for the electric sector – in 2030;
• Decrease emission of carbon dioxide, nitrous oxide, sulfur dioxide, and hazardous particulate matter both in California and the West;
• Reduce impacts of the electricity sector on land and water resources
• Integrate larger amounts of renewable energy more smoothly;
• Save California electricity ratepayers $1 billion to $1.5 billion annually in 2030, assuming a fully integrated market across all western U.S. utilities except the federal power marketing administrations;
• Create between 9,900 and 19,400 new jobs by 2030 in the state, primarily stemming from lower energy rates;
• Increase household incomes by $300 to $550 annually in 2030, due to lower energy costs;
• Improve real income and job opportunities to disadvantaged California communities; and
• Reduce operating reserves needed to meet reliability requirements, offer improved real-time visibility of system conditions in a larger regional footprint, and enhance management of unscheduled power flows.

The study authors pointed out that many of these findings are conservative estimates, and some of the likely regional market benefits are not easily quantified. The ISO studies are being conducted by leading consultants in the fields of economics, environment, social justice,and energy policy modeling. While the study focused primarily on the benefits of a regional energy market to California, the results also can be used as a foundation for other states to determine their specific benefits, the researchers said.

As directed in SB 350, the studies examined impacts of participation by 31 balancing authority areas in the United States, including Washington, Oregon, California, Nevada, Idaho, Montana, Wyoming, Utah, Colorado, Arizona and New Mexico.

SB 350 also laid out a process for evolving the ISO into a regional organization. CAL-ISO will conduct a public process to explore the appropriate governance structure of a regional organization to provide other states with fair representation in oversight of the ISO. That process has included briefings with western state’s energy policy and regulatory leadership, and a public workshop led by the California Energy Commission.

To date, more than 400 stakeholders have participated in the process and many have provided public comments.