Prospect of a New Western Regional Transmission Organization

Prospect of a New Western Regional Transmission Organization

INSIGHTi

Prospect of a New Western Regional
Transmission Organization
September 8, 2021
Electric power systems in many western states are under stress with wildfires, persistent drought, and heat
waves presenting challenges to reliability, with some seeing climate change as a driver of the West’s
extreme weather. The growth of population in the region also is increasing demand for electric power, set
against the increasing use of renewable sources of electricity and retirements of coal-fired and nuclear
power plants in the region. California has set a goal of 60% renewable energy by 2030 in its renewable
portfolio standard (RPS). California’s is not the only clean energy plan in the region; Arizona, Colorado,
Nevada, New Mexico, and Oregon are among the states with RPS requirements for their retail utilities to
obtain renewable electricity.
The demand for electricity in California has dominated energy issues in the West for many years, with
California utilities reaching out to the Pacific Northwest and neighboring states when needed to import
more electricity. But the continuing western drought, combined with recurring region-wide heat waves,
have reduced the ability of California’s neighbors to provide their excess capacity to the state. Competing
RPS requirements have led to regional electricity system inefficiencies in some cases. A lack of
transmission capacity, connections, or energy storage has meant that renewable energy sometimes was
wasted, as the peak generation from wind and solar power resources does not always match customer
demands for electricity.
To address these issues, several utilities in the West led by the California Independent System Operator
(ISO) established a voluntary Western Energy Imbalance Market (WEIM) in 2014.The WEIM allows
“participants to buy and sell power close to the time electricity is consumed, and gives system operators
real-time visibility across neighboring grids. The result improves balancing supply and demand at a lower
cost.” An extended Day-Ahead Market that competitively serves the expected power demands of the next
day is currently under development for the WEIM. Bonneville Power Administration—a federal power
marketing administration (PMA)—plans to join the WEIM in 2022. Parts of another PMA, the Western
Area Power Administration (WAPA), joined the WEIM in 2021.
The WEIM is not a full regional transmission organization (RTO), which would be established under the
regulatory jurisdiction of the Federal Energy Regulatory Commission (FERC). An RTO would have
control over daily and long-term functions such as power plant commitment to provide power to the
system, system load balancing, transmission planning, and generation resource adequacy—functions that
Congressional Research Service
https://crsreports.congress.gov
IN11743
CRS INSIGHT
Prepared for Members and
Committees of Congress

Congressional Research Service
2
mostly remain under the control of WEIM members today. Several RTOs also operate various formal
centralized capacity markets using auctions to obtain future generation. Conversely, the California ISO,
the Southwest Power Pool (SPP), and the Electric Reliability Council of Texas chose instead to provide
market-based and cost-based incentives.
Some observers (including a group of nine past FERC chairs and commissioners) have expressed the
opinion that it is time for the West to have a fully fledged RTO, citing the potential planning and
competitive “savings and efficiencies of a full RTO (estimated at more than $4 billion/year).” The formal
expansion of SPP into an RTO West is another pathway for further RTO formation in the West. A formal
study by SPP also cited potential benefits of RTO membership for current and new members. Parts of
WAPA are considering full participation in the SPP’s RTO West. FERC chair Richard Glick was reported
to have expressed his support for the formation of one or more RTOs in the Western states following a
FERC technical conference on western resource adequacy.
Other industry observers do not support a formal federal policy of RTO expansion in the West, preferring
to leave the “emergent” WEIM to evolve to meet the needs of western states. Former FERC
Commissioner Bernard McNamee said that he “does not believe the RTO model is the best way to ensure
resource adequacy,” referring to past blackouts in California and Texas under organized market structures.
Historically, how electricity was generated largely depended on regional resources. RTOs were first
adopted in Northeastern and Midwestern U.S. regions that generally had higher energy costs, where
competitive markets and centralized planning were expected to deliver lower prices for electricity
customers. Whether RTOs have met these goals has been debated, with some saying “a detailed and
objective study of the cost of electricity” in RTOs is needed to inform federal policy.
Congress may consider what regulatory mechanisms and market structures best serve the evolving U.S.
electricity industry, contemplating how these structures encourage the development of new, cleaner
electricity technologies and efficiently use local resources. Harnessing local resources may lead to more
electric transmission development with planning focused on meeting regional needs, and avoid
overbuilding electric infrastructure. Upgrading links to other regional interconnections may be one option
to share resources and improve western resource adequacy. Elements of RTO markets already have been
worked into the WEIM. Congress may consider whether a full-fledged RTO is the best way to reliably
and affordably meet the current and future needs of western electricity customers. For instance, the
“Climate Leadership and Environmental Action for our Nation’s Future Act” or the “CLEAN Future Act”
(H.R. 1512), which was introduced in the 117th Congress, would compel each public utility (as defined in
the Federal Power Act) to place its transmission facilities under the control of an RTO, not later than two
years after the date of enactment of the bill. Congress may consider whether furthering RTO formation in
the West requires federal guidance, pending a study of costs and benefits considering the needs of states
in the region.

Author Information

Richard J. Campbell

Specialist in Energy Policy

Congressional Research Service
3

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United
States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However,
as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the
permission of the copyright holder if you wish to copy or otherwise use copyrighted material.

IN11743 · VERSION 1 · NEW