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1. SB539 RTO Study Comments Comment Record ID 2021-0314 Organization Name Organization Type PNGC Utility or related trade associations
2. Questions (1) Legal Barriers Oregon retail customers are served by a complex arrangement of private and public distribution utilities, with the majority of the state’s transmission owned and operated by a federal entity. These entities operate under different governing laws, with different types of regulatory and governing oversight. • Are you aware of any legal barriers to Oregon entities joining a Regional Transmission Organization? (1) Legal Barriers: Oregon’s retail electricity customers are served by a complex arrangement of private and public distribution utilities, with the majority of the state’s transmission owned and operated by a federal entity. These entities operate under different governing laws, with different types of regulatory and governing oversight. • Are you aware of any legal barriers to Oregon entities joining a Regional Transmission Organization? Although due process for policy changes, regulatory approvals, and organizational board actions will be required in many instances, PNGC believes that no fundamental legal barriers exist to Oregon entities, and multi-state entities that serve Oregon customers, joining an RTO.
3. (2) Oregon-Specific Net Benefits Technical analyses of RTO formation in the West, inclusive of Oregon, have identified significant quantifiable net economic benefits for the regional power system. There would likely be some variation, however, in the distribution of these net benefits across individual states and utilities. What are your perspectives on Oregon-specific net benefits that would accrue from RTO formation? Specifically: • Are there reasons why you believe that these net benefits found in the technical analyses might be greater or (more importantly) lesser in Oregon? Do you believe there is a need for additional technical analysis of the particular costs and benefits to Oregon from RTO formation? • What are some of the costs and risks that participation in an RTO might introduce specifically for Oregon? Please suggest how these might be mitigated to ensure net benefits to Oregon and how these mitigation measures can be designed to center underserved and low-income communities. 2) Oregon-Specific Net Benefits: Technical analyses of RTO formation in the West, inclusive of Oregon, have identified significant quantifiable net economic benefits for the regional power system. There would likely be some variation, however, in the distribution of these net benefits across individual states and utilities. What are your perspectives on Oregon-specific net benefits that would accrue from RTO formation? Specifically: • Are there reasons why you believe that these net benefits found in the technical analyses might be greater or (more importantly) lesser in Oregon? Do you believe there is a need for additional technical analysis of the particular costs and benefits to Oregon from RTO formation? PNGC notes that despite the range of various calculations of state-specific benefits that are projected to accrue to Oregon, a consistent theme across these studies is that the broader the participation, as measured by size of the geography served and the scale of the resources brought to the market by participating entities, the greater the benefits to Oregon. The recent USDOE-funded State-Led Market Study projects on page 72 of the Technical Report that Oregon would accrue $207M/year in annual benefits under a comprehensive West-wide RTO versus $160M/year under a Western RTO that does not include California, for instance. Please note that PNGC is not advocating for Western entities joining CAISO specifically, but rather observing more generally that inclusive approaches that maximize the potential for RTO participation will accrue the greatest benefits to Oregonians. We recommend that an RTO that leaves the door open following initial launch for later entry by entities in states, such as California, that must address particular legal and structural challenges, will allow for critical mass to be achieved to start an RTO while allowing for continued expansion to grow benefits over time. Accordingly, PNGC recommends that the State of Oregon work collaboratively with other states and entities toward an RTO that maximizes participation, in order to maximize benefits to Oregon. Similarly, the State-Led Market Study also underscores the importance of implementing a full-blown RTO instead of settling for incremental implementations of piecemeal portions. This study calculates Oregon’s benefits with a Day-Ahead West-wide Market as coming out to $66M/year, compared to $207M/year under with a fully functioning RTO. While the operating costs of a Day-Ahead system are expected to be less than half as much as a full RTO, the additional benefits of participation in a full RTO to Oregon more than outweighs the additional costs of a full RTO. • What are some of the costs and risks that participation in an RTO might introduce specifically for Oregon? Please suggest how these might be
4. mitigated to ensure net benefits to Oregon and how these mitigation measures can be designed to center underserved and low-income communities. PNGC notes that various approaches to developing an RTO could entail different costs and introduce a range of risks. In particular, PNGC is concerned about two potential scenarios. One scenario involves disparate and uncoordinated implementations of various sub-RTO functions - such as intra-hour imbalance markets, real-time trading, day-ahead markets, resource adequacy systems, and transmission planning collaborations – that result in incompatible governance structures and redundant infrastructures that render the development of a full-fledged RTO harder, rather than easier. The second scenario involves the emergence of an RTO that is built around the priorities of investor-owned utilities and/or utility regulators, which does not adequately consider the interests of consumer owned utilities in the Northwest, many of which provide power to underserved, low-income communities in rural areas. Potential mitigation measures against these risks include: (1) policy directives to ensure that implementation of various sub-RTO functions retain functional compatibility with any eventual overarching RTO, and (2) requiring that the group of participants and stakeholders that develops any organized market that serves Oregon customers include state regulators and also constitute the formal governance structure for actual RTO itself, to assure inclusive representation. Toward this end, we recommend the Southwest Power Pool’s governance structure as an attractive reference point from which to start in considerations for how an RTO the includes Oregon entities might function.
5. (3) Oregon Retail Customers RTO formation could generate significant economic benefits for participating entities, even after taking into account the cost of participating in and operating an RTO. It is important to consider how these costs and benefits would flow through to Oregon’s retail electricity customers. • What are some costs that might accrue as a result of participation in an RTO, and how might these be balanced against stated benefits? How might net benefits be measured? • What mechanisms or processes would be needed to ensure that the net economic benefits accrued from RTO formation directly benefit Oregon retail customers? (3) Oregon Retail Customers: RTO formation could generate significant economic benefits for participating entities, even after taking into account the cost of participating in and operating an RTO. It is important to consider how these costs and benefits would flow through to Oregon’s retail electricity customers. What are your perspectives on costs and benefits to Oregon retail customers associated with RTO formation? Specifically: • What are some costs that might accrue as a result of participation in an RTO, and how might these be balanced against stated benefits? How might net benefits be measured? The wide array of both analytical studies from independent organizations and real-world experiences from RTOs across the country give PNGC confidence that the RTO benefits will outweigh costs overall. The aforementioned State-Led Market Study offers a state-by-state breakdown of expected benefits across a range of potential market footprints and depths of implementation, with all sensitivity scenarios projecting net benefits to Oregon resulting from capacity efficiencies, transmission savings, renewable resource integration, and carbon reductions. RTOs should be considered a prerequisite for expanded utilization of renewable energy resources, as they enhance the sharing of firm resources to backstop intermittent generation, diversify the geographic and temporal scope across which generation of and demand for renewable energy takes place, and enable open access to transmission for renewable resources, which are often located away from population centers and industry clusters. • What mechanisms or processes would be needed to ensure that the net economic benefits accrued from RTO formation directly benefit Oregon retail customers? Ensuring the state regulators and a diversity of interests representing perspectives beyond just market participants, such as tribes, consumer advocates, small consumer-owned electric utilities, environmental advocates, and equity-focused groups, will help assure that benefits arising from RTO formation and operation accrue to Oregonians fairly.
6. (4) Principles Separate from the consideration of the technical questions below, there may be areas of common ground among stakeholders that can be identified with respect to core principles (e.g., independent governance, a minimal expectation of net benefits to Oregonians, preservation of state policy influence, etc.) that can inform how Oregon evaluates potential RTO formation. Are there core principles that should guide Oregon’s evaluation of potential RTO formation? (4) Principles: Separate from the consideration of the technical questions below, there may be areas of common ground among stakeholders that can be identified with respect to core principles (e.g., independent governance, a minimal expectation of net benefits to Oregonians, preservation of state policy influence, etc.) that can inform how Oregon evaluates potential RTO formation. Are there core principles that should guide Oregon’s evaluation of potential RTO formation? PGNC recommends that RTO governance be consistent with the governance of the process that leads up to RTO formation. We recommend that RTO governance include seats at the table for state regulators to give voice to state policies. RTO governance also should include a diversity of interests representing perspectives beyond just market participants, such as tribes, consumer advocates, small consumer-owned electric utilities, environmental advocates, and equity-focused groups. PNGC recognizes that an RTO, like all markets, cannot guarantee net benefits, but we advocate that net benefits can be maximized by giving priority to forming and participating in an RTO that achieves the greatest possible diversity of geography and resource types, as benefits scale more linearly with diversity while costs are more fixed than not. PNGC advises state policymakers to think not only of ensuring RTO benefits for their own states’ citizens, but also to consider region-wide benefits that could be achieved by multi-state collaborative approaches to RTO policies, which may not necessarily maximize benefits to any particular state, but which will lay the foundation for broader participation that ultimately benefits all stakeholders.
7. (5) Transmission Rates The elimination of pancaked transmission rates has been identified as a significant source of economic benefits resulting from RTO formation. Given the existing variation in transmission rates across Oregon (and the broader west, including CAISO), the impacts on individual transmission customers and transmission owners would likely vary. Please provide feedback on how these potential impacts to transmission rates from RTO formation would or would not be preferable to the status quo. In responding, you might also consider the following questions: • Rates. Do you expect that the adoption of uniform transmission rates under an RTO would result in net benefits or costs? • Revenues. Do you expect that the adoption of uniform transmission rates under an RTO would result in a net increase or decrease of revenue for Oregon transmission owners? • Solutions. Can you describe or identify potential solutions or mechanisms (e.g., examples from other RTOs) to address any adverse impacts related to transmission rates resulting from RTO formation? (5) Transmission Rates: The elimination of pancaked transmission rates has been identified as a significant source of economic benefits resulting from RTO formation. Given the existing variation in transmission rates across Oregon (and the broader West, including CAISO), the impacts on individual transmission customers and transmission owners would likely vary. Please provide feedback on how these potential impacts to transmission rates from RTO formation would or would not be preferable to the status quo. In responding, you might also consider the following questions: • Rates. Do you expect that the adoption of uniform transmission rates under an RTO would result in net benefits or costs? • Revenues. Do you expect that the adoption of uniform transmission rates under an RTO would result in a net increase or decrease of revenue for Oregon transmission owners? • Solutions. Can you describe or identify potential solutions or mechanisms (e.g., examples from other RTOs) to address any adverse impacts related to transmission rates resulting from RTO formation? PNGC recommends a transition period during which shifts in costs resulting from RTO implementation can be identified and addressed. Participants and stakeholders will benefit from better understanding which costs are more appropriately assigned directly versus ones that should be applied across a “postage stamp” footprint. New build assignments will also need to be worked out, but given the breadth of experiences across other RTOs that have been down these paths already, PNGC is confident that models exist from which optimized solutions for our region can be developed.
8. (6) Transmission Planning & Operation An RTO would be able to provide coordinated transmission planning functions and would centrally operate the transmission system across a wide geographic area, with revenues accrued from individual transmission assets flowing to the participating transmission owner. Please provide feedback on how these potential impacts to transmission planning and operation would or would not be preferable to the status quo. In responding, you might also consider the following questions: • Generator Interconnection: RTO formation would standardize the process for interconnecting large-scale generators to the transmission system across a wide area. What are the pros and cons of this compared to the status quo? How can an RTO be designed to address these issues? • Transmission Planning and Expansion: An RTO would affect decisions about the need for new transmission investments. What are the key advantages and disadvantages of this compared to the status quo? How can an RTO be designed to identify least-cost solutions that maximize retail customer benefits? • Cost Allocation: An RTO could provide a uniform mechanism for allocating the costs of new inter-regional transmission investments. Is the status quo mechanism for allocating the costs of inter-regional transmission projects preferable? What concerns do you have about transmission cost allocation by an RTO? • Legacy Transmission Rights: RTO operation of the transmission system would seek to replace the existing system of bilateral transmission rights. How would converting those legacy transmission rights into financial rights compatible with an RTO ultimately affect Oregon retail customers? What mechanisms or processes could be developed to mitigate these concerns? (6)Transmission Planning & Operation: An RTO would be able to provide coordinated transmission planning functions and would centrally operate the transmission system across a wide geographic area, with revenues accrued from individual transmission assets flowing to the participating transmission owner. Please provide feedback on how these potential impacts to transmission planning and operation would or would not be preferable to the status quo. In responding, you might also consider the following questions: • Generator Interconnection: RTO formation would standardize the process for interconnecting large-scale generators to the transmission system across a wide area. What are the pros and cons of this compared to the status quo? How can an RTO be designed to address these issues? • Transmission Planning and Expansion: An RTO would affect decisions about the need for new transmission investments. What are the key advantages and disadvantages of this compared to the status quo? How can an RTO be designed to identify least-cost solutions that maximize retail customer benefits? • Cost Allocation: An RTO could provide a uniform mechanism for allocating the costs of new inter-regional transmission investments. Is the status quo mechanism for allocating the costs of inter- regional transmission projects preferable? What concerns do you have about transmission cost allocation by an RTO? • Legacy Transmission Rights. RTO operation of the transmission system would seek to replace the existing system of bilateral transmission rights. How would converting those legacy transmission rights into financial rights compatible with an RTO ultimately affect Oregon retail customers? What mechanisms or processes could be developed to mitigate these concerns? PNGC observes that regional transmission has not been built at a rate that keeps up with demand under the
9. status quo system. Closing this gap through RTO implementation will benefit the region more broadly and benefit Oregonians specifically, too. RTOs utilize approaches such as Locational Marginal Pricing (LMP) for pricing. LMP structures do a good job of pricing into power prices where system congestion resides. This identification combined with an RTO structure creates a better environment for third party transmission developers to more efficiently develop transmission assets in the appropriate areas. This benefits Oregon retail customers in both rates (by eliminating “pancaking” of transmission rates) and, most importantly, by improving reliability in load service. RTOs also provide for a more robust and coordinated planning process for transmission infrastructure. This helps with needed development and reliability of the grid. One of the additional benefits of an RTO that is absent in the world we operate in today is a fair and open governance process, which in an RTO can include the perspectives of far more stakeholders than the existing processes available today.
10. (7) Renewables An RTO can be designed to support and accelerate the deployment of renewable energy projects, but these design choices could also create new challenges in some cases. Please provide feedback on how the implications on renewables development from RTO formation would or would not be preferable to the status quo. In responding, you might also consider the following questions: • Types of renewables: Technical studies indicate that the types (e.g., wind or solar) of renewable energy projects developed in a state may be substantially impacted by RTO formation. For example, the capacity contribution value of developing particular types of renewables in Oregon may increase or decrease in a West-wide RTO compared to the status quo. Do you anticipate impacts to the types and scale of renewables developed in Oregon would result from RTO formation? • Location of renewables: Several studies found that West-wide RTO formation could result in a significant shift in the location of renewable development across different states and regions of the West. This could present opportunities and challenges for Oregon. Do you expect that changes in the location of renewable development would be a net positive or negative for Oregon? • PURPA: Pursuant to multiple FERC Orders (most recently FERC Order 872), utilities participating in an RTO are exempt from their legally enforceable obligations under PURPA to make avoided-cost pricing available to renewable qualifying facilities with a capacity between 5 MW and 80 MW on the basis that RTOs provide non- discriminatory access to energy markets for projects of this size. What are the pros and cons that these changes to PURPA implementation would create for Oregon? • Distributed Energy Resources: While a consequence of an RTO could be to adversely affect the adoption of DERs, RTO energy markets could also be intentionally designed to provide new, uniform revenue streams that make it easier to finance DERs. How should RTO design take into account the opportunities and challenges associated with developing DERs? How can RTO design facilitate the adoption of DERs in high-risk, underserved, or low-income communities? • Manufacturing potential: Some studies note the potential for benefits of RTO formation that are difficult to anticipate or quantify, such as the economic benefits associated with in-state manufacturing of clean energy technologies at-scale. Do you anticipate that substantial economic benefits associated with clean energy manufacturing in Oregon could accrue from RTO formation? • Oregon jobs: These issues related to the development of renewables have the potential to affect the number and quality of jobs in the clean energy sector in Oregon. Do you anticipate that RTO formation would result in a net increase or decrease in Oregon-based jobs in the clean energy sector? How can these considerations be incorporated into the design of an RTO? (7) Renewables: An RTO can be designed to support and accelerate the deployment of renewable energy projects, but these design choices could also create new challenges in some cases. Please
11. provide feedback on how the implications on renewables development from RTO formation would or would not be preferable to the status quo. In responding, you might also consider the following questions: • Types of renewables: Technical studies indicate that the types (e.g., wind or solar) of renewable energy projects developed in a state may be substantially impacted by RTO formation. For example, the capacity contribution value of developing particular types of renewables in Oregon may increase or decrease in a West-wide RTO compared to the status quo. Do you anticipate impacts to the types and scale of renewables developed in Oregon would result from RTO formation? • Location of renewables: Several studies found that West-wide RTO formation could result in a significant shift in the location of renewable development across different states and regions of the West. This could present opportunities and challenges for Oregon. Do you expect that changes in the location of renewable development would be a net positive or negative for Oregon? PNGC underscores that the electrons follow the laws of physics and do not heed political boundaries. Accordingly, any RTO solution should not seek to be defined by, or have benefits maximized for, any single state. PNGC recommends that stakeholders collaboratively seek solutions that bring the most benefits to the greatest number of people across the west, addresses equity and cost allocation to ease the transition, and shares benefits as a secondary consideration. PNGC cautions against overly state-specific priorities and actions that could inadvertently limit the array of available options to maximize regional RTO development. PNGC further notes that RTOs utilize modern mathematics that combine economics and physics to create Locational Marginal Pricing (LMP). LMP signals, in turn, enable market mechanisms to convey where new renewables can be built to best enhance grid capacity, identify and provide congestion relief, and lower power costs to customers. Overall, PNGC asserts that net positive benefits can be expected to accrue to Oregonians as a result of RTO optimization and acceleration of renewable development. Regardless of location, greater and faster penetration of renewables will reduce carbon emissions and lessen climate change impacts. An RTO is the best solution to ensure reliability as we continue renewable growth on the grid. • PURPA: Pursuant to multiple FERC Orders (most recently FERC Order 872), utilities participating in an RTO are exempt from their legally enforceable obligations under PURPA to make avoided-cost pricing available to renewable qualifying facilities with a capacity between 5 MW and 80 MW on the basis that RTOs provide non-discriminatory access to energy markets for projects of this size. What are the pros and cons that these changes to PURPA implementation would create for Oregon? An advantage presented here by an RTO over the status quo is that stakeholders and market participants would not need to spend time and energy on this process. The current process is used to game the system at times. Under an RTO, local distribution utilities would not be forced to purchase local resources that provide greater benefit by serving the grid. The costs associated with such resources also can be smoothed out across all loads served by the grid. Participants would not need to integrate these resources themselves under an RTO, saving time, energy, and costs. • Distributed Energy Resources: While a consequence of an RTO could be to adversely affect the adoption of DERs, RTO energy markets could also be intentionally designed to provide new, uniform revenue streams that make it easier to finance DERs. How should RTO design take into account the opportunities and challenges associated with developing DERs? How can RTO design facilitate the adoption of DERs in high-risk, underserved, or low-income communities? PNGC highlights that rural communities, which are often home to lower income populations, are positioned to be most vulnerable to suffering the greatest inequities from pancaked rates and transmission congestion. RTOs can achieve economic efficiencies that can help keep rates low overall and make the benefits of clean renewable energy accessible to those that are at a geographic and economic disadvantage to investing on their own. • Manufacturing potential: Some studies note the potential for benefits of RTO formation that are difficult to anticipate or quantify, such as the economic benefits associated with in-state manufacturing of clean energy technologies at-scale. Do you anticipate that substantial economic benefits associated with clean energy manufacturing in Oregon could accrue from RTO formation? No comment • Oregon jobs: These issues related to the development of renewables have the potential to affect the number and quality of jobs in the clean energy sector in Oregon. Do you anticipate that RTO formation would result in a net increase
12. or decrease in Oregon- based jobs in the clean energy sector? How can these considerations be incorporated into the design of an RTO? PNGC recommends RTO mechanisms that ensure that the transmission planning process addresses each state’s system constraints. PNGC also advises that non- wires solutions be given consideration in transmission planning. Non-wires solutions generally mean local construction and therefore local jobs. RTOs are also very beneficial to renewable project integration and development. OR already has a fleet of renewable resources with a potential to continue and build more wind, solar, and biomass resources. With more renewables being developed in- state more in-state jobs are created. An RTO is the best path to achieve this value. Furthermore, an RTO’s ability to identify and relieve system congestion and constraints will open up economic development opportunities for areas that are presently limited by energy bottlenecks posed by the current transmission system, which lacks comparable processes to attract investment toward grid infrastructure where it is needed most.
13. (8) Environmental Impacts Aggressive carbon policies already in place in the West, including Oregon, make it unlikely that RTO formation would significantly accelerate a reduction in carbon emissions. There are, however, other potential environmental considerations resulting from RTO formation. Please provide feedback on how the environmental impacts resulting from RTO formation would or would not be preferable to the status quo. In responding, you might also consider the following questions: • Thermal dispatch: There is some potential that RTO formation could result in a short-term increase in the utilization of existing thermal plants, even though most studies find RTOs support the retirement of coal plants and the efficient operation of remaining gas plants, to the degree they are responsive to market price signals. Would these issues create a barrier to RTO formation? Could these issues be addressed through the design of an RTO? • Geographic footprint of renewables development: As noted previously, RTO formation could affect the location of renewables development across the West, with the potential to result in different land use impacts in Oregon (in terms of resource type, scale, and location) compared to what might occur absent an RTO. How could an RTO be designed to ensure that potential adverse land use, and other associated environmental and biological, impacts to Oregon are adequately addressed? • Environmental Justice: Energy production and delivery has had disparate impacts (both in terms of opportunities created and adverse effects) on different communities across Oregon. Would there be opportunities in designing an RTO to support the state’s interests in addressing disparate impacts and environmental justice issues? • GHG accounting: Accounting for the GHG emissions profile of electricity across different regulatory regimes, markets, and state boundaries can be challenging. How could this issue be incorporated into considerations of RTO formation? (8) Environmental Impacts: Aggressive carbon policies already in place in the West, including Oregon, make it unlikely that RTO formation would significantly accelerate a reduction in carbon emissions. There are, however, other potential environmental considerations resulting from RTO formation. Please provide feedback on how the environmental impacts resulting from RTO formation would or would not be preferable to the status quo. In responding, you might also consider the following questions: • Thermal dispatch: There is some potential that RTO formation could result in a short-term increase in the utilization of existing thermal plants, even though most studies find RTOs support the retirement of coal plants and the efficient operation of remaining gas plants, to the degree they are responsive to market price signals. Would these issues create a barrier to RTO formation? Could these issues be addressed through the design of an RTO? PNGC believes that if reduced utilization and/or retirement of existing thermal plans for environmental reasons is a desired outcome for state policymakers, policies directly addressing these issues/opportunities are more a more appropriate instrument for achieving such outcomes than relying on an RTO market to do so. PNGC sees no categorical obstacles presented by an RTOs to state policies to reduce/retire existing thermal plants. More transmission infrastructure and access to greater geographic diversity for renewable energy will mean higher penetration of non- emitting generation resources in our region. The NW region has a unique advantage in balancing an
14. RTO: our hydro system. This system benefit reduces the need for thermal resources to balance intermittent renewable generation. We also can look to Oregon’s timber industry as a potential resources to expand upon biomass generation, which operates as a much lower carbon emitting dispatchable resources than fossil fuels. If an RTO achieves this, it positively affects far more than just the electric industry in Oregon. • Geographic footprint of renewables development: As noted previously, RTO formation could affect the location of renewables development across the West, with the potential to result in different land use impacts in Oregon (in terms of resource type, scale, and location) compared to what might occur absent. How could an RTO be designed to ensure that potential adverse land use, and other associated environmental and biological, impacts to Oregon are adequately addressed? PNGC recommends that rather than try to use RTO mechanisms to achieve desired land use outcomes, land use policies should directly address and serve as the primary instrument to mitigate environmental impacts from renewable development. However, we do note that inclusive governance models could allow for public comment and input into the RTO’s policies and decisionmaking. • Environmental Justice: Energy production and delivery has had disparate impacts (both in terms of opportunities created and adverse effects) on different communities across Oregon. Would there be opportunities in designing an RTO to support the state’s interests in addressing disparate impacts and environmental justice issues? PGNC recommends diverse and inclusive governance for the development, formation, and operation of an RTO serving Oregonians as a sound starting point for designing processes and institutions that support equitable environmental justice outcomes. • GHG accounting: Accounting for the GHG emissions profile of electricity across different regulatory regimes, markets, and state boundaries can be challenging. How could this issue be incorporated into considerations of RTO formation?
15. (9) Climate Resilience For the most part, the studies reviewed did not consider the impacts of RTO formation on energy resilience in the context of our rapidly changing climate. For example, just in the last year, catastrophic wildfires have necessitated the need to shut off power to Oregon communities; historic winter ice storms resulted in widespread outages in the Willamette Valley; and dense smoke from a wildfire earlier this summer forced an outage of major transmission lines connecting Oregon to California. Please provide feedback on how climate resilience implications resulting from RTO formation would or would not be preferable to the status quo. In responding, you might also consider the following questions: • Geographic diversity of resources: What opportunities (e.g., new mechanisms for monetizing and supporting the deployment of resilient microgrids) and challenges (e.g., potential for increased reliance on transmission to import power) could an RTO create to support energy resilience for Oregon communities? How could these issues be taken into account when designing an RTO? • Wildfire nexus: The recent shutdown of the AC intertie to California for multiple days due to wildfire smoke is an example of the nexus between wildfires and transmission lines. How can wildfire risks be mitigated in the design of an RTO? (9) Climate Resilience: For the most part, the studies reviewed did not consider the impacts of RTO formation on energy resilience in the context of our rapidly changing climate. For example, just in the last year, catastrophic wildfires have necessitated the need to shut off power to Oregon communities; historic winter ice storms resulted in widespread outages in the Willamette Valley; and dense smoke from a wildfire earlier this summer forced an outage of major transmission lines connecting Oregon to California. Please provide feedback on how climate resilience implications resulting from RTO formation would or would not be preferable to the status quo. In responding, you might also consider the following questions: • Geographic diversity of resources: What opportunities (e.g., new mechanisms for monetizing and supporting the deployment of resilient microgrids) and challenges (e.g., potential for increased reliance on transmission to import power) could an RTO create to support energy resilience for Oregon communities? How could these issues be taken into account when designing an RTO? • Wildfire nexus: The recent shutdown of the AC intertie to California for multiple days due to wildfire smoke is an example of the nexus between wildfires and transmission lines. How can wildfire risks be mitigated in the design of an RTO? PNGC recommends consideration of transmission planning frameworks that stimulates potential cost-effective investment in infrastructure that allows for sectionalization of power delivery systems at the transmission level. Additionally, RTOs can identify and attract investment into non-wires alternatives that can serve vulnerable areas through technologies that allow for operations even when disconnected from the main system.
16. (10) Governance Many of the issues identified here help to illuminate the need for effective governance of an RTO that would ensure Oregon’s perspectives are adequately represented. Please provide feedback on the priorities or principles that should be incorporated in the development of governance mechanisms for an RTO. In responding, you might also consider the following questions: • Best Practices: There are a variety of RTO governance models across the country. Can you identify any best practices in RTO governance from around the country (or internationally)? • New Practices: What are some new governance mechanisms that could ensure net benefits to Oregon retail customers are considered as a result of Oregon RTO participation? • State interests: Some stakeholders in other RTOs contend that vesting too much governing authority in participating utilities and existing transmission owners makes it difficult for the state to adopt and implement new policies. How can an RTO be designed to balance the interests of meaningful state oversight and policy with the interests of RTO participants? • Governance principles: Can you identify or describe specific governance principles that you believe should be incorporated into the design of any RTO? For example: geographic balance of representation on the governing board; public power representation; mechanisms for meaningful input and guidance from state policymakers; retail customer protections; opt-out provisions for participating members; etc. (10) Governance: Many of the issues identified here help to illuminate the need for effective governance of an RTO that would ensure Oregon’s perspectives are adequately represented. Please provide feedback on the priorities or principles that should be incorporated in the development of governance mechanisms for an RTO. In responding, you might also consider the following questions: • Best Practices: There are a variety of RTO governance models across the country. Can you identify any best practices in RTO governance from around the country (or internationally)? Effective and inclusive governance is critical to successful development and launch of an RTO that includes entities in Oregon and across the Northwest. We believe that targeted analysis of this issue, informed by comprehensive assessment of existing RTOs and organized markets in other jurisdictions, merits strong consideration. PNGC recommends consideration of the Southwest Power Pool governance model as an attractive inclusive starting point for deliberations on NW RTO, along with certain aspects of the representative aspects of the CAISO governance system. We further note that the governance models currently being implemented by sub-RTO functions should be designed in a way that is consistent with and can be integrated into the ultimate governance system that will be utilized for an eventual RTO. • New Practices: What are some new governance mechanisms that could ensure net benefits to Oregon retail customers are considered as a result of Oregon RTO participation? PNGC recommends that the group of participants and stakeholders that develops any organized market that serves Oregon customers include state regulators and also constitute the formal governance structure for actual operation of a NW RTO itself, to assure inclusive representation. We further note that the governance models currently being implemented by sub-RTO functions should be designed in a way that is consistent with and can be integrated into the ultimate governance system that will be utilized for an eventual RTO. • State
17. interests: Some stakeholders in other RTOs contend that vesting too much governing authority in participating utilities and existing transmission owners makes it difficult for the state to adopt and implement new policies. How can an RTO be designed to balance the interests of meaningful state oversight and policy with the interests of RTO participants? PNGC recommends that state utility regulators, tribes, and stakeholders be explicitly included alongside market participants in the development and ultimate governance of a NW RTO. We further note that the governance models currently being implemented by sub-RTO functions should be designed in a way that is consistent with and can be integrated into the ultimate governance system that will be utilized for an eventual RTO. • Governance principles: Can you identify or describe specific governance principles that you believe should be incorporated into the design of any RTO? For example: geographic balance of representation on the governing board; public power representation; mechanisms for meaningful input and guidance from state policymakers; retail customer protections; opt-out provisions for participating members; etc. PNGC specifically notes that inclusion of public power in RTO governance will inherently help balance representation of geographic, economic, and social diversity in a NW RTO. We further note that the governance models currently being implemented by sub-RTO functions should be designed in a way that is consistent with and can be integrated into the ultimate governance system that will be utilized for an eventual RTO.
18. (11) Market Design Optionality There are numerous ways that energy markets could be designed. The studies we reviewed considered multiple different constructs, from the bilateral status quo, to an expansion of real-time (EIM) and day-ahead markets (EDAM), to multiple full RTOs across the West or a single West-wide RTO. Please provide feedback on the priorities or principles that should be considered when designing specific energy markets like those that would be administered by an RTO. In responding, you might also consider the following questions: • Retail Customer Benefits: Assuming that substantive barriers and challenges can be satisfactorily addressed, do you expect the cumulative benefits to retail customers in Oregon to be significantly greater under certain constructs than others? Is a minimum viable size for the geographic or jurisdictional scope of an RTO necessary to achieve sufficient retail customer benefits to justify forming an RTO? • Optionality: Are there opportunities to consider different ways of dividing the traditional functions of an RTO across multiple legal entities in a manner that can simultaneously maximize benefits to Oregon retail customers while minimizing other potential barriers or concerns (e.g., around governance or preserving state influence over Resource Adequacy)? • Marginal Cost Dispatch: What types of changes, if any, might be incorporated into the design of RTO energy markets to support regional system reliability as zero marginal cost renewables increase their share of the power mix? (11) Market Design Optionality: There are numerous ways that energy markets could be designed. The studies we reviewed considered multiple different constructs, from the bilateral status quo, to an expansion of real-time (EIM) and day-ahead markets (EDAM), to multiple full RTOs across the West or a single West-wide RTO. Please provide feedback on the priorities or principles that should be considered when designing specific energy markets like those that would be administered by an RTO. In responding, you might also consider the following questions: • Retail Customer Benefits: Assuming that substantive barriers and challenges can be satisfactorily addressed, do you expect the cumulative benefits to retail customers in Oregon to be significantly greater under certain constructs than others? Is a minimum viable size for the geographic or jurisdictional scope of an RTO necessary to achieve sufficient retail customer benefits to justify forming an RTO? • Optionality: Are there opportunities to consider different ways of dividing the traditional functions of an RTO across multiple legal entities in a manner that can simultaneously maximize benefits to Oregon retail customers while minimizing other potential barriers or concerns (e.g., around governance or preserving state influence over Resource Adequacy)? • Marginal Cost Dispatch: What types of changes, if any, might be incorporated into the design of RTO energy markets to support regional system reliability as zero marginal cost renewables increase their share of the power mix? PNGC is concerned about ongoing piecemeal implementation of various functions that are typically included in a full RTO, such as energy imbalance trading, day ahead trading, resource adequacy, reliability, and transmission planning. While the emergence of various entities and programs that deliver these functions could be viewed as stepping stones on the path toward a full RTO, this approach also runs the risk of taking significant parts of the value streams associated with an RTO off the table and, perhaps inadvertently, hinder or even render impractical the development of a fully integrated RTO. The piecemeal approach fails to achieve synergies resulting from delivering these functions in an integrated manner, resulting in suboptimal and inefficient implementation of certain
19. services that prevent fulfillment of key RTO benefits, such as economic dispatch of generation and transmission optimization and de-pancaking of transmission rates. We further note that the governance models currently being implemented by sub-RTO functions should be designed in a way that is consistent with and can be integrated into the ultimate governance system that will be utilized for an eventual RTO.