New California law could expand energy trading across the West
After years of failed attempts, California lawmakers have cleared the way to create an electricity-trading market that would stretch across the U.S. West. Advocates say that could cut the region’s power costs by billions of dollars and support the growth of renewable energy. But opponents say it may make the state’s climate and clean-energy policies vulnerable to the Trump administration. Those are the fault lines over AB 825, also known as the “Pathways Initiative” bill, which was signed into law by Democratic Gov. Gavin Newsom on Sept. 19 as part of a major climate-and-energy legislative package. The law will grant the California Independent System Operator (CAISO), which runs the transmission grid and energy markets in most of the state, the authority to collaborate with other states and utilities across the West to create a shared day-ahead energy-trading regime. Passage of this bill won’t create that market overnight — that will take years of negotiations. CAISO’s board wouldn’t even be allowed to vote on creating the market until 2028. But for advocates who’ve been working for more than a decade on plans for a West-wide regional energy market, it’s a momentous advance. “We’ve shot the starting gun,” said Brian Turner, a director at clean-energy trade group Advanced Energy United, which was outspoken in support of the legislation. Today, utilities across the Western U.S. trade energy via bilateral arrangements — a clunky and inefficient way to take advantage of cheaper or cleaner power available across an interconnected transmission grid. An integrated day-ahead trading regime could drive major savings for all participants — nearly $1.2 billion per year, according to a 2022 study commissioned by CAISO. That integrated market could create opportunities for solar power from California and the Southwest and wind power from the Rocky Mountains and Pacific Northwest to be shared more efficiently, driving down energy costs and increasing reliability during extreme weather. Lower-cost power more readily deliverable to where it’s needed could also reduce consumers’ monthly utility bills — a welcome prospect at a time of soaring electricity rates. The regional energy market plan is backed by a coalition that includes clean-energy trade groups such as Advanced Energy United and the American Clean Power Association; environmental groups including the Sierra Club, Union of Concerned Scientists, and the Natural Resources Defense Council; business groups including the California Chamber of Commerce and the Clean Energy Buyers Association; and the state’s major utilities. It also has the backing of U.S. senators representing California, Oregon, and Washington, all states with strong clean-energy goals. Assemblymember Cottie Petrie-Norris, a Democrat who authored AB 825, said in a statement following its passage that it “will protect California’s energy independence while opening the door to new opportunities to build and share renewable power across the West.” But consumer advocates, including The Utility Reform Network, Consumer Watchdog, and Public Citizen, say the bill as passed fails to protect that energy independence. The Center for Biological Diversity and the Environmental Working Group share their concerns. They fear a new trading market will allow fossil fuel–friendly states like Idaho, Utah, and Wyoming to push costly, dirty coal power into California — and give an opening to the Trump administration to use the federal government’s power over regional energy markets to undermine the state’s clean-energy agenda. What a Western energy market could achieve The arguments for a day-ahead energy-trading market can be boiled down to a simple concept, Turner said — bigger is better. Being able to obtain power from across the region could reduce the amount of generation capacity that individual utilities have to build. And tapping into energy supplies spanning from the Pacific Ocean to the Rocky Mountains would allow states undergoing heat waves and winter storms to draw on power from parts of the region that aren’t under the same grid stress, improving resiliency against extreme weather. A Western trading market could also serve as a starting point for even more integrated activity between the dozens of utilities in the region that now plan and build power plants and transmission grids in an uncoordinated way. A 2022 study commissioned by Advanced Energy United found that a regional energy organization could yield $2 billion in annual energy savings, enable up to 4.4 gigawatts of additional clean power, and create hundreds of thousands of permanent jobs. For advocates of a Western market, the chief challenge has been to design a structure that doesn’t give up California’s control over its own energy and climate policies, but allows other states and their utilities a share of decision-making authority over how the market works. Taking a lead on that design work has been the West-Wide Governance Pathways Initiative, a group of utilities, state regulators, and environmental and consumer advocates.
After years of failed attempts, California lawmakers have cleared the way to create an electricity-trading market that would stretch across the U.S. West. Advocates say that could cut the region’s power costs by billions of dollars and support the growth of renewable energy. But opponents say it may make the state’s…
After years of failed attempts, California lawmakers have cleared the way to create an electricity-trading market that would stretch across the U.S. West. Advocates say that could cut the region’s power costs by billions of dollars and support the growth of renewable energy. But opponents say it may make the state’s climate and clean-energy policies vulnerable to the Trump administration.
Those are the fault lines over AB 825, also known as the “Pathways Initiative” bill, which was signed into law by Democratic Gov. Gavin Newsom on Sept. 19 as part of a major climate-and-energy legislative package. The law will grant the California Independent System Operator (CAISO), which runs the transmission grid and energy markets in most of the state, the authority to collaborate with other states and utilities across the West to create a shared day-ahead energy-trading regime.
Passage of this bill won’t create that market overnight — that will take years of negotiations. CAISO’s board wouldn’t even be allowed to vote on creating the market until 2028.
But for advocates who’ve been working for more than a decade on plans for a West-wide regional energy market, it’s a momentous advance. “We’ve shot the starting gun,” said Brian Turner, a director at clean-energy trade group Advanced Energy United, which was outspoken in support of the legislation.
Today, utilities across the Western U.S. trade energy via bilateral arrangements — a clunky and inefficient way to take advantage of cheaper or cleaner power available across an interconnected transmission grid. An integrated day-ahead trading regime could drive major savings for all participants — nearly $1.2 billion per year, according to a 2022 study commissioned by CAISO.
That integrated market could create opportunities for solar power from California and the Southwest and wind power from the Rocky Mountains and Pacific Northwest to be shared more efficiently, driving down energy costs and increasing reliability during extreme weather.
Lower-cost power more readily deliverable to where it’s needed could also reduce consumers’ monthly utility bills — a welcome prospect at a time of soaring electricity rates.
The regional energy market plan is backed by a coalition that includes clean-energy trade groups such as Advanced Energy United and the American Clean Power Association; environmental groups including the Sierra Club, Union of Concerned Scientists, and the Natural Resources Defense Council; business groups including the California Chamber of Commerce and the Clean Energy Buyers Association; and the state’s major utilities. It also has the backing of U.S. senators representing California, Oregon, and Washington, all states with strong clean-energy goals.
Assemblymember Cottie Petrie-Norris, a Democrat who authored AB 825, said in a statement following its passage that it “will protect California’s energy independence while opening the door to new opportunities to build and share renewable power across the West.”
But consumer advocates, including The Utility Reform Network, Consumer Watchdog, and Public Citizen, say the bill as passed fails to protect that energy independence. The Center for Biological Diversity and the Environmental Working Group share their concerns. They fear a new trading market will allow fossil fuel–friendly states like Idaho, Utah, and Wyoming to push costly, dirty coal power into California — and give an opening to the Trump administration to use the federal government’s power over regional energy markets to undermine the state’s clean-energy agenda.
What a Western energy market could achieve
The arguments for a day-ahead energy-trading market can be boiled down to a simple concept, Turner said — bigger is better. Being able to obtain power from across the region could reduce the amount of generation capacity that individual utilities have to build. And tapping into energy supplies spanning from the Pacific Ocean to the Rocky Mountains would allow states undergoing heat waves and winter storms to draw on power from parts of the region that aren’t under the same grid stress, improving resiliency against extreme weather.
A Western trading market could also serve as a starting point for even more integrated activity between the dozens of utilities in the region that now plan and build power plants and transmission grids in an uncoordinated way. A 2022 study commissioned by Advanced Energy United found that a regional energy organization could yield $2 billion in annual energy savings, enable up to 4.4 gigawatts of additional clean power, and create hundreds of thousands of permanent jobs.
For advocates of a Western market, the chief challenge has been to design a structure that doesn’t give up California’s control over its own energy and climate policies, but allows other states and their utilities a share of decision-making authority over how the market works. Taking a lead on that design work has been the West-Wide Governance Pathways Initiative, a group of utilities, state regulators, and environmental and consumer advocates.