SB540 letter 4/15/25
Dear Ava Board members,
Please do not endorse SB540, but instead oppose it. The danger is too great that SB540 would disempower California from controlling costs for Ava customers and the rest of the state’s residents and from meeting its climate goals.
The hopes of SB540 proponents rest on three things:
1. misplaced trust that the Regional Organization and FERC will not act to undermine California’s goals;
2. bill language that sounds reassuring but actually cedes all governing authority to the Regional Organizaiton and gives up legal protections from actions of FERC (Federal Energy Regulatory Commission); and
3. the bill’s false promise that California can leave the Regional Organization if it doesn’t work out well.
1. Trust that the RO and FERC will not act to undermine California’s goals is unwarranted and potentially tragic.
According to the Brattle Study, the likely members of the RO will exclude most Pacific Northwest and Desert Southwest utilities-- resulting in a majority of fossil-fuel dominated states who have not shied away from suing other states and federal agencies on behalf of the coal industry. See:
Utah moves to sue California over fee on coal power; Wyoming, Idaho, Montana, Utah et al sue the EPA over electric plant greenhouse gas emissions standards; Wyoming backs coal with $1.2M threat to sue other states.
The Brattle study’s projections could not take into account the vast changes occurring in the environmental regulatory and legal landscape. For example, since the study’s publication PacifiCorp has released its 20-year Integrated Resource Plan for 2025. This Plan cuts back on renewables and completely abandons the company’s 2023 IRP plans for early retirement of almost all its coal-fired facilities.
Just one example of pro-coal laws passed by the State of Utah in 2024 is SB2242. SB 224 sets securing “dispatchable resources” (i.e. coal power plants) as a “Utah energy policy priority”, and allows utilities to pass on to rate payers all excess costs of keeping coal plants open vs securing cheaper renewable power—including legal fees and stranded costs if the feds move to close a plant. Utah’s SB224 notes that “the ability to sell excess energy generated in an interstate energy market” could give coal-fueled electricity a cost advantage overall for Utahns.
SB540 unfortunately promises to decrease the use of polluting and expensive gas peaker plants in California by substituting a more climate-heating and polluting alternative that may come at a steep cost premium under market rules set by a coal-state dominated Regional Organization.
2. SB540 Section 345.6(a) and Section 345.6(e) sound reassuring but retain no authority over energy market rules and thus do not protect the state’s ability to pursue its policies.
CAISO must find that the twelve requirements listed in Section 345.6(a) “have been or will be adopted” by the Regional Organization (RO) before relinquishing the governance of electricity markets. Please read the requirements carefully and critically. They use terms like “engage with,” “receive the views of,” and “nonbinding advice.” Requirement (1) is to “respect the authority of each state…to set its own…policies”. • However, SB 540 would force California to ignore PUC Law 345.5(b) which “requires CAISO to run all electricity markets … consistent with state law intended to protect the public’s health and the environment,” and
• the RO would be free to set market rules that undermine California policies.
Requirement (2) is to maintain “a public policy committee that “engages with states …about potential impacts to state… policies before it approves a tariff change for filing at the Federal Energy Regulatory Commission.
What does this mean? From FERC 101: Electricity Regulation and the Federal Energy Regulatory Commission I learned:
Tariffs are documents that contain rules on the operation of electricity markets and how rates are set.
FERC regulates wholesale electricity by issuing orders. … such as orders that approve or reject specific RTO tariff changes. (RTO=Regional Transmission Organization=SB540’s RO) In a section 205 proceeding [or filing], a public utility (a term that includes RTOs) proposes changes to existing rates or market rules. The utility must prove [to “beautiful, clean coal” Trump’s FERC] that the proposed changes would result in “just and reasonable” rates.
In other words, after California cedes its electricity market governance to the RO, the RO can file with FERC to change the rules and rates to favor fossil-fuels, as long as it first “engages with” the state.
In addition, others have explained how SB 540 would force California to ignore PUC Law 345.5(b) which “requires CAISO to run all electricity markets … consistent with state law intended to protect the public’s health and the environment,” and that California would lose its unique protections against FERC (Federal Energy Regulatory Commission) based on CAISO v FERC (2004).
3. California may not actually be able to exit the Regional Organization.
Requirement (12) reads: The independent regional organization permits and provides a procedure for unilateral withdrawal by any participant with reasonable prior notice. notice and without any further approvals.
The terms of the withdrawal procedure are not specified. Once governance is ceded to the RO, the RO can file for a tariff change with FERC to change the procedure, including an extremely long prior notice requirement and/or prohibitive financial penalties.
Endorsing SB540 would be a grave mistake. Please take a stand against it.
Sincerely,
Ann Harvey, MD, Ava customer
Utah moves to sue California over fee on coal power; Wyoming, Idaho, Montana, Utah et al sue the EPA over electric plant greenhouse gas emissions standards; Wyoming backs coal with $1.2M threat to sue other states.