Published: May 11, 2017

by Juliana Brint, Josh Constanti, Franz Hochstrasser, and Lucy Kessler of the Yale Environmental Protection Clinic (a project of the Yale Law School and the Yale School of Forestry & Environmental Studies)

I. Executive Summary

This analysis addresses the legal and policy merits of a transition to a fully integrated electricity grid in the Western United States through the creation of a regional independent system operator. We summarize the increasing constraints that today’s balkanized grid imposes on system-wide electricity costs and reliability, address the potential benefits of enhanced grid integration, and evaluate potential legal risks for key California clean energy policies.

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This report examines the potential impacts of an integrated Western electricity market on California’s clean energy policies, including the state’s renewable portfolio standard (RPS), the greenhouse gas emissions performance standard (EPS) for long-term contracts with baseload power plants, and the cap-and-trade program established by AB 32, the state’s groundbreaking climate law. We find that enhanced Western grid integration—through the creation of a regional ISO—does not interfere with these clean energy policies, and it instead can assist California in meeting its objectives by creating more market opportunities for renewable energy, reducing greenhouse gas emissions and other pollution, and improving the transmission system’s efficiency and reliability.

….Two provisions of the U.S. Constitution pose theoretical threats to California’s clean energy laws: the Supremacy Clause and the Commerce Clause. Under the Supremacy Clause, a state law is preempted and invalid if it conflicts with a federal law, such as the Federal Power Act (FPA) or the Public Utility Regulatory Policies Act (PURPA)…. Our analysis indicates that the expansion of CAISO into a regional system operator across several states would not make these challenges any more likely to succeed. Given the highly interconnected nature of the electric grid in the Western United States through the Western Interconnection, wholesale sales and transmission of electricity in the CAISO footprint are already treated as forms of “interstate commerce” subject to regulation by the Federal Energy Regulatory Commission (FERC) under the FPA. California laws and regulations affecting wholesale electricity transactions could be subject to challenges today if they conflict with federal energy law, and those same laws and regulations are already subject to scrutiny under the dormant Commerce Clause. As long as California and other Western states remain within the Western Interconnection, the potential for Supremacy Clause and dormant Commerce Clause challenges will not change. It is noteworthy that to date there have been no such challenges.

In sum, enhanced Western grid integration under a regional system operator would not expose California’s clean energy policies to additional risks of preemption under the FPA or challenges based on the dormant Commerce Clause. Shifting to a regional grid operator would enable more efficient, affordable, and reliable integration of renewable resources without increasing the legal risk to California’s clean energy policies

Read the full report on the Yale Law School website.