Yesterday, the U.S. Supreme Court issued orders (such as this Order) granting five petitions to stay the EPA’s “Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units” 80 Fed. Reg. 65,662 (October 23, 2015), or Clean Power Plan (CPP). Parties seeking the stay range from states to independent power producers to rural electric cooperatives.   Petitioners sought a stay from the highest Court after the D.C. Circuit denied a stay of the rule on January 21, 2016.  The stay remains in effect pending disposition of applicants’ petition for review in the D.C. Circuit by a three-judge panel (and any subsequent review by the full D.C. Circuit) and disposition of any subsequent writ of certiorari to the U.S. Supreme Court.   Five Justices supported the order staying the rule (Chief Justice Roberts and Justices Alito, Kennedy, Scalia, and Thomas) with four Justices dissenting (Justices Breyer, Ginsburg, Kagan, and Sotomayor).

An immediate implication of the stay – and future implications of the potential granting of the petitions to strike down the CPP – is to remove the only federal mechanism that requires nationwide decreases of GHGs from regulated electric generation units (EGUs). This directly affects the required analysis under SB 350 that authorized impact studies (See p. 6 for the Battle Group’s approach) and actual regional expansion of the California Independent Systems Operator (CAISO) (A blog post about SB 350 and Regional ISO Expansion can be found here).   Specifically, staying of the CPP and its potential strike down affects impact analysis of all required studies of proposed CAISO governance modifications:

• Overall benefits to ratepayers;
• Creation or retention of jobs and other benefits in the California economy;
• Environmental impacts in California and elsewhere;
• Impacts on disadvantaged communities;
• Emissions of GHG and other air pollutants; and
• Reliability and Integration of renewable energy resources.

These studies must now account for the uncertainty around the CPP litigation and the potential implications of achieving California’s GHG reduction goals under a regional ISO composed of out-of-state fossil fuel EGUs that may have no obligation to reduce GHG emissions.

The generation resources available in a regional ISO will be determined by whether the CPP survives legal challenge. The CPP will determine whether coal plants are retired or repowered as well the level of investment in natural gas generation and renewables in the west. The studies must account for the effects on production costs, changes to power plant and transmission investment including renewables, land use impacts from such investments, consequent pollutant and GHG community level impacts, generation carbon intensity, and air quality in light of the uncertainty around the CPP. Also at play in this analysis is federal preemption under FERC jurisdiction over wholesale energy markets (such as an ISO) that focus on just and reasonable rates, reliability, efficiency, and non-discrimination with no mandate to account for GHG emissions.

As California moves towards 50% renewable under SB 350’s updated Renewable Portfolio (RPS) mandate, sees efficiencies from an expanding CAISO Energy Imbalance Market (EIM), and meets its need under bilateral contracts and the existing CAISO system, close scrutiny of the benefits of a regional ISO must be undertaken given the uncertainty around national GHG reduction regulation of out-of-state EGUs.   This is made clearer by the litigation timeline and subsequent administration change under a new President. The D.C. Circuit three-judge panel will hear the petition on June 2, 2016 with an expected decision in the fall of 2016. If the full D.C. Circuit grants review of the three-judge panel decision, review and issuance of a decision should occur at the earliest by the end of the 2016. President Obama will leave office on January 20, 2017 meaning that a writ of certiorari may be pending or may have been accepted by the U.S. Supreme Court at the end of the Obama administration with a decision issued under a new administration sometime in 2017. More uncertainty is interjected by the pending election and the future policies of a new administration.

When these potential dates are superimposed on the CAISO’s current regional integration timeline (see p. 3) that looks to have all studies and workshops completed by the second quarter of 2016 and submission to the Governor and California Legislature for action between the second and third quarter of 2016, it seems that the uncertainty around the CPP may delay the required impact analysis and proposed governance changes of a CAISO regional expansion. SB 350 provides a deadline of December 31, 2017 for the Governor to submit CAISO regional expansion documents and studies to the legislature for possible statutory implementation of the expansion.  The uncertainty around the CPP may require that the CAISO use all the time allowed under this deadline.