Breaking Down Barriers for a More Reliable Grid

Over a dozen state utility commissions sounded the alarm against “siloed, reactive planning.” But their recommendations are just a starting point to strengthen resource adequacy through improved collaboration.

On November 28, 2023, the Organization of PJM States, Inc (OPSI), which consists of regulators from 14 state public utility commissions (PUCs), issued a letter to the board of directors of PJM (the Mid-Atlantic region’s wholesale electricity market), asking them to pursue a more “holistic” approach to reliability planning and “innovative” reliability solutions. A key point in OPSI’s letter is the need for better alignment in planning between PJM and member states, as a lack of coordination risks PJM proposing reliability solutions which aren’t actually the most cost-effective.

Historically, PUCs had authority over resource adequacy — ensuring that there is enough energy available in the bulk power system to meet demand in all but the rarest of cases — in their states. This meant that state regulators (in their representation of their communities’ interests) were in control of which type of resources they would prefer to build within their state border.

However, in many parts of the country where the electricity industry has been restructured into wholesale markets, such as in PJM, states relinquished control of resource adequacy outcomes to the market for the promise of lower costs due to efficient economic structures. With plummeting renewable energy costs and an evolving policy landscape, including state-specific climate and clear energy goals, there are an unprecedented amount of new renewable resources across the country waiting in lengthy queues to interconnect to the electric grid. Even once connected, however, these resources’ contributions to resource adequacy aren’t necessarily being reflected in market outcomes.

OPSI’s letter is one example of how state regulators are raising their voices over what they see to be deficits in how their regional transmission organizations (RTOs) are tackling emerging reliability issues. But discrepancies between state priorities and market outcomes aren’t unique to OPSI and PJM. Another example is from the northeastern region of the United States, where the New England Independent System Operator (ISO-NE), and its state committee, the New England States Committee on Electricity (NESCOE), have also struggled to see eye-to-eye on resource adequacy.

Misalignment between state and RTO/ISO planning efforts is just one of several barriers in utility planning that stand in the way of more efficient planning outcomes. Existing electric industry constructs have been siloed into a complex cache of individual components of planning. Breaking down these barriers and increasing coordination and collaboration, such as depicted in the figure below, is one of the most important tools that we have for planning for a grid that is not only reliable but also affordable and clean.

Coordination Is Key to Better Resource Adequacy Outcomes

OPSI’s letter emphasizes the need to coordinate planning practices between individual states and regional entities such as RTO/ISOs — this is a salient strategy to enable better, lower-cost reliability outcomes for ratepayers across the country. As an example of how this has been done well, the Organization of MISO States (OMS), in addition to their annual meetings, hosted resource adequacy summit meetings in 2022 and 2023 to bring stakeholders from MISO states (15 states in the Midwest and South) together to facilitate shared learning on key resource adequacy topics and generate new ideas.

Ensuring alignment and communications between state offices and agencies, as well as with RTO/ISOs, is also key. As an example, one Mid-Atlantic state’s Department of Environmental Protection (DEP) consulted with the state PUC while developing new efficiency rules for steam generators. The two agencies further consulted PJM on the proposal, which offered valuable feedback on the rule’s reliability implications that the DEP incorporated into its final rule. In Connecticut, the Department of Energy and Environmental Protection also consulted the state’s Public Utility Regulatory Agency, but in this case for feedback as it developed its state-wide integrated resource plan. And on the West Coast, the California Public Utilities Commission uses load forecasts developed by the California Energy Commission to develop its System Reliability Modeling Datasets, used in its resource adequacy modeling.

Among states, there are a myriad of opportunities to coordinate both regionally and inter-regionally. In early 2023, the Federal Energy Regulatory Commission (FERC) approved a voluntary program in the non-RTO West, the Western Resource Adequacy Program (WRAP), that will allow Western utilities to share capacity and benefit from regional load, weather, and resource diversity. While not specifically modeling WRAP, a recent study of the Western United States using the GridPath RA Toolkit concluded that a “failure to account for regional dynamics can result in overbuild and a misunderstanding of the nature of the resource adequacy challenge,” affirming the importance of a regional approach to planning. In addition, FERC has an open rulemaking attempting to increase inter-regional transfer capabilities — an important tool for maintaining resource adequacy. Indeed, in times of extreme weather conditions such as during Winter Storm Elliot in 2022, the Tennessee Valley Authority would likely have experienced more widespread blackouts had they not been able to access imports from their neighbors through transmission.

The authority of a state’s PUC is defined by state legislative statute, and other laws promulgated by lawmakers have implications for resource adequacy; therefore, state policymakers are another key entity which must be included as part of a more holistic approach to planning. In its most recent Reliability Risk Priorities Report, for example, the North American Electric Reliability Corporation (the United States’ national reliability monitor) introduced “energy policy” as a new risk to grid reliability but cites “[i]ncreased coordination and collaboration” between policymakers, state and federal regulators, and other entities involved in grid operations as key recommendation to mitigating that risk.

Replacing Barriers with Bridges

Across the country, we are seeing examples of and opportunities for coordination and collaboration between historically siloed entities. But there is more that regulators, regional grid operators, and other stakeholders can do:

• Leverage Regional State Committees (RSCs) to raise resource adequacy concerns. Other commissions in RTO/ISO regions can look to OPSI’s letter as a good example and feel empowered to raise concerns with their RTO boards through their RSC. There is also opportunity for states to file comments regarding reliability or take positions on tariff proposals with FERC where disagreement with RTO actions and decision-making persists.
• Continue and expand education surrounding resource adequacy. State PUCs can open investigatory dockets to assess the current resource adequacy situation and opportunities to improve it, as demonstrated by the commissions of Montana, Colorado, New Mexico, and Oregon. State regulators can also push for additional educational opportunities in their own RTO, like OMS’s Resource Adequacy Summit, which could set the stage for inter-state discussion and coordination. Finally, state regulators and other stakeholders nationwide can benefit from the comprehensive guides and reports on resource adequacy recently published by the National Association of Regulatory Utility Commissioners.
• Create new opportunities for communication and coordination among state energy offices and other agencies. In New Jersey, commission-energy office communication is formalized by incorporating the state energy office into a division of the Board of Public Utilities. Similarly, coordination between PUCs and a state’s DEP through information-sharing, participating in regulatory proceedings and IRPs, etc., can help each agency accomplish its goals. In addition, PUC and state agency staff should identify opportunities to educate state lawmakers on emerging resource adequacy challenges and solutions, for example, by presenting on learnings that resulted from investigatory dockets.
• Remove barriers to inter-regional cooperation. At present, the three main electric grids in the United States are completely isolated from one another; FERC should quickly move forward with an inter-regional planning framework for RTOs to enable the many benefits of long-haul transmission. In addition, states that perform integrated resource planning, such as those in MISO, should consider how planning decisions in neighboring balancing areas or states could affect in-state planning outcomes.

Apart from Hawaii, no state is an island — so regulators in the contiguous US states need not regard resource adequacy from an islanded perspective, either. Sharing resources and coordinating on adequacy is key to enabling a more affordable and more reliable electric grid that is more resilient to extreme weather and bolstered by aligned and informed decision-making.