RTO Insider reports on the Pathways Bill, SB 540, as it advances through the Judiciary Committee with new amendments aimed at protecting California’s clean energy leadership, addressing federal overreach, and ensuring continued stakeholder engagement. United's Leah Rubin Shen voiced support of SB 540, noting that the bill balances diverse stakeholder interests while strengthening regional collaboration. 

New amendments to California’s proposed Pathways bill will include protections against possible attempts by President Donald Trump to influence the state’s energy markets, such as pushing it to buy power from coal-fired generators.

Democratic State Sen. Josh Becker presented the proposed amendments during a California Senate Judiciary Committee hearing April 29. The committee unanimously approved all the changes in a late-night vote, sending the bill on to the Appropriations Committee.

The changes follow concerns from consumer advocacy groups like The Utility Reform Network (TURN) that handing over governance of CAISO’s energy markets to a proposed independent regional organization (RO) could undermine the Golden State’s clean energy goals. 

“Some opponents have raised reasonable concerns … and I appreciate those and will continue discussion,” Becker said. “I believe the committee amendments not only address these concerns but further strengthen the protections in this bill.”

Senate Bill 540, or Pathways, is the product of the work of the West-Wide Governance Pathways Initiative, an effort to support the expansion of CAISO’s Western Energy Imbalance Market (WEIM) and soon-to-be-implemented Extended Day-Ahead Market (EDAM) to entities outside California by creating a new independent RO to govern rules for CAISO’s markets while leaving key elements of the ISO’s balancing authority area intact.

Under the bill’s first iteration, California could not join the RO market before mid-2027. But with amendments, the timeline would be pushed to January 2028, according to Becker.

This gives stakeholders “a full three years of watching the new administration, seeing what it does and what it attempts to do regarding California’s energy markets” before any final decision is made, Becker said.

The amendments also clarify that the RO cannot establish capacity markets. This is to prevent the Trump administration from forcing California to buy coal, Becker said. He added that the strategy to use capacity markets to incentivize coal “is outlined by Project 2025.”

“We cannot establish capacity markets under this bill or establish any mandatory reserve or resource adequacy requirements,” Becker said.

Additionally, the tariff filed with FERC “cannot assess any cost of fossil fuel generation resources to California participants. E.g. can’t force California to pay for coal generated in Wyoming,” according to Becker.

Becker also said electrical corporations must leave the RO if one of three things happen: market rules or public policies turn out to be “detrimental to California consumers”; renewable portfolio standards are “held invalid by reviewing court on claims of impermissible discrimination”; or Trump or future presidents use emergency powers to require California to subsidize fossil fuels.

“We now have it in the bill, if any of those things happen, automatic required withdrawal,” Becker said.

Other amendments include:

• • Require the RO’s governing documents and tariff approved by FERC to respect the authority of each state and manage energy markets consistent with existing California protections.
  • Allow participants to withdraw without penalties.
  • CAISO must provide testimony and receive feedback from the state Senate and Assembly energy committees before adopting the resolution.
  • CAISO must conduct a jobs study.

Praise, Concerns, Fear

In calling the amendments “substantial,” Becker also said some opponents “are falsely evoking public fear” that the market initiative exposes California to “federal meddling.”

“If FERC wants to interfere with our markets today or our climate policies via our energy markets, they can do that today. Just to be extremely clear,” Becker said.

Speaking in support of the bill, Marc Joseph, an attorney representing the International Brotherhood of Electrical Workers (IBEW), also noted that Trump already poses a threat to energy markets in the West.

“This bill does not give FERC any more jurisdiction over our policies than it has today,” Joseph said. “In any case, as Sen. Becker said, the decision to participate won’t come before 2028, so we have plenty of time to evaluate whether this remains a good idea. If it’s not, we just don’t do it.”

Still, former California Public Utilities Commission President Loretta Lynch, an outspoken opponent of SB 540, argued that federal challenges likely will ensue should the bill become law. 

“Two major legal concerns that arise from this bill, according to the committee analysis, are based on the federal preemption doctrine and the Dormant Commerce Clause,” Lynch said.

“While the proposed amendments attempt to close the legal deficiencies that make California vulnerable, and I applaud the author for considering proposed amendments, they do not go far enough to protect California,” Lynch said. “And most importantly, they change the law now, today, and provide too much of California’s current legal authority, giving it over to the FERC and to the new RO.”

In an email to RTO Insider, Matthew Freedman, staff attorney for TURN, wrote: “TURN appreciates the amendments taken today in the Judiciary committee to address many of the concerns outlined in our letter. We are continuing to evaluate the bill and are working with Sen. Becker to minimize the risks to California’s consumers, environmental protections and clean energy leadership.”

Advanced Energy United has supported the bill. In an email, the organization’s managing director, Leah Rubin Shen, said, “We are encouraged to see lawmakers engaging constructively and balancing the priorities of a wide range of stakeholder interests.”

“This bill will strengthen California and the West’s position by building a broader market that protects state interests and fosters regional collaboration,” Shen added.

Read the full article here.