Integrity, and Other Things

I was listening to a podcast on a biography of William F. Buckley, a man who formed some of my more developed thoughts on society and politics in my youth. Doubtless, he’s not much remembered by those who either don’t follow politics or who were born after 1975. He was a man of many faces and a major Conservative protagonist in American politics from the early 1950s until the late 1990s. In his political and social discourse, he was charming, normally polite, and often humorous. Like any human, he had his flaws and contradictions.

But during the interview with the author, one word came up that caught my mind. He had “integrity.” Normally that word is meant to convey honesty, fairness, and accountability. While those qualities are often applied to Buckley, that normal meaning was not what the author felt described him. Rather, the common root “integrity” has with the word “integral” (not the math application but the adjective), meaning “necessary to complete.” Taken in this context, it’s meant “being whole in character”.

A person like Buckley is an acquired taste and if you were not of that political stripe, you would not agree with him. But if you were in a debate, you would enjoy the discussion as a person of integrity – who takes in the whole – will listen to your view, consider its merits, and reply having considered the “whole” honestly.

So, your point?

When I write these blogs, I eventually get to a relationship with our energy market experience in the West. Here is my elliptical connection to “integrity.” Part of what makes our market, the rules, the stakeholder discussions and regulatory interplay, is a bit of conflict. One party feels that a proposal works best for customers, but another party feels it is discriminatory. One party views its advocacy as the most efficient outcome, while an opposing party believes important societal issues are not being addressed. We engage in discussion, attempt to counter the other party’s arguments.

We submit these arguments to some decision-making authority: a market staff or market governance structure. Perhaps a state or federal regulatory body. Sometimes a legislative process. These discussions are mostly adversarial, but if we listen to the other side before we submit our views to a decision authority, we might find more common ground – which can lead to better decisions.

Let me apply this to two current efforts that will affect the Western power market structure for years to come.

Congestion Medicine

One of the benefits of an organized market is that it makes congestion on the system transparent (which exists in all uses of electric transmission) and has methods to either hedge the congestion through congestion rights or assess costs to redispatch around the congestion. The costs associated with the congestion are paid to those with congestion rights to make them financially whole. The congestion costs or “rents” are allocated to be distributed to those with rights to the system – transmission rights.

While considering a revised tariff of a utility that would join the CAISO’s EDAM, it became clear that the approved congestion rent allocation would not allow for an equitable solution to protecting transmission customers from costs as had been expected. When CAISO was alerted to this, there was a typical reaction of “defense” because they had a FERC approved tariff. This defensive reaction was frustrating but is a natural human reaction to an unexpected event. To CAISO staff’s credit however, they were persuaded that taking a lemon (bad outcome) and turning it to their advantage (engaging on the issue) was a better outcome. In a way, it was taking in the “whole” situation, not just arguing the justness of its position.

The outcome, while not perfect, is a far better allocation of congestion rents to protect customers. We’ll see how FERC acts on the proposal, but it represented a better outcome. From my vantage point, CAISO listened, considered and made changes. It is true that CAISO had other motivations (like helping other utility tariffs as they apply to EDAM at FERC), but let’s compliment a market administrator when they make improvements.

Legislation & Building Markets

Anyone in our space knows there’s legislation that’s intended to change the structure of CAISO’s market rules to allow for utilities to join a regional market that would include California. The recommendations made by the Pathways effort, resulted in the introduction of SB 540 to the California legislature. When you have labor, environmentalists, public utilities, investor-owned utilities, independent generators, community choice aggregators and others behind a bill like this, it should be an easy decision, right?

Despite a large and diverse group of supporters, and initial approval by the Senate Committee with oversight in April, vague concerns were raised by parties who are normally skeptical of markets. What proceeded was an effort to propose amendments that were so restrictive as to make the goal of SB 540, regionalization with all its benefits, a dead letter. The diverse group of supporting parties were frustrated because it was not clear what the parties concerned were trying to fix.

As we headed into a summer recess before the sprint to the end of the legislative session, what should the parties in favor of SB 540 do? I keep track of what is going on but am not actively involved in the lobbying. However, it appears that a stalwart group of California parties who support SB 540’s goals is trying to work through the issue, to understand the “concerns” of other parties and address them.

If successful, I suggest they will have acted with “integrity,” keeping a view of the whole rather than just one side or view. Naturally, this attempt at an integral or “necessary to be complete” quality requires the other parties to act in a similar manner. We’ll see how it works but it seems to have a better possibility than merely ridiculing the other parties.

Lessons Going Forward

My former colleagues at FERC have been following the Western efforts for regional market integration with great interest. To their eyes, the Western parties have been working remarkably well in most instances. We are all human so there are times of pettiness and parochialism. But largely, the discussions have been informed and mostly collegial. If we broaden our engagement with one another, if we can take in the whole, we may find even greater areas of agreement.

And, in our small way, we might set an example that would be worthy of attention by parties nationally.