CALIFORNIA LEGISLATURE STATE CAPITOL SACRAMENTO, CALIFORNIA 95814 February 4, 2016 Governor Edmund G. Brown Jr State Capitol First Floor Sacramento, CA 95814 RE: CAISO Paci?Corp Merger Dear Governor: As your agencies begin to evaluate the proposed California Independent System Operator (PC) grid merger, we write to share our views on matters that should be addressed as part of legislative changes to the CAISO governance structure and related laws. We are watching with interest to see how a revised western regional energy grid would Operate while ensuring California preserves its authority over energy ef?ciency, demand response, distributed energy resources, and clean fossil generation. We are open to considering a new governance structure provided it retains state climate leadership, lowers grid costs to California consumers, exports our clean energy in ways that bene?t California jobs and economy, enhances transportation electri?cation consistent with the new state targets, and promotes open governance and regional stability of the grid. At present, there remain signi?cant unanswered questions to be resolved before the state proceeds with regionalization. We have outlined those issues below in the hope that your administration reSponds to each as it reports to the Legislature and proceeds with next steps. These issues need to be reviewed and responded to by independent outside parties in order to have credibility, and not simply by those who have a vested interest in the merger of the two control areas. 1. No preemption or weakening of California?s clean energy and climate laws. Our recent travels to Paris show that California is a world leader in climate and energy policy. At the same time the US Congressional majorities and other states?including several of which are within the current PC service area?actively oppose these policies. Regionalization undertaken improperly could result in a revamped regional grid Operator subject only to jurisdiction of the Federal Energy Regulatory Commission (F ERC), even where its actions con?ict with California law. Conflicts between California and the revamped ISO would likely be resolved in the federal administrative agencies and courts, and not by California?s elected representatives or their appointees. The proposed regionalization must not undermine state sovereignty or cede authority of our state?s cutting edge clean energy and climate policies to others who do not have the same strong commitment and legal framework to reduce climate pollution and promote clean energy. PRINTED ON RECYCLED PAPER Governor Edmund G. Brown Ir February 4, 2016 Page 2 2. Air and GHG pollution should be reduced. Expansion of the CAISO into a western regional grid would add states heavily invested in coal and other high GHG emitting resources. California law prohibits our utilities from investing in new coal resources that do not meet a GHG emissions performance standard. Any regionalization proposal should guarantee that an expanded regional grid operator will continue the path California has charted to reduce region-wide and localized air and GHG pollution, particularly in California nonattainment areas and in disadvantaged communities, by delivering renewable energy to California load centers and displacing fossil fuel generation in those areas. 3. Protect California?s Renewable Portfolio Standard. This past year, Califomia?s renewable portfolio standard (RPS) was carefully revised and extended to mandate that half of the state overall energy portfolio come from clean energy by the year 2030. Any regionalization proposal should maintain?and not weaken??the RPS. Incremental RPS procurement within a new regional grid should continue to displace in-state fossil generation, should not weaken the current RPS product content requirements that require energy deliveries into California, and should not result in substitution of surplus existing renewable generation from other regions for new development to meet RPS goals. 4. Lower costs to California ratepayers. Any merger proposal should demonstrate that costs for capacity, energy, and transmission borne by California customers under the proposal would be less than costs California customers could reasonably be expected to pay, absent the merger. Analysis or projections of savings should speci?c benefits from regional expansion and consider actions the state is already taking to address renewable intermittency and over-generation through energy storage, demand response, ?exible electric vehicle charging, customer load shifting, time-variant retail rate designs, or exports to other states under the recently implemented Energy Imbalance Market. 5. Maintain public transparency and access. Any regionalization proposal should ensure that open meetings, transparency, and public access to an expanded grid operator are maintained, with appropriate exceptions for grid security. It also should ensure effective participation by, and input from, low?income and environmental justice groups and other key public interests. These requirements are important because the CAISO is not a public agency and otherwise is not bound by those laws. 6. Support new state targets for low cost charging of electric vehicles. Achievement of California?s ambitious clean energy and climate goals depends heavily on electrifying our tranSportation system. Any regionalization proposal should not undermine this Opportunity either by resulting in new renewable generation built far from California with no transmission capacity to delivery to California electric vehicles or by exporting most of that power to PC customers. Governor Edmund G. Brown Jr February 4, 2016 Page 3 7. Promote economic growth and iob creation. California?s clean energy policies are also good economic policy. According to the Advanced Energy Economy, advanced energy employment in the state in 2015 was 431,800, an increase of 5% over the prior year. Employers are optimistic about the future as well, with about half of all firms expecting to add employees during the coming year, for more than 70,000 new jobs a 17% projected increase. Regionalizing the grid should not put this new California investment at risk. We are particularly concerned about this risk because some of the proponents of regionalization describe shifting new investment to PC territory as a positive attribute of the proposal, rather than serious challenge to California jobs and its economy. Thank you for your consideration of these issues. We look forward to working with you this year to ensure that any proposed regionalization of the California grid protects the values we all share for the future of California and the planet. In you have any questions or would like to discuss this matter further, please do not hesitate to contact us directly. Sincerely, I f?jri;;7 A 74 DE Senate resident Pro Tempore Speaker-Elect of the Assembly BEN EUE DAS ILLIAMS .2 Chair 6 Energy, Utilities Chair Assembly Natural Resources Communications Committee Committee GATTO ?mo Chair Assembly Utilities and Chair Senate Budget Fiscal Review Commerce Committee Committee