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A Job Well Done… Now What?

At this moment, I’m writing from inside my camper van on the South Island of New Zealand. Why am I writing now? Immediately after the WPTF Winter Meeting, I left for the trip down here to celebrate a “significant” birthday (no, I’m not speaking the number). I had forgotten about the news Steve Berberich leaving the CAISO until I found myself barreling down an NZ mountain road in an RV. It was there on Takaka Hill that my mind started to process Steve’s news.

Applause, applause

First, let’s all sing Steve’s praises. His tenure has seen many challenges and successes. The most notable success, in my estimation, has been his leadership in working with utilities and regulators outside of California to create the Energy Imbalance Market (EIM) – an accomplishment on par with the original implementation of nodal pricing in California. The EIM has the potential to link most of the West into an integrated market. California politics have frustrated efforts to establish a governing structure that would lead to other utilities actually joining the CAISO. Full participation in the CAISO would yield the most efficient uses of generation and transmission resources, and reliable integration of renewables. This challenge notwithstanding, Steve and his team at CAISO have done great work.

The aspirational exuberance of California politics when it comes to moving toward renewable energy has presented Steve and his team with a significant and growing challenge. Integration of ever more renewables has been made more difficult by the legacy of California policies in the 2000s that demanded more thermal generation be procured, which in turn depressed prices. As if all this weren’t enough, the Department of Market Monitoring keeps saying there are scary monsters under the CAISO bed, which of course encourages California regulators’ worst instincts. Consequently, Steve’s job of keeping the CAISO markets on an even keel has been a difficult one.

Throughout his tenure, Steve and his team have been dedicated and conscientious in their efforts to run a reliable grid while enabling the market to function as well as the politics would allow. Neither I – nor many of the WPTF members – agreed with everything the CAISO management did, but I always thought Steve and his team did the best they could in the circumstances. Thanks Steve. You did good.

Now what?

Whomever the Board picks to be the next CEO will have many challenges. Can he/she get CAISO to grow beyond its borders to become a true regional market? This is different from an EIM with a tacked-on day-ahead product. Can the next CEO manage the transformation of the generation mix toward an energy dispatch that is dominated by renewables? Can this transformation happen with enough capacity resources to balance the system, and how will these resources be compensated since they won’t earn much in the energy market? Can he/she manage the unique politics of California without becoming a slave to Sacramento or the CPUC even as FERC continues to defer to the CPUC?

These thoughts ran through my head on the Kiwi highway, so I thought I would lay out what I see as some key attributes of the next CAISO CEO.

  •          Independence: This element is the cornerstone of administering a market. Electricity moves at the speed of light and it isn’t always easy for participants to ascertain if the dispatch of a utility system is being performed fairly. It is crucial, therefore, that the system be operated in a fair and transparent manner. In the FERC lexicon, this is meant to be “independence” from any market participant. However, the unique politics of California make it imperative that the CAISO be as independent from political pressure as it is from undue influence by any market participants. This, of course, does not mean that the CAISO should not listen to California policy makers, but rather refrain from deferring to them without a good reason. Normally, one could count on FERC helping but, as we have seen, the Feds don’t want to do anything to annoy California. As a consequence, it seems they don’t administer the CAISO tariff the same way they would SPP, MISO, PJM, etc. This makes the job of the CEO more difficult, further underscoring the need for independence.

 

  •          Thick Skin: Every decision that is made by the CAISO (or any ISO/RTO for that matter) will annoy some party or stakeholder. It is inevitable. Even if they did their job perfectly – which is impossible as they’re humans too – they will have critics. It is crucial that the CEO understand this and not allow feelings to color their judgements. I’ve worked in an RTO before and the criticism is constant. But, if the CEO can focus on doing the best job possible, understanding how important the job is, and still maintaining good humor (most days) in interactions with members and stakeholders, the respect he/she will earn will make the job easier as time goes on. Most of all, one can’t allow hurt feelings to affect the decision-making process of the ISO management.

 

  •          Vision: During a Presidential debate, years ago, one candidate was sounding his campaign theme of competence, without regard to ideology. It was a good line until the other candidate said that making the “trains run on time” without regard to where they are going or why would be useless. Certainly, we want our next CAISO CEO to be competent, but having a vision of where to take the CAISO will be of enormous benefit. The management of all the ISOs are the most informed people in the power business without an economic dog in the fight. This position gives them unique perspective that can inform and advise policy makers who typically lack the knowledge of how things work on a day-to-day basis.

 

  •          Appropriate humility: While asking the CEO to have many qualities, it can seem odd to say that this superhuman needs humility. However, I mean that this person needs to be appreciative of what they don’t know. I’ve known great leaders in the military, industry and government. The best I’ve ever known were those who could understand that he/she was not supposed to know everything and were cognizant in circumstances where they needed to seek input. The key then is to work with your team and stakeholders to come to a solution to things unknown. That, to me, is “appropriate” humility.

Surely there are other things that could be added to this list, but these are the attributes I’ve been thinking about down in the Southern Hemisphere. We don’t need to focus on a particular academic orientation. In the early days, it seemed everyone wanted the CEO to be an electrical engineer, but I contend that the CAISO and all RTOs have a plethora of technical talent. I hope for a leader with key qualities who can work with a team and diverse stakeholders. I wish the CAISO Board luck in their search. I hope it is extensive and considered. Afterall, the fate of things like renewable integration, climate policy, and resource adequacy across the West may be decided by whomever is selected for this job. As they say down here, “no worries”.