Overview of the West-wide Governance Pathways Initiative Step 1 and Step 2 proposals
The West-wide Governance Pathways Initiative was launched in response to a request by regulators from five Western states, including Arizona, California, New Mexico, Oregon, and Washington in July 2023, to explore the continued evolution of the governance of western energy markets to ensure that benefits are maximized for customers across the West.
A Pathways Initiative launch committee was formed by and comprised of a diverse group of Western stakeholders, to develop a proposal for how this evolution of governance could occur. While the California ISO provides technical support to the Pathways Initiative, it is not a participant. The Pathways Initiative identified a stepwise approach to continued evolution of the governance of the western energy markets. More details on this effort and on the Step 1 and Step 2 proposals can be found below.
The Pathways Step 1 governance change is currently in effect today with the Western Energy Markets Governing Body holding primary authority over the tariff rules for western energy markets. Meanwhile, the ISO is collaborating with the Pathways Initiative and the newly formed Regional Organization for Western Energy to implement the Pathways Step 2 framework.
Pathways Initiative Step 1
The launch committee developed a “stepwise” approach to evolving the governance of the western energy markets. Step 1 of this approach was formally adopted as a recommendation of the launch committee in June 2024. The Step 1 proposal was intended to maximize the independence of the Western Energy Markets (WEM) Governing Body from the CAISO Board of Governors within the bounds of the law at the time.
Pathways Step 1 included two core governance changes:
- Primary Authority: Elevate the decision-making authority of the WEM Governing Body in market-related matters from “Joint Authority” to “Primary Authority,” placing the initial vote to approve or reject a proposed tariff change in the Governing Body’s hands. Governing Body decisions would then be placed on the consent agenda of the CAISO Board of Governors.
- Dual Section 205 Rights: Modify the process when the WEM Governing Body and the CAISO Board of Governors do not both approve the same proposal. In the event of an unresolved disagreement between the two bodies, CAISO could make a “dual filing” pursuant to Section 205 of the Federal Power Act containing two proposals – one approved by each body – for FERC to decide between.
After adoption of the Pathways Initiative Step 1 proposal, the launch committee submitted its recommendation jointly to the CAISO Board of Governors and the WEM Governing Body for consideration. At the direction of the Board of Governors, CAISO staff then initiated a stakeholder process to consider the Step 1 proposal and the changes that would be required to implement the governance changes it sought. For more information on the Stakeholder Policy Initiative for Step 1, please see Stakeholder Guidance or Pathways Stakeholder Process.
The CAISO Board of Governors and WEM Governing Body jointly approved the Pathways Initiative Step 1 recommendations in August 2024, and FERC approved certain changes needed to implement Step 1 in April 2025. The Step 1 governance structure became effective in July 2025 when the trigger threshold for implementation was met. View the Step 1 Trigger Calculations.
Pathways Initiative Step 2
The Step 1 proposal was implemented under the existing statutory authority of the CAISO Board of Governors, and through its delegation of authority, the WEM Governing Body. In November 2024, the Pathways Initiative adopted its Step 2 proposal calling for a transfer of sole authority (including exclusive filing rights at the Federal Energy Regulatory Commission) over the western energy markets to a newly formed, independent Regional Organization for Western Energy.
This change, which would remove the ISO Board from the process of approving changes to the market rules for the WEIM and EDAM, required a change to California law. The passage of Assembly Bill 825 in 2025 in California enabled this transition
Learn more about the Regional Organization for Western Energy, a newly formed not-for-profit organization created to provide independent governance over voluntary energy markets and services across the Western United States.