A regional transmission organization (RTO) in the

United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

is an

electric power Electric power is the rate at which electrical energy is transferred by an electric circuit. The SI unit of power is the watt, one joule per second. Standard prefixes apply to watts as with other SI units: thousands, millions and billions ...

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(TSO) that coordinates, controls, and monitors a multi-state electric

grid Grid, The Grid, or GRID may refer to: Common usage * Cattle grid or stock grid, a type of obstacle is used to prevent livestock from crossing the road * Grid reference, used to define a location on a map Arts, entertainment, and media * News ...

. The transfer of electricity between states is considered interstate commerce, and electric grids spanning multiple states are therefore regulated by the

Federal Energy Regulatory Commission The Federal Energy Regulatory Commission (FERC) is the United States federal agency that regulates the transmission and wholesale sale of electricity and natural gas in interstate commerce and regulates the transportation of oil by pipeline in ...

(FERC). The voluntary creation of RTOs was initiated by FERC Order No. 2000, issued on December 20, 1999. The purpose of the RTO is to promote economic efficiency, reliability, and non-discriminatory practices while reducing government oversight. An independent system operator (ISO) is similarly an organization formed at the recommendation of FERC. In the areas where an ISO is established, it coordinates, controls, and monitors the operation of the

electrical power Electric power is the rate at which electrical energy is transferred by an electric circuit. The SI unit of power is the watt, one joule per second. Standard prefixes apply to watts as with other SI units: thousands, millions and billion ...

system, usually within a single US state, but sometimes encompassing multiple states. RTOs typically perform the same functions as ISOs but cover a larger geographic area. The two are similar, with an RTO being more clearly defined and born out of the concept of electrical grid reliability. The delineation between an ISO and an RTO is subtle to some and quite specific to others, as the similarities in the table below illustrate: In short, an ISO operates a region's electricity grid, administers the region's wholesale electricity markets, and provides reliability planning for the region's bulk electricity system. Today's RTOs do the same thing with an added component of greater responsibility for the transmission network, as established by the FERC.

Background

FERC Orders 888 & 889

In April 1996, the Federal Energy Regulatory Commission (FERC) issued two orders that changed the landscape of how electricity is generated, transmitted, and distributed throughout the North America. Prior to these rulings, generated power and the subsequent energy provided to customers by local service providers was owned and controlled by single entities who often owned the entire generation, transmission, and distribution assets. Because these companies controlled the retail delivery of the energy from generation through their own power lines, consumers had little to no choice regarding whose electricity they were buying. In economic terms, this structure constituted an impediment for new providers who would want to generate power, move energy, or provide retail electricity to individual consumers. Order No. 888 addressed "Promoting Wholesale Competition Through Open Access Non-discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities." and Order No. 889 added and amended existing rules "...establishing and governing an Open Access Same-time Information System (OASIS) (formerly real-time information networks) and prescribing standards of conduct."

Order No. 888

Order No. 888 is often cited as the "Deregulation" of the electric industry; deregulation, however, is not an accurate term. In actuality, the electricity industry is still regulated (depending on the region) by a series of federal, state, and local agencies and various public commissions. Order No. 888 is substantial in scope. Relative to this article, however, it defined two key elements: # An acknowledgment that barriers to competitive wholesale markets may exist and that those barriers must be removed # Permit utilities to recover stranded costs associated with providing open access to transmission
In addressing #1 above, Order No. 888 defined the fundamental purpose of an ISO to “…operate the transmission systems of public utilities in a manner that is independent of any business interest in sales or purchases of electric power by those utilities.” The order, however, did not mandate or require the establishment of ISOs. Rather, in an attempt to comply with the FERC's order, groups of participants (or “Power Pools” composed of generators, transmission providers and utilities) partnered, and proposed to the FERC, for the right to establish designs of independent system operations. Through negotiation, collaboration and legal challenges, the first ISOs to emerge included California ISO, PJM Interconnection, New York ISO and New England ISO. Each proposed a slightly different market design according to their collaborative results. In order to facilitate competitive wholesale markets, Order No. 888 specified the unbundling of a utility's operations separating generation and transmission and distribution.

In addressing #2 above, the original order (and subsequent clarification by the FERC) allows utilities, under certain defined circumstances, to seek extra-contractual recovery of stranded costs. The FERC continues to receive rehearing petitions regarding stranded cost recovery as it has clearly placed the importance on remedying what it terms as “undue discrimination” at the forefront. It is important to note that Order No. 888 was not met without objection among the public, academics and industry participants. Requests for rehearing and/or clarification were filed by 137 entities after the order's issuance. The majority agreed with the FERC's assertion for the need to harness the benefits of competitive electricity markets.

Order No. 889

Order No. 889, amended rules establishing and governing the Open Access Same-time Information System (OASIS) (formerly real-time information networks) and prescribed standards of conduct for its use and access. Subsequent orders provided clarifications, standards and protocols.

FERC Order 2000

Where as Order No. 888 provided for an entity (an ISO) to facilitate open access, it was not written with the intent to establish one. FERC Order No. 2000 was:
Issued by the FERC on December 29, 1999, Order No. 2000 codified what it means to be an RTO including its minimum characteristics, functions and ratemaking policy. The order also stated its commitment toward open architecture with a stated goal that an RTO "...be designed so that they can evolve over time." The order still, however, does not mandate that a new entity called an RTO be created, nor does it mandate that an entity call itself an RTO to comply with the FERC's order.

Independent system operators (ISOs)

An ISO is an organization formed at the direction or recommendation of the Federal Energy Regulatory Commission (FERC). In the areas where an ISO is established, it coordinates, controls and monitors the operation of the

system, usually within a single US State, but sometimes encompassing multiple states. Similar to an RTO, the primary difference is that ISOs either do not meet the minimum requirements specified by FERC to hold the designation of RTO or that the ISO has not petitioned FERC for the status. Electric utilities that are located within the United States and engage in interstate commerce fall under FERC authority. Not all utilities are members of ISOs. All utilities and ISOs, however, are responsible to meet the compliance of a larger organization called the North American Electric Reliability Corporation (NERC) which overlays the entire FERC footprint and also includes a Mexican utility and several Canadian utilities. As such, international reciprocity is commonplace, and rules or recommendations introduced by FERC often are voluntarily accepted by NERC members outside of FERC's jurisdiction. Therefore, one Canadian Province is a member of a US-based RTO, while two others function as an Electric System Operator (ESO), an organization essentially equal to a US-based ISO. Within the United States one ISO, and its participating utilities, does not fall under FERC authority: The Electric Reliability Council of Texas (ERCOT). ERCOT does fall under the authority of NERC and operates a reliability function, separate from its market function, in order to comply with NERC requirements. ISOs act as a

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operator in

wholesale Wholesaling or distributing is the sale of goods or merchandise to retailers; to industrial, commercial, institutional or other professional business users; or to other wholesalers (wholesale businesses) and related subordinated services. I ...

power, resulting from FERC order No. 888. Most are set up as

nonprofit A nonprofit organization (NPO) or non-profit organisation, also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and operated for a collective, public or social benefit, in co ...

corporation A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and ...

s using governance models approved by FERC and/or regional or local commissions. There are regions of the United States where ISOs do not exist and, consequently, the utilities do not engage in wholesale power markets. The Pacific Northwest, and states east of California and west of the Dakotas, Nebraska, Kansas and Texas largely do not participate. The majority of Southeastern states also do not participate in wholesale markets. While these regions must conform to open access as mandated by FERC, the power exchanges between utilities is mostly facilitated through

bilateral contract A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...

s and

power purchase agreement A power purchase agreement (PPA), or electricity power agreement, is a contract between two parties, one which generates electricity (the seller) and one which is looking to purchase electricity (the buyer). The PPA defines all of the commercial te ...

Current ISOs

, there are nine ISOs within North America: *

CAISO The California Independent System Operator (CAISO) is a non-profit Independent System Operator (ISO) serving California. It oversees the operation of California's bulk electric power system, transmission lines, and electricity market generated ...

- California ISO *

NYISO New York energy law is the statutory, regulatory, and common law of the state of New York concerning the policy, conservation, taxation, and utilities involved in energy. Secondary sources have also influenced the law of energy in the Empire Stat ...

- New York ISO * Electric Reliability Council of Texas (ERCOT); also a Regional Reliability Council *

Midcontinent Independent System Operator The Midcontinent Independent System Operator, Inc., formerly named Midwest Independent Transmission System Operator, Inc. (MISO) is an Independent System Operator (ISO) and Regional Transmission Organization (RTO) providing open-access transmissio ...

- Midcontinent ISO *

ISO-NE ISO New England Inc. (ISO-NE) is an independent, non-profit Regional Transmission Organization (RTO), headquartered in Holyoke, Massachusetts, serving Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont. ISO-NE oversee ...

- ISO New England * SPP - Southwest Power Pool * PJM - Pennsylvania-New Jersey-Maryland Interconnection * AESO - Alberta Electric System Operator * Independent Electricity System Operator (IESO); operates the

Hydro One Hydro One Limited is an electricity transmission and distribution utility serving the Canadian province of Ontario. Hydro One traces its history to the early 20th century and the establishment of the Hydro-Electric Power Commission of Ontario ( ...

transmission grid for

Ontario Ontario ( ; ) is one of the thirteen provinces and territories of Canada.Ontario is located in the geographic eastern half of Canada, but it has historically and politically been considered to be part of Central Canada. Located in Central Ca ...

Canada Canada is a country in North America. Its ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, covering over , making it the world's second-largest country by to ...

The New Brunswick System Operator ( NBSO) was dissolved when New Brunswick's new ''Electricity Act'' went into effect on October 1, 2013.

Regional transmission organizations (RTOs)

An RTO is an organization formed at the approval of the Federal Energy Regulatory Commission (FERC). In the areas where an RTO is established, it coordinates, controls and monitors the operation of the electrical power system, usually within a single US State, but sometimes encompassing multiple states. The official definition for an RTO: "An entity that is independent from all generation and power marketing interests and has exclusive responsibility for grid operations, short-term reliability, and transmission service within a region."
The designation of an RTO is largely one of scope. In addition, an organization wanting to achieve RTO status must petition the FERC for approval and meet 4 minimum characteristics and 8 minimum functions:

Characteristics

#Independence – an RTO should be independent from its market participants in financial interests, decision-making, and tariff-setting. #Scope and regional configuration – the region for an RTO should be chosen to achieve the necessary regulatory, reliability, operational, and competitive benefits. #Operational authority – an RTO must have the authority to control its transmission facilities (e.g. switching elements in and out of service, monitoring and controlling voltage) and must be the security coordinator for its region. #Short-term reliability – an RTO must ensure the region meets the NERC reliability standards or alert FERC if it does not.

Functions

#Tariff administration and design – in order to ensure non-discriminatory transmission service, an RTO must be the sole provider of transmission service and sole administrator of its own open access tariff. #Congestion management – an RTO must ensure the development and operation of market mechanisms to manage

transmission congestion Electricity transmission congestion is a condition of the electrical grid that prevents the accepted or forecasted load schedules from being implemented due to the grid configuration and equipment performance limitations. In simple terms, congestion ...

. #Parallel path flow – an RTO must develop and implement procedures to address parallel path flow issues within its region and with other regions. #Ancillary services – an RTO must serve as the supplier of last resort for all ancillary services and determine if the minimum amount of ancillary services have been supplied according to FERC Order No. 888. #OASIS and Total Transmission Capability (TTC) and Available Transmission Capability (ATC) – an RTO must be the single OASIS site administrator for all transmission facilities under its control and independently calculate TTC and ATC. #Market monitoring – an RTO must monitor market behavior and report market power abuses and market design flaws to FERC. #Planning and expansion – an RTO must have ultimate responsibility for both transmission planning and expansion within its region that will enable it to provide efficient, reliable and non-discriminatory service. #Interregional coordination – an RTO must coordinate its activities with other regions. Only electric utilities that are located within the

fall under FERC authority, but a larger organization called the

North American Electric Reliability Corporation The North American Electric Reliability Corporation (NERC) is a nonprofit corporation based in Atlanta, Georgia, and formed on March 28, 2006, as the successor to the North American Electric Reliability Council (also known as NERC). The original ...

(NERC) overlays the entire FERC footprint and also includes a

Mexican Mexican may refer to: Mexico and its culture *Being related to, from, or connected to the country of Mexico, in North America ** People *** Mexicans, inhabitants of the country Mexico and their descendants *** Mexica, ancient indigenous people ...

utility and several

Canadian Canadians (french: Canadiens) are people identified with the country of Canada. This connection may be residential, legal, historical or cultural. For most Canadians, many (or all) of these connections exist and are collectively the source of ...

utilities. As such, international reciprocity is commonplace, and rules or recommendations introduced by FERC often are voluntarily accepted by NERC members outside of FERC's jurisdiction. Therefore, one Canadian Province is a member of a U.S.-based RTO, while two others function as an Electric System Operator (ESO), an organization essentially equal to a U.S.-based ISO. Some ISOs and RTOs also act as a

power, especially since the

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restructuring Restructuring is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs. Other reasons ...

of the late 1990s. Most are set up as

s using governance models developed by FERC. FERC Orders 888 and 889 defined how independent power producers (IPPs) and power marketers would be allowed fair access to transmission systems, and mandated the implementation of the Open Access Same-Time Information System (OASIS) to facilitate the fair handling of transactions between electric power transmission suppliers and their customers. TSOs in

Europe Europe is a large peninsula conventionally considered a continent in its own right because of its great physical size and the weight of its history and traditions. Europe is also considered a Continent#Subcontinents, subcontinent of Eurasia ...

cross state and provincial borders like RTOs.

History of RTOs

RTOs were created by the

(FERC) as a way to handle the challenges associated with the operation of multiple interconnected

independent power supply Independent or Independents may refer to: Arts, entertainment, and media Artist groups * Independents (artist group), a group of modernist painters based in the New Hope, Pennsylvania, area of the United States during the early 1930s * Independen ...

companies. FERC describes this as a voluntary system. The traditional model of the

vertically integrated In microeconomics, management and international political economy, vertical integration is a term that describes the arrangement in which the supply chain of a company is integrated and owned by that company. Usually each member of the supply ...

electric utility An electric utility is a company in the electric power industry (often a public utility) that engages in electricity generation and distribution of electricity for sale generally in a regulated market. The electrical utility industry is a majo ...

with a transmission system designed to serve its own customers worked extremely well for decades. As dependence on a reliable supply of electricity grew and electricity was transported over increasingly greater distances, power pools were formed and interconnections developed. Transactions were relatively few and generally planned well in advance. However, in the last decade of the 20th century, some policy makers and academics projected that the

electrical power industry Electricity is the set of physical phenomena associated with the presence and motion of matter that has a property of electric charge. Electricity is related to magnetism, both being part of the phenomenon of electromagnetism, as described by ...

would ultimately experience

deregulation Deregulation is the process of removing or reducing state regulations, typically in the economic sphere. It is the repeal of governmental regulation of the economy. It became common in advanced industrial economies in the 1970s and 1980s, as a ...

, and RTOs were conceived as the way to handle the vastly increased number of transactions that take place in a competitive environment. About a dozen states decided to deregulate but some pulled back following the

California electricity crisis California is a state in the Western United States, located along the Pacific Coast. With nearly 39.2million residents across a total area of approximately , it is the most populous U.S. state and the 3rd largest by area. It is also the m ...

of 2000 and 2001. RTOs ensure three key free marketer drivers: 1) open access and non-discriminatory services, 2) the continued reliability of a system unequaled anywhere else, and 3) multiple transmission charges that will not negate the savings to the end-use customer. Critics of RTOs counter that the

as operated through the RTOs is in fact raising prices beyond what would obtain in a truly competitive situation, and that the organizations themselves add a needless layer of bureaucracy. While the original intention was for the RTOs to remain an independent, non-profit organization and were given nearly autonomous control of their service area. The primary committees, and a majority of participant committees are almost entirely represented by investor owned utilities and have eroded States power and Federal authority. The RTO concept provides for separation of

generation A generation refers to all of the people born and living at about the same time, regarded collectively. It can also be described as, "the average period, generally considered to be about 20–⁠30 years, during which children are born and gr ...

and transmission and elimination of pancaked rates, and it encourages a diverse membership including public power. Wider membership contributes to the establishment of an entity with the size necessary to function as an RTO.

Purpose

In the 1990s, as states and regions in the United States established wholesale competition for electricity, groups of

utilities A public utility company (usually just utility) is an organization that maintains the infrastructure for a public service (often also providing a service using that infrastructure). Public utilities are subject to forms of public control and ...

and their federal and state regulators began forming independent transmission operators that would ensure equal access to the power grid for non-utility firms, enhance the reliability of the transmission system and operate wholesale electricity markets. Today, seven of these grid operators, either independent system operators (ISOs) or RTOs, coordinate the power grid to ensure the reliable delivery of two-thirds of the electricity used in the United States to two-thirds of its population. Most are overseen by FERC. ISOs and RTOs coordinate generation and transmission across wide geographic regions, matching generation to the load instantaneously to keep supply and demand for electricity in balance. The grid operators forecast load and schedule generation to assure that sufficient generation and back-up power is available in case demand rises or a

power plant A power station, also referred to as a power plant and sometimes generating station or generating plant, is an industrial facility for the generation of electric power. Power stations are generally connected to an electrical grid. Many ...

power line An overhead power line is a structure used in electric power transmission and distribution to transmit electrical energy across large distances. It consists of one or more uninsulated electrical cables (commonly multiples of three for three-p ...

is lost. They also operate wholesale electricity markets that enable participants to buy and sell electricity on a day-ahead or a real-time

spot market The spot market or cash market is a public financial market in which financial instruments or commodities are traded for immediate delivery. It contrasts with a futures market, in which delivery is due at a later date. In a spot market, settle ...

basis. These markets provide electricity suppliers with more options for meeting consumer needs for power at the lowest possible cost. ISO/RTOs provide non-discriminatory transmission access, facilitating competition among wholesale suppliers to improve transmission service and provide fair electricity prices. Across large regions, they schedule the use of transmission lines; manage the interconnection of new generation and monitor the markets to ensure fairness and neutrality for all participants. Providing these services regionally is more efficient than providing them on a smaller-scale, utility by utility. Today's power industry is far more than a collection of power plants and transmission lines. Maintaining an effective grid requires management of three different but related sets of flows – the flow of energy across the grid; the exchange of information about power flows and the equipment it moves across; and the flow of money between producers, marketers, transmission owners, buyers and others. ISO/RTOs play an essential role in managing and enhancing all three of these flows.

Current RTOs

As of 2020 there are nine ISO/RTOs operating in North America: * Alberta Electric System Operator (AESO) - ISO *

California Independent System Operator The California Independent System Operator (CAISO) is a non-profit Independent System Operator (ISO) serving California. It oversees the operation of California's bulk electric power system, transmission lines, and electricity market generated a ...

(CAISO) - ISO *

Electric Reliability Council of Texas The Electric Reliability Council of Texas, Inc. (ERCOT) is an American organization that operates Texas's electrical grid, the Texas Interconnection, which supplies power to more than 25 million Texas customers and represents 90 percent of the s ...

(ERCOT) - ISO *

, Inc. (MISO) - RTO * ISO New England (ISO-NE) - RTO *

New York Independent System Operator New York energy law is the statutory, regulatory, and common law of the state of New York concerning the policy, conservation, taxation, and utilities involved in energy. Secondary sources have also influenced the law of energy in the Empire Stat ...

(NYISO) - ISO * Ontario

Independent Electricity System Operator The Independent Electricity System Operator (IESO) is the Crown corporation responsible for operating the electricity market and directing the operation of the bulk electrical system in the province of Ontario, Canada. It is one of seven independ ...

(IESO) - ISO *

PJM Interconnection PJM Interconnection LLC (PJM) is a regional transmission organization (RTO) in the United States. It is part of the Eastern Interconnection grid operating an electric transmission system serving all or parts of Delaware, Illinois, Indiana, Kent ...

(PJM) - RTO * Southwest Power Pool (SPP) - RTO Non-RTO transmission organizations: *

Columbia Grid Columbia may refer to: * Columbia (personification), the historical female national personification of the United States, and a poetic name for America Places North America Natural features * Columbia Plateau, a geologic and geographic region in ...

* Northern Tier Transmission Group

ColumbiaGrid

ColumbiaGrid, a nonprofit corporation, is not a regional transmission organization (RTO) and has no plans to become one, but instead seeks to achieve many of the benefits of an RTO through incremental additions to its functions. ColumbiaGrid was formed after some of its members chose not to continue in efforts to form Grid West, a Northwest evolutionary structure with the ability to add functions and to move toward independent grid management. The ColumbiaGrid members, including the

Bonneville Power Administration The Bonneville Power Administration (BPA) is an American federal agency operating in the Pacific Northwest. BPA was created by an act of Congress in 1937 to market electric power from the Bonneville Dam located on the Columbia River and to cons ...

, several

Washington Washington commonly refers to: * Washington (state), United States * Washington, D.C., the capital of the United States ** A metonym for the federal government of the United States ** Washington metropolitan area, the metropolitan area centered o ...

State public utilities and two investor-owned utilities, wanted an organization with more limited functions and no independent ability to change. ColumbiaGrid performs single-utility transmission planning and expansion via an open and transparent process and is also establishing a multi-system OASIS portal. The former Grid West participants who had argued for an eventual RTO, mainly investor-owned utilities and state representatives from

Oregon Oregon () is a U.S. state, state in the Pacific Northwest region of the Western United States. The Columbia River delineates much of Oregon's northern boundary with Washington (state), Washington, while the Snake River delineates much of it ...

Idaho Idaho ( ) is a U.S. state, state in the Pacific Northwest region of the Western United States. To the north, it shares a small portion of the Canada–United States border with the province of British Columbia. It borders the states of Monta ...

Montana Montana () is a state in the Mountain West division of the Western United States. It is bordered by Idaho to the west, North Dakota and South Dakota to the east, Wyoming to the south, and the Canadian provinces of Alberta, British Columb ...

Wyoming Wyoming () is a state in the Mountain West subregion of the Western United States. It is bordered by Montana to the north and northwest, South Dakota and Nebraska to the east, Idaho to the west, Utah to the southwest, and Colorado to t ...

and

Utah Utah ( , ) is a state in the Mountain West subregion of the Western United States. Utah is a landlocked U.S. state bordered to its east by Colorado, to its northeast by Wyoming, to its north by Idaho, to its south by Arizona, and to its ...

, formed the Northern Tier Transmission Group (NTTG), a nascent effort open to evolution but initially focused on inexpensive and relatively easy improvements to grid management, including area control error (ACE) diversity interchange, currently underway; transparent methodologies for calculating available transmission capacity; and planning, as required by FERC Order 890.

References

{{Electricity generation Electric power transmission system operators in North America