Regional transmission organization (North America)
[2] The purpose of the RTO is to promote economic efficiency, reliability, and non-discriminatory practices while reducing government oversight.
Today's RTOs do the same thing with an added component of greater responsibility for the transmission network, as established by the FERC.
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.
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 actuality, the electricity industry is still regulated, depending on the region, by a series of federal, state, and local agencies and various public commissions.
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.
An ISO is an organization formed at the direction or recommendation of the Federal Energy Regulatory Commission (FERC).
Electric utilities that are located within the United States and engage in interstate commerce fall under FERC authority.
Within the United States one ISO, and its participating utilities, does not fall under FERC authority: The Electric Reliability Council of Texas (ERCOT).
The Pacific Northwest, and states east of California and west of the Dakotas, Nebraska, Kansas and Texas largely do not participate.
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.
An organization wanting to achieve RTO status must petition the FERC for approval, and meet 4 minimum characteristics and 8 minimum functions:[9][2] Only electric utilities that are located within the United States fall under FERC authority, but a larger organization called the North American Electric Reliability Corporation (NERC) overlays the entire FERC footprint and also includes a Mexican utility and several Canadian utilities.
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.
RTOs were created by the Federal Energy Regulatory Commission (FERC) as a way to handle the challenges associated with the operation of multiple interconnected independent power supply companies.
The traditional model of the vertically integrated electric utility with a transmission system designed to serve its own customers worked extremely well for decades.
Some policy makers and academics projected that the electrical power industry would ultimately experience deregulation.
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.
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.
[14] The RTO concept provides for separation of generation and transmission and elimination of pancaked rates, and it encourages a diverse membership including public power.
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.
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, Idaho, Montana, Wyoming and Utah, 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. International: General:
