Regional Transmission Organization
Encyclopedia
A regional transmission organization (RTO) in the United States
is an organization that is responsible for moving electricity
over large interstate areas. Like a transmission system operator
(TSO), an RTO coordinates, controls and monitors an electricity transmission
grid
that is larger with much higher voltage
s than the typical power company's distribution
grid. TSOs in Europe
cross state and provincial borders like RTOs.
An Independent System Operator (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 electrical power
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.
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. 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 marketplace
in wholesale
power, especially since the electricity market
deregulation
of the late 1990s. Most are set up as nonprofit corporation
s using governance models developed by FERC.
FERC Orders 888 and 889 defined how Independent Power Producers (IPP’s) 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.
(FERC) as a way to handle the challenges associated with the operation of multiple interconnected independent power supply companies. FERC describes this as a voluntary system. The traditional model of the vertically integrated electric utility
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
would ultimately experience deregulation
, 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
of 2000 and 2001.
RTOs ensure three key free marketer drives: open access and non-discriminatory services, the continued reliability of a system unequalled anywhere else, and multiple transmission charges that will not negate the savings to the end-use customer. Critics of RTOs counter that the wholesale
electricity market
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.
The RTO concept provides for separation of generation
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.
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 or power line
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
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.
Non-RTO transmission organizations:
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
, several Washington 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
, 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.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
is an organization that is responsible for moving electricity
Electricity
Electricity is a general term encompassing a variety of phenomena resulting from the presence and flow of electric charge. These include many easily recognizable phenomena, such as lightning, static electricity, and the flow of electrical current in an electrical wire...
over large interstate areas. Like a transmission system operator
Transmission system operator
File:Electricity grid simple- North America.svg|thumb|380px|right|Simplified diagram of AC electricity distribution from generation stations to consumersrect 2 243 235 438 Power stationrect 276 317 412 556 Transformer...
(TSO), an RTO coordinates, controls and monitors an electricity transmission
Electric power transmission
Electric-power transmission is the bulk transfer of electrical energy, from generating power plants to Electrical substations located near demand centers...
grid
Grid (electricity)
An electrical grid is a vast, interconnected network for delivering electricity from suppliers to consumers. It consists of three main components: 1) generating plants that produce electricity from combustible fuels or non-combustible fuels ; 2) transmission lines that carry electricity from power...
that is larger with much higher voltage
Voltage
Voltage, otherwise known as electrical potential difference or electric tension is the difference in electric potential between two points — or the difference in electric potential energy per unit charge between two points...
s than the typical power company's distribution
Electricity distribution
File:Electricity grid simple- North America.svg|thumb|380px|right|Simplified diagram of AC electricity distribution from generation stations to consumers...
grid. TSOs in Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
cross state and provincial borders like RTOs.
An Independent System Operator (ISO) is an organization formed at the direction or recommendation of the Federal Energy Regulatory Commission (FERC)
Federal Energy Regulatory Commission
The Federal Energy Regulatory Commission is the United States federal agency with jurisdiction over interstate electricity sales, wholesale electric rates, hydroelectric licensing, natural gas pricing, and oil pipeline rates...
. In the areas where an ISO is established, it coordinates, controls and monitors the operation of the electrical power
Electric power transmission
Electric-power transmission is the bulk transfer of electrical energy, from generating power plants to Electrical substations located near demand centers...
system, usually within a single US
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
State, but sometimes encompassing multiple states. RTOs typically perform the same functions as ISOs, but cover a larger geographic area.
Only electric utilities that are located within the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
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
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
utility and several Canadian
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
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 marketplace
Marketplace
A marketplace is the space, actual, virtual or metaphorical, in which a market operates. The term is also used in a trademark law context to denote the actual consumer environment, ie. the 'real world' in which products and services are provided and consumed.-Marketplaces and street markets:A...
in wholesale
Wholesale
Wholesaling, jobbing, or distributing is defined as the sale of goods or merchandise to retailers, to industrial, commercial, institutional, or other professional business users, or to other wholesalers and related subordinated services...
power, especially since the electricity market
Electricity market
In economic terms, electricity is a commodity capable of being bought, sold and traded. An electricity market is a system for effecting purchases, through bids to buy; sales, through offers to sell; and short-term trades, generally in the form of financial or obligation swaps. Bids and offers use...
deregulation
Deregulation
Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or...
of the late 1990s. Most are set up as nonprofit corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
s using governance models developed by FERC.
FERC Orders 888 and 889 defined how Independent Power Producers (IPP’s) and power marketers would be allowed fair access to transmission systems, and mandated the implementation of the Open Access Same-Time Information System (OASIS)
Open Access Same-Time Information System
The Open Access Same-Time Information System , is an Internet-based system for obtaining services related to electric power transmission in North America. It is the primary means by which high-voltage transmission lines are reserved for moving wholesale quantities of electricity...
to facilitate the fair handling of transactions between electric power transmission suppliers and their customers.
History
RTOs were created by the Federal Energy Regulatory CommissionFederal Energy Regulatory Commission
The Federal Energy Regulatory Commission is the United States federal agency with jurisdiction over interstate electricity sales, wholesale electric rates, hydroelectric licensing, natural gas pricing, and oil pipeline rates...
(FERC) as a way to handle the challenges associated with the operation of multiple interconnected independent power supply companies. FERC describes this as a voluntary system. The traditional model of the vertically integrated electric utility
Electric utility
An electric utility is a company that engages in the generation, transmission, and distribution of electricity for sale generally in a regulated market. The electrical utility industry is a major provider of energy in most countries. It is indispensable to factories, commercial establishments,...
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
Wide area synchronous grid
A wide area synchronous grid, also called an "interconnection" in North America, is a power grid at a regional scale or greater that operates at a synchronized frequency and is electrically tied together during normal system conditions...
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
Electrical power industry
The electric power industry provides the production and delivery of electric energy, often known as power, or electricity, in sufficient quantities to areas that need electricity through a grid connection. The grid distributes electrical energy to customers...
would ultimately experience deregulation
Deregulation
Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or...
, 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 electricity crisis
The California electricity crisis, also known as the Western U.S. Energy Crisis of 2000 and 2001 was a situation in which California had a shortage of electricity caused by market manipulations and illegal shutdowns of pipelines by Texas energy consortiums...
of 2000 and 2001.
RTOs ensure three key free marketer drives: open access and non-discriminatory services, the continued reliability of a system unequalled anywhere else, and multiple transmission charges that will not negate the savings to the end-use customer. Critics of RTOs counter that the wholesale
Wholesale
Wholesaling, jobbing, or distributing is defined as the sale of goods or merchandise to retailers, to industrial, commercial, institutional, or other professional business users, or to other wholesalers and related subordinated services...
electricity market
Electricity market
In economic terms, electricity is a commodity capable of being bought, sold and traded. An electricity market is a system for effecting purchases, through bids to buy; sales, through offers to sell; and short-term trades, generally in the form of financial or obligation swaps. Bids and offers use...
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.
The RTO concept provides for separation of generation
Electricity generation
Electricity generation is the process of generating electric energy from other forms of energy.The fundamental principles of electricity generation were discovered during the 1820s and early 1830s by the British scientist Michael Faraday...
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 utilitiesElectric utility
An electric utility is a company that engages in the generation, transmission, and distribution of electricity for sale generally in a regulated market. The electrical utility industry is a major provider of energy in most countries. It is indispensable to factories, commercial establishments,...
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
Energy demand management
Energy demand management, also known as demand side management , is the modification of consumer demand for energy through various methods such as financial incentives and education...
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 or power line
Power Line
Power Line is an American political blog, providing news and commentary from a conservative point-of-view. It was originally written by three lawyers who attended Dartmouth College together: John H. Hinderaker, Scott W. Johnson, and Paul Mirengoff...
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
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...
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.
RTOs
As of 21 December 2010, there are three RTO's operating in North America- ISO New EnglandISO New EnglandISO New England Inc. is an independent, non-profit Regional Transmission Organization , serving Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont....
Inc. (ISO-NE), an RTO despite the ISO in its name - Midwest Independent Transmission System OperatorMidwest Independent Transmission System OperatorThe Midwest Independent Transmission System Operator, Inc. is an Independent System Operator and the Regional Transmission Organization that provides open-access transmission service and monitors the high voltage transmission system throughout the Midwest United States and Manitoba, Canada...
(MISO), an RTO despite the ISO in its name - PJM InterconnectionPJM InterconnectionPJM Interconnection LLC is a Regional Transmission Organization which is part of the Eastern Interconnection grid operating an electric transmission system serving all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee,...
LLC (PJM)
Non-RTO transmission organizations:
- ColumbiaGrid
- Northern Tier Transmission Group
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
Bonneville Power Administration
The Bonneville Power Administration is an American federal agency based 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 construct facilities necessary to transmit that power...
, several Washington 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
Oregon is a state in the Pacific Northwest region of the United States. It is located on the Pacific coast, with Washington to the north, California to the south, Nevada on the southeast and Idaho to the east. The Columbia and Snake rivers delineate much of Oregon's northern and eastern...
, Idaho
Idaho
Idaho is a state in the Rocky Mountain area of the United States. The state's largest city and capital is Boise. Residents are called "Idahoans". Idaho was admitted to the Union on July 3, 1890, as the 43rd state....
, Montana
Montana
Montana is a state in the Western United States. The western third of Montana contains numerous mountain ranges. Smaller, "island ranges" are found in the central third of the state, for a total of 77 named ranges of the Rocky Mountains. This geographical fact is reflected in the state's name,...
, Wyoming
Wyoming
Wyoming is a state in the mountain region of the Western United States. The western two thirds of the state is covered mostly with the mountain ranges and rangelands in the foothills of the Eastern Rocky Mountains, while the eastern third of the state is high elevation prairie known as the High...
and Utah
Utah
Utah is a state in the Western United States. It was the 45th state to join the Union, on January 4, 1896. Approximately 80% of Utah's 2,763,885 people live along the Wasatch Front, centering on Salt Lake City. This leaves vast expanses of the state nearly uninhabited, making the population the...
, 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.
ISOs
As of 2011, there are nine ISO/RTO's operating North America:- Alberta Electric System Operator (AESO)Alberta Electric System OperatorThe Alberta Electric System Operator, abbreviated AESO, is a not-for-profit entity responsible for the planning and operation of the Alberta Interconnected Electric System in a safe, reliable, and economical manner....
- California ISO (CAISO)
- Electric Reliability Council of Texas (ERCOT)
- Midwest Independent System Operator (MISO)
- New England Independent System OperatorISO New EnglandISO New England Inc. is an independent, non-profit Regional Transmission Organization , serving Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont....
(ISO-NE) - New York Independent System Operator (NYISO)
- Ontario Independent Electricity System Operator (IESO)
- PJM InterconnectionPJM InterconnectionPJM Interconnection LLC is a Regional Transmission Organization which is part of the Eastern Interconnection grid operating an electric transmission system serving all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee,...
(PJM) - Southwest Power PoolSouthwest Power PoolThe Southwest Power Pool is the oldest North American Reliability Organization still in operation. SPP's story began in the early days of WWII, when America was furiously ramping up production of weapons and military supplies. After entering the War, the USA had an immediate and crucial need to...
(SPP)
See also
- Energy lawEnergy lawEnergy laws govern the use and taxation of energy, both renewable and non-renewable. These laws are the primary authorities related to energy...
- European Transmission System OperatorsEuropean Transmission System OperatorsThe European Network of Transmission System Operators for Electricity is an association of Europe's transmission system operators for electricity...
- ISO RTOISO RTOIn North America, an ISO is an Independent System Operator and an RTO is a Regional Transmission Organization. The two are similar with an RTO being more clearly defined and born out of the concept of electrical grid reliability...
- New York energy lawNew York energy lawNew York energy law is the statutory and common law of the state of New York concerning the policy, conservation, and utilities involved in energy, along with its regulation and taxation.-Energy Law :...
- Transmission system operatorTransmission system operatorFile:Electricity grid simple- North America.svg|thumb|380px|right|Simplified diagram of AC electricity distribution from generation stations to consumersrect 2 243 235 438 Power stationrect 276 317 412 556 Transformer...
(TSO) - United States energy
External links
- California Independent System Operator (CAISO)
- Electric Reliability Council of Texas
- ISO New England (ISO-NE)
- Midwest Independent Transmission System Operator (MISO)
- New York Independent System Operator (NYISO)
- PJM Interconnection (PPM)
- Southwest Power Pool (SPP)
- ColumbiaGrid
- FERC - RTOs and ISOs
- Ontario's Independent Electricity System Operator
- Midwest ISO
- Alberta Electric System Operator
- Korea Power Exchange