RTO Backgrounders 1.0

Two-thirds of people in the United States are served by electricity markets run by FERC-regulated regional transmission organizations (RTOs) or independent system operators (ISOs). The main distinction between these markets and their predecessors (such as vertically integrated utilities, municipal utilities and co-ops) is that RTO markets schedule and deliver electricity through organized market mechanisms with publicly visible pricing as a primary feature.

The basic functions of an RTO include the following:

  • Ensure the reliability of the transmission grid
  • Operate the grid in a defined geographic footprint
  • Balance supply and demand instantaneously
  • Operate competitive nondiscriminatory electricity markets
  • Provide nondiscriminatory interconnection service to generators
  • Plan for transmission expansion on a regional basis

In performing these functions, RTOs have operational control of the transmission system, manage transmission congestion, coordinate the maintenance of generation and the transmission system, and oversee a transmission planning process to identify needed upgrades. RTOs do not own transmission or generation assets or perform the actual maintenance on generation or transmission equipment, or directly serve end use customers.

Currently, seven RTOs operate in the United States, listed below in order of the size of their peak load:

  • PJM Interconnection (PJM), 165 GW (summer of 2011)
  • Midcontinent ISO (MISO), 126 GW (summer of 2011)
  • Electric Reliability Council of Texas (ERCOT), 68 GW (summer of 2011)
  • California ISO (CAISO), 50 GW (summer of 2006)
  • Southwest Power Pool (SPP), 48 GW (summer of 2011)
  • New York ISO (NYISO), 34 GW (summer of 2013)
  • New England ISO (ISO-NE), 28 GW (summer of 2006)

Utilities and others in the Southeast and the West are exploring the possibility of creating RTOs or other organized market structures in their regions.