RTOs and ISOs
Regional Transmission Organizations (RTOs) and Independent Transmission Operators (ISOs) bring together multiple individual transmission owners to serve coordinated functions of reliability, planning and wholesale market management.
North America’s RTOs/ISOs
Source: FERC
AEP’s RTO affiliations
PJM Interconnection, LLC
Southwest Power Pool
Electric Reliability Council of Texas
How we got to this point
Although a few of these organizations (notably PJM Interconnection, LLC, and Southwest Power Pool) have existed for planning purposes for more than 50 years, most RTOs are the product of the late 1990s effort to create active wholesale trading markets.
FERC Order 2000 proposed, but did not require, that every transmission owner in the U.S. join an RTO or ISO. Although many utilities took that cue, others did not. Today, most of the population in California, Texas, New York, New England, Mid-Atlantic, Midwest, and southwestern portions of the Eastern Interconnection are affiliated with an RTO or ISO.
AEP position
AEP is supportive of broad cost allocation and planning for extra-high voltage, or “backbone” transmission. We believe these elements are critical for efficient operation of a robust transmission grid, providing Americans with reliable and abundant electricity at reasonable cost. RTOs perform these functions.
Beyond that statement, it’s hard to support or oppose RTOs as a concept – each organization is unique, with differing market structures, pricing mechanisms and reliability standards. All comply with technical standards set by the North American Electric Reliability Corp. (NERC) and business standards set by the Federal Energy Regulatory Commission (FERC).
The regional planning protocols offered by RTOs are desireable. Effort is needed to eliminate seams issues – those sharp delineations in protocol that occur at the border of two RTOs. But the only way to achieve seamless operation is to have interconnection-wide planning and cost allocation. The broader regional footprints of RTOs (as opposed to individual companies)are a step in the right direction.
The face of America’s RTOs: 2002
Source: Edison Electric Institute
Seven RTOs currently serve the U.S. In 2002, a total of 14 either were in existence, approved, or being discussed. Those that fell by the wayside either were absorbed into other organizations geographically as FERC sought to consolidate and streamline borders, or were in regions in which the concept was not given priority.
RTO participation was “encouraged” by FERC Order 2000, as the nation appeared headed toward sweeping retail competition that would have required more robust wholesale market activity.
What the industry says
As the current RTO map would suggest, the nation’s electric utilities are divided somewhat regionally on their perspectives regarding the benefits of RTO membership. Three RTOs – New York ISO, California ISO and the Electric Reliability Council of Texas – are confined to one state, although they are large states. Those organizations serve a planning and scheduling function, but are not as sweeping in terms of bringing together regional markets from multiple states with varied retail regulatory frameworks.
