Regional Transmission Organization

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A Regional Transmission Organization (RTO) is an organization that is established to control and manage the transportation (at high voltage) and flows of electricity over an area that is generally larger than the typical power company's distribution system.

1 Reasons for creating
2 History
3 RTOs
4 ISOs

[edit] Reasons for creating

RTOs were created as a voluntary 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. 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, it became apparent that the electric industry would ultimately experience deregulation, and Regional Transmission Organizations (RTOs) were conceived as the way to handle the vastly increased number of transactions that take place in a competitive environment. RTOs also ensure three key free marketer drives: open access and nondiscriminatory 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.

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.

[edit] History

In the 1990s, as states and regions in the United States established wholesale competition for electricity, groups of utilities 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 regional transmission organizations (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 the Federal Energy Regulatory Commission (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.

Seven ISOs and RTOs currently operate in the U.S. They are the California Independent System Operator (California ISO); the Electric Reliability Council of Texas (ERCOT, an ISO); ISO New England (ISO-NE, an RTO); the Midwest Independent Transmission System Operator (Midwest ISO, an RTO); the New York Independent System Operator (NYISO); PJM Interconnection (PJM, an RTO); and the Southwest Power Pool (SPP, an RTO). (ISOs typically perform the same functions as RTOs, but cover a smaller geographic area, or are not subject to FERC jurisdiction, like ERCOT.)