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Regional Transmission Organizations (RTOs)

According to Federal Energy Regulatory Commission (FERC) Order 2000, RTOs must embrace four core characteristics and eight key functions. The core characteristics are: independence, scope/regional configuration, operational authority, and short-term reliability.

 The functions are:

• tariff administration and design - the RTO administers its own tariff and is the sole decision-making authority on provision of transmission service
• congestion management - the RTO will ensure mechanisms are in place to manage transmission congestion
• parallel path flows - the RTO must implement procedures within three years of start-up to address problems associated with parallel path flow and immediately implement procedures for regional parallel path flow. 
• ancillary services - the RTO is the provider of last resort for ancillary services
• OASIS and Capability Calculations - the RTO should act as a single OASIS node. The RTO will calculate transmission capability and available transmission capability or, if provided by the transmission owner, the RTO will verify the calculations.
• market monitoring - RTOs will submit a plan to FERC that ensures that there is objective information about the markets; contains procedures for proposing efficiency improvements, market flaws, and market power; and contains procedures to evaluate the behavior of market participants.
• planning and expansion - the RTO must develop a planning and expansion proposal that encourages actions for preventing and relieving congestion
• interregional coordination - the RTO will develop mechanisms to ensure the integration of reliability practices within an interconnection and market interface practices among regions.

In theory, RTOS are designed to benefit consumers and industry

RTOs are supposed to promote a more robust market while maximizing the efficiency of the electric transmission system for a more reliable, economical electric transmission system for both wholesale and retail consumers.

As the industry undergoes deregulation, independent RTOs are to ensure equal treatment to all industry participants using the transmission lines and increase the reliability of the system by controlling of the national wholesale bulk electric system rather than having entities with varying vested interests control the lines. 

The RTO approach is that one organization oversees and coordinates the processes integral to the efficient planning and operation of the electric transmission system in a region. With an independent organization in this role, industry participants are supposed to be assured that a consistent set of standards and protocols will be applied in the region to level the playing field and create greater competition in the wholesale bulk electric market. 

Under a restructured electric industry, who builds the transmission? Who pays for it? Who gets the rights to use it in an open-access environment?

Most RTOs have selected license plate pricing for transmission usage.  Experience has demonstrated that license plate pricing will not encourage new transmission investments. License plate pricing charges for only the local utility transmission facilities (called a zone) even though the entire grid is  used.

What will the new rules be? FERC issued its standard market design (SMD) with new market concepts that has industry concerned about the impacts and confused on FERC's direction.

Federal legislation that might mandate other changes with transmission operations has industry in a "wait and see" mode.

States rights verses federal rights. Can states form regional organizations to do the necessary transmission planning and do they have the necessary authority or should that be done by the RTOs?

How do Cooperatives that are not regulated by FERC or the States' PUCs fit into this new world? 

In the past, participants wanting to deliver power across multiple pre-defined zones, would have to pay separate rates for each area crossed, resulting in the stacking (or "pancaking") of rates.

It is also thought that RTOs would also be in a position to improve the efficiency in use of the electric transmission grid. Because the RTO has access to information from a large, regional perspective, the RTO can take actions that result in the most efficient use of the system while preserving reliability of the system. 

This regional perspective also is beneficial when planning enhancements to the transmission system. By looking at the entire RTO region, the RTO should be able to determine the most economical additions to the transmission system that will, at the same time, provide the greatest system reliability.

A national electric grid advances our energy policy by:

• Modernizing and expanding our aging energy infrastructure
• Diversifying energy supplies
• Strengthening America's energy security 

States like North Dakota, Montana and Wyoming have abundant coal and wind energy resources, but are hindered from future energy development because the transmission infrastructure is inadequate to export the power to populated regions that need the energy. 

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• Regional Transmission Organizations
• Glossary

Policy points

The nation needs: 

• A transmission grid similar to our interstate highway system would provide transportation for electricity from multiple resources and create a competitive wholesale electric marketplace.
• A transmission cost recovery policy that recognizes that all electric energy uses the entire transmission grid to get electricity from all supply resources to all loads.
• A policy that assures investors of minimal risk to their money.
• A policy that encourages increased investment in broad regional transmission infrastructure.
• Procedures that allow all consumers to participate equally in achieving access to competitive wholesale power supply resources.