Definition of ISOs and RTOs
Both ISOs and RTOs are organizations formed with the approval of the Federal Energy Regulatory Commission (FERC) to coordinate, control and monitor the use of the electric transmission system by utilities, generators and marketers. An ISO is a non-profit organization that combines the transmission facilities of several transmission owners into a single transmission system to move energy over long distances at a single lower price than the combined charges of each utility that may be located between the buyer and seller. The ISO provides non-discriminatory service, and must be independent of the transmission owners and the customers who use its system.
RTOs also provide non-discriminatory access to the transmission network; however, they are required to meet specific FERC regulations that deal with transmission planning and expansion for an entire region, the use of energy markets to deal with system congestion, of power users and owners. RTOs offer regional wholesale electric transmission services under one tariff.
FERC first required transmission owners to provide non-discriminatory access to their lines in Order Nos. 888 and 889, building on the model it had used to require interstate natural gas pipelines to provide access to pipeline capacity. In those orders, FERC noted that ISOs could provide the additional assurance of independence from the owners, and the elimination of multiple (“pancaked”) rates to transmit electricity over long distances. Shortly thereafter, FERC Order No. 2000 encouraged the formation of RTO’s to regionally manage portions of North America’s electricity grid.
There are nine ISOs, five of which are RTOs, operating in North America. They manage the systems that serve two thirds of the customers in the U.S., and over half the population of Canada. Over time, the distinction between ISOs and RTOs in the United States has become insignificant. Both organizations provide similar transmission services under a single tariff at a single rate, and they operate energy markets within their footprints.
Read more about this topic: Midwest Independent Transmission System Operator
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