Purpose
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 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 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.
Read more about this topic: Regional Transmission Organization
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