What are ISOs & RTOs?
In the mid-1990s, the U.S. electricity industry underwent significant restructuring to promote competition and efficiency. The Federal Energy Regulatory Commission (FERC) issued Orders 888 and 889 in 1996, leading to the creation of Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs). These entities were established to ensure non-discriminatory access to transmission networks, enhance grid reliability, and foster competitive wholesale electricity markets. ISOs and RTOs operate the high-voltage transmission systems, coordinating the generation and delivery of electricity across vast regions.
As the electricity markets evolved, so did the complexity of operating within them. ESAI Power emerged as a trusted partner for market participants navigating these dynamic environments. We provide in-depth, fundamentals-based analysis and insights into the U.S. wholesale power markets, including PJM, NYISO, ISO-NE, and MISO. ESAI Power’s Benchmark Energy Research offers timely updates on critical market events, long-term price forecasts, and comprehensive coverage of capacity, energy, emissions, transmission, renewable energy, and tracking of both the Interconnection Queues and power plant retirements. By leveraging ESAI Power’s Benchmark Energy Research, investors, IPPs, Lenders, developers, and power markets traders gain the clarity and confidence needed to make informed decisions in the ever-changing power markets.
ISO-NE
ISO New England Inc. (ISO-NE) is an independent, non-profit Regional transmission organization (RTO), serving virtually all of the New England states; Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont. ISO-NE oversees the operation of the 32,000 megawatt bulk electric power system and transmission lines in New England, generated and transmitted by its member utilities. The ISO-NE grid does not extend to remote parts of eastern and northern Maine in Washington and Aroostook Counties. In these areas, residents receive their electricity from Canadian providers such as NB Power and Hydro-Québec. ISO-NE is headquartered in Holyoke, Massachusetts, and was created in 1997 as a replacement for the New England Power Pool (NEPOOL), which was created in 1971.
NYISO
The New York Independent System Operator (NYISO) operates New York State’s bulk electricity grid, administers the state’s wholesale electricity markets, and provides comprehensive reliability planning for the state’s bulk electricity system. NYISO has a Total Resource Capability of approximately 41,071 megawatts. NYISO began operating in 1999 and is based in Rensselaer, NY.
MISO
Midcontinent Independent System Operator (MISO) is an independent, not-for-profit, member-based organization responsible for operating the power grid across 15 U.S. states (Arkansas, Illinois, Indiana, Iowa, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, Montana, North Dakota, South Dakota, Texas, and Wisconsin) and the Canadian province of Manitoba. Over 42 million people are served by MISO to generate and transmit electricity. MISO has a market capacity of 186,986 MW of electricity across 72,000 miles of transmission lines. In addition to managing the power grid within our region, MISO administers the buying and selling of electricity and partners with members and stakeholders to plan the grid of the future.
PJM
PJM Interconnection LLC (PJM) is a regional transmission organization (RTO) serving all or parts of 13 states, including Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia and West Virginia, plus the District of Columbia. PJM serves 65 million customers, with 84,236 miles of transmission lines, 180,086 megawatts of generation capacity and 369,089 square miles of territory. Started in 1927, this energy pool was renamed the Pennsylvania-New Jersey-Maryland Interconnection (PJM) in 1956. PJM is headquartered in Valley Forge, Pennsylvania
ISOs & RTOs History
Creation of ISOs and RTOs
Before ISOs were formed, all aspects of a market’s electricity grid was typically owned by a single entity – including generation, transmission and distribution. This lead to lack of competition and higher prices. In 1996 FERC created Order 888 and Order 889 to establish a series of Independent System Operators (ISOs).
ISOs were designed to reduce government oversight, ensure grid reliability, reduce prices for energy buyers, and improve access. These organizations run the high-voltage transmission grid for transmission owners in their regions.
In 1999, FERC issued Order 2000 to encourage smaller transmission owners to join Regional Transmission Organizations (RTOs). RTOs run the transmission grid for their respective regions across the United States and Canada. Order 2000 included technical requirements an operator must meet to be considered “FERC Approved”.
What is the difference between an RTO and an ISO?
In today’s market, the only difference between an RTO and an ISO is the way it prices it’s services, and the size of it’s footprint. Each RTO and ISO operate independently, and each sets prices based upon very specific supply and capacity tags.
RTOs and ISOs share the same mandates:
- Operate as a non-profit organization.
- Ensure non-discriminatory access to the grid by customers and suppliers.
- Operate the power transmission system within their footprint and do so independently of the wholesale market (i.e. these organizations do not sell electricity to corporations or consumers).
- Obtain electricity from generation owners to meet market demand and sustain system reliability.
- RTOs and ISOs are not allowed to own any equipment (i.e. generators, power lines, etc.).
Initially FERC envisioned RTOs as broader organizations composed of several independent ISOs. For example, PJM serves the Mid-Atlantic states, is an example of an RTO. PJM was created from power pools first constructed in the 1920’s.
ESAI’s Power Markets Coverage
ESAI Power’s Benchmark Energy Research provides clients with data driven analytics for buying, and investing in power market assets and making investment and trading decisions in the Northeast Power Markets – ISO New England (ISO-NE), New York ISO (NYISO), and PJM Interconnection (PJM). ESAI provides Capacity market coverage and Interconnection queue tracking for the Midcontinent ISO (MISO).
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