What is an RTO?
In a 2007 article in the Energy Law Journal, Michael H. Dworkin and Rachel Aslin Goldwasser gave perhaps the definitive answer, describing RTOs as “larger than states but smaller than nations, [taking] a form that is between government and business, thus creating serious accountability problems.”
“Unlike governments, which must answer either directly to the electorate or to the people’s representatives, RTOs are not subject to elections or legislative confirmation processes,” they noted.
Their article suggests RTOs can be viewed through several lenses, “as agents of the FERC, as monopolists or private regulated entities, as ‘hybrid’ organizations, as similar to commodities trading markets, as agents of some of the market participants, and as planning processes.”
“Because confidence in the RTOs is vital to their success, stakeholders and members of the public needed to see them as independent actors dedicated to the public interest,” they write.
FERC gave much thought to the nature of RTOs in the rulemaking that led to Order 2000, which set minimum requirements for the organizations. FERC was concerned, they write, that “the potential for undue discrimination increases in a competitive environment unless the market can be made structurally efficient and transparent with respect to information and equitable in its treatment of competing participants.”
In the order, FERC noted that industrial consumers (the Electricity Consumers Resource Council, the American Iron & Steel Institute and the Chemical Manufacturers Association) had argued “that market participants must perform monitoring and, accordingly, an RTO’s operations should be fully transparent.”
The America Public Power Association told FERC in the rulemaking that the grid operators “still represent the interests of the transmission owners that formed” them. APPA said FERC should view RTOs as “regional monopolies that it must vigorously regulate, not regional extensions of the commission itself.”
Since the order, the authors noted, “there has been a chorus of questions regarding RTOs, their efficacy and their governance,” including reports by APPA and PJM stakeholders that argued that RTOs were not sufficiently accountable.
“The Energy Consumers Resource Council, a consortium of large industrial users, also produced a white paper questioning the ability of current RTO structures to provide real market solutions and claimed that ‘governing structures of the organized markets are skewed to benefit suppliers.’
“It is important to note,” the authors added, “that many of these ‘large consumer’ groups were originally supportive of restructuring and the RTOs.”
Dworkin, former chairman of the Vermont Public Service Board, is a professor and director of the Institute for Energy and the Environment at Vermont Law School.
Dworkin said yesterday that FERC “delegates great discretion to RTOs; and the RTOs’ exercise of that discretion is heavily influenced by the meetings of its stakeholders… The system would be far healthier if the people and businesses that will be affected can learn what was and wasn’t said about the issues that may well affect them.”
Goldwasser, a Vermont Law graduate, was a law clerk to a U.S. District Court judge in Maine when she co-authored the article. She is now executive director at the New England Conference of Public Utilities Commissioners (NECPUC). She declined to comment.
— Rich Heidorn Jr.
