Power companies do not just make power and put it on the grid. The grid must be balanced between supply and demand all the time if it is to operate. Coordination makes the electric industry hum. The technology demands that. (Power customers demand that.)
Every part of the nation has some group for this critical function. Has to. Regional Transmission Organizations [RTOs] coordinate the grid in some parts of the country. The group just may not be called an RTO or have those exact duties. In other areas, cooperation among electric utilities provides the necessary grid balancing.
(Note: The Carolinas are not covered entirely by an RTO, but North Carolina is touched a bit in its northeast by RTO PJM because of Dominion’s NC presence.)
This blog post introduces the idea of an RTO. Our next blog post will wrap up that introduction.
Some policymakers tie an RTO directly to specific energy functions; suggesting an RTO will do certain things:
- Lower prices. RTOs do not dictate customer costs. RTOs do manage bulk wholesale power markets.
- Clean energy. RTOs do not specify how power is made – nuclear, wind, gas…
- Customer choice. RTOs do not add or take away any retail outlets for customers.
- Policy: RTOs make no policy decisions that change utility business models.
- Grid modernization. RTOs do not make investments in or own any physical asset.
Some policymakers want to create an RTO in the Southeast. A report out of San Francisco says the Carolinas ought to have an RTO.
Should that happen? A fair question that requires a look at the functions of an RTO.
Here’s a spoiler alert: ECC does not say an RTO should or should not be the answer. ECC does emphasize the need for careful analysis and understanding of consumer needs and RTO functions. Our electric system should not be part of a sound bite for policymakers.
Several points are important for policymakers to know:
- RTOs are independent and do not take orders, nor are influenced, by elected officials and state regulatory commissions, or independent state regulatory commissions
- RTOs are responsible for power reliability and power supply, not just cost
A regional power group works like this.
- Companies that serve retail power customers say how much energy they want
- Generators submit offers to supply power
- RTOs accept lowest- to highest-priced generator bids to meet forecasted demand
- RTOs issue an operating schedule for generators and buyers to follow
Our next blog post looks at what an RTO does and does not do.