The Texas power crisis exposed that restructured utility models, like regional transmission organizations (RTOs) and independent system operators (ISOs) have fallen short in every area that matters, including cost, reliability and accountability.

• RTOs and ISOs  have little incentive to safeguard power plants or transmission lines against extreme weather or other crises like we saw in Texas. 

• RTOs and ISOs make risky assumptions about power usage that lead to loss of power when consumers need it most. 

• RTOs and ISOs risky assumptions can lead consumers with sky-high electric bills in the time of a crisis.

RTOs and ISOs make a risky gamble on power generation that leaves consumers exposed to life threatening crises and sky high electric bills.

• Deregulation reduces stability and reliability for consumers. Instead of prioritizing the needs of everyday Americans, RTOs disproportionately benefit large purchasers of electricity, whose buying power gives them access to wholesale rates. 

• In order to cut costs, RTOs make the risky gamble that there will never be a need for additional power. 

• This risky gamble leaves consumers exposed in the case of a weather emergency by not having enough power for everyday consumers or by jacking up prices in order to meet the needs.

Reliability, affordability and next-gen grid investments are best supported through traditionally regulated markets.

• These markets use a vertically integrated structure that controls the entire flow of electricity from generation to the meter, ensuring consistency for consumers.

• Unlike Texas’ deregulated market and other RTO markets, traditionally regulated utilities provide the accountability and transparency that best serves consumers. Any structure that lacks these qualities puts American lives at risk.

Regulated utility markets are built to sustain and anticipate the needs of the consumer, even in times of crisis.

• States with regulated markets work hand in hand with local officials to ensure electric demand does not outweigh supply for consumers

In regulated markets, electricity is treated as a necessity, not a commodity.

• Regulated utilities keep consumers and their needs at the forefront of everything they do, whereas RTOs have little incentive to prepare for worst case scenarios, like what we saw in Texas and California. Regulated markets ensure that, even when disaster strikes, the entire system is prepared.

Regions with traditionally regulated utility markets are leaders in innovation.

• Regions with regulated markets are heavily invested in low-carbon resources and use a transparent method that allows competing generation resources to be financed while in alignment with state and federal energy goals.

Clean energy grid investments are better achieved in a traditionally regulated market. 

• Of the 13 states that are fully restructured, nine are ranked in the bottom half percentage of electricity generated from renewables.

In light of Texas and California, RTOs and ISOs must evolve to address their inadequacies. As they do so, systems like the Southeast Energy Exchange Market (SEEM) should serve as the gold standard for utility structuring. 

• The new systems and upgraded technology incorporated into the SEEM model will reduce costs for consumers and improve the integration of renewables while holding utilities accountable for providing reliable electricity.
  

What is an RTO/ISO?

A Regional Transmission Organization (RTO) is a systems operator that controls electrical transmissions across state lines. It is a replacement for the more typical state-by-state regulation of electricity, where each state’s electricity is highly regulated by a public utility commission (PUC). An Independent System Operator (ISO), is similar to an RTO -- as in it eliminates the strict regulation of a PUC -- but only operates in a single state. 

Why does Power for Tomorrow oppose RTOs/ISOs?

We oppose RTOs/ISOs because eliminating the PUC means less regulation of power which leads to higher electric bills and less accountability from utilities and energy providers. The problem is particularly acute for residential customers as evidenced by higher residential electric rates in many states with RTOs/ISOs. This loss of strict regulation and accountability is why Texas’ ISO suffered massive power outages for days during Winter Storm Uri.

Why do customers benefit from more regulation and oversight?

In states where utilities are highly regulated by PUCs, customers get affordable electricity because the PUC determines rates. These customers also get more reliable power because the PUC mandates that utilities properly maintain the power grid and require that power supply be available to meet peak demand. In states with RTOs/ISOs excess power is typically lacking, which means customers pay higher rates – or lose power all together – when weather events result in peak demand for power that outpaces the supply. 

Who is supporting the creation of RTOs/ISOs?

Massive corporations that use enormous amounts of electricity – like Google and Wal-Mart – support the creation of RTOs/ISOs so they can hire sophisticated energy buyers to ensure that they get access to the most affordable power. This lowers their energy costs, but leaves the more expensive power for everyone else, i.e. the average the customer. Hence, Google saves money, regular customers see higher electric bills with an RTO/ISO. On the other hand, in states where utilities are regulated by PUCs, the largest buyers of power subsidize the smallest customers. 

Do RTOs/ISOs mean more clean energy?

There is no evidence that states operating under the authority of RTOs/ISOs are any more aggressive at bringing online new sources of renewable energy. In fact, most expenditures in renewable energy sources occur because PUCs mandate that traditionally regulated utilities make those costly investments.

Why are we talking about…

Texas is a deregulated state, with an ISO, where no PUC sets energy rates and few mandates exist around grid maintenance and reliability. In Texas the PUC’s role was split into the Public Utility of Texas (PUCT) which mandates investment in the electric grid, and the poorly named Electric Reliability Council of Texas (ERCOT) which serves as the marketplace for electricity generation to be sold in a real time pricing environment. An RTO is very similar to a multistate version of ERCOT. Therefore, it is common sense that what happened in Texas, could happen in other states managed by RTOs/ISOs because neither organization sets rates. Equally problematic, adequate price signals are not established by RTOs/ISOs to encourage the private market to build power plants to supply power 365 days a year, even at peak demand.

Articles: 

The Wall Street Journal - The Texas Freeze: Why the Power Grid Failed

The New York Times - Poor Planning Left California Short of Electricity in a Heat Wave

Utility Dive - Everything old is new again: Why Big Tech is wrong about utility restructuring

Texas Tribune - Blackouts Revive Debate Over Electric Deregulation