R Street Policy Study No. 180: Problems in Electricity Market Governance: An Assessment
WASHINGTON (Aug. 30, 2019)—Most markets where major commodities are exchanged have one set of rules for the entire nation, but not the nation’s electricity markets. These markets are divided into regions, each of which is run by a quasi-governmental, not-for-profit business called a Regional Transmission Organization (RTO) that has its own peculiar features.
Certain electricity markets have rules that some argue are biased against clean energy resources that receive subsidies under state and local policies. One former governor, Maryland’s Martin O’Malley, has written that rather than “working with” his administration, the electricity market operator for much of the eastern United States—PJM Interconnection—”chose to resist” his state’s energy policies. Over the past month, state attorneys general and U.S. senators have echoed that sentiment.
In a new policy study, R Street’s director of Energy Policy, Travis Kavulla, observes that important energy policy decisions are in fact being made by RTOs. In fact, as Kavulla points out, “The decisions of an RTO executive may be more dispositive of the important questions of electricity policy than the pronouncements of, say, a typical governor, legislature, or state utility commission.” This situation raises questions about the transparency and accountability of the RTOs’ decision-making processes.
To help address these concerns, Kavulla asserts that the Federal Energy Regulatory Commission (FERC), the nation’s energy regulator, should assume leadership on important policy questions. And even if it cannot resolve them alone, he argues that FERC should not outsource important policy functions to an RTO. Instead, it should work with state officials or task its own advisory committee with resolving them.
