Policy Studies Energy and Environment

Problems in Electricity Market Governance: An Assessment

Key Points

Important energy policy decisions are being made by not-for-profit businesses that run the electric grid, called Regional Transmission Organizations (RTOs). This raises questions about the transparency and accountability of the RTOs’ decision-making processes.
The Federal Energy Regulatory Commission (FERC), the nation’s energy regulator, should assume leadership on important policy questions. Even if it cannot resolve them alone, 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.
When surveyed, large consumers found Texas’ RTO, the Electric Reliability Council of Texas (ERCOT), to be the most consumer-friendly RTO. They also found value in the competition between generators that the RTO markets offer, which is still better than the alternative where a single monopoly dominates the sector.

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.

Press release: R Street Policy Study No. 180: Problems in Electricity Market Governance: An Assessment

Image credit: Lumppini

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