For something as ubiquitous in modern life as electrical power, few of us know much about the rules that govern power production, fees, or transmission. Most people, including academics and lawmakers, know even less about the Regional Transmission Organizations, or RTOs, that develop those rules. But last September, committees from both the U.S. House and Senate invited SFI External Professor Seth Blumsack, with colleagues from Boise State University and Duke University, to fill them in on what the researchers have learned through a recently funded project called RTOGov (short for RTO Governance).
RTOs were first formed in the late 1990s as part of a federal initiative to restructure the electric utility industry and break up the electrical monopolies that then provided power to the country. RTOs are charged with helping ensure a reliable electrical grid at the lowest possible cost, but the rules for how they achieve these goals are determined not by federal regulators but by a group of regional stakeholders that may include power companies, utilities, and financial players like hedge funds and banks. “Who is actually at the table making these rules, and how much each vote counts, varies by region,” says Blumsack. The goal of the RTOGov project, which has been supported by the Alfred P. Sloan Foundation and the Heising Simons Foundation, is to understand how RTOs make rules and how these rule-making processes affect the operation of regional grids.
The rules that RTOs set govern things like fee structures, cybersecurity, and how much energy on the grid can come from which sources — the ratio of renewable energy to fossil fuel-based power, for instance. RTOs can also develop incentives for certain types of power generation. “They basically determine the economic environment for new technologies, and the tools that people operate the power grid have available to keep it going reliably,” says Blumsack. The details can look wildly different from one region to the next. Now, House and Senate committees are trying to figure out if things have changed so much since the 1990s that we need to rethink the mission, goals, and oversight of these organizations, he says.
As new technologies are developed, and as states set goals toward decarbonization, RTOs play a critical role. “If you care about electricity costs or reliability or sustainability, these RTOs are incredibly important,” says Blumsack. “They’re the most important sustainability organizations you’ve never heard of. A lot of our ability to facilitate technology transition in electricity while keeping it reliable is not just technology, but the environment in which rules and regulations are made.”