The Grid's "Org Chart"
FERC, NERC, RE, ISO, RTO, PJM, SPP, WTF?!
The power business is complex. As if the physics of continuously balancing supply and demand in real time isn’t complex enough, the way the North American grid is configured, regulated, planned, and operated adds layers of complexity that even people in the industry struggle to understand. My intent with this article is to provide a high-level explanation of what I consider to be some key concepts to help non-experts understand the way this beautifully complex machine we call “The Grid” is organized in North America.
From Complicated to Confusing
Prior to the mid-1990s, power systems were run by vertically integrated utilities that owned and operated all of the generation, transmission, and distribution assets in their service territories. They were monopolies that were regulated by state or provincial regulatory agencies and they planned the expansion of their power systems to meet demand and ensure reliability through an economic balance between generation and transmission. There were also electric cooperatives which were coordinated groups of utilities, but the same general approach applied. While this arrangement was complicated, most people could understand the basics. This all started to change in the mid-1990s.
In 1996, FERC issued Order 888 which initiated the deregulation of the power industry, or “restructuring” as it is often called. The objective was to reduce the monopoly power of the integrated utilities and enable competition for the supply of electricity (competition between generators) to keep costs low for consumers. Transmission and distribution remained regulated because they were/are considered to be “natural monopolies” that do not facilitate effective competition. Order 888 introduced the Independent System Operator (ISO) construct to oversee the operation of power systems and wholesale electricity markets. Deregulation was further augmented by FERC Order 2000 in 1999 that saw the introduction of the Regional Transmission Organization (RTO) construct that was very similar to, but broader than, an ISO. Participation in ISOs and RTOs was (somewhat) voluntary and some regions chose to continue as vertically integrated utilities.
Deregulation took the planning, operation, and oversight of the grid from complicated to confusing. It also dispersed accountability for reliability across several different entities that play different roles to ensure reliable operations and effective long term planning. The current North American grid contains a blend of traditional vertically integrated utilities, ISOs, and RTOs with coordinated operations across vast geographic areas.
To try to explain this, I’ll first start with the physical arrangement of the grid in North America and then turn to the organization of the entities that oversee and manage the grid.
The Interconnections
The power systems in Canada and the US are organized into four physical regions called “Interconnections” that enable the coordination of the entities within each region:
The Western Interconnection
The Eastern Interconnection
The ERCOT Interconnection
The Quebec Interconnection
Within each Interconnection, all entities (generators, transmission providers, and distribution providers) are “synchronized” which means that they all operate at the same frequency (60 Hz) and their voltage and current waveforms are all “in phase” with each other. This means that the operation of all entities within an Interconnection are fully coordinated at all times. They are literally on the same wavelength.
However, while all the entities within each Interconnection are synchronized with each other, the Interconnections themselves are not synchronized to each other. They are “asynchronous”, which means that while each Interconnection operates at the same nominal frequency of 60 Hz, the Interconnections are not “in phase” with each other and their voltage and current waveforms are not synchronized. For this reason, the transmission lines that connect each Interconnection are asynchronous high voltage direct current (HVDC) lines and not alternating current (AC) lines. It is helpful to think of each Interconnection as an “electrical island” and the HVDC lines that connect them as “electrical bridges” between each island. The HVDC lines connecting the Interconnections are shown in the map below.
The Interconnections evolved over time as the power systems across North America expanded and as system operators recognized the need to electrically separate the Interconnections when the synchronized areas started to become too large to reliably operate. Here is a summary of the evolution of the Interconnections from the book The Grid: Biography of an American Technology by Julie A. Cohn:
As the energy transition progresses, there are many recommendations and calls for increasing the east-west transmission capacity across Canada and the US to share renewables and other generating resources across regions. While this is a great concept in theory, the electrical separation of the Interconnections introduces significant technical complexities and associated costs that must be considered.
FERC and NERC
FERC and NERC are the two US federal agencies the oversee the North American electricity industry and establish reliability standards and operational requirements for the North American grid.
FERC, the Federal Energy Regulatory Commission is an independent US federal agency that regulates the interstate transmission of electricity, natural gas, and oil, which includes oversight of reliability and energy markets. FERC oversees NERC and directs it to take actions by issuing Orders.
NERC, the North American Electric Reliability Corporation is overseen by FERC and is an international regulatory authority that develops and enforces mandatory reliability standards, assesses seasonal and long‐term reliability, monitors the bulk power system, and educates, trains, and certifies industry personnel. NERC’s authority spans the US, Canada, and the northern portion of Baja California, Mexico.
The reliability standards established by NERC are implemented and enforced across all North American power systems, including the Canadian provinces. NERC does not have legal jurisdiction in Alberta, but Alberta adopts and enforces applicable NERC standards as Alberta Reliability Standards.
To summarize, FERC broadly regulates electricity, natural gas and oil while NERC exclusively regulates electricity under FERC’s oversight.
The Regional Entities
NERC regulates and monitors the reliability of the North American grid in partnership with 6 “Regional Entities” that are roughly geographically aligned with the Interconnections. The Regional Entities (RE) monitor the ISOs/RTOs and integrated utilities in their regions and work with NERC to enforce the mandatory reliability standards. The REs are:
Reliability First (RF)
Southeastern Electric Reliability Council Reliability Corporation (SERC)
Texas Reliability Entity (Texas RE)
Within their regions, the duties of the REs are to monitor and enforce compliance with mandatory reliability standards, oversee reliability planning and operational performance assessments, and analyze regional system events and disturbances to share learnings and recommend operational improvements.
The combined objectives of NERC and the REs are:
clear and consistent guidance across the Interconnections
sharing information, knowledge, and resources across the Interconnections
developing and sharing harmonized communications across the Interconnections
supporting innovation, initiatives, and the sharing of best practices across the Interconnections
The ISOs and RTOs
Within each Interconnection, there is a blend of regulated vertically integrated utilities and deregulated wholesale markets. The deregulated wholesale markets are overseen by Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs). The functions of the ISOs/RTOs are to facilitate open-access to transmission, operate the transmission system, and oversee and operate wholesale electricity markets. Currently, over 60% of North American electricity is provided by ISO/RTO regions and market participants in ISO/RTO wholesale markets include both independent power producers and integrated utilities.
When FERC initially kicked off deregulation in 1996 with FERC Order 888, the concept of the ISO was born and 7 ISOs were eventually established. To further encourage competition in 1999, FERC issued Order 2000 that established the RTO concept that was intended to aggregate the smaller remaining transmission entities into larger regional system operators. This resulted in the creation of 2 RTOs.
So what’s the difference between an ISO and an RTO? They have very similar responsibilities which include providing non-discriminatory transmission access to market participants, power system operations, and wholesale market operations, but RTO operations typically span multiple states while ISO operations are typically within a single state or province. The key differences between ISOs and RTOs are as follows, but there is a lot of grey and overlap between the two:
Scope of Operations
ISOs typically operate within a single state/province or a portion thereof and manage transmission and wholesale market operations within their designated areas.
RTOs cover larger geographical areas, often spanning multiple states or regions and manage transmission and wholesale market operations across broader territories, facilitating coordination and optimization over a wider area.
Reliability
ISOs are responsible for ensuring the reliable operation of the power grid within their designated areas. This includes managing the flow of electricity, maintaining grid stability, and coordinating the operations of generation and transmission assets.
RTOs have broader responsibilities that encompass not only grid operation but also regional transmission planning, market administration, and coordination among utilities, generators, and other stakeholders.
Regulatory Oversight
ISOs are subject to regulatory oversight by federal and/or state and provincial agencies.
Like ISOs, RTOs are also subject to regulatory oversight, but their broader geographical scope often involves coordination with multiple regulatory bodies at the federal and state levels.
The current ISOs and RTOs are as follows:
Independent System Operators (ISOs)
The Alberta Electric System Operator (AESO)
The California Independent System Operator (CAISO)
The Electric Reliability Council of Texas (ERCOT)
The Independent Electricity System Operator (IESO) in Ontario, Canada
The Independent System Operator of New England (ISONE)
The Midcontinent Independent System Operator (MISO)
The New York Independent System Operator (NYISO)
Regional Transmission Organizations (RTOs)
Final Thoughts
So, here’s roughly how the “org chart” looks from a reliability perspective:
Hopefully this overview left you more informed than confused. There are many additional nuances, such as Balancing Authorities, Reliability Coordinators, and state and provincial electricity regulators, but I think the organizational aspects of the North American grid I’ve described in this article provide the basic concepts you need to decipher what you typically hear and read about the grid.
This is superb! I will be writing something very similar about the British grid system. Check out my posts on here for the economic history of the grid!
This is a very good in-depth description of what we call the grid. I teach a class on this and I can say you covered it very well. Thank you!