The important regulatory acts that led to the current ISO/RTO structure
In order to understand competitive North American power markets, it’s useful to review what preceded them. In this post we’ll review what electricity production and delivery looked like in the early and mid 20th century, as well as the policies that helped shape competitive markets.
Electricity in the US was originally delivered through vertically integrated utilities. These for-profit utilities owned and controlled generation, transmission, and distribution. With little to no competition, natural monopolies developed and utilities were able to charge high prices for electricity.
To combat this, some city, county, and state governments created not for profit and public utilities, called municipal utilities, which owned generation and distribution assets for the local community. In rural areas, where it was more difficult to get electricity, not for profit cooperatives were formed, which primarily owned distribution assets.
Independent System Operators (ISO’s) and Competitive Markets
Following these acts, markets began opening up to competition in some areas of the country, giving rise to electric marketers and Independent System Operators (ISO’s). In these deregulated markets, FERC oversees fair trade practices.
If you are wondering what an Independent System Operator is, don’t worry, we’ll review what they are, how they came to be, and what they do in our next blog post so be sure to sign up to our blog updates email list.
This is a brief overview of the history of power in the US. Look out for more information on power markets and trading in the following weeks.
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