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by Gaby Flores
If you haven’t already, make sure to read the other blog posts in this series. This post will review the history of US power markets.
In this blog, you'll learn:
- What vertically integrated utilities are
- How natural power monopolies developed
- Why cooperative utilities were built
- About FERC’s role in the development of ISOs
- The important regulatory acts that led to the current ISO/RTO structure
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.
Vertically Integrated Utilities and Natural Monopolies
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 could 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 formed, which primarily owned distribution assets.
Independent System Operators (ISOs) and Competitive Markets
Following these acts, markets began opening up to competition in some areas of the US, giving rise to electric marketers and Independent System Operators (ISOs). In these deregulated markets, the Federal Energy Regulatory Commission (FERC) oversees fair trade practices.
This is a brief overview of the history of US power markets. Next, read more about Independent System Operators today.
Next Steps
Already working as an industry professional? Yes Energy provides historical and real-time market data for all of the ISOs in North America. Request a demo to learn more.
For more information on the terms in this blog post, check out the Yes Energy Glossary.
Resources we found helpful when putting together Power Markets 101 are available.
