Who Controls the Electric Grid?

On September 4, 1882 Thomas Edison flipped a switch and, when 400 light bulbs lit up in an office building in New York’s financial district, everyone cheered. Today we flip a switch and, when our lights, our appliances and our computer equipment work we think nothing of it. 

Edison lit his light bulbs with a single dynamo generating electricity that was delivered under the street and up through the walls of the building on a simple distribution system. Today our service comes from a bulk electric system consisting of 7000 power plants whose generation is delivered by 360,000 miles of high voltage transmission lines (over 115 kV) to a local distribution system managed by your utility. That high voltage transmission system is generally referred to as the Grid.

But who manages the Grid and how do they make sure that the lights come on every time that we flip the switch?

A short time ago the answer would have been simple.  Your local utility owned and managed the portion of the grid that interconnected its distribution system to its generating plants. Your utility probably also owned high voltage lines that interconnected to neighboring utilities so that they could buy and sell supplemental power to each other when needed.  

The weakness of this system first appeared in 1965 with a blackout of the Northeast United States that left 30 million people without power. The cause of the blackout was the weakness of the inter-utility interties created to facilitate utility-to-utility sales. In response to the 1965 Blackout the utility industry agreed that the utility-by-utility planning was not working. They promised to start planning high voltage transmission systems on a regional basis and to voluntarily implement uniform reliability procedures.

The Grid, as we now know it, developed as a result of this regional planning process. It enabled utilities to reliably transmit power over multiple utility systems. In effect, the Grid could be operated like the interstate highway system where a power plant operating at almost any point on the Grid could deliver its power to almost any other point on the Grid. 

In 1995 the Federal Energy Regulatory Commission (FERC) issued its Open Access Orders requiring every utility to provide non-discriminatory access to its high voltage transmission system. This meant that every utility was required to transport power produced by any other utility or by any non-utility generator to any customer located anywhere on the Grid. It also meant that generation could be separated from transmission and distribution service and sold as a competitive commodity.

When it issued its Open Access Orders the FERC was concerned that utilities could not be trusted to provide access on a non-discriminatory basis. They were concerned that utilities would favor their own generation at the expense of other parties’ generation.  The FERC was afraid that it would have to deal with a raft of complaints from generators who claimed that utilities were violating the non-discriminatory access provisions of the Open Access Orders.

In order to avoid dealing with these disputes the FERC strongly urged utilities turn control of their transmission facilities over to new entities called Independent System Operators or Regional Transmission Operators (ISO/RTOs). ISO/RTOs are non-profit entities that are run by an independent Board of Directors whose members are elected by the ISO/RTO members, which include utilities, generators and customers.

Utilities that join an ISO/RTO retain ownership of their high voltage transmission facilities. But they operate those facilities at the direction of the ISO/RTO. The ISO/RTO is responsible for coordinating and directing the flow of electricity over its region’s high-voltage transmission system. The ISO/RTO also performs the studies, analyses, and planning to make sure that the region’s electricity needs will in future time periods.

The following video, prepared by the California ISO/RTO, describes the ISO/RTO responsibilities with respect to operation of their portion of the Grid

The ISO/RTOs also manage the wholesale power markets in which competitive generation is bought and sold. The operation of those markets will be addressed in a later Post.  

The ISO/RTO is considered to provide all transmission on the regional Grid and ensures that such transmission is provided on a non-discriminatory basis. The revenues collected by the ISO/RTO for the transmission service is turned over to the utilities whose facilities are used to provide that transmission service and is adequate to provide each utility reimbursement for its prudently incurred costs and a reasonable return on its investment.

The following are the ISO/RTOs that have been created in the United States:

The utilities in the Southeast, the Northwest and the Southwest (other than California) have not joined ISO/RTOs and continue to both own and operate their own high voltage transmission facilities.  

In 2003 there was another blackout of the Northeast United States. This time 50 million people were without power. The 2003 Blackout was the result of the failure of at least one utility (First Energy Corporation) to adhere to the voluntary reliability standards adopted by the industry after the 1965 Blackout. Congress decided that the reliability of the Grid was too important to rely upon utility promises of voluntary compliance. It, therefore, gave the FERC authority to make compliance with the NERC standards mandatory and to impose penalties of up to $1 million per day for failure to comply.

Therefore, the answer to the question of who manages the Grid has three parts:

First, the utilities still own the high power transmission lines that make up the Grid. They are responsible for maintaining those facilities and keeping them in good working order.

Second, in most parts of the country the ISO/RTOs are responsible for directing the operation of the Grid and for long term planning.

Third, the FERC is responsible making sure that the utilities operate and maintain their facilities in compliance with reliability standards adopted by the NERC.

David Rosenstein worked as an attorney and consulting engineer in the electric utility industry for 40 years. When he retired he wrote a book entitled Electrifying America: From Thomas Edison to Climate Change which describes the evolution of the electric industry from the time Edison invented the light bulb until today. Each of his posts in this Blog describe a different aspect of electricity, the electric industry or the issues currently faced by the electric industry. 

Leave a comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: