Independent system operator

A regional transmission organization (RTO) in the United States is an electric power transmission system operator (TSO) which coordinates, controls and monitors a multi-state electric grid. The transfer of electricity between states is considered interstate commerce and electric grids spanning multiple states are therefore regulated by the Federal Energy Regulatory Commission (FERC). The voluntary creation of RTOs was initiated by FERC Order No. 2000, issued on December 20, 1999. The purpose of the RTO is to promote economic efficiency, reliability and non-discriminatory practices while reducing government oversight.

An independent system operator (ISO) is similarly an organization formed at the recommendation of the Federal Energy Regulatory Commission (FERC). In the areas where an ISO is established, it coordinates, controls and monitors the operation of the electrical power system, usually within a single US State, but sometimes encompassing multiple states. RTOs typically perform the same functions as ISOs, but cover a larger geographic area.

The two are similar, with an RTO being more clearly defined and born out of the concept of electrical grid reliability. The delineation between an ISO and an RTO is subtle to some and quite specific to others as the similarities in the table below illustrate:

In short, an ISO operates a region's electricity grid, administers the region's wholesale electricity markets, and provides reliability planning for the region's bulk electricity system. Today's RTOs do the same thing with an added component of greater responsibility for the transmission network as established by the FERC.

In April 1996, the Federal Energy Regulatory Commission (FERC) issued two orders that changed the landscape of how electricity is generated, transmitted, and distributed throughout the North America. Prior to these rulings, generated power and the subsequent energy provided to customers by local service providers was owned and controlled by single entities who often owned the entire generation, transmission, and distribution assets. Because these companies controlled the retail delivery of the energy from generation through their own power lines, consumers had little to no choice regarding whose electricity they were buying.

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