Steps toward a unified electricity market in the western US
Unlike other parts of the country, the 11 western US states have not joined together in a regional transmission organization (RTO) to more efficiently and cost-effectively administer their respective electrical transmission systems. In this episode, Michael Wara, director of the Climate and Energy Policy Program at the Stanford Woods Institute for the Environment, discusses the current status of a potential western RTO and the political factors affecting the conversation.
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David Roberts
In about half the country, power utilities have turned over administration of their electrical transmission systems to regional transmission organizations (RTOs), or what amounts to the same thing, independent system operators (ISOs). RTOs and ISOs oversee wholesale electricity markets and do regional transmission planning, which increases system efficiency and reduces costs for ratepayers.
The power utilities in the 11 western US states are not joined together in an RTO. California has its own ISO, but it only covers that one state. In the rest of the region, utilities are islands — they each maintain their own reserves and do their own transmission planning within their own territories. It leads to enormous duplicated efforts and inefficiencies.
For years, there has been discussion of creating a western RTO, to bring the western states together to share resources and coordinate transmission planning. Analysts have found that an RTO could save the region’s ratepayers billions of dollars a year.
Recently the discussion has begun to heat up again. A regionalization bill in California was tabled this year but promises to return next session. Governor Gavin Newsom expressed his support for the idea. Nonetheless, numerous sticky technical and political issues remain to be hashed out.
To explore the promise and risks of a western RTO, I contacted Michael Wara, director of the Climate and Energy Policy Program at the Stanford Woods Institute for the Environment. We discussed the political forces pushing for and against an RTO, the way the west's electrical system has changed since the last time this discussion came up, and incremental steps that can be taken in the direction of greater regional cooperation.
All right then, with no further ado, Michael Wara, welcome to Volts. Thank you so much for coming.
Michael Wara
Thanks for having me.
David Roberts
So we're here to discuss something that is somewhat complex and rests on a set of concepts that might not be — that everybody might not come in understanding. But because I want to talk about the specifics and I don't just want this to be a 101 kind of thing, I'm going to assume Volts listeners have some basic background. So I think the main thing to know is the US electricity system is sort of divided in two. On the one hand, you have the traditional old school, vertically integrated utilities which own the generation and the transmission and the customer interaction, the whole deal.
And then the other half is what's called "deregulated" or "liberalized" or whatever the term is. Basically have created markets, wholesale energy markets, where generators compete and sell into the markets. And then distribution utilities which interact with customers buy power from those markets and sell it to customers. And those areas with energy markets are overseen by organizations called Regional Transmission Operators or sometimes Independent System Operators. RTOs and ISOs, as everyone in our world is so familiar with saying over and over again I'll just use RTO, I think from now on as a shortcut for those. So in these liberalized areas
