Comments in Response to FERC Rulemaking on Regional Transmission Organizations

Paul L. Joskow


On May 13, 1999, the Federal Energy Regulatory Commission (FERC) issued a Notice of Proposed Rulemaking (NOPR) on Regional Transmission Organizations (RTO). The purpose of the NOPR is to solicit comments on proposed FERC regulatory rules that would encourage transmission system owners to participate in regional transmission organizations. Such organizations would manage various aspects of the operation and expansion of the nation’s high-voltage electricity transmission system to support developing competitive wholesale and retail electric generation service markets that rely on these transmission networks. Regional integration of transmission systems is thought to be required in order to manage more effectively transmission network operations, to internalize various network externalities, and to facilitate the development of competitive electricity markets. The FERC initiative aims to speed the development of such regional organizations. I prepared the attached comments in response to FERC’s RTO NOPR. My comments focus primarily on the future structure of the regulatory framework that governs how transmission system owners and operators will be compensated for providing transmission service. I also present a framework for evaluating the benefits and costs of not-for-profit ISOs that operate transmission facilities owned and maintained by others vs. for-profit Independent Transmission Companies (Transcos) that own, maintain, and operate their own transmission facilities.