Regulatory Bodies

What are Regulatory Bodies?

Often, energy is produced far away from the people or places that use it. This is why we have transmission lines, which transport electricity from one place to another. With all of these lines going every which way, a regulatory body is required to manage the entire system. Even if you’re a pro in the electricity industry and how it’s regulated, the hierarchy can get very confusing! The main terms to know when navigating this world are FERC, NERC, ISOs, and RTOs. Below is a breakdown of how they interact and interrelate.

The Federal Energy Regulatory Commission (FERC) is the federal agency responsible for the regulation of the interstate sale and distribution of electricity, oil, and natural gas in the United States. It is led by a commission of 4 members (but can be as many as 5 members) that are appointed by the U.S. President after the Senate approves the appointment. The term length for each commissioner is 5 years. The current Chairman is Willie Phillips.

The North American Electric Reliability Corporation (NERC) is an international, non-profit regulatory body that spans the entire United States, Canada, and the northern portion of Baja California, Mexico. Its main responsibility is to reduce risks to the reliability and security of the electrical grid. NERC does this through the development and enforcement of reliability standards and policies. NERC is governed by a board of trustees elected by its stakeholders and its CEO, James B. Robb. The FERC has oversight over the NERC, and gives the NERC authority to regulate the six regional entities.

This map, drawn from the NERC website, also shows the division of the Western, Eastern, and ERCOT interconnections. These three regions comprise the entirety of the US power grid. Between each interconnection there are very few points where energy can pass from one interconnection to the next. The ERCOT interconnection is almost completely isolated from the other two interconnections, which was a strategy devised in the 1930’s by Texas energy companies to avoid regulation by the FERC.

Another one of the FERC’s functions is to oversee Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs). ISOs are non-profit governing bodies that are responsible for grid operations, power systems planning, and market administration. Similarly, RTOs coordinate, monitor, and control electrical grids in multi-state regions. There is no substantial difference between RTOs and ISOs. Their main purpose is to ensure the reliability and security of the grid as well as to oversee the electricity markets by maintaining a balance between supply and demand. ISOs are responsible for delivering a continuous supply of electricity even when there are disturbances to the grid such as a car hitting a utility pole or a tree falling onto a distribution line. Therefore, a reliable, secure grid is one that you can depend on delivering the right amount of electricity where you need it, when you need it.

Here’s a handy map of all of the ISOs and RTOs in the United States (taken from the FERC website).

But, what about the states where there are no ISOs or RTOs? The states in the southeast, southwest, and northwest areas of the map don’t have regulated markets, so the utility companies in each of these areas operate under regular supply and demand models as dictated by each state’s regulating authority (like a Department of Public Utilities). The FERC still has some authority over these arrangements, but generally utility companies will supply energy through a purchase power agreement in which an independent generator will sell electricity to the utility company.

Governance and Coverage

California ISO (CA-ISO) is an ISO led by a board of 5 members and has 12 corporate officers. CA-ISO has its headquarters in Folsom, CA, and oversees around 80% of the state as well as a small portion of Nevada.

Electricity Reliability Council of Texas (ERCOT) is an RTO led by a board of 9 members and has 13 corporate officers. ERCOT has its headquarters in Austin, TX, and oversees around 75% of Texas.

ISO New England (ISO-NE) is led by a board of 10 members and has 12 corporate officers. ISO-NE has its headquarters in Holyoke, MA, and oversees CT, ME, MA, NH, RI, and VT.

Midcontinent ISO (MISO) is led by a board of 10 members and has 12 corporate officers. MISO has its headquarters in Carmel, IN, and oversees AR, IL, IN, IA, KY, LA, MI, MN, MS, MO, MT, ND, SD, TX, and WI.

New York ISO (NYISO) is an ISO led by a board of 9 members and has 13 corporate officers. NYISO has its headquarters in Rensselaer, NY, and oversees the state of New York.

PJM Interconnection (PJM) is an RTO led by a board of 10 members and has 13 corporate officers. PJM has its headquarters in Norristown, PA, and oversees DE, IL, IN, KY, MD, MI, NJ, NC, OH, PA, TN, VA, WV, and Washington DC.

Southwest Power Pool (SPP) is an RTO led by a board of 10 members and has 10 corporate officers. ERCOT has its headquarters in Austin, TX, and oversees around 90% of the state’s electric load.

NEPOOL is an advisory body specific to the 8 New England States and consists of 501 representatives from 6 sectors (Generation, Transmission, Supplier, Publicly Owned Entity, Alternative Resources, End-Use) as well as a board of 18 officers. NEPOOL serves as the primary advisory body to ISO-NE and can also make recommendations to FERC. NEPOOL does not have any voting rights in ISO-NE or FERC matters.

Climable is based in Cambridge, MA which means our system operator is ISO-New England. The handy chart shows a basic hierarchy of grid authorities within the 6 New England states. For a more detailed chart, check out the links at the bottom of this page!

Regulatory Challenges to the Energy Transition

America’s electricity grid is heavily fragmented, broken up into regional entities who compete with each other in a system designed for oil and gas powered energy. To reduce our reliance on gas and coal the country must shift to clean energy powered by solar and wind, but the grid may not be ready to take on this change, because of its age. Our grid is very old and the technology and infrastructure is so outdated that even without the new demands put on it by the clean energy transition, the grid is still inaccessible and unreliable.

Solar and wind energy have the most potential in the Great Plains, the Midwest, and the coasts. This means the electricity would have to be transported long distances, via high-voltage transmission lines, to the places it would be used – which are usually far from the source. But, given the sheer number of entities involved in regulating the American grid, getting consensus on where and how the lines will be built is exceedingly difficult.

The first step is permitting, and for many ventures it’s also the last step. Permitting is required of all high-voltage transmission lines spanning across state lines by federal law. Those looking to expand transmission must confer with local, state, federal, and tribal authorities as well as private landowners who must consent to their land being developed for transmission lines. This introduces the chance for Not In My Backyard lawsuits, or lawsuits launched by those who don’t want wind or solar farms near their homes. NIMBY lawsuits have been a major roadblock for a variety of clean energy and transmission line projects, including the notable Cape Wind project which was canceled after too many legal delays. Then the Department of Energy has to file an environmental assessment in accordance with the National Environmental Policy Act which is such a detailed and extensive process it can take up to five years for the permits to be issued. There are a host of other impactful, federal environmental laws that may apply on a case-by-case basis further complicating the process.

Utility companies, especially investor owned utilities, feel like their business model and regional monopolies are threatened by the interstate transmission lines, so they tend to not expand transmission and hold up the federal government’s efforts to do it on their own. This also is a barrier to neighborhood solar, because, as an alternative to mainstream grid usage, solar is a way for individuals to reduce their reliance on utility companies and thus another threat to their business model.

Some in Congress worry about state’s rights if the FERC was to be given greater influence. Oil and coal interests align with the interests of the solar and wind industry given that both would benefit from an expanded, more reliable grid. But still, there are so many conflicting interests that many permitting projects are dead in the water far too soon. This New York Times article offers a deeper look into the regulatory hurdles of adapting the US grid for an energy transition.

To make a long story short, there are significant barriers to a clean energy transition, but there are still big successes at hand. In November of 2022 the White House approved $13 billion to modernize the grid including dramatically expanding the use of grid-enhancing technologies which reduce grid congestion, can save customers hundreds of millions of dollars per year, and push the US closer to its clean energy goals. Maine just approved a transmission line project to bring hydropower electricity from Canada that was tied up in a multi-year fight. These kinds of transmission projects are necessary to bring about an energy transition, but, as seen with the transmission line in Maine, NIMBY lawsuits and other legal challenges are major hurdles.