The way electricity is generated, transmitted, and distributed across the United States varies from state to state. Over the past two decades, many of the functions of electric companies have changed. To improve reliability and economic efficiency, local power grids are connected to form larger grids. The electrical system is divided into three main interconnections: the Eastern Interconnect, the Western Interconnect, and the Texas Electrical Reliability Council (ERCOT).
These three interconnections operate independently of each other and have very limited energy transfers between them. The National Grid Authority (NGA) organized a three-part series on electricity markets. You can view and access the slides from the webinar at the following links or view the playlist. Electricity Markets: Current Events USA. Electricity markets have both wholesale and retail components. Wholesale markets involve the sale of electricity between generators and resellers, which will then be sold to consumers.
Retail markets involve selling electricity directly to consumers. Wholesale and retail markets can be found in both traditionally regulated states and in restructured states. Wholesale electricity markets can be found in both traditionally regulated states and in restructured markets, such as in the Northeast, Midwest, Texas, and California. Independent System Operators (ISOs) and Regional Transmission Organizations (RTOs) manage competitive markets that allow independent energy producers and generators outside of public services to sell their energy. Other key purposes and tools of the market include Thomas Edison's first provision of electricity to a wide area in New York City in the 1880s. This initiated the process of supplying electricity to large areas, which in turn developed economies of scale.
As more people were served, costs were distributed among customers to pay for electrical infrastructure. The Federal Energy Act established for the first time federal and state jurisdictions for wholesale and retail sales. It also allowed the Federal Energy Regulatory Commission (FERC) to have regulatory authority. The North American Energy Systems Interconnection Committee became an informal, voluntary organization to coordinate the bulk energy system. The National Electrical Reliability Corporation (NERC) was created as a non-profit regulatory authority for North America with the mission of ensuring an effective, efficient, and secure electricity grid. The Public Services Regulatory Policy Act (PURPA) was enacted in response to the oil crisis and high prices of the 1970s.
It focused on promoting cogeneration, integrating renewable resources, increasing competition in generation, and conserving electricity. It has been revised at several points and will reappear in the chronology. The Energy Policy Act gave FERC authority to allow open access to transmission. FERC Order 888 required mandatory access to open broadcasting for all users, completing the mosaic left by the Energy Policy Act four years earlier. In addition, it promoted the concept of independent system operators (ISOs) to generate competition among participants in the wholesale market. It left FERC jurisdiction over wholesale electricity sales and transmission, and left state commissions jurisdiction over distribution and generation components of retail service.
The Energy Policy Act strengthened frameworks for competitive wholesale markets. It allowed use of eminent domain to acquire power transmission rights of way in areas designated as congested by the Secretary of Energy. It repealed a PURPA requirement that required utility companies to purchase energy from facilities that met requirements and from small energy producers at a rate based on cost avoided by utility companies if there were competitive electricity markets available. Finally, FERC has the task of prohibiting any price manipulation in wholesale transactions in response to the Western energy crisis which revealed market deficiencies. FERC Order 890 reformed its open access broadcasting standards to promote that streaming service is provided in a fair and reasonable manner as well as providing more transparency in operation of network. FERC Order 719 eliminated barriers to demand response in organized energy markets treating it in a manner comparable to other resources.
FERC Order 745 required RTOs and ISOs to pay for demand response resources (the market price of energy) when used to balance demand as a replacement for new generation. FERC Order 1000 provided a new framework for planning large scale transmission projects with focus on renewable energy projects increasing participation in regional transmission planning expanding single-company planning. Superstorm Sandy hit much of Northeast leaving 8.5 million people in 21 states without electricity leading to focus on improving critical energy infrastructure and energy resilience. FERC expanded controversial Minimum Offer Price Rule which established predetermined prices for renewable energies if they received revenues from state programs helping core resources such as coal and nuclear energy compete in capacity markets. This order was later rescinded after change in leadership of FERC. Apart from regulation states can establish energy policies such as requiring certain percentage of retail electricity sales come from renewable generation according to renewable portfolio standard (RPS) or they can establish energy efficiency resource standards (EERS) or clean energy standards (CES). These policies incorporate tools that affect generation capacity and prices in electricity markets as well as financial incentives such as renewable energy credits (REC) or zero emission credits (ZEC) creating greater demand for certain types of cleaner generation such as renewable energy storage or nuclear energy. The Federal Energy Regulatory Commission (FERC) regulates interstate transmission and wholesale energy sales while Environmental Protection Agency (EPA) along with other agencies such as Department of Interior (DOI) issue regulations that affect energy sector such as EPA regulating emissions of air pollutants from power plants or other sources such as mercury or pollutants that form smog (NOx & SOx) regulating greenhouse gas emissions from certain types of new fossil-fuel-based generators while DOI oversees some aspects granting permits location generation & transmission lines crossing federal lands including possible impacts.