ISO RTO Basics

Seven independent organizations operate the wholesale electricity markets and manage the transmission grid across roughly two-thirds of the US. They do not own any generators or wires. They are traffic controllers, not airlines.

An RTO (Regional Transmission Organization) or ISO (Independent System Operator) serves three functions. First, it runs the wholesale energy market, dispatching generators in merit order and settling prices every five minutes. Second, it manages transmission, directing power flows and resolving congestion. Third, it ensures reliability, maintaining reserves and coordinating responses to emergencies. The "independent" in ISO means the operator has no financial stake in which generators run, eliminating the conflict of interest that exists when a utility dispatches its own plants.

The seven US RTOs/ISOs. PJM (Mid-Atlantic, 65 million people), MISO (Midwest), SPP (Plains), ERCOT (Texas), CAISO (California), NYISO (New York), and ISO-NE (New England). Together they serve about 200 million Americans. The remaining third of the country operates under the traditional vertically integrated model, with no RTO.

Why do some states refuse to join RTOs?

Because joining means ceding control. Utilities in non-RTO states control their own dispatch and transmission. Joining an RTO means an independent operator decides which plants run and at what price, potentially stranding utility-owned assets. Southeastern utilities (Southern Company, Duke, TVA) have resisted RTO membership for decades, arguing their bilateral trading arrangements work fine. Critics counter that RTO markets consistently produce lower wholesale prices through competitive dispatch.

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