Landmark FERC Orders

Three FERC orders reshaped US electricity markets more than any legislation. Each forced utilities to open their infrastructure to competition, transforming electricity from a regulated monopoly product into a market commodity. Understanding these orders explains why today's electricity markets work the way they do.

Order 888 (1996). Required utilities owning transmission lines to provide open access to all generators at non-discriminatory rates. Before 888, a utility could refuse to transmit a competitor's cheaper power across its lines. After 888, transmission became a common carrier. This single order made wholesale electricity competition physically possible.

Order 2000 (1999). Encouraged (but did not mandate) utilities to transfer transmission operations to independent RTOs. The logic: utilities that own both generation and transmission have incentives to favor their own generators. Independent operators eliminate this conflict of interest. Seven RTOs now manage 60% of US generation.

Order 2222 (2020). Required RTOs to allow distributed energy resource aggregations to participate in wholesale markets. A single rooftop solar system cannot bid into PJM. But 10,000 of them, aggregated by a VPP operator, now can. Order 2222 is to distributed resources what Order 888 was to independent generators: market access.

Why did FERC use orders rather than waiting for Congress?

Because FERC has direct authority over interstate wholesale electricity. Congressional energy legislation is slow and politically difficult. FERC orders implement policy through regulatory authority, taking effect years faster than legislation. The tradeoff: orders can be reversed by future commissioners, while legislation is more durable.

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