Regional Transmission Organizations: Millennium Order on Designing Market Institutions for Electric Network Systems

"...it is clear that RTOs are needed to resolve impediments to fully competitive markets." 2 The Commission identified the key role of RTOs in supporting competitive electricity markets. No matter what the name or governance structure, there must be an organization responsible for key coordination activities needed to make a market work. This is not an option, and the market cannot solve the problem of market design. Hence the most important part of the Commission's Millennium Order is the description of a workable framework for competitive electricity markets. A competitive electricity market can be the vehicle for pursuing the public interest, but only if the market structure addresses the particular characteristics of the electricity system with its complex mix of essential facilities and large network externalities. The central design requirement is easy access to a coordinated spot market. There are certain critical functions that must be provided by the system operator. When these functions are organized within the framework of a bid-based, security-constrained economic dispatch with locational pricing, the tools are available to deal with the most important network complexities that otherwise confound electricity markets. Once done, many of the other problems in the electric network would either disappear or would be greatly simplified.