Before the 1990s, most homes and businesses in the United States had one choice for electricity—a single electric utility with the monopoly franchise in their state or region. That utility owned most of the power plants generating its electricity, the long-distance wires transporting that power, and the local distribution lines and poles. But following the deregulation and restructuring of the telecommunications and railroad industries, Congress directed the Federal Energy Regulatory Commission (FERC) to introduce competition in the electricity sector.
Today, more than two-thirds of electricity customers are served by competitive wholesale electricity markets known as Regional Transmission Organizations (RTOs). These markets are run as nonprofits and regulated by FERC as “public utilities” under the Federal Power Act. RTOs are required to offer power at “just and reasonable rates” and to refrain from unduly discriminating between generators and technologies.
Over the same time period, the power sector has experienced fundamental shifts. Natural gas plants and renewable energy can now be built and operated for less than coal plants in most parts of the country. Consumers are demanding cleaner energy. New technologies make it possible for batteries, rooftop solar, and demand response to bid into competitive markets. As the U.S. economy continues to grow, reliance on old energy infrastructure and market rules to meet these shifts is unsustainable—policy innovation is needed.
The Nicholas Institute provides research, insight, and recommendations to help regulators shape or adapt market trends to make transmission and power markets work for both the environment and the economy. Since early 2015, the Institute has also hosted the Power Shift network with Harvard and UNC, engaging energy scholars in the conversation about the regulatory infrastructure needed to manage innovation.