The Perfect RTO? Even at PJM, Pulling It Off Is No Cinch

A former state regulator notes serious problems in Northeast power markets, and offers remedies.

As the electric industry copes with the Federal Energy Regulatory Commission's Order 2000, the final rule on regional transmission organizations, let's reconsider the role of the RTO. How does it facilitate transmission? How does it ensure reliability? What changes are needed for today's independent system operator (ISO)?

And to gauge performance so far, why not take a look at PJM Interconnection, and the control area that it runs as an ISO? After all, few would argue that PJM has built the most successful track record of existing ISOs.

But not all is well with the wholesale pricing market within PJM. It's true that PJM has accomplished a great deal. It has become almost un-Pennsylvanian or even un-American not to praise the organization. PJM has been accessible to all participants, including environmental and consumer organizations whose opinions have not always been sought or taken seriously. But its past accomplishments will not solve emerging challenges. PJM must move aggressively to resolve these serious problems that undermine wholesale competition and reliability and threaten to harm retail competition.

Seven problems require PJM's immediate attention. For each challenge, I propose a corrective response.