Studying Apples and Oranges

 

RTO cost/benefit studies are difficult to reconcile.

The premise behind the Federal Energy Regulatory Commission's (FERC) push for regional transmission organizations (RTOs)-that they will provide positive economic benefits to society- increasingly is being challenged.

Over the course of the past year, at least five studies examining the costs and benefits of RTO formation have been published, with more certainly to follow.¹ Not surprisingly (given the differences in approach, methodology, assumptions, and geographic scope), the results have added fuel to the ongoing national debate about the economic benefits that may or may not result from RTO formation.

While there are significant differences between the five RTO cost/benefit studies summarized in this article, they all share two principal characteristics. First, each concludes that creating RTOs will provide substantial benefits to society. However, only the RTO West study provides an attempt to detail the actual costs and, therefore, net benefits of RTO implementation. Second, each study also finds that while there are overall benefits from RTO formation, there will be winners and losers as a result of this process. These findings have raised further concerns, particularly among regulators, and are leading the debate in the direction of more detailed analyses of state-level customer class impacts.

The variety of differences in the time period, scope, and assumptions make comparing the various studies difficult. Even so, comparing the apples-and-oranges studies does yield some useful insights.