How the feds opened the supply side.
Sonia Aggarwal is the Director of Strategy at Energy Innovation: Policy and Technology LLC, where she works on policies to transform the electric grid and reduce emissions into a clean, reliable, and affordable system. Robbie Orvis is a policy analyst for Energy Innovation’s Smart Energy Policy program area. The authors thank Kurt Adelberger (Google), Katherine Hamilton (Energy Storage Association), Devra Wang (Natural Resources Defense Council), Eric Gimon (independent consultant), Michael O’Boyle (Energy Innovation), and Hal Harvey (CEO, Energy Innovation) for helping.
In 1973, when Congress enacted the Public Utility Regulatory Policies Act (PURPA), it intended, among other things, to spur the development of independently-owned generation. But the sheer scale of independent power production that arose from PURPA was a surprise to many. In fact, this tremendous growth effectively "put a stake through the heart of the old view that independent power producers [IPPs] could not provide cost-effective and reliable supplies."1
Later, in 1992, in order to accommodate this significant growth in non-utility generation, Congress passed the Energy Policy Act (EPAct) in 1992. EPAct promoted wholesale generators and required vertically owned utilities to open their transmission systems to third party operators in an effort to improve wholesale trading and competition.2
In 1996, the Federal Energy Regulatory Commission (FERC) built on EPAct with Order 888, which required all vertically integrated utilities to provide universal access to their transmission systems via an open access transmission tariff, and Order 889, which required the vertically integrated investor-owned utilities (IOUs) to provide information about transmission capacity and prices.3 Orders 888 and 889 also proposed for the first time the idea of an independent system operator (ISO) to optimize the portfolio of power produced and traded on the transmission system.