1993, the PJM member utilities formed the
ISO PJM Interconnection Association, which
operated the PJM power pool. In 1997, PJM
opened its first bid-based electricity market and
provided the underlying trading platform. Later
that year, FERC approved PJM as the first ISO in
the USA. In 2002, in line with FERC’s standard
market design, PJM became an RTO to operate
the multi-state transmission network. Figure 40
shows changes in the market structure of PJM
over time.
(2) Transmission investment
PJM carries out a planning process called
regional transmission expansion planning
(RTEP) to ensure future adequacy of the network. Under the RTEP process, PJM analyses
several scenarios to assess the adequacy of network conditions over a time frame of 15 years.
RTEP defines the need for and benefits of a
transmission project, but review and approval are
the responsibility of the member states where the
project is located. The transmission investments
Table 4 Summary of network arrangements in the USA
Institutional
arrangements
Transmission planning and delivery Network pricing
Institutional model:
FERC proposed
best practice is the
RTO model, which
is functionally
similar to the ISO
model
RTO model has
been adopted by
seven out of ten
interconnection
regions
However, the
Southeast,
Southwest and
Northwest pools
retain a traditional
vertically
integrated utility
structure
Planning:
In PJM and CAISO, the SO directly
plans investment projects, while in
regions such as NYISO, TOs or
merchants plan and propose
transmission solutions
All ISOs review current and planned
TO investments for suitability
against reliability and public policy
needs
Upstream and downstream
stakeholders are consulted during
the review process, with NERC as
the regulator
Delivery:
In CAISO and PJM, the SO invites
tenders for planned investment, with
TOs and merchants competing for
delivery
TOs and merchants propose and
deliver their own solutions in NYISO
Investment regime:
Merchants may make investments,
although these have largely been
limited to interconnections
Following FERC orders,
liberalised markets
adopted nodal pricing
However, ISOs apply this
at different resolutions
PJM has highly granular
prices, but aggregates to
hub prices to ensure
liquidity
Nodal prices in CAISO
are less granular than
in PJM
Note FERC = Federal Energy Regulatory Commission; CAISO = California Independent System Operator; NYISO = New York Independent
System Operator; RTO = regional transmission organisation; ISO = independent system operator.
Source Vivid Economics
110
W. Xiaoming et al.
ISO PJM Interconnection Association, which
operated the PJM power pool. In 1997, PJM
opened its first bid-based electricity market and
provided the underlying trading platform. Later
that year, FERC approved PJM as the first ISO in
the USA. In 2002, in line with FERC’s standard
market design, PJM became an RTO to operate
the multi-state transmission network. Figure 40
shows changes in the market structure of PJM
over time.
(2) Transmission investment
PJM carries out a planning process called
regional transmission expansion planning
(RTEP) to ensure future adequacy of the network. Under the RTEP process, PJM analyses
several scenarios to assess the adequacy of network conditions over a time frame of 15 years.
RTEP defines the need for and benefits of a
transmission project, but review and approval are
the responsibility of the member states where the
project is located. The transmission investments
Table 4 Summary of network arrangements in the USA
Institutional
arrangements
Transmission planning and delivery Network pricing
Institutional model:
FERC proposed
best practice is the
RTO model, which
is functionally
similar to the ISO
model
RTO model has
been adopted by
seven out of ten
interconnection
regions
However, the
Southeast,
Southwest and
Northwest pools
retain a traditional
vertically
integrated utility
structure
Planning:
In PJM and CAISO, the SO directly
plans investment projects, while in
regions such as NYISO, TOs or
merchants plan and propose
transmission solutions
All ISOs review current and planned
TO investments for suitability
against reliability and public policy
needs
Upstream and downstream
stakeholders are consulted during
the review process, with NERC as
the regulator
Delivery:
In CAISO and PJM, the SO invites
tenders for planned investment, with
TOs and merchants competing for
delivery
TOs and merchants propose and
deliver their own solutions in NYISO
Investment regime:
Merchants may make investments,
although these have largely been
limited to interconnections
Following FERC orders,
liberalised markets
adopted nodal pricing
However, ISOs apply this
at different resolutions
PJM has highly granular
prices, but aggregates to
hub prices to ensure
liquidity
Nodal prices in CAISO
are less granular than
in PJM
Note FERC = Federal Energy Regulatory Commission; CAISO = California Independent System Operator; NYISO = New York Independent
System Operator; RTO = regional transmission organisation; ISO = independent system operator.
Source Vivid Economics
110
W. Xiaoming et al.