CFTC Regulation of RTO-Administered Capacity Markets

• Pages: 59-77
• Date: 01 March 2026
• Published date: 01 March 2026
• Author: Patrick Seroogy
• Subject Matter: Administrative & Public Law

MAR/APR 2026 ENVIRONMENTAL LAW REPORTER 56 ELR 10143

Author’s Note: The views and opinions expressed in this Ar-

ticle are the author’s own and do not necessarily ref‌lect any

position of Enhesa nor any of its employees. He would like

to thank Peter Malyshev for teaching the course in which

the early drafts of this Article were developed.

CFTC REGULATION OF

RTO-ADMINISTERED CAPACITY

MARKETS: OBSTACLES OR LESSONS?

by Patrick Seroogy

Patrick Seroogy, J.D., is an environmental, health, and safety regulatory consultant at Enhesa.

Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) operate, and the

Federal Energy Regulatory Commission (FERC) oversees, wholesale electricity markets that facilitate sale

and purchase of electricity. Some transactions were potentially subject to Commodity Futures Trading Com-

mission (CFTC) jurisdiction after the Dodd-Frank Act, but the agency later exempted transactions compli-

ant with FERC-authorized tarif fs. Through the electricity capacity market, RTOs/ISOs aim to secure reliable

electricity supply and meet future demand, but various aspects of this market’s design have been criticized

for its long-term effectiveness and ensuing impact on grid reliability, prompting various reform proposals.

This Article considers whether adopting or modeling CFTC regulation could assist or inform such reform. It

concludes that FERC regulation is substantially similar to CFTC regulation in terms of market and compliance

monitoring, but is appropriately tailored to physical electricity markets; and it is not clear whether adopting

CFTC regulation would help or hurt eff‌icient administration of these markets.

SUMMARYSUMMARY

e United States economy runs on enormous quantities

of energy, much of which is used in the form of electr ic-

ity that is generated, tr ansmitted, and distributed throu gh

the electric ity grid.... e modern electricity grid is

so complex that it seems almos t impossible that it is able

to function as well a nd as reliably as it does. A merican

households and businesses t ake for granted th at the grid

will provide power on demand at al l times and in virtua lly

any circumsta nces short of a catastrophic natura l disaster.1

e electric grid, interchangeably cal led the power grid or

transmission grid, is a “vast, s ynchronized machine” slowly

built up by thousands of smaller utilities and cobbled

together over a century.2 e grid is made up of transform-

ers, substations, and thousands of miles of transmission

lines that facilitate the generation, transmission, and dis-

1. Todd Aagaard & Andrew N. Kleit, Too Much Is Never Enough: Constructing

Electricity Capacity Market Demand, 43 E L.J. 79, 80 (2022).

2. Nadja Popovich & Brad Plumer, Why the U.S. Electric Grid Isn’t Ready for the

Energy Transition, N.Y. T (June 12, 2023), https://www.nytimes.com/

interactive/2023/06/12/climate/us-electric-grid-energy-transition.html.

tribution of electricity.3 ere are three large, primary

regional power grids in the United States, called “ intercon-

nections,” that operate largely independently of each other:

the Eastern Interconnect ion, the Western Interconnection,

and the Electric Reliability Council of Texas (ERCOT).4

Each regional power grid is composed of local gr ids that

are physically interconnected into a broader network: this

makes for better reliability (and commercial enterprise) by

“providing multiple routes for power to ow and allow-

ing generators to supply electricity to many load centers.

is redundancy helps prevent transmission line or power

plant failures from causing interruptions in ser vice to retail

cu st om er s.” 5 While the interconnections describe the grid’s

physical network, the entities that operate the grid, keep

electricity owing, and keep elect ricity demand and supply

balanced are the ba lancing authorities: Regional Transmis-

sion Organizations (RTOs), Independent System Opera-

tors (ISOs), Power Marketing Administrations (PMAs),

and electric utilities, whether investor-owned, tribal, coop-

erative, or municipal.6

3. U.S. Energy Information Administration (EIA), Electricity Explained: How

Electricity Is Delivered to Consumers, https://www.eia.gov/energyexplained/

electricity/delivery-to-consumers.php (last updated Apr. 16, 2024).

4. Id.

5. Id.

6. Id. (“Most of the balancing authorities are electric utilities that have taken

on the [electricity] balancing responsibilities for a specic part of the power

system. All of the [RTOs] in the United States also function as balancing au-

Copyright © 2026 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, https://www.eli.org

56 ELR 10144 ENVIRONMENTAL LAW REPORTER MAR/APR 2026

Figure 1. U.S. Electric Power Regions

Interconnectors

Eastern (light grey)

ERCOT (black)

Western (dark grey)

Circles represent the 66

balancing authorities

RTOs and ISOs (hereinafter RTOs)7 are electric power

transmission system operators (i.e., “grid” operators) that

coordinate, control, and monitor the transfer of electricity

along parts of the grid’s transmission networks, ensuring

their reliability and preventing undue discrimination in

access to the grid.8 ey, along with other bala ncing author-

ities, occupy all space of the contiguous United States and

its interconnections (as seen in Figure 1) that have a grid.9

thorities.”); Federal Power Marketing Administrations Operate Across Much of

the United States, EIA (June 12, 2013), https://www.eia.gov/todayinenergy/

detail.php?id=11651 (“All four of the PMAs function as balancing authori-

ties for their regions.”). See also Sara Ho, U.S. Electric System Is Made Up

of Interconnections and Balancing Authorities, EIA (July 20, 2016), https://

www.eia.gov/todayinenergy/detail.php?id=27152.

EIA uses the denition of “balancing authority” provided by the North

American Reliability Corporation (NERC): “e responsible entity that

integrates resource plans ahead of time, maintains load-interchange-gener-

ation balance within a Balancing Authority Area, and supports Intercon-

nection frequency in real time.” EIA, Glossary, https://www.eia.gov/tools/

glossary/index.php?id=B (last visited Feb. 13, 2026) (citing NERC, Glos-

sary of Terms Used in Reliability Standards 2 (Nov. 5, 2025), https://www.

nerc.com/globalassets/standards/reliability-standards/glossary_of_terms.

pdf. See also id. (dening “Balancing Authority Area” as “e collection of

generation, transmission, and loads within the metered boundaries of the

Balancing Authority. e Balancing Authority maintains load resource bal-

ance within this area.”).

7. RTOs and ISOs are not one and the same, but their roles and functions are

similar enough to warrant using one acronym to refer to both entities for the

purpose of this Article, dierentiated in text as necessary.

8. Federal Energy Regulatory Commission (FERC), Energy Markets, https://

www.ferc.gov/opp/energy-markets (last updated Aug. 18, 2025).

9. Ho, supra note 6 (displaying map of interconnections, RTOs and ISOs,

and other balancing authorities in the contiguous United States); EIA, supra

note 3 (displaying same map). While the map states that there are 66 bal-

ancing authorities (BAs) operating in the contiguous United States, other,

more recent EIA data indicate that there are 62 BAs operating at the time

of writing. See EIA, Hourly Electric Grid Monitor: About the EIA-930 Data,

https://www.eia.gov/electricity/gridmonitor/about (last visited Feb. 24,

2026) (providing a list of 77 historical BAs, 15 of which are indicated to

have retired across both Canada and the United States, and indicating that

62 BAs are still operating in the contiguous United States). Six BAs have

retired since “July 1, 2015, the rst date of” the EIA reporting the hourly

operating data of BAs, either because they were incorporated into another’s

system or they “made other arrangements[.]” Id.

Hawaii10 and Alaska11 have their own electricity grids and

are not part of any of the mainla nd interconnections.

e Federal Energy Regulatory Commission (FERC) is

the primary federa l regulatory body for the transmission of

electricity (and natural gas).12 It oversees the operation of

RTOs and reviews their eorts to operate and coordinate

the grid reliably (with the exception of ERCOT, which

is outside of FERC’s jurisdiction).13 FERC is empowered

under the Federal Power Act (FPA) with ensuring that the

e same EIA webpage that provides a list indicating retired BAs mis-

takenly says elsewhere on the page that there are ve retired BAs, missing

one (Grith Energy, LLC (GRIF)) provided in the “List of balancing au-

thorities” at the top of the page. See id. Another EIA “real-time” dashboard

indicates that it receives and reports hourly data from 68 BAs, but six of

them are those that the EIA has indicated have retired. See id.; EIA, Hourly

Electric Grid Monitor: U.S. Electricity Overview (U.S. Lower 48), https://

www.eia.gov/electricity/gridmonitor/dashboard/electric_overview/US48/

US48 (last visited Feb. 24, 2026) (displaying, under the “View” drop-down

option for “Balancing authority electricity overview” and under “List View,”

that real-time updates are being received from 68 BAs).

10. “Each of Hawaii’s six main islands has its own electrical grid, not connected

to any other island” and “four electric utility companies [are] engaged in

the production, purchase, transmission, distribution, and sale of electric

energy in the State[,]” and in this capacity they are functionally balanc-

ing authorities. See Hawaii Public Utilities Commission, Energy, https://

puc.hawaii.gov/energy/ (last updated July 2025). See also FERC, Reliabil-

ity Explainer, https://www.ferc.gov/reliability-explainer (last updated Aug.

16, 2023) (“FERC certied NERC as the Electric Reliability Organization

for the United States mainland, not including Alaska and Hawaii[,]” and

NERC can develop and legally enforce reliability standards for the power

grid); Singularity, Open Grid Emissions: Summary of the Data, https://docs.

singularity.energy/docs/open-grid-emissions/using_the_data-summary-of-

the-data (last visited Feb. 24, 2026) (BAs in Hawaii and Alaska “do not

report their electricity interchange to the EIA.”).

11. See id.; University of Alaska Fairbanks, Alaska’s Arctic Energy System, https://

uaf-iarc.org/alaska-arctic-policy-trends/energy-issues/arctic-energy/ (last

visited Feb. 10, 2026) (“[m]ore than 150 standalone electrical grids make

up the state’s energy system” and “[o]ver 100 utilities deliver energy to Alas-

ka consumers[,with m]ost electric utilities [being] small, often serving just

one community, with electric loads varying”).

12. FERC, What FERC Does, https://www.ferc.gov/what-ferc-does (last updat-

ed June 18, 2025).

13. FERC, supra note 8.

Copyright © 2026 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, https://www.eli.org