The Organized Wholesale Market Improvement Paradox

• Date: 01 August 2022
• Author: Tom Hassenboehler

82022 ENVIRONMENTAL LAW REPORTER 52 ELR 10649

COMMENT

THE ORGANIZED WHOLESALE

MARKET IMPROVEMENT PARADOX

by Tom Hassenboehler

Tom Hassenboehler is a Partner at COEFFICIENT.

Regional transmission organizations (RTOs), while

imperfect, are the best method to fac ilitate the deliv-

ery of reliable, aordable, and clean electric power.

However, after more than 20 years, and as the West and

Southeast debate new market congurations, it is time to

take a critical look and improve RTOs to ensure that they

will continue to be a force in the U.S.’s electric system for

the next 20 years. Despite oversight by the Federal Energy

Regulatory Commission (FERC) and a growing judicial

record of precedence in the courts, the U.S. Congress is t he

only place that can “x” RTOs, and the political will must

be developed to do so.

By way of background, I am a late appreciator of what

markets have achieved over the last t wo decades. Despite

having the privilege of participating in some of the big-

gest energy policy debates at the federal level over the last

two decades, up until my second stint at the U.S. House

of Representatives Energy and Commerce Committee, I

could barely tell you what a regional transmission orga-

nization (RTO/ISO) is or does. is knowledge has been

relegated to the FERC experts and electricity practitio-

ners—and always viewed as overly cumbersome, compli-

cated, and problematic. at was my perspective as a fa irly

informed policy professional—so imagine what members

of Congress are like when you try to explain this complex

architecture. However, this wasn’t always the case. As ma ny

know, there was a robust history of congressional interest,

oversight, and legislative development in the late 1990s and

early 2000s. But then, for nearly 20 years at the federal

legislative level, organized ma rkets became relegated to the

congressional sidel ines. Why? Complexit y. Underapprecia-

tion. Imperfection. Inc onsistency throug hout the country,

all of which make it dicult to have a national narrative.

Due to lack of congressional involvement subsequent

to facilitating the creation and debating the standardiza-

tion of RTOs in the 1990s, RTOs have become necessarily

and unnecessarily complex. Why? e electricity system

is evolving in ways that were not considered during their

origination, and they have become the default policy deci-

sionmakers for Congress. In 2015, however, Congress

did take a look at wholesale markets and RTO gover-

nance through a legislative hearing series called “Power-

ing America” that I helped to lead and organiz e. We held

nearly 13 hearings that were completely bipartisan. e

hearings and the development of the witness lists and top-

ics were completely bipartisan. A two-part hea ring that

inspired my future work was called “Consumer Oriented

Perspectives on Improving the Nation’s Organized Mar-

kets.” e hearing was one of the rst to showcase the rise

of the 21st-century electricity customer—and its big-tent

evolution—from consumer advocates, to large industrial

and tech customers, to the active, climate-conscious con-

sumer who wants to secure clean and increasingly local-

ized electrons. ese customers were simply not part of the

equation two decades ago, when RTOs evolved into their

current stance.

Despite time passing, the record from these hear ings has

not evaporated. While many new members of Congress a re

now on the Committee, several members and their sta 

remain. ere is now burgeoning interest in building from

these prior hearings and tack ling some of these challenging

but necessary topics again—in particular, organized mar-

ket governa nce and expansion.

Organized ma rkets (both their governance and new for-

mation) have recently become a key topic in states and in

new regions where they don’t exist such as the West and

Southeast, due to the rise of the active electricity customer.

As the electricity industr y evolves, so too does the elec-

tricity customer. No longer content with the traditional

model, today’s electricity customers seek a more active role

in accelerating the energy transition. New electricity cus-

tomers expect options that t their needs and their mission.

Wholesale markets are again becoming intert wined in the

policy narrative, because customers (both large and smal l)

are becoming more engaged and seek ing options.

Prof. Shelley Welton’s article¹ correctly points out aws

in the current approach and challenges the reader to think

comprehensively about ways to improve upon the existing

structures. is “rethink” comes at a critical a nd oppor-

tune time as new cong urations of RTOs are being consid-

1. Shelley Welton, Rethinking Grid Governance for the Climate Change Era, 109

C. L. R. 209, 257 (2021).

Editors’ Note: Tom Hassenboehler’s Comment is based on

his remarks at the 2021-2022 Environmental Law and Pol-

icy Annual Review conference, available at https://www.

eli.org/environmental-law-policy-annual-review/2021-

2022-ELPAR-conference.

Copyright © 2022 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.