Policy and regulation Policy for the electricity sector in the United States is set by the executive and legislative bodies of the federal government and state governments. Within the executive branch of the federal government the
Department of Energy plays a key role. In addition, the
Environmental Protection Agency is in charge of environmental regulation and the
Federal Trade Commission is in charge of consumer protection and the prevention of anti-competitive practices. Key federal legislation related to the electricity sector includes: • the
Federal Power Act of 1935 that promoted hydropower and increased the role of the federal government in the sector, • the
National Energy Act of 1978, including the
Public Utility Regulatory Policies Act (PURPA), which required utilities to provide residential consumers with energy conservation audits and other services to encourage slower growth of electricity demand, and was intended to promote
renewable energy with the result of promoting mainly
co-generation; • the
Energy Policy Act of 1992 which provided further incentives for energy efficiency and removed obstacles to wholesale competition; and • the
Energy Independence and Security Act of 2007 which phased out
incandescent light bulbs. Many state governments have been active in promoting
renewable energy. For example, in 2007 25 states and the District of Columbia had established
renewable portfolio standards (RPS). There is no federal policy on RPS. The
Federal Energy Regulatory Commission is in charge of regulating interstate electricity sales, wholesale electric rates, and licensing hydropower plants. Rates for electricity distribution are regulated by state-level Public Utilities Commissions or Public Services Commissions.
Deregulation and competition Deregulation of the electricity sector consists in the introduction of competition and the unbundling of vertically integrated utilities in separate entities in charge of
electricity generation,
electricity transmission,
electricity distribution and commercialization. The deregulation of the electricity sector in the U.S. began with the
Energy Policy Act of 1992 which removed obstacles for wholesale competition. In practice, however, regulation has been unevenly introduced between states. It began in earnest only from 1996 onwards when the
Federal Energy Regulatory Commission issued orders that required utilities to provide transmission services "on a reasonable and non-discriminatory basis". In some states, such as in California, private utilities were required to sell some of their power plants to prevent concentration of market power. As of April 2014, 16 U.S. states –
Connecticut,
Delaware,
Illinois,
Maine,
Maryland,
Massachusetts,
Michigan,
Montana,
New Hampshire,
New Jersey, New York,
Ohio,
Oregon,
Pennsylvania,
Rhode Island, and
Texas – and the
District of Columbia have deregulated their
electricity markets in some capacity. Additionally, seven states –
Arizona,
Arkansas, California,
Nevada,
New Mexico,
Virginia, and
Wyoming – started electricity deregulation in some capacity but have since suspended deregulation. The
deregulation of the Texas electricity market in 2002 is one of the better-known examples. The result has been that the different states with in United States have a wide spectrum of different levels of deregulation. Some states only allow large commercial customers to choose a different supplier, some allow all consumers to choose. Contrary to the largely similar methods of deregulation for natural gas, different states have taken very different approaches to electricity deregulation.
Service provision Electric utilities in the U.S. can be both in charge of
electricity generation and
electricity distribution. The
electricity transmission network is not owned by individual utilities, but by companies and organizations that are obliged to provide indiscriminate access to various suppliers to promote competition. In 1996, there were 3,195 electric utilities in the United States and 65 power marketers. Of these, 2,020 were publicly owned (including 10 Federal utilities), 932 were rural electric cooperatives, and 243 were investor-owned utilities. Fewer than 1,000 utilities are engaged in power generation.
Generation About 80% of the electricity in the U.S. is generated by private ("investor-owned") utilities. The remaining electricity is produced by the public sector. This includes federal agencies such as the
Tennessee Valley Authority (producing mainly nuclear and hydropower), and
Power Marketing Administrations of the
Department of Energy, one of which is the
Bonneville Power Administration (in the
Pacific Northwest)(hydropower). It also includes municipal utilities and
utility cooperatives. The largest private electric producers in the United States include: •
AES Corporation •
Southern Company, 42GW •
American Electric Power, 38GW •
Duke Energy, 58.2GW •
Luminant, 18GW •
Reliant Energy, 14GW •
Pacific Gas and Electric Company, 7.7GW •
Vistra, 41GW
Transmission (kV) There are two major
wide area synchronous grids in North America, the
Eastern Interconnection and the
Western Interconnection. Besides this there are two minor power grids in the U.S., the
Alaska Interconnection and the
Texas Interconnection. The Eastern, Western and Texas Interconnections are tied together at various points with
DC interconnects allowing electrical power to be transmitted throughout the contiguous U.S., parts of Canada and parts of Mexico. The transmission grids are operated by
transmission system operators (TSOs), not-for profit companies that are typically owned by the utilities in their respective service area, where they coordinate, control and monitor the operation of the electrical power system. TSOs are obliged to provide non-discriminatory transmission access to electricity generators and customers. TSOs can be of two types:
Independent System Operators (ISOs) and
Regional Transmission Organizations (RTOs). The former operates within a single state and the latter covers wider areas crossing state borders. In 2009 there were four RTOs in the U.S.: •
ISO New England (ISO-NE, which is an RTO despite its name); •
Midcontinent Independent System Operator; •
PJM Interconnection in the Mid-Atlantic region; and •
Southwest Power Pool (SPP) covering Oklahoma, Kansas and parts of Arkansas, Missouri, Texas and New Mexico. There are also three ISOs: •
California Independent System Operator (California ISO); •
New York Independent System Operator (NYISO); •
Electric Reliability Council of Texas (ERCOT, an ISO). RTOs are similar, but not identical to the nine
Regional Reliability Councils associated in the
North American Electric Reliability Corporation (NERC), a non-profit entity that is in charge of improving the reliability and security of the bulk power system in the U.S., Canada and the northern part of Baja California in Mexico. The members of the Regional Reliability Councils include private, public and cooperative utilities, power marketers and final customers. The Regional Reliability Councils are: •
Eastern Interconnection •
Florida Reliability Coordinating Council (FRCC) •
Midwest Reliability Organization (MRO) •
Northeast Power Coordinating Council (NPCC) •
ReliabilityFirst Corporation (RFC) •
SERC Reliability Corporation (SERC) •
Southwest Power Pool (SPP) •
Western Interconnection •
Western Electricity Coordinating Council (WECC) •
Texas Interconnection •
Electric Reliability Council of Texas (ERCOT) The
FERC distinguishes between 10 power markets in the U.S., including the seven for which RTOs have been established, well as: • Northwest • Southwest (covering Arizona, most of New Mexico and Colorado) • Southeast ISOs and RTOs were established in the 1990s when states and regions established wholesale competition for electricity.
Distribution About 75% of electricity sales to final customers are undertaken by private utilities, with the remainder being sold by municipal utilities and cooperatives. == Economic and financial aspects ==