Skip to content
Contact
Set Up A Call
  • Blog
  • What’s the Difference Between ISO and RTO?
Share this post
Kathy Hitchens

Kathy Hitchens

Transmission lines against a bright blue sky

What’s the Difference Between ISO and RTO?

November 29, 2022
/
US ISO/RTO Markets

Spend more than five minutes talking to anyone in the energy transmission industry, and you’ll hear the terms Independent System Operators (ISO) and Regional Transmission Organizations (RTO). While initially envisioned to be two pieces of the same puzzle, these acronyms have become interchangeable over time. Whether someone refers to an ISO, RTO, or even an ISO/RTO, they’re likely talking about the same thing — an organization that manages the high-voltage transmission grid in the U.S.

In this article, we’ll explore the history of these two groups and how the differences between them, at this point, are basically semantics.

The birth of ISOs and RTOs

Before ISOs were formed, all aspects of a market’s grid electricity, from generation to transmission and distribution, were typically owned by a single entity. This lack of competition led to higher prices for energy buyers who had little choice in where they could purchase electricity.

In 1996, the Federal Energy Regulatory Commission (FERC) took action to increase competition in the electricity market and ensure there was no discrimination regarding transmission access. The result was FERC Order 888 and FERC Order 889, which established a series of Independent System Operators (ISOs).

In addition to changing market economics and improving access, ISOs were designed to reduce government oversight and ensure grid reliability. Essentially, these organizations run the high-voltage transmission grid for transmission owners in their respective regions.

In 1999, FERC issued Order 2000, encouraging smaller transmission entities to join Regional Transmission Organizations (RTOs) voluntarily. RTOs run the transmission grid on a regional basis across North America and Canada. The order included specific technical requirements an operator must meet to be considered a FERC-approved RTO.

Essentially, FERC envisioned RTOs as larger organizations composed of multiple independent ISOs. PJM, which serves the Mid-Atlantic states, is an example of an RTO. It was formed from power pools that were first organized in the 1920s.

The regions

Source: [FERC]

The U.S. is split into 10 distinct transmission regions, as shown in the above map. The Southeast, Southwest, and Northwest all have traditional wholesale electricity markets where utilities are responsible for grid operations and management as well as providing electricity to customers. For that reason, we’ll exclude them from this conversation.

The remaining seven are ISOs or RTOs (see map). ISOs include the California ISO (CAISO), the Midcontinent Independent System Operator (MISO), the New York Independent System Operator (NYISO), and ISO New England (ISO-NE). The Electric Reliability Council of Texas (ERCOT) is also an ISO, though it does not fall under the purview of FERC. The Southwest Power Pool (SPP) and PJM have RTO status.

All told, two-thirds of the U.S. electricity load is served in ISO and RTO regions, according to FERC.

Same goal, different name

Here’s where we start getting into the semantics. Both ISOs and RTOs share the same general mandates:
  • They must operate as a nonprofit
  • They must ensure non-discriminatory access to the transmission grid by both customers and suppliers.
  • They operate the bulk power transmission system within their footprint and do so independently of the wholesale market (meaning they don’t sell electricity to end users)
  • They cannot own any equipment (generators, power lines, and the like)
  • They must obtain electricity from generation suppliers to maintain system reliability and meet market demand

The only difference between an ISO and an RTO in today’s market is the size of its footprint and the way it prices services. Because each ISO and RTO operates independently, each sets prices based on specific supply and capacity tags. Other than that, the two organizations serve the same purpose — no matter what they’re called.

Interested in learning more about FERC Orders 888 and 889 and how they ensured that external transmission system users were treated fairly? Read “e-Tag History in Wholesale Energy Markets” on the PCI blog.
Kathy Hitchens

Kathy Hitchens

Kathy has more than 25 years of writing experience, working with a variety of companies in the technology, energy, education, and financial industries. Of late, her work has been focused on renewable energy, including writing about utilities, microgrids, solar, and wind energy companies. Kathy has a BFA in Media Arts from the University of Arizona and an MBA from the University of Denver.

Related blog posts

Loading...
INFOCUS General Session
Jan 18
About Us

Our Company Vision to Guide Us Through 2023 and Beyond

Jan 04
Hydrogen

Can Hydrogen Help Decarbonize Your Turbine Fleet?

Dec 20
Energy Accounting

Audit with Confidence with Automated Verification in Energy Accounting

Related press

Loading...
Laptop computer with code displayed on the screen
Jan 23
Cybersecurity

PCI Successfully Completes SOC/FISMA Examinations for 2022

Ron Swartz, senior director of Trading Analytics, at PCI Energy Solutions
Jan 11
About Us

Energy Trading Product Visionary Ron Swartz Joins PCI Energy Solutions

Transmission Lines
Nov 16
SEEM

Multiple Customers Go Live With the PCI SEEMTrader Platform for Autonomous Power Trading in the Southeast Energy Exchange Market (SEEM)

PCI Energy Solutions

PCI Energy Solutions

Also known as Power Costs, Inc.

Connect with us

U.S. 1+ 405.447.6933

Sales 1+ 405.701.7301

301 David L. Boren Blvd., Suite 2000
Norman, OK 73072

Contact us

We’re Hiring! 

Linkedin Twitter
  • Energy Trading and Optimization
  • Wholesale Market Participation
  • ETRM
  • Portfolio Optimization
  • Settlements and Billing
  • Gas & Fuels Management
  • Generation Outage Management
  • Company Type
  • Utilities
  • Generators
  • Traders
  • Renewable Energy
  • Asset Managers
  • Retailers
  • About
  • About Us
  • Cybersecurity
  • Leadership
  • Our Technology
  • Newsroom
  • Careers

Subscribe to our newsletter

Subscribe
  • Transmission and Reliability
  • Transmission Outage Management
  • Transmission Scheduling
  • e-Tagging
  • Balancing Authority Operations
  • Energy Accounting
  • Settlements and Billing
  • Sustainable Energy
  • Renewables Trading & Scheduling
  • Energy Storage Optimization & Trading
  • Hydrogen
  • Hydropower
  • Carbon Intensity
  • Markets
  • US ISO/RTO Markets
  • US Bilateral Markets
  • Canada
  • Chile
  • Mexico
  • Europe
  • Australia
  • Thought Leadership
  • Blog
  • Webinars & Events
  • Customer Portal
  • INFOCUS Conference
  • Product Trainings
  • Product Documentation
  • Issue Tracker

© Power Costs, Inc. 2022 | All Rights Reserved.

  • Privacy Policy
  • Sitemap
Manage Cookie Consent
To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behavior or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
Functional Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes. The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
Manage options Manage services Manage vendors Read more about these purposes
View preferences
{title} {title} {title}

Request More Information

  • This field is for validation purposes and should be left unchanged.

Contact

Name(Required)
This field is for validation purposes and should be left unchanged.

Subscribe

Name
I am not a robot 🤖(Required)

Solutions

Energy Trading and Optimization

  • Wholesale Market Participation
  • ETRM
  • Portfolio Optimization
  • Settlements and Billing
  • Gas & Fuels Management
  • Generation Outage Management
  • Wholesale Market Participation
  • ETRM
  • Portfolio Optimization
  • Settlements and Billing
  • Gas & Fuels Management
  • Generation Outage Management

Transmission and Reliability

  • Transmission Outage Management
  • Transmission Scheduling
  • e-Tagging
  • Balancing Authority Operations
  • Settlements and Billing
  • Energy Accounting
  • Transmission Outage Management
  • Transmission Scheduling
  • e-Tagging
  • Balancing Authority Operations
  • Settlements and Billing
  • Energy Accounting

Sustainable Energy

  • Renewable Energy Trading & Scheduling
  • Energy Storage Optimization & Trading
  • Hydrogen
  • Hydropower
  • Carbon Intensity
  • Renewable Energy Trading & Scheduling
  • Energy Storage Optimization & Trading
  • Hydrogen
  • Hydropower
  • Carbon Intensity

Markets

  • US ISO/RTO Markets
  • US Bilateral Markets
  • Canada
  • Mexico
  • Chile
  • Europe
  • Australia
  • US ISO/RTO Markets
  • US Bilateral Markets
  • Canada
  • Mexico
  • Chile
  • Europe
  • Australia

Resources

Thought Leadership

  • Blog
  • Webinars & Events
  • Blog
  • Webinars & Events

Customer Portal

  • INFOCUS Conference 2023
  • Product Trainings
  • Product Documentation
  • Issue Tracker
  • INFOCUS Conference 2023
  • Product Trainings
  • Product Documentation
  • Issue Tracker

About Us

  • About
  • Leadership
  • Newsroom
  • Our Technology
  • Cybersecurity
  • About
  • Leadership
  • Newsroom
  • Our Technology
  • Cybersecurity

Careers

Contact Us