In a report released on September 23, the Government Accountability Office (GAO) echoed the views of many industry participants that Regional Transmission Organizations (RTOs) have improved the management of and access to the transmission grid.  However, the report also echoed concerns raised by the National Rural Electric Cooperative Association and others that RTO markets have failed to provide promised benefits to consumers above the costs to create and run those markets.

Congress asked the GAO to review “(1) RTO expenses and key investments in property, plant, and equipment from 2002 to 2006, the most current data available; (2) how RTOs and FERC review RTO expenses and decisions that may affect electricity prices; and (3) the extent to which there is consensus about RTO benefits.”

According to a report summary, “Many agree that RTOs have improved the management of the transmission grid and improved generator access to it; however, there is no consensus about whether RTO markets provide benefits to consumers or how they have influenced consumer electricity prices.”

“The GAO findings are consistent with the results of our research,” said NRECA’s power supply manager, Paul McCurley.  “We know that RTOs can take advantage of more efficient, lower-cost generation on a large regional scale, but there’s no evidence that these opportunities translate into lower costs for the consumer.  In fact, the GAO found that RTOs more often than not lead to higher costs.  The GAO, like NRECA and other consumer-oriented folks, was not able to identify benefits of RTO markets that outweigh their costs.”

According to the GAO report, “Many experts and industry participants agree that RTOs are better positioned than individual utilities to make use of lower-cost generators more frequently, although they do not agree whether this has resulted in electricity prices for consumers that are lower than they otherwise would have been.”

A state-by-state analysis of electricity prices reveals differences between RTO and non-RTO regions that have likely led to concerns about the impact of RTO markets on electricity prices. We considered retail electricity prices in four regions of the country: (1) original RTO states— states that joined an RTO in 1999 or earlier and were historically in a power pool, (2) new RTO states—states in an RTO region after 1999, (3) non-RTO states—states outside RTO regions, and (4) California.34 As shown in figure 9 [see below], 11 of the 17 states with above-average retail electricity prices are in the original RTO group. California also had above average prices in 2007.

Specifically, advocates and critics of RTOs debate the extent to which RTO markets, rising fuel prices and other factors have contributed to rising costs of electricity generation in RTO regions, the GAO said.

What is lacking, the agency suggested, is an analysis by FERC of whether RTOs achieved expected benefits, or a comprehensive, commission-developed set of “publicly available, standardized measures to help evaluate such performance.”

NRECA will be releasing its third annual RTO Report Card later this year.