Electricity Markets in the United States: Power Industry Restructuring Processes for the Present and Future

Following Order 888 from the Federal Regulatory Energy Commission (FERC) in 1996, the U.S. power industry began its restructuring process. This undertaking involved a transition from a vertically integrated utility structure where generation, transmission, and distribution are combined to serve consumers. Through advancing to a market environment, generation companies (GenCos) can compete with each other to provide energy through open transmission and distribution systems managed by transmission (TransCos) and distribution companies (DisCos). The goals of the restructuring are the efficient production of electricity and efficient generation investment through competition. Under the restructured environment shown in Figure 1, wholesale electricity markets are managed by independent system operators (ISOs) or regional transmission organizations (RTOs), whose responsibility is reliable system operation, market administration, and system planning. GenCos, large consumers, load aggregators, marketers, and load serving entities (LSEs) buy and sell electricity through FERC-regulated wholesale electricity markets. Small consumers like individual households, some large consumers, LSEs, marketers, and load aggregators can transact energy either at a regulated retail rate overseen by the public utility commission (PUC) or through retail competition. The restructuring process has been complex, especially in trying to harmonize the wholesale and retail sides, and involves many stakeholders from both public and private sectors (see Figure 1).