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• Unlike vertically integrated utilities that are accountable to state elected officials and state public utility commissions, RTOs and their participants are accountable only to FERC. Even then, however, accountability is indirect through the tariffs (rules) that the RTOs adopt and FERC approves. In addition, unlike utilities, generators in an RTO have no obligation to serve customers.

New Policies FERC must make reliability of the grid and service to end use top priorities. To do so, it should:

• Reexamine the premise of RTOs. RTOs no longer seem to work for the benefit of the American people. Marginal price auctions for energy are not ensuring the reliability of the grid and are not passing the full economic benefits of subsidized renewables on to customers. FERC needs to reexamine the RTOs under its jurisdiction to make sure that they procure reliable and affordable electricity for the benefit of the American people.

• Ensure that RTOs return to market fundamentals so that they serve customers, not special interests and political causes. FERC should require RTOs to ensure that reliable, dispatchable resources are properly valued to provide electricity when needed for the benefit of customers. Potential reforms could include:

1. Requiring renewable generators to provide intra-day backup by dispatchable on-demand generation so that bids by intermittent resources into RTOs equate fairly with far more valuable on-demand dispatchable resources;

2. Creating dual energy markets for dispatchable and nondispatchable resources; or

3. Eliminating capacity markets where intermittent resources participate and instead establishing “reliability” markets where dispatchable on-demand resources participate.

Alternatives to marginal price auctions also should be considered.

• Direct the RTOs to ensure that the economic benefits of renewables (like tax credits and no fuel costs) are passed on to customers.