As attention to Ohio House Bill 6 continues to grow, more people are beginning to look into the legislation surrounding it. Three acronyms that keep appearing across legal and legislative documents are RTO, PJM, and MOPR. Acronyms and jargon are often confusing to those outside of the industry, and can make understanding documents more difficult. Today, we’ll explain what these terms mean.
RTO is the acronym for “regional transmission organization.” Regional transmission organizations were created to promote economic efficiency, reliability, and non-discriminatory practices while reducing government oversight. They control, coordinate, and monitor multi-state electric grids. When energy is shared across state lines, it’s considered to be interstate commerce, so RTOs are regulated by the Federal Energy Regulatory Commission (FERC). In RTOs, power companies have the ability to offer excess energy in a stock market-like situation, and other companies bid on the energy to supplement their own power generation. Other RTO markets also exist, such as power companies bidding on who will supply energy in the future.
Independent system operators (ISOs) are structured similarly to RTOs, but typically only handle the power grid for a single state. The primary difference is that ISOs either do not meet the minimum requirements specified by FERC to hold the designation of RTO, or that the ISO has not petitioned FERC for the RTO status.
PJM, or PJM Interconnection LLC, is the name of an RTO that coordinates the movement of wholesale electricity. PJM acts as a neutral, independent party and oversees the competitive wholesale electricity market in Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, and Washington, DC. PJM also oversees the high-voltage electricity grid across these regions. PJM is headquartered in Valley Forge, Pennsylvania. More than 1,000 companies are part of PJM, and it was the largest competitive wholesale electricity market in the world until the early 2000s. It still remains the largest in the United States.
PJM has several markets, but the largest by far is the energy market, in which buyers and sellers of excess energy bid and place offers. Other PJM markets include the ancillary services market, which balances the energy on the power grid by regulating power where needed, and the capacity market, which holds a three-year projection of power in reserve to be sure electric needs are met in the future.
MOPR stands for “minimum offer price rule,” which is the minimum amount that a power company can offer as a starting bid in a market. The FERC order in December 2019 directed PJM to expand its current MOPR rule to address state-subsidized electric generation resources, with certain exemptions. Previously, the PJM minimum offer price rule focused mostly on natural gas resources. With the FERC ruling, PJM had until March 18, 2020 to change their existing MOPR procedures to apply to both new and existing resources, internal and external, that receive (or are entitled to receive) certain out-of-market payments—unless an exemption applies. The FERC order read: “Going forward, the default offer price floor for applicable new resources will be the Net Cost of New Entry (Net CONE) for their resource class; the default offer price floor for applicable existing resources will be the Net Avoidable Cost Rate (Net ACR) for their resource class.”
People are continuing to debate HB6 and the government rulings regarding it. It will likely be some time before the dust settles, especially since the bill may have been created unethically. How everything will affect power generation, aggregation, and consumer pricing is yet to be seen, but Trebel will always strive to bring you and your community the best possible pricing.