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44 Energy L.J. 447 (2023)
Replacing the Utility Transmission Syndicate's Control

handle is hein.journals/energy44 and id is 657 raw text is: REPLACING THE UTILITY TRANSMISSION SYNDICATE'S CONTROL Ari Peskoe * Synopsis: Technological progress can topple industry titans. But in the elec- tricity industry, entrenched power can stymie disruptive change by setting rules that block competition and reinforce the status quo. In this paper, I chronicle how regional power sector governance - the decisionmaking processes and structures used to change industry rules - is impeding innovation that could challenge in- cumbent firms, business models, and technologies. I limit my inquiry to control over electric transmission, the channels of interstate commerce essential for keep- ing the lights on. Twenty-five years ago, amidst a seismic industry shift to competition, federal utility regulators (FERC) empowered new entities to coordinate the industry through interstate markets and integrated planning. To receive regulatory ap- proval, these new Regional Transmission Organizations (RTOs) had to demon- strate that their governance was free from industry control. FERC believed that RTO independence was necessary to foster confidence in the fairness of RTO transmission service and attract investment to RTO-run markets. The RTO model of procuring reliable power through markets spread quickly. While RTOs have since rewritten rules and invented new markets, their governance is unchanged. I argue that RTO governance is now holding the industry back for the benefit of last century's power players. The industry is in the early phase of a technolog- ical revolution, but the commercial interests and individual entities that held for- mal power and informal influence in regional decisionmaking processes are largely the same today as they were twenty-five years ago. As a result, regional rules tend to cater to incumbents' interests, to the detriment of competition, con- sumers, and innovation. I explain why RTO governance stagnated, detail how the power industry changes its the rules, and outline a path for reform. Despite the drawbacks of RTOs, I contend that independent control over transmission opera- tions and planning is indispensable for moving the industry forward. I. Introduction: Power Sector Governance Has Stagnated ................ 448 II. Power Sector Innovation Hinges on Governance Reforms............ 456 III. Filing Rights and the Rise and Fall of FERC's Regional Governance Oversight.................................................................... 463 * An Peskoe is the Director of the Electricity Law Initiative at Harvard Law School. I appreciate researchers who have conducted empirical research on RTO governance by interviewing market participants and stakeholders, including: Dalten Fox, Rikaela R. Greane, Travis Kavulla, Ashleigh H. Krick, Mark James, Kevin B. Jones, Stephanie Lenhart, Christina Simeone, Benjamin A. Stafford, and Elizabeth Wilson. I also acknowledge the RTOGov initiative, founded by Kate Konschnik and now led by Seth Blumsack and Stephanie Lenhart. I thank Greg Carmean, Hannah Dobie, Joshua C. Macey, Ben Sloan, and Dan Watkiss, all of whom read drafts and provided helpful feedback. 447

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