Electricity markets and grid basics

Regional Transmission Organization (RTO)

an independent, non-profit entity that manages the electric grid and wholesale power markets across multi-state regions. They function like "air traffic controllers" for electricity, ensuring grid reliability and equal access to transmission lines without owning the power plants themselves

Major RTOs

PJM, MISO, CAISO, NYISO, ISO-NE, ERCOT

PJM

mid-Atlantic and Midwest, largest in the U.S.

MISO

Midwest and South

CAISO

California

NYISO

New York

ISO-NE

New England

ERCOT

Texas (operates independently from the rest of the rest of the U.S. grid)

RTO Caveats

Some states - mostly in the Southeast and parts of the Northwest - don't have RTOs. They're served by vertically integrated utilities that own generation, transmission, and distribution all in one, and are regulated by state PUCs rather than FERC

Public Utility Commission (PUC)

(or sometimes Public Service Commission, PSC). It is a government regulatory agency—present in every U.S. state—that oversees utility companies (like electricity and natural gas) to ensure they provide safe, reliable service at fair and reasonable prices.

Because energy utilities (like power plants and local delivery grids) often operate as monopolies, PUCs act as a check-and-balance on their power. They are responsible for several critical energy functions:

Setting Rates: When a utility company wants to raise the price of electricity or natural gas, they must file a formal rate case with the PUC. The PUC reviews the costs, holds public hearings, and decides whether the increase is justified.

Approving Infrastructure: Utilities must get PUC approval before building new power plants, pipelines, or major grid updates.

Driving Clean Energy Goals: PUCs play a major role in the energy transition. They set rules for how much renewable energy (like wind and solar) utilities must use, and oversee incentives for rooftop solar and electric vehicle charging infrastructure.

Ensuring Grid Reliability: They establish standards for how quickly companies must restore power after outages and ensure that the energy grid is capable of meeting demand.

Why RTOs matter

Cement facilities in different RTO territories, which means the rules for how they can access clean energy vary significantly by region.

Wholesale electricity pricing

RTOs run markets where generators bid in their electricity. The price is set by the most expensive generator needed to meet demand at any given moment - this is called the LMP (locational marginal price). Every location on the grid has its own LMP that varies by hour.

Locational Marginal Price (LMP)

stands for Locational Marginal Pricing. It is a wholesale pricing mechanism used in regional power markets to determine the cost of generating and delivering electricity at specific locations (nodes) on the transmission grid.

An LMP is calculated based on three key components:

1) Energy Component: The base cost of producing the next megawatt (MW) of electricity.

2) Congestion Component: The added cost when the transmission lines are operating at capacity and alternative, more expensive routes must be used to deliver power.

3) Loss Component: The cost of the electrical energy lost as heat when power travels across transmission lines

Because of congestion and line losses, the cost of electricity varies depending on where and when you are on the grid.

Why LMP matters

Industrial facilities buying large amounts of electricity are exposed to these wholesale prices. Understanding LMP is foundational to understanding clean energy procurement costs for cement plants.

Restructured Markets

In restructured states, (most of the Northeast, mid-Atlantic, Texas, California) generation is competitive - anyone can build a power plant and sell into the market. utilities just own the wires

Vertically Integrated Utilities

In regulated states, (mostly Southeast, parts of Northwest) one utility owns everything - generation, transmission, and distribution - and a state PUC sets the rates they can charge. Industrial customers in these states have fewer clean energy procurement options because they're captive to whatever the utility offers

regulated vs restructured

a cement plant in a regulated state trying to procure clean energy has a very different and usually harder path than one in a restructured market

Integrated Resource Plans (IRPs)

An IRP is a long-term plan a utility files with its state PUC showing how it intends to meet customer electricity demand over the next 10-20 years - what a mix of generation resources it plans to build or retire, and why.

IRPs are one of the primary venues where advocates can intervene to push for more clean energy. if a utility's IPR doesn't include enough renewables or doesn't account for industrial load growth from decarbonization, advocates can file comments, present technical testimony, and pressure the PUC to reject the plan

Why IPRs matter

At Industrial Labs, you'd be the person making sure Industrious Labs' arguments in IRP proceedings are analytically credible

PUC proceedings

are formal regulatory processes - utilities file documents, interveners (including NGOs like Industrious Labs) can submit comments and testimony, and the commission makes decisions. They're slower and more process-heavy than legislative advocacy but often more durable because they set binding rules

Why PUC proceedings matter

industrial clean energy access often comes down to what tariffs and programs a PUC approves. If a cement plant wants to buy clean energy but the utility doesn't offer a viable tariff, that's a PUC problem - and a campaign opportunity

FERC vs PUC

Federal Energy Regulatory Commission (FERC) regulates interstate transmission and wholesale electricity markets. It sets the rules RTOs operate under.

PUCs regulate retail electricity - what end customers pay and the rules utilities follow at the state level

wholesale and interstate is FERC, retail and in-state is PUC. They interact constantly and jurisdiction questions can be complicated

Clean energy procurement options for industrial buyers

1. Power Purchase Agreement (PPA)

2. RECs

3. Utility green tariffs

Power Purchase Agreement (PPAs)

A long-term contract directly with a renewable energy developer, usually 10-20 years. The industrial buyer agrees to buy power at a fixed price. This is the gold standard for large buyers but requires scale and creditworthiness

Renewable Energy Certificates (RECs)

Certificates representing one megawatt-hour of renewable generation. A company can buy RECs to claim renewable energy without a direct contract. Cheaper and easier than a PPA but increasingly criticized as not driving new clean energy onto the grid

Utility green tariff

programs utilities offer where industrial customers can pay a premium to get renewable energy through the utility rather than a direct contract. Quality varies enormously by state and utility

Why industrial clean energy procurement matters

part of the cement mapping tool's value is identifying which facilities have viable clean energy procurement pathways and which are stuck because of where they're located or who their utility is.