Traditional wholesale electricity markets exist primarily in the Southeast, Southwest and Northwest where utilities are responsible for system operations and management, and, typically, for providing power to retail consumers. Utilities in these markets are frequently vertically integrated – they own the generation, transmission and distribution systems used to serve electricity consumers. They may also include federal systems, such as the Bonneville Power Administration, the Tennessee Valley Authority and the Western Area Power Administration. Wholesale physical power trade typically occurs through bilateral transactions, and while the industry had historically traded electricity through bilateral transactions and power pool agreements, Order No. 888 promoted the concept of independent system operators (ISOs).

Along with facilitating open-access to transmission, ISOs operate the transmission system independently of, and foster competition for electricity generation among, wholesale market participants. Several groups of transmission owners formed ISOs, some from existing power pools. In Order No. 2000, the Commission encouraged utilities to join regional transmission organizations (RTOs) which, like an ISO, would operate the transmission systems and develop innovative procedures to manage transmission equitably. Each of the ISOs and RTOs have energy and ancillary services markets in which buyers and sellers could bid for or offer generation. The ISOs and RTOs use bid-based markets to determine economic dispatch. While major sections of the country operate under more traditional market structures, two-thirds of the nation’s electricity load is served in RTO regions.