Act To Lower Costs And Increase Reliability Of Electric Grids

Prior to task force meetings, ALEC posts these legislative member-submitted draft model policies to our website. The draft model policies are then discussed, debated, and voted on by ALEC task force members. Policies that receive final approval by legislators on the ALEC Board of Directors become official ALEC model policy. Draft model policies that fail to become official ALEC model policy are removed from the website.

Policy Status

  • Type: Model Policy
  • Status: Draft
  • Date Introduced: July 18, 2025

Issues

  • Energy

    • Task Forces

  • Energy, Environment and Agriculture

    • Tags

  • 2025 Annual Meeting

    • Summary

    This model act will require, after a time of negotiations and adjustments, the electric utilities within a state, and the RTOs which they are members of, to use the actual bid price for compensating electric generators. And require better pricing structure to formulate bids which will take into account all actual costs -- including fuel, operations, maintenance, capital costs, and capital rate of return. This model act requires discounting the payments to intermittent electricity sources by 33% from the highest price paid for electricity accepted and used by the RTO during any time frame or its bid price whichever is lower.
    Draft

    Act To Lower Costs And Increase Reliability Of Electric Grids

    Section 1. Definitions 

    1. On demand power” otherwise known as “dispatchable” power, means electricity from sources whose output is not weather dependent and can be controlled to meet changes in demand. 
    2. “Intermittent generation” also known as non-dispatchable power, means electric generation that varies minute-to-minute based on weather conditions. 
    3. “Firming power” means electric systems that provide at least 48 hours of back-up power to “firm” intermittent generation. 
    4. “RTO” means organized electricity market and regional transmission organization (RTO) that is an electric power transmission system operator (TSO) that coordinates, controls, and monitors a multi-state electric grid. 
    5. “Bid price” means the price that is offered to supply electricity to an RTO. 
    6. “Rate of return” means the electricity capital rate of return, or Rate of Return (ROR), is the profit authorized or actually earned on the rate base or capital investment over a period of time. 
    7. “Generating unit” means any electricity source that sells electricity to an RTO or electric grid controller, except for individuals with small generating units not intended to primarily sell electricity to the RTO. 
    8. “Utilities” means an electric utility companies that engage in the generation, transmission, and distribution of electricity for sale. 
    9. “Commission” means the state electricity regulatory commission. 

    Section 2. Process 

    1. The RTOs, utilities and commission shall enter into negotiations and within eighteen 18 months set in place new rules that accomplish the requirements of this act. 
    2. If the RTOs and utilities are unable to accomplish the requirements of this Act within eighteen (18) months, the commission shall have one (1) year to implement rules required by this act. 

    Section 3. Requirements 

    1. RTOs shall pay the actual bid price offered by each source of electricity generation, and not a common price to all. 
    2. RTOs shall have allowable bid prices that include; fuel, operating expenses, maintenance expenses, capital costs, rate of return and other reasonable direct expenses of generating electricity. 
    3. Intermittent power generation shall be paid at a 33% discount of the highest price for that period for electricity accepted by an RTO or their bid price, whichever is lower. 

    Section 4. Severability 

    Each section, paragraph, and portion of each paragraph of this Act is severable. If one or more sections, paragraphs, or portions of one or more paragraphs of this Act are held invalid on their face or as applied to particular facts, then the remaining portions and applications of the Act shall be given full effect to the greatest extent practicable. 

    Section 5. Applicability and Effective Date 

    This Act applies to all electricity procurement contracts entered into, amended, or renewed after [DATE].