Grid Reliability in the Electric Era

The United States has delegated the responsibility of keeping the lights on to a self-regulatory organization called the North American Electric Reliability Corporation (NERC). Although NERC is a crucial example of industry-led governance—and regulates in an area that is central to our economy and basic human survival—this unusual institution has received scant attention from policymakers and scholars. Such attention is overdue. To decarbonize its economy, the United States must enter a new “electric era,” transitioning many sectors to run on electricity while also transforming the electricity system itself to run largely on clean but intermittent renewable resources. These new resources demand new approaches to electric grid reliability—approaches that NERC is failing to adequately embrace. 

This Article traces NERC’s history, situates NERC in ongoing debates about climate change and grid reliability, and assesses the viability of reliability self-regulation in the electric era. A self-regulatory model for maintaining U.S. electric-grid reliability sufficed in prior decades, when regulated monopolies managed nearly every segment of electricity production. But the criteria that NERC once used to justify self-regulation—electric utilities’ expertise, clear accountability metrics, and public-private alignment of interests—no longer hold. The climate crisis creates a need for expertise beyond NERC’s domain, while the introduction of competition in the electricity sector blurs lines of accountability for reliability failures. NERC’s structure also perpetuates an incumbency bias at odds with public goals for the energy transition.

These shifting conditions have caused to fail to keep pace with the reliability challenges of the electric era. Worse still, outdated NERC standards help entrench fossil-fuel interests by justifying electricity-market rules poorly suited to accommodate renewable resources. We therefore suggest a suite of reforms that would increase direct government oversight and accountability in electricity-reliability regulation.