Before the establishment of independent transmission operators, electricity was a matter of local concern and was regulated strictly at the state level. The technology simply wasn’t there to move electricity over great distances, which required power plants to be located close to customers.
For this reason, the industry operated for years as a monopoly with one local utility providing generation, transmission and distribution services for its area. When technology evolved to provide the ability to move electrons over many miles, plants could be located away from consumers and the concept of competitive markets became viable.
Independent system operators and regional transmission organizations were created following the 1992 passage of the Federal Energy Policy Act, which introduced competition to the wholesale side of the electricity business.
The law also created independent operators with no stake in transactions to manage the grid, which prevents market manipulation while ensuring that electricity keeps flowing to customers.
ISOs and RTOs are often compared to air traffic controllers, because they independently manage the electron traffic on a power grid they don’t own, much like airlines on an airport runway.