The Second Unbundling
Manifesting Second Power
90s “deregulation” of power has always been a misnomer. “Unbundling” is a more accurate description of what “deregulation” is gesturing at. The Independent Power Producer (IPP) wave of the 1990s, which continues today, was the direct result of ending the integrated utility’s exclusive privilege (monopoly) to generate power. They still produce a lot of power but we have a much larger ecosystem of independent operators today than we did for most of the 20th century.
Today, there is a second unbundling slowly underway. There are three new pressure points working against the traditional model at very different speeds, poised to claim market share in areas once closed off, due to regulation and/or technological impossibility, to anyone outside of utilities or regional authorities.
(1) THE COORDINATION LAYER CHALLENGED FROM BOTH SIDES OF THE METER
Coordination: deciding which plants to run, managing power flow across the network, maintaining frequency, and ensuring enough spare capacity exists to handle system failures. In the integrated model, one entity did all of it. The utility owned the generators, so it decided which ones to dispatch. It owned the wires, so it decided how power moved. It served the customers, so it forecast the load it was dispatching against. Ownership and coordination were the same job because the tools to separate them didn’t exist, and that arrangement held for roughly a century, from the state regulatory compacts of the 1910s and 1920s until the RTOs & ISOs took the wholesale piece in the late 1990s. The distribution piece stayed with the utility even then. It is only now coming loose, and from two directions at once.
a. Behind the Meter (BTM)
The distribution utility was built to push power one way. It’s now increasingly tasked with managing rooftop solar pushing back up the line, home batteries cycling, EV chargers, smart thermostats. Legacy systems weren’t designed for any of it, so many utilities have been contracting the intelligence out. DERMS providers, VPP operators, and demand response aggregators fill this gap in capability. Firms like AutoGrid, Kraken Flex, Voltus, Leap, and Base Power all represent this new class of participant.
The utility no longer holds absolute operational control. Revenue will increasingly flow to these new platforms, and the utility loses its historical information primacy as these platforms accumulate deep operational intelligence about the distribution system. The utility still plays an important coordination function but it is not absolute.
b. Front of the Meter (FTM)
BTM coordination as described above, although new, is more mature than the emerging FTM coordinator. The FTM coordinator is a further unbundling of the previous unbundling. Newly formed dispatch platforms are starting to take operational control and financial risk away from the IPPs that the first unbundling created. They control assets they don’t own, assume the risk the owner can’t manage well, guarantee a floor payment to owners, and keep the trading upside they earn through financial engineering. Physical dispatch and financial hedging run as one operation.
Nodal prices financialized enough to hedge against.
Storage is becoming programmable inventory power markets have never had.
Machine learning forecasting has become accurate enough at smaller and smaller temporal intervals.
Highly flexible loads make the demand side programmable.
Generally, these firms will not own all of the assets they operate. Instead, they’ll lease dispatch decision-making from owners, guarantee a revenue floor, and retain the upside. This is somewhat new to power but is a similar model to how giants like Cargill operate in agricultural products and how Glencore operates in hydrocarbons and a whole range of other commodities.
If these platforms succeed at scale, managing gigawatts physically and financially, they change what RTOs and ISOs are coordinating. Instead of thousands of assets bidding independently and reacting to prices after the fact, a growing share of the fleet arrives already optimized, presenting as firm, shaped, forward-aware capacity via highly competent private coordinators. This makes it much easier to anticipate how the fleet will behave. The private FTM coordinator will be able to signal what they’ll do and when they’ll do it, with the assets they manage, creating more certainty for the regional and state authorities to operate with. That frees the system operator to concentrate on what only it can do, which is reliability, contingency, and worst case scenarios.
(2) THE CUSTOMER IS BECOMING LESS CAPTIVE
The utility’s most durable assumption is that customers in its area can’t leave. They’re “captive”. They sit in a service territory, the utility serves them, and the regulator sets the terms. That still holds for households (Texas is the exception). But captivity is weakening at the top of the commercial and industrial market.
While Texas is the outlier in open-market access, other states are now following suit.
States have started opening this pathway for large loads to bring their own power, sidestepping the usual utility based interconnection process. Texas never needed to explicitly open this pathway due to their relatively open nature of ERCOT but states like Ohio, Utah, West Virginia, and New Hampshire have made these types of carve outs explicit. Dozens of other states have introduced similar types of bills in their own contexts.
At the federal level, FERC has been rewriting the rules for large customers that sit next to their own power plants, making building your own generation easier while making sure you pay the full freight on whatever grid you still happen to touch. If passed, Senator Cotton’s DATA Act would exempt fully off-grid power from federal regulation, providing a clear statutory exit ramp from the traditional grid.
Due to these openings and clarifications at the state and federal level, hyperscalers are building and proposing private power systems in the hundreds of megawatts to low gigawatts, running outside the traditional utility relationship.
Some of these set ups are pure islands but most are, or will be, hybrid set ups. Compute operators will primarily use their own power, but will seek to use a utility connection as a reliability backstop. This allows them to move fast while also giving them a path to enjoy the reliability the traditional grid offers. The net effect being more and more large power consumers ceasing to be completely captive customers of the utilities.
PRIVATE TRANSMISSION
The wire is the last real “natural-ish” monopoly. It doesn’t make sense to, and nobody wants to build, parallel sets of poles. This is true, but private non-utilities have wanted to build new wires where none exist for a long time. Only in this century have they begun to break through, and new momentum is building to accelerate private transmission development.
FERC Orders 888 and 889 in 1996 opened access to existing transmission but left construction with incumbents. Order 1000 in 2011 removed the federal right of first refusal (ROFR), applied only to federal projects, and left states free to write their own. Since then, 3% of new transmission investment has been competitive. Tiny but larger than zero. Order 1920 in 2024 required long-term transmission planning that accommodates non-incumbents.
The major constraint is state law. While the feds were slowly opening transmission up, about a dozen states wrote their own ROFR laws, protecting their local regulated monopolies, handing incumbents exclusive rights to build in their territories.
Lines got built anyway by working around the road blocks put up by states. SunZia, $11 billion and operational in June 2026, worked because Pattern Energy was both the generator and the anchor customer. CHPE, $6 billion and operational in May 2026, substituted a New York state offtake contract for a private anchor. Grain Belt uses 39 Missouri municipal utilities as distributed anchors. Same mechanism underneath all three: something creditworthy commits to capacity before financing, and the route follows existing rail or highway corridors to dodge landowner fights.
The hyperscalers are an incredible new set of potential anchors. Through 2024 and 2025 they moved from buying renewable energy credits to financing generation directly, including Google’s $20 billion partnership with Intersect and TPG and its investment in advanced conductor deployment with CTC Global. A data center committing gigawatt-scale load to one location for a decade is the strongest anchor merchant transmission has ever had, with a balance sheet an order of magnitude past any renewable developer. But capital doesn’t beat state statutes. The most motivated anchors in the history of this business are sitting in many states that have made it effectively illegal for them to build. That configuration is new, and it’s why AI competitiveness and energy dominance arguments are landing in red-state legislatures where clean energy arguments never did.
An emerging policy coalition reflects that. Center left think tank Niskanen and the Electricity Transmission Competition Coalition pushed the White House in March 2025 to prioritize transmission competition. R Street published center-right principles on transmission in April 2026 echoing the same point of view. Industrial users, data center developers, renewable generators, center-left progressives, and free-marketeers are aligned on the same reform.
This will be the slowest to change among the three. The other two pressures are private capital moving into new markets that haven’t been closed off by statute. This one requires breaking or weakening protected monopoly rights under state law, in states where the incumbents have owned the relationships that decide it for close to a century. Nonetheless, the cracks are widening as a motivated and ideologically diverse coalition converges on this pressure point.
WHAT THE INCUMBENTS KEEP
Even if these pressures build, and are successful, the legacy institutions like utilities and RTOs will still be critical parts of the system. If it’s common for incumbents to foolishly assume they’re invincible, upstarts and reformers usually make the opposite mistake of thinking the incumbent will just wither away into irrelevancy. Disruption is usually more jagged and messy than either assumption would lead one to believe.
The utilities will most likely keep the centuries of transmission infrastructure under their control and earn some form of regulated return on it. It will also keep its reliability function, which matters more as the grid gets more complex. These neo-energy platforms optimizing for financial return have no obligation nor the decades of experience thinking about voltage stability or what happens during a situation where the grid is inundated with a parade of terribles. And they’ll probably still maintain their retail and tight regulatory relationships, which is always and everywhere a powerful moat.
The RTOs & ISOs faces a different threat. A loss of scope.
These new arrangements leave the coordinator’s job description intact but shrinks the surface area it applies to. Load that sits behind a generator and never buys from the market, BTM generation never bids in, and private lines built outside the regional planning process all limit the potential scope of regional and state responsibility. The ISO still runs security-constrained dispatch, settles the market, and keeps the system standing during a contingency but it doesn’t do it for all the assets out there that are physically operating.
Traditional institutions will not disappear overnight. Instead, they will undergo an uneven, layered unbundling and descoping, eventually shifting away from general dominance to more focus on the specialized services where they are essential.
