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MISO Resource Adequacy Proposals Receive Mixed Reviews from States, Utilities, and Experienced Users

Diving Brief:

  • Midcontinent Independent System Operator (MISO) proposals designed to ensure it has sufficient power supply in its footprint are receiving mixed reviews from states, utilities, large energy users and renewable energy advocates in comments filed Friday with the Federal Energy Regulatory Commission.

  • Responding to a changing energy mix, MISO proposed in November requiring market participants representing Load Service Entities (LSEs) to obtain at least half of their capacity outside the system operator’s annual capacity auction. In a related proposal, the network operator wants to set seasonal resource adequacy requirements coupled with “availability-based” accreditation.

  • The proposals are driven by power plant retirements, increased reliance on intermittent resources and a reduction in excess capacity across MISO’s footprint, which stretches from Louisiana to Manitoba, Canada, according to the grid operator. .

Overview of the dive:

MISO’s process for ensuring it has enough power supplies is no longer adequate, according to the network operator.

Increasing intermittent wind and solar, along with lower reserve margins, increasing extreme weather and associated power plant outages, and more unexpected outages in general, are forcing MISO to take action emergency throughout the year to maintain reliability, according to the network operator, which expects the problems to grow.

Currently, MISO holds an annual, voluntary “scheduling resource auction,” the equivalent of a capacity auction, based on its estimated peak load on the hottest summer day.

However, since 2015, MISO has made 40 “maximum production” claims to maintain reliability, 25 of which occur outside of the summer months, a sign that reliability issues occur throughout the year, according to the report. network operator.

At the same time, some market players are increasingly relying on capacity auctions to buy all their capacity, MISO said.

Market participants should not rely solely on the auction, as there is no guarantee that sufficient capacity will be available there, according to MISO.

To spur “prudent” resource planning, MISO has proposed imposing a “minimum capacity obligation,” or MCO, on market players representing LSEs. They could not cover more than half of their capacity needs through capacity auctions, with a 50 MW exemption. If an LSE does not meet its MCO, it incurs a fine for its lost revenue of 1.5 times the “cost of new entry”.

The Illinois Commerce Commission (ICC) urged the FERC to reject the MCO proposal, saying it would drive up prices in states like Illinois that have retail competition and create market power for capacity sellers.

The proposal would require Illinois LSEs that acquire capacity through the planning resource auction to purchase half of that capacity in the bilateral capacity market or through resource ownership, said ICC to FERC.

“Such an obligation places these LSEs ‘above a barrel’ in the sense that resources long on capacity have no obligation to sell any of their excess capacity to LSEs with an MCO and could use the obligation MCO to their advantage,” the ICC said.

Furthermore, it is not clear that the proposal would improve the reliability of the network, according to the ICC. According to MISO’s testimony to FERC, only 742 MW would have been affected had the requirement been in place at the last grid operator auction, approximately half of 1% of MISO’s 133,903 MW planning reserve margin requirement for the auction, said said the ICC.

Exelon Generation, Ameren Services, the Retail Energy Supply Association, coalitions of renewable energy advocates, American Municipal Power and others opposed the proposal. Its supporters include the Indiana Utility Regulatory Commission, DTE Electric and Duke Energy.

MISO’s separate proposal to move to a seasonal capacity framework and adopt availability-based accreditation for demand response and non-intermittent generation resources was generally supported by the MISO States Organization (WHO) , which represents state utility regulators.

“This more granular year-round risk assessment will allow MISO to identify each season’s unique reliability needs instead of relying on the increasingly inaccurate assumption that if resources are available for the summer peak, they will also be available to provide energy during the other seasons,” the WHO said.

However, in separate documents, utility regulators in Louisiana and Mississippi argued that the proposed availability-based accreditation framework was flawed.

“It is more likely to undermine the adequacy and reliability of resources than to improve them; and that will cost retail customers dearly,” the Mississippi Public Service Commission said. “This interferes with state jurisdiction over production resource decisions because existing and future production that meets MISO criteria will be devalued as a source of capacity.”

MISO’s transmission owners, which include utilities like Duke Energy Indiana, AES Indiana and Northern States Power, said the proposal does not meet MISO’s goals and should be reviewed. For example, provisions for scheduled outages for maintenance of power plants need to be fine-tuned, according to transmission system owners.

The Coalition of Midwest Power Producers said it supports grid reliability, but MISO has failed to show its sseasonal capacity market and accreditation proposal would improve reliability.

If FERC doesn’t reject the proposal, it should hold a technical conference to help MISO and stakeholders develop “a fair and reasonable approach” to capacity market reform, according to the trade group, which includes companies powerhouses such as Calpine and Vistra.