By Amanda Durish Cook

A new MISO task team on Monday kicked off an effort to develop a scheme to compensate resources that deliver restoration energy in the event that the RTO’s wholesale market ceases to function.

“There’s no Tariff provisions for compensation during an islanding event,” MISO Director of Market Services John Weissenborn explained at the first meeting of the Compensation for Restoration Energy Task Team. He noted that MISO’s black start and NERC recommendation-based schedules are insufficient to cover all generation as it comes back online.

Stakeholders said having a restoration pricing structure in place may prevent yearslong legal battles over compensation following blackout conditions.

MISO has yet to make any decisions but is considering implementing either a dollar-per-megawatt filed rate or recovery based on verifiable costs. Multiple stakeholders said they preferred the latter over the former.

Weissenborn asked stakeholders to think about how an islanding event would interrupt the day-ahead market and how MISO might measure the imbalance and compensate afterward. He also pointed out the RTO would have to confer with state regulators to assess the implications of having a new rate schedule in place.

MISO would likely rely on an after-the-fact settlement to compensate resources, Weissenborn said, adding that the task team should examine how current settlement rules might apply to a restoration pricing structure and how normal settlements would resume after an event.

The system would not be able to price nodes within an area experiencing an islanding event, Weissenborn said, asking stakeholders to think about whether they would want to come up with a nodal price per load.

MISO has said it would complete all billing with no expectation that local balancing authorities calculate settlements. However, stakeholders asked how the RTO would ensure that prices are separated down to the LBA.

The RTO may use a five-year-old white paper on the subject as a starting point for the pricing structure. (See Old Analysis Could Guide MISO Restoration Pricing Effort.) In that paper, MISO proposed using either 110% of a FERC-approved rate or a $100/MWh price, whichever is greater. As FERC-filed rates include start-up costs, the RTO said a real-time revenue sufficiency guarantee would not apply.

Weissenborn said using a static, filed rate would be “a relatively simple solution,” and MISO could use the $100/MWh figure as a pricing floor. “We would have a filed rate, and we can come up with an output to multiply by,” he said. But he added that pricing should ensure that generators recover start-up costs, which are amortized over commitment periods in MISO’s usual energy pricing.

He also said that many generation owners and MISO staff involved in the 2013 white paper are no longer participating in the RTO. Using the white paper as a basis for a pricing structure without knowing the reasons behind the proposal might prove tricky when making a case to FERC, he said.

‘Extreme Event’

The task team will also have to consider how resource owners would establish eligibility for the new rate schedule, Weissenborn said.

Xcel Energy’s Kari Hassler said MISO might “glean” some aspects of pricing from recent emergency events. In the most recent maximum generation emergency in late January, emergency pricing floors defaulted prices to above $600/MWh.

“This is going to be more an extreme event,” Hassler reminded staff, saying a $100/MWh figure was probably too low considering the extraordinary circumstances of a system blackout and islanding.

Entergy’s Al Ralston said he remembered hurricanes that hit the company’s service territory in 2005 and 2008, causing “thousands of megawatts unable to be served” after several generators, substations and transmission went down. He said in those cases, Entergy — not yet a MISO member — used bilateral agreements to negotiate prices after the fact.

“We wanted to have prices that allowed generators to recover their legitimate costs and, at the same time, didn’t allow generators to gouge the load,” Ralston said. He asked MISO to devise a “reasonably” straightforward pricing method that would achieve both goals.

However, he also said plants must sometimes be evacuated or are difficult to reach because of flooding. He asked MISO about costs in excess of normal operations, such as to feed and board plant operators. He also warned that a restoration event can sometimes take weeks, and MISO may not want a static price in place that allows generators to make unchecked profits.

“This is not something that just happens and it’s over in a day,” Ralston said.

“I do agree with you. We have to have a good balance,” Weissenborn said as he took notes.

Stakeholders also suggested MISO put rules in place to create a temporary stakeholder group following a restoration event to educate resources on what they can and cannot submit in a verifiable cost-based offer. Some also suggested MISO’s Independent Market Monitor could work to verify offers after a restoration event.

Weissenborn also asked stakeholders to keep in mind that MISO would not be in control of dispatch as the system is restored.

“I think the harsh reality is we’re not energizing resources based on economic decisions as we restore the system. It’s based on ‘let’s start getting load back,’” Weissenborn said.

Ralston said the characterization was “exactly right.”

The task team will meet two more times, including on May 1, before presenting a pricing recommendation to the Market Subcommittee.