By Amanda Durish Cook

Despite solid performance in 2018, MISO should adopt a new set of proposed changes to its markets to ensure they run more efficiently, the RTO’s Independent Market Monitor has recommended.

In his 2018 State of the Market report, Monitor David Patton produced six new market recommendations on top of previous suggestions not yet adopted by MISO. They range from clarifying what constitutes an emergency declaration to reserving more transfer capability on the RTO’s Midwest-South transmission constraint.

MISO’s market was overall competitive in 2018, even when considering three emergency declarations, Patton told the Board of Directors’ Markets Committee in a conference call Wednesday.

He said supplier offers were “highly competitive” last year and market power mitigation rare, though MISO experienced a “sharp increase in the frequency of generation emergencies partly due to changes in reserve margins and resource mix.” The RTO handled about $29.9 billion in gross market charges in 2018.

MISO lost about 2 GW worth of unforced capacity in 2018, mostly from coal resources, a loss that was only partially offset by wind resources, Patton said.

“We are seeing a continuation of the trend of renewables replacing coal units. That’s a trend we expect to continue,” he said.

Patton said coal and nuclear generators still operated at the highest capacity factors last year, with coal still producing the greatest share of energy and setting systemwide prices in 46% of hours, down from 55% in 2017.

Improvements for Emergencies

Ever increasing emergency declarations have given the Monitor ample fodder to review MISO’s emergency decision-making. In his report, Patton criticized the RTO for being inconsistent in how it issues warnings, declarations and calls for load-modifying resources (LMRs), saying he wants it to clarify the criteria for calling emergencies and “improve the logging” for taking emergency actions.

He said the inconsistency may have something to do with the fact that MISO is now experiencing region-specific — rather than systemwide — emergency conditions.

“These regional emergencies have only been occurring in the last few years. The risks are relatively unknown versus systemwide emergencies. The procedures around them are not as clear,” Patton said.

The Monitor also recommended MISO implement fixed default floors to reduce the unpredictability of its emergency pricing. Emergency default floors are currently set by a supplier’s offer, which can result in them being either too high or too low under different circumstances, he said.

Reserves on the Midwest-South Transfer Limit

To avoid exceeding the Midwest-to South regional transfer limit during emergencies, Patton recommended that MISO procure operating reserves on the line to “better allow it to respond to regional system contingencies.”

He said MISO could come to an agreement that would pay the joint parties to the transfer settlement the clearing price for subregional reserves as well as for the deployment of the reserves, which would use capacity over the line’s 3,000-MW contractual limit. Use of the reserved transmission would cost $500/MW multiplied by the quantity of reserves deployed, Patton suggested.

“We’re going to come to an end with the joint parties on the regional directional transfer,” Patton reminded the board. Starting Jan. 31, 2021, MISO and SPP’s settlement may be terminated by any party with a year’s notice. Without a replacement settlement in place, flows would be limited to MISO’s original 1,000-MW contract path in either direction.

Unreported Outages

Patton also wants to prevent emergencies through a clearer picture of actual supply. He said MISO should take inventory of unforced and unreported outages and derates during tight supply periods, then reduce capacity accreditations accordingly.

“There are a lot of outages and derates that are not reported, so they’re completely ignored,” Patton said.

He recommended that MISO measure all derates and outages — planned or unplanned — under its tightest supply conditions and calculate how much generators are actually delivering to the system during the tightest hours.

Patton said the change stands to affect peaking resources the most, which aren’t called on very often, so forced outages don’t affect their accreditation too much.

“We’re giving them way too much credit,” Patton said.

Assessing Capacity Needs

Patton also recommend three adjustments to help MISO improve the calculation of its capacity supply and demand, including: 1) working a realistic amount of unforced outages and derates during peak load conditions into planning assumptions; 2) accounting for planning resources’ behind-the-meter process load; and 3) devising a method for validating capacity suppliers’ submitted data.

“We have identified a number of areas where erroneous data has been submitted by suppliers, resulting in sizable capacity accreditation inaccuracies,” he said.

Patton also noted that, unlike station service loads, planning resources’ process — or industrial — loads “continue when the power generation equipment is out of service.” He said because process load must be served alongside MISO’s other firm load, it should be recognized in the RTO’s capacity requirements.

Easing Tx Constraints

Finally, Patton recommended the RTO use a lower generator shift factor (GSF) cutoff for transmission constraints with limited relief. The RTO currently employs a 1.5% GSF cutoff to identify which generators to optimize in its dispatch when managing the flows on a constraint, but the Monitor said that policy eliminates most or all of the economic relief available for some constraints.

“The reality is that there are many, many generators. The problem is our software may not solve when 150 generators can relieve a constraint,” Patton said.

Patton said MISO should introduce new software capabilities that allow for a 0.5% GSF cutoff.

“It’s a relatively simple idea,” Patton said, adding that it was a good time for the recommendation because the software capability could be worked into MISO’s new market platform.

29 Outstanding Recommendations

The six new recommendations bring the running total of Monitor recommendations to 29. Patton said MISO addressed four of his recommendations in 2018 and early 2019.

The RTO last year implemented three recommendations from 2012, creating dynamic narrowly constrained areas for market power mitigation, tightening thresholds for uninstructed deviation and implementing five-minute settlements — a “very important accomplishment,” according to Patton.

MISO also addressed a 2016 recommendation last year by getting FERC’s permission to apply existing reserve procurement enhancement — first rolled out in 2011 in MISO Midwest — to the sub-regional constraint between Midwest and South. The enhancement models the effects of transmission constraints by accounting for the deliverability of reserves deployed from market-cleared resources and adding a marginal delivery cost to the zonal reserve market clearing price.

The RTO said it will review the Monitor’s 2018 report and post a public response in October. Its Tariff provides it 120 days to respond to the State of the Market report. By December, it will have decided whether to incorporate any of the Monitor’s suggestions into its ongoing Integrated Roadmap list of market improvements.