By Michael Brooks

PJM’s Market Monitor has weighed in on a MISO dispute over whether generation owners can be compensated for their plants’ sunk costs when the plants are prevented from retiring in order to maintain grid reliability.

In July, the Federal Energy Regulatory Commission found that MISO’s Tariff rules concerning system support resources (SSRs) were unjust and unreasonable because they did not compensate generation owners for their SSR units’ fixed costs, only their going-forward costs. Under MISO’s Tariff, the ISO may designate a plant that is scheduled to be retired or suspended as an SSR if it finds that the plant is necessary to main grid reliability.

The PJM equivalent to the SSR is the reliability-must-run (RMR) unit.

In a filing last month (EL13-76), PJM’s Market Monitor asked FERC to clarify its ruling.

“If by ‘fixed costs,’ the commission only means fixed costs incurred specifically to provide SSR service, the Market Monitor requests clarification on that point,” the Monitor said. “The Market Monitor respectfully urges that if a finding that sunk fixed costs should be recovered through SSR service rates was intended, that such a finding be reversed.”

The Monitor argued that generators scheduled to retire were likely not recovering all of their sunk costs when they were operating. Allowing a generator to recover sunk costs through the market in a SSR agreement would create the unintended incentive for generators to retire their units prematurely, the Monitor said.

“The goal of an SSR service agreement should not be to provide a windfall that the market would not otherwise provide,” the IMM said.

Instead, the IMM recommended that MISO provide an incentive rate for SSR units, as PJM does for its RMR units.

FERC’s ruling stems from a July 2013 complaint by Ameren, which at the time owned the Edwards coal-fired plant near Peoria, Ill. After Ameren decided to retire the plant’s 90-MW Unit 1, MISO designated it as an SSR.

Ameren had asked FERC to rule that the definition of “going-forward costs” in SSR agreements include fixed costs and requested that about $12.8 million be included in the Edwards SSR agreement. Illinois Power Holdings, a subsidiary of Dynegy, bought the plant last December and asked for another $5 million.