Generators that planned to retire coal-fired units just ahead of the Environmental Protection Agency’s mercury rule extension deadline in April 2016 say they may have to accelerate retirements by a year to avoid incurring MISO capacity deficiency penalties.

But that will force them to buy capacity — and sellers wise to the generators’ dilemma are capitalizing on the situation, with capacity prices in the bilateral market tripling recently, Indianapolis Power & Light complained to the Federal Energy Regulatory Commission Oct. 1 (EL14-70).

“IPL believes that this threefold increase is indicative of a market that is seeking to capitalize on the current anomalous circumstances created by the six and one-half week disconnect between [the Mercury and Air Toxics Standard (MATS)] and MISO’s capacity planning year,” the utility said.

Last July, IPL asked the commission for a waiver from MISO’s open access transmission, energy and operating reserve markets tariff. It said there’s no clear mechanism within the MISO tariff that would permit it to buy replacement capacity through the auction to cover the six-and-a-half-week period between the planned April 16, 2016, retirement of its Eagle Valley units and the end of MISO’s planning year on May 31, 2016.

Instead, IPL told the commission, it would need to spend up to $22 million to purchase replacement capacity for the entire year. The utility is building a 650-MW gas generation plant near the 216-MW Eagle Valley units, which date to the 1950s, but the new generation isn’t expected to be on-line until late 2016.

IPL seeks a waiver from FERC for the six-week period so it can continue offering Eagle Valley capacity without MISO penalty through April 16, 2016.

Otherwise, IPL could retire the plant in mid-2015 and purchase capacity to meet its planning resource margin requirements.

“Our customers should not be made to pay for the ongoing costs of operating these units for 10 ½ months going forward plus the cost of procuring an additional full year of capacity in order to fill a capacity hole that is for a six-week period,” the company said.

IPL isn’t alone. Alliant Energy, MidAmerican Energy, Xcel Energy Services and Consumers Energy are among utilities that made filings in support of IPL’s request for a waiver.

In a filing last August, Consumers Energy said it’s in the same boat as IPL, with plans to shutter its 940-MW Classic Seven units on April 15, 2016, due to MATS.

Consumers said that it, too, would have to essentially “over-procure” capacity for 10 ½ months to meet MISO resource adequacy requirements — or may be exposed to replacement costs or a deficiency charge for the six-and-a-half-week period.

But MISO opposes such requests for a waiver from capacity resource performance requirements in its tariff, including the Must Offer and Resource Replacement requirements.

MISO told FERC on July 25 that such waivers “anytime during the last five months of a planning year could result in a substantial deficit in resources needed to meet demand.”

MISO noted that the five-month period would include the winter, “and as we learned during the polar vortex events of this past winter, winter demand can be significant even in a summer-peaking region.”

Further, changing the tariff as proposed by IPL, Alliant and MidAmerican “could have catastrophic resource adequacy consequences.”

But MISO downplayed the idea that other generators beyond IPL are grappling with the six-and-a-half-week gap between the MATS deadline and the end of the MISO planning year. “MISO is not aware that any other market participants believe their circumstances would necessitate early retirement to comply with MISO’s tariff provisions,” the RTO said in a filing this summer.

Also protesting IPL’s request is NRG Power Marketing and GenOn Energy Management, providers of bilateral capacity. NRG said IPL “correctly” notes that there’s no guarantee that bilateral capacity will be available, but “it is highly likely that such capacity will be available on a bilateral basis — and at far less than the cost of new entry.”

NRG also contends that requiring IPL to pay the market price for capacity during a period of scarcity “should not be considered a ‘problem.’ It is the market at work.”