By Chris O’Malley

MISO and three power suppliers have asked the Federal Energy Regulatory Commission to deny Duke Energy’s request for a waiver from MISO’s must-offer requirement, arguing the RTO’s reserve margins in Zone 6 have fallen by a “dramatic” amount since Indianapolis Power & Light obtained a waiver in October.

Duke Energy Indiana is the latest utility to seek a must-offer waiver (ER15-592), joining others that complain there’s no clear mechanism within MISO’s Tariff that would permit them to buy replacement capacity to cover a six-week gap in 2016 between when they plan to retire coal units under the Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS) and the end of the MISO planning year on May 31.

Requests by DTE Electric (ER15-90) and MidAmerican Energy (ER15-199) are pending before the commission. Consumers Energy, having been denied a waiver request last fall (ER14-2622), has come back to the commission with a modified request (ER15-435).

Duke told the commission that buying replacement capacity for its Wabash Units 2-6 for the six-week period could cost up to $17.7 million. Consumers said buying replacement power for the 2015-2016 planning year would cost $5.8 million to $84.8 million.

In a Dec. 29 filing opposing Duke’s request, MISO said the waiver requests have grown to 2,440 MW.

“It is very difficult to understand how these accumulated waiver requests are limited in scope and will not have a great potential for undesirable consequences. Moreover, a large number of pending requests creates additional regulatory uncertainty among buyers and sellers of capacity and hinders the efficiency of MISO’s capacity construct,” MISO said.

Dynegy, NRG Energy and Exelon also opposed Duke’s request, arguing that MISO’s reserve margins have suffered a “dramatic” fall since IPL’s June 2014 request. IPL cited an “available maintenance” of a minimum 3,000 MW in Zone 6 for the April-May 2016 period.

“By contrast, [Duke Indiana] acknowledges that ‘MISO’s updated monthly Maintenance Margins’ now show a low of 738 MW,’” the companies said in a Dec. 29 protest. “This is a razor-thin margin in a zone with forecasted demand of 17,629 MW.”

Pandora’s Box?

FERC Commissioner Norman Bay had warned that the number of waivers would grow last October when he dissented in the IPL decision. (See IPL Wins Waiver from MISO Must-Offer Rule for Retiring Eagle Valley Units.)

Bay warned that a one-time waiver “creates an unfortunate precedent that erodes MISO’s capacity construct, undermines the bilateral market for capacity and blurs, unnecessarily, a line that had once been bright.”

MISO used a monthly resource adequacy construct until 2012, when the RTO won FERC approval for an annual construct, saying the monthly capacity products might not provide the certainty to attract competitive participants to the auction. The change meant that capacity resources would be required to be available anytime during the planning year.

That became problematic when utilities began making plans to retire older units to comply with MATS. Duke Indiana decided that in 2016 it would retire Wabash Units 2-5 and suspend Unit 6.

Duke argues that it essentially faces the same situation that confronted IPL, which plans to retire its Eagle Valley coal units in 2016 as part of MATS compliance.

Duke Leaves Bigger Void

But suppliers noted that Duke’s 668-MW Wabash units are considerably larger than Eagle Valley’s 216-MW capacity.

In November, the commission rejected Consumers Energy’s initial request for a waiver of its Classic Seven units, noting they comprise 940.7 MW in Michigan, 14.5% of the utility’s total capacity.

As for Duke’s must-offer waiver request, the three suppliers told FERC that while the Eagle Valley plant represents about 1.2% of total demand forecast for MISO’s Zone 6, the combination of Eagle Valley and Wabash River Units 2-6 “would now represent 5% of the total demand forecast in that zone.”