By Chris O’Malley
MISO has asked the Federal Energy Regulatory Commission for a rehearing of the commission’s Dec. 12 order requiring the RTO to modify the way it calculates the “hurdle rate” for determining whether to allow power flows between its north and south regions.
The RTO said FERC’s directive would cause the hurdle rate to soar by 4.5 times the current rate of $9.57/MWh, making transfers between the regions of more than 1,000 MW — the maximum allowed by SPP without paying additional transmission charges — uneconomic (ER14-2445-002, ER14-2445-003).
MISO began limiting flows last spring between its northern and southern regions after SPP complained that MISO breached their joint operating agreement by moving power over its transmission footprint in excess of a 1,000-MW physical contract path. SPP has billed MISO more than $35 million for flows exceeding 1,000 MW.
While seeking to resolve the dispute with SPP, MISO last July asked FERC for permission to implement the $9.57/MWh hurdle rate — an adder to the LMPs of the importing sub-region — to establish market signals indicating when the savings from avoided redispatch costs exceed SPP’s additional transmission charges.
MISO anticipated the hurdle rate could result in about $34 million in annual production cost savings, benefitting consumers.
‘Irreparable Harm’
But MISO told FERC this month that the new method of calculating the hurdle rate ordered by the commission, and SPP’s Service Agreement charges, mean its ability to use its 1,000 MW of contract path rights “is significantly limited and its market is suffering irreparable harm.”
MISO claims that the SPP-MISO Service Agreement assesses charges for every hour of the 24-hour day for even a 30-second, unintentional “incursion” over the threshold.
The RTO “continues to see that redispatching generation is more economic than incurring hurdle rate charges at $9.57/MWh,” MISO said. “When the hurdle rate soars to almost $42/MWh as a result of the commission’s order, it is clear that MISO’s market participants will not be able to realize the economic benefits of allowing flows to be dispatched in excess of the 1,000-MW threshold even though there is available uncongested capacity above 1,000 MW.”
FERC said it agreed with Madison Gas & Electric and WPPI Energy that “by dividing the hourly approximation of the SPP Service Agreement charges by all intra-regional flows, MISO’s proposed hurdle rate is too low and would allow flows when the economic benefits of such transfers would be less than the SPP Service Agreement charges.”
The hurdle rate has not been universally accepted within MISO’s footprint. The Mississippi Public Service Commission contends that the hurdle rate could distort energy prices and effectively treat MISO’s north and south regions as separate RTOs.
Other Fallout from Seams Spat
The flow dispute with SPP has had other effects. Last month, FERC approved MISO’s request to suspend action on long-term transmission service requests (TSRs) between its north and south regions through April 1.
The order (ER14-2022) also allows MISO to waive Tariff requirements and North American Energy Standards Board standards involving flows exporting from MISO South to PJM. MISO told the commission that the waiver request would affect 10 pending long-term firm TSRs from a single customer totaling 2,831 MW.
That waiver request provided some insight into MISO’s thinking in integrating Entergy before the dispute with SPP arose.
Originally, MISO said it anticipated that the primary restrictions on flows between its north and south regions would be set under the Operations Reliability Coordination Agreement (ORCA), a seams agreement with SPP.
MISO also said it thought it would have extra time to negotiate seams agreements governing flows between those regions.
The need for a 1,000-MW limit on flows between north and south was a “sudden and unexpected development,” MISO told FERC.