By Amanda Durish Cook
CARMEL, Ind. — MISO will not raise its energy offer cap for the coming winter but will ask FERC to approve another waiver allowing recovery of costs above $1,000/MWh through uplift.
MISO officials told the Market Subcommittee on Oct. 27 that they were responding to stakeholder feedback that generally preferred to repeat the approach that ruled the RTO’s market last winter (ER15-691). Like last winter, all offers are still subject to mitigation by the Independent Market Monitor.
MISO is expected to file the waiver request with FERC by Nov. 2, asking for a January implementation date. As late as last month, MISO had been considering raising the limit to $1,500. (See MISO Considering Raising Energy Offer Cap.)
Markets System Analyst Chuck Hansen said that MISO will seek a long-term solution for winter 2016/17 that complies with FERC guidance. FERC on Sept. 17 announced its intention to take action on offer caps and other price formation issues, though it offered no timeline. (See NOPR Requires RTOs Switch to 5-Minute Settlements.)
“Any permanent solution is going to have to follow what FERC might do,” Hansen said. “We don’t know what that direction is yet, but we’re going to have to respond to it.”
The offer cap is designed to limit potential market power, but natural gas price spikes, such as those in January 2014, can push generators’ costs higher.
Jeff Bladen, MISO’s executive director of market design, said no generators sought to use the waiver last winter.
Hansen said that MISO’s database could accommodate a higher offer cap with only minor “tweaks.” But MISO said caps above $1,500 could require changes to market rules governing the value of lost load (VOLL) and operating reserve demand curves.
During gas price spikes and high loads that tighten operating reserves, system marginal prices could near or exceed MISO’s $3,500/MWh VOLL, and congestion and loss components of LMPs could be reduced or lost.
“Our studies have shown that the energy offer cap has to be in sync with other market parameters,” Hansen said. “Before the following winter, we want to raise the offer cap, but we want to be careful of fixing one thing and creating issues under a different scenario. The point is we don’t want to solve one problem, then cause a bigger problem in other market conditions.”
Another consideration is that MISO generation could be lured to other regions with higher caps. PJM members agreed in September to seek FERC approval to increase its offer cap to $2,000/MWh beginning this winter. (See PJM Members OK $2,000/MWh Energy Market Offer Cap.)
MISO said generator responses also would be affected by different operating reserve scarcity curves.
MISO’s call for feedback on the issue generated 10 stakeholder responses: six votes to maintain a $1,000 cap, two votes to raise the cap to $1,500 and two votes supporting either case. Eight stakeholders voted to use uplift to recover verifiable costs above the cap; two stakeholders disagreed with using uplift to recover costs exceeding $1,000.
