Tx Developers Urge ‘Proactive’ Role; OMS: Respect State Jurisdiction

By Amanda Durish Cook

CARMEL, Ind. — MISO stakeholders are deeply split over how proactive the RTO should be in helping its 15-state region comply with the Clean Power Plan.

At an Advisory Committee “hot topic” discussion last week, some stakeholders cautioned MISO against taking policy positions, while others said the RTO should help guide the states to the most economical compliance options.

“MISO is going to have to live with what the states decide,” said Texas Public Utility Commissioner Kenneth Anderson, whose state is among 11 in MISO whose officials have joined in legal challenges to the EPA rule. “Until real decisions are made, you run the risk of running into political minefields. Whether we do rate-based or mass-based [compliance], there are going to be very different consequences.”

No Advocacy Role

The Organization of MISO States also urged MISO to follow rather than attempt to lead the states. “Ultimately, MISO will be charged with incorporating the states’ decisions on CPP compliance into its markets, planning and operations. If those decisions result in some states choosing to ‘go it alone,’ some choosing to be trading-ready, some choosing rate-based or mass-based compliance, or taking legal action against the EPA, such decisions are the states’,” OMS said in its written comments. “MISO should focus on how to best operate a reliable system in these conditions.”

The End-Use Customer sector agreed that MISO’s role should “be limited to providing information and analysis on the cost and reliability impacts” of compliance options “rather than taking on an advocacy role.”

But others urged MISO to help steer the states, with the Environmental sector saying the RTO should “encourage states to adopt consistent, complementary plans that include coverage of new sources and facilitate broad trading opportunities.”

The Public Consumer sector said MISO should provide each state a comparison of rate-based and mass-based compliance “so the lowest-cost and lowest-risk compliance options are clearly identified.”

The Competitive Transmission Developers sector also pushed for a proactive role, saying “it is time for MISO’s role to shift from information dissemination to collaboration and active planning to facilitate state compliance efforts.”

“Without a proactive and accelerated RTO planning effort to ensure necessary transmission infrastructure can be put in place across the region, the ability of each member state to meet compliance requirements could be heavily restricted (if not jeopardized) due to reliability concerns, in addition to the potential loss of efficiencies currently provided by the MISO market,” it said.

Stakeholders also were divided on whether MISO should file comments with FERC on EPA’s proposed federal implementation plan. “MISO has not made any decisions on if we will comment,” said Kari Bennett, MISO’s senior corporate counsel.

Bennett said MISO will not seek to advocate or condemn any state compliance plans and that modeling would be based on “dispassionate calculations.”

But MISO Director Eugene Zeltmann said it might be difficult to entirely wipe out any public policy in CPP modeling. “There’s going to be some very sterile modeling going on,” he said.

MISO Role in Trading

Although there is wide agreement that compliance will be least costly if it includes a broad regional emissions trading program, MISO’s role in trading is uncertain.

The Transmission Owners sector said MISO should look to existing programs such as the Midwest Renewable Energy Tracking System, rather than developing its own trading platform. “There are existing markets … for trading allowances and credits,” the TOs said. “These markets will perform very well.”

The Independent Power Producers sector said MISO “should not have a role in implementing any multi-state implementation plans,” saying both the Regional Greenhouse Gas Initiative and California’s cap-and-trade program “require no interface with the RTO/ISOs beyond allowing suppliers to price the cost of emissions compliance into their offers.”

Many Unknowns

Next month, MISO expects to release its near-term analysis, which will evaluate the implications of various compliance paths based on models used in prior analyses of the draft CPP, with updates reflecting the final rule.

The mid-term analysis, expected to run through June, will use new models based on the most relevant compliance paths from the near-term study to determine likely resource buildouts and their locations under three separate futures. It will be the foundation for transmission development under the 2017 MISO Transmission Expansion Plan.

A long-term analysis, which will run through late 2018, will seek to develop transmission overlays needed to implement state compliance plans. (See MISO Unveils CPP Study Scope, Will Deliver Preliminary Near-Term Results Next Month.)

With state compliance plans unknown, there are limits to what MISO can model, said Clair Moeller, MISO executive vice president of transmission and technology.

Most states are expected to seek a one-year delay from EPA, meaning their compliance plans won’t be filed until November 2017, when MISO will be in the middle of its long-term analysis. EPA will impose a federal plan on states that fail to present an acceptable plan of their own.

Detailed modeling would have to wait “until the states start to tip their hand one way or the other,” Moeller said. “We’re going to run out of time like we always do. There’s going to be a panic in 2017, but we’re going to do all we can.”

Challenges will arise to fit state plans into regional markets, stakeholders said. Several AC members pointed out that Wisconsin is the only state within MISO whose borders are completely within the RTO’s footprint.

“I don’t think we’re going to model our way into quantitative comfort,” Director Michael Curran said. “We may model ourselves to a level of frustration with each other.”

More transmission will likely be needed under any compliance scenario, several stakeholders said.

“MISO should not wait for all state plans to be filed before beginning work on the transmission studies, including overlay studies,” the TOs said, urging MISO to quickly identify “no regrets” transmission projects likely to be needed under a variety of scenarios.

MISO’s Environmental sector pointed out that the Midwest is home to the nation’s best onshore wind resources. “Planning to quickly, affordably and reliably tap into these wind resources and deliver them to market can be done more effectively if interregional planning processes are improved,” it said. “More action is necessary to identify the transmission necessary to access and transport the energy to MISO and other regions.”

Modeling Priorities

Some stakeholders expressed dissatisfaction with MISO’s modeling priorities.

The TOs said MISO should focus on “providing an impartial comparison of the different means and approaches to full compliance and its impacts on reliability and efficiency of the grid.” They said that scenarios for partial and accelerated compliance would provide only “marginal” benefits.

“The accelerated compliance scenario, while still possible, is highly unlikely, even with technology breakthroughs, given the short timeline,” it said. “Even if, ultimately, more aggressive long-term goals for greenhouse gas abatement were to be adopted, they would likely be sought through steeper reductions in the outer years. Second, a partial compliance scenario may have some value, particularly if scoped as a delayed implementation scenario to account for legal challenges, but MISO should avoid spending too many resources and/or time on this.”

The End-Use sector said MISO should increase its coordination with neighboring SPP and PJM and “benchmark” the results of its analyses against those of the other regions. The sector said MISO should expand its modeling to include not only cost estimates for generation and transmission that may be needed, but also an evaluation of whether the region has sufficient natural gas infrastructure to accommodate the anticipated increase in gas-fired generation.

The Environmental sector said MISO should “more comprehensively model compliance strategies that rely on increasing energy efficiency (EE).”

“Without modeling high EE scenarios, states will not be able to understand the cost and emissions implications of expanding their EE programs as a strategy to comply with the CPP,” it said. “For example, in rate‐based compliance approaches, excluding EE from the supply will artificially constrain the supply of emissions reduction credits (ERCs) and increase ERC prices. Modeling EE simply as lower demand growth would not allow for its incorporation into a rate‐based plan in this manner, and thus would skew model results.”

Changes Coming

The Transmission-Dependent Utilities sector said MISO may need to change some market rules. It said a seasonal capacity construct, now under discussion, could aid compliance. (See MISO Proposes Two-Season Capacity Market, Appoints Team to Address Ill. Zone.) “Entities may choose to only run their coal-fired units during peak demand periods in the summer, and use natural gas as much as possible in shoulder periods,” it said.

It also said MISO should be prepared to replace spinning reserves, black start services and reactive power services provided by baseload units that may retire or limit operations.

The shift from coal- to gas-fired generation argues for a move to a multi-day resource commitment, it said.

“The current next-day economic commitment process can lead to higher costs by not committing long-lead time resources, which are economical over longer periods. A longer commitment process will help to address this issue and improve the economic operation of gas-fueled generation by providing a longer lead time to procure fuel.”

The competitive transmission developers said MISO should “conduct accelerated discussions” with stakeholders on how the RTO will allocate costs of transmission improvements needed for compliance. “Currently, there is too little flexibility in the MISO Tariff to allow for sub-regional or state-based cost allocation for public policy projects, which could impede necessary development if left unaddressed,” they said.