By Amanda Durish Cook

NEW ORLEANS — Deregulated markets in MISO would get a three-year forward capacity auction beginning in 2018, under a proposal unveiled by the RTO last week.

The RTO announced the proposal after reviewing stakeholder recommendations for addressing the capacity needs of retail choice regions such as southern Illinois’ PJM-Type Capacity Auction for MISO Zone 4 Proposed.)

“It is now evident MISO’s markets … need to effectively and efficiently signal the need to maintain existing and/or invest in new resources necessary to assure resource adequacy in competitive retail areas that rely exclusively on markets,” MISO said. “Given the existing [Planning Resource Auction] was not designed to meet this need, narrowly focused reforms are required to complement the existing market construct while also preserving the benefits currently derived by most of MISO’s region from simple capacity balancing.”

The proposed Forward Local Requirements (FLR) auction would be held three years in advance of the planning year and employ a downward sloping demand curve. Procured local capacity would be self-scheduled into the existing PRA with costs allocated pro rata to participating load-serving entities.

LSEs not subject to retail choice will continue to procure capacity through state integrated resource plans and the PRA using the current vertical demand curve.

“These enhancements are designed to have no impact on the existing state or local jurisdictional long-term planning processes for those that do not participate,” MISO said. “The effect will be that nonparticipating LSEs and participating LSEs will have different price sensitivities to purchasing … capacity in the auction.”

Design Elements

The RTO proposed to hold the first FLRAs in spring 2018 for planning years 2019/20 through 2021/22. The amount of capacity retail choice LSEs obtain under the sloped demand curve would be variable, within a newly defined “target reliability range.” Any capacity needs not met through the forward auctions will be filled through the existing prompt-year capacity auction.

While LSEs in deregulated areas would be automatically entered into the FLRA, they could opt out by developing a fixed resource adequacy plan in advance of the auction. LSEs outside of deregulated areas could opt-in to the forward auction but would be required to remain for at least five years.

Participation will be voluntary for supply resources except for those in a local resource zone with participating demand. Such resources will be subject to existing market power rules.

Supply resources owned or controlled by LSEs will be exempt from the must-offer requirements if the LSEs have forecasted demand equal to or more than their supply portfolios.

Seasonal Construct

The forward capacity product would match the two-season construct MISO proposed in December for the PRA, with a four-month summer season (June-September) and eight-month winter (October-May). The RTO hopes to implement the seasonal structure for the 2018/19 planning year. (See MISO Delays Seasonal, Locational Capacity Constructs.)

MISO officials said the RTO is committed to working with stakeholders to refine the new auction proposal. “I think the key is keeping that stakeholder dialogue going, and we’ll continue that in the April Resource Adequacy Subcommittee,” MISO CEO John Bear said.

In a recent letter to stakeholders, MISO Executive Director of Market Design Jeff Bladen wrote, “The goal is to ensure MISO’s capacity market design is up to the task of serving as the primary market mechanism for assuring resource adequacy in all time horizons in competitive retail areas of the MISO region while also serving a complementary role in the rest of MISO.”

MISO plans to file a final proposal with FERC in July, according to Bear.