By Amanda Durish Cook
MISO continues to move forward with modifications to its capacity market even as some stakeholders question the need for the proposed changes and others seek more time to consider their implications.
RTO staff are aiming to file Tariff changes with FERC next month to implement seasonal and locational capacity constructs. MISO also proposed filing in July for the creation of a separate Forward Local Requirements Auction for deregulated regions in 2018.
That timeline sparked concerns for many market participants still skeptical of the proposed auction.
During an April 14 Resource Adequacy Subcommittee meeting, multiple stakeholders urged the RTO to postpone a filing for the FLRA based on the volume of questions regarding its design.
“There were a lot of good questions today, but MISO has essentially said, ‘We’ll consider them,’” said Marka Shaw, Exelon regulatory affairs manager. “I think there’s a lot of work to be done, especially [before] a July filing.”
MISO concedes that several design details for the FLRA have yet to be clarified. RTO staff have asked stakeholders for feedback about how congestion costs from the current Planning Resource Auction should be allocated to the FLRA, what the proposed auction’s demand curve should look like and what resource adequacy plan rules should be implemented. MISO is also seeking reactions to the idea of bifurcated capacity procurement — separate auctions covering regulated and deregulated areas.
Price Risks in Bifurcation
Skeptical of bifurcation, independent power producers are instead pushing for a single three-year forward auction for all of MISO.
Consumer advocates urged the RTO to delay auction changes until results from the MISO-Organization of MISO States survey on available capacity are released in July — or until a capacity shortage becomes imminent.
Jim Dauphinais of Illinois Industrial Energy Consumers is among the opponents to the FLRA proposal. During last week’s meeting, he contended that capacity price volatility can be best addressed by self-supply and bilateral contracts, pointing out that more than 65% of capacity in southern Illinois for the 2015/16 was procured by those means.
Dauphinais cautioned that the FLRA’s proposed downward-sloping demand curve could act as a “wedge” to inflate prices before MISO’s predicted capacity shortage in the 2021/22 planning year.
“There’s volatility even if it’s done three years in advance with a sloping demand curve,” Dauphinais said.
Kevin Murray, representing the Coalition of Midwest Transmission Customers, sought clarification on whether load-serving entities in deregulated areas could develop a forwardixed resource adequacy plan and make bilateral agreements to circumvent a forward auction altogether, something MISO says will be possible.
AARP’s Bill Malcolm questioned the need for what he called a PJM-style forward auction.
“We urge more study on the matter,” Malcolm said. “The rate impact on consumers should be fully vetted and be part of the discussion.”
Mark Volpe, Dynegy senior director of regulatory affairs, focused on price volatility risks to the downside. He pointed to what he considered a “fundamental flaw” in the forward capacity auction design: The value of capacity in MISO’s Zone 4 could approach zero as more generation projects come online in southern Illinois.
Jeff Bladen, MISO’s executive director of market design, said Volpe’s comment illustrated why the RTO is seeking feedback on bifurcated procurement.
“This is something we’re acutely aware of, but I can’t predict what the forward zone will look like,” Bladen said, referring to how the auction might clear.
According to Bladen, MISO will not seek a specific price outcome for the forward auction, but it does want results to fall within a target reliability range.
Bladen also said MISO wants stakeholder feedback on the shape of the FLRA demand curve.
Meanwhile, draft Tariff changes for MISO’s proposed seasonal and locational capacity constructs are almost complete, according to Renuka Chatterjee, MISO executive director of resource adequacy and transmission access planning. Still, the RTO could delay an expected July filing with FERC, depending on feedback from the Independent Market Monitor — and an unnamed MISO customer — regarding the creation of external resource zones.
The seasonal construct proposal outlines a single auction with two seasonal offers, while the locational construct sets out external resource zones. (See MISO Delays Seasonal, Locational Capacity Constructs.)
