By Amanda Durish Cook

CARMEL, Ind. — MISO and its Independent Market Monitor have developed a compromise auction design calling for a prompt, single Planning Resource Auction with separate prices for competitive retail areas.

But that isn’t stopping the RTO from also keeping its original forward auction proposal on the table, a proposal Monitor David Patton says is not viable.

“We don’t believe there is one definitive solution forward, but we do believe we have two very good options in front of us,” MISO executive director of market services Jeff Bladen said during a two-day Resource Adequacy Subcommittee meeting Wednesday and Thursday. “We’re deep into the weeds of evaluating both for price stability.”

Bladen said MISO has hired The Brattle Group to conduct an analysis on both proposals and will select a plan based on the results.

The hybrid competitive retail solution marries elements from earlier proposals by the Monitor and MISO. With it, the RTO could abandon its proposed three-year forward auction for deregulated sections of the footprint in favor of the IMM’s multi-stage prompt auction in which only merchant supply could receive competitive retail pricing set by a systemwide sloped demand curve.

Assets controlled by a load-serving entity whose demand is outside a competitive retail zone would be precluded from clearing at the competitive retail price. MISO’s forward proposal would allow non-merchant generators to offer into the separate, retail choice auction.

Two-Stage Auction

The hybrid proposal would deliver the auction in two stages: Immediately after the competitive retail stage of the auction is cleared, the PRA, with traditionally rate-regulated supply and demand, would take place. The PRA would be referred to as the “legacy” stage of the auction and would continue using the current vertical demand curve.

Fixed resource adequacy plans remain the same under the two proposals; LSEs would have to create plans on a forward basis to opt out of serving retail-choice load.

“I think the hybrid prompt proposal would work,” Monitor David Patton said after multiple stakeholders asked for his opinion. “I’m confident the forward proposal would produce more volatility than the hybrid proposal.”

Patton said the hybrid proposal’s sloped demand curve could be adjusted by MISO to correct instances of over- or under-procurement.

Dynegy’s Mark Volpe asked for Patton’s view on both proposals.

Patton said the forward proposal MISO is continuing to consider is not structured to produce an efficient price and does not represent a compromise. “It may not surprise you that I don’t think the forward proposal is not a viable proposal,” he said  . …We’re going to be providing some information regarding the price that you get under both proposals at the next meeting,” he said.

Bladen countered that the hybrid approach could produce volatility. He also said MISO’s Tariff would have to undergo extensive revision to implement the hybrid proposal.

“While it has theoretical elegance, the practical application is questionable,” Bladen said. “FERC is the ultimate judge.”

Stakeholders asked if either proposal had been reviewed by FERC staff.

Bladen said although commission staff has been following MISO’s deliberations “FERC would never give advance notice on what they would approve.”

Bladen also said he didn’t have an estimate on when draft Tariff language would be in front of stakeholders, but he did say it would be “very difficult to achieve” implementation in time for the 2017/18 planning year.

“I wish I could give an exact date when we’re going to walk into the room and announce the selected proposal,” he said.

Forward Proposal Still Unfinished

MISO has yet to offer a demand curve shape for its forward proposal for deregulated areas. Bladen said the final shape is “pending further Brattle Group analysis” but the resulting shape would most likely resemble shapes used by other RTOs. MISO has asked Brattle to look at broader, New York-style demand curves that have more megawatt breadth as well as the narrower PJM-style demand curve, he said.

The RTO’s forward proposal also has yet to identify the “hurdles” rate-regulated supply could face when electing to participate in deregulated areas. Bladen said MISO is working with Brattle on restrictions.

“MISO does not want to be a party to any LSE selling itself short,” Bladen explained.

Stakeholders: Give Us the Evidence

Stakeholders sought more evidence that either proposal would work, with several asking MISO to run simulations using the 2016/17 planning year offers.

Indianapolis Power and Light’s Ted Leffler asked if simulations have been run at all.

“We’re working on it. The short answer is it’s complicated,” Bladen said. He said both MISO and the IMM would come back with simulations and concrete examples, but their results could differ.

Bladen also said there has been “a high lack of understanding [among stakeholders] on how these proposals would work.”

Susan Satter, public utilities counsel for the Illinois attorney general’s office, asked at what point regulated suppliers would supply load in Zone 4 using a hybrid model. Bladen responded that regulated suppliers would influence the competitive retail price by contributing to the systemwide demand curve. He added the systemwide demand curve is needed so deregulated areas contribute to footprint-wide resource adequacy.

“In a sense, [rate-regulated load-serving entities] are providing a moderating service on the competitive retail price,” Bladen said. “While they’re not being explicitly committed to serving load, they’re implicitly moderating the price … versus if there was only merchant generator participation.”

Stakeholders asked if MISO’s forward proposal would guarantee lower prices.

“I’m hesitant to say anything in life is a guarantee,” Bladen responded. But he added that the forward proposal’s price mechanism should produce lower prices. “We think the proposal has legs.”

Patton continues to maintain that MISO’s forward proposal would fail to produce efficient price signals. (See MISO Considering Changes to Proposed Auction Design.)

Initial stakeholder feedback on the hybrid and forward proposals is due July 7.

An additional special meeting of the RASC will take place July 14, at which stakeholders are again expected to discuss the hybrid proposal. Bladen promised Brattle representatives would be on hand to explain their analysis of both proposals and answer questions.

“One of these proposals will fall by the wayside, unless they’re miraculously merged, which I don’t think will happen,” said RASC Chair Gary Mathis.

MISO Contemplates Outages in Seasonal Capacity Accreditation

MISO ‎Manager of Resource Adequacy Coordination Laura Rauch also continued discussion at the RASC on how outages might be handled under seasonal capacity accreditation. (See MISO Moves Forward on Auction Design; Seasonal Filing Delayed Again.)

Stakeholders have said some planned outages during peak hours are appropriate under certain circumstances: when a unit is undergoing a one-time upgrade, when a unit hasn’t cleared the capacity auction or when weather is mild.

Currently, MISO’s planning reserve margin does not make room for any planned or maintenance outages during peak times. Rauch said the RTO is weighing increasing the reserve margin or reducing individual units’ capacity accreditations to reflect the risk of outages during peak hours.

“We’re still trying to get the point where we identify and clear what’s needed under a two-season construct,” said Rauch.

MISO’s locational filing, which would create external resource zones, is still being examined.

“One of the things stakeholders requested is more transparency and more clarity on how local resource zones would be run in the auction,” Rauch said. “Our homework is to come back with some better examples.”

Further discussion on MISO’s seasonal and external zone constructs is expected at the August RASC meeting. Rauch said an updated design document on the constructs will be released in September.