ST. PAUL, Minn. — Independent Market Monitor David Patton said that although MISO markets and operations performed well over a warmer-than-usual summer, there is room for improvement, namely in price-setting protocols.

Patton said MISO’s all-in energy price increased 9% from spring to summer, owing to increased gas prices and load. Summer load peaked at 121 GW on July 21, when a maximum generation alert was called, Patton said during a quarterly report at the Sept. 13 Markets Committee of the Board of Directors meeting.

“On several of these days, we committed a large amount of peaking resources,” Patton said. The Monitor said he was concerned that although July 21 was the hottest day of the year, prices weren’t the highest because utilities self-curtailed and demand response resources were not called on during the emergency maximum generation event. Real-time energy prices peaked at $36/MWh while the day-ahead price hit $78/MWh.

The voluntary curtailments led to a spike in revenue sufficiency guarantee (RSG) payments. Patton also said MISO committed more resources than necessary on some days because of incorrect load forecasting, leading to a “significant” uptick in RSG costs.

Todd Ramey, MISO vice president for system operations and market services, said July 21’s maximum generation event was the RTO’s first since the 2014 polar vortex and the first such event during summer in four years.

Patton also said only a few peaking resources were allowed to set prices on July 21. He said his proposal to expand the amount of resources able to set prices in extended LMP would alleviate dips in pricing during maximum generation alerts. Patton said if his ELMP recommendations were adopted, July 21’s average real-time system marginal price would have been 31% higher and real-time RSG would have been 14% lower.

MISO has said its simulations don’t support Patton’s proposal, which he first made in June’s State of the Market Report. (See MISO Study Undercuts IMM Proposal on Expanding ELMP Pricing.)

Patton also said voluntary load curtailment is “somewhat troubling” because it is not integrated well into MISO’s market and distorts pricing.

“As far as control goes, there’s very little control with voluntary curtailment,” Patton said.

Patton recommended increasing the visibility of load curtailment and categorizing it as DR. He also said MISO could better integrate load curtailment into market products.

“You’re simply raising your hand and saying please curtail?” Director Paul Feldman asked MISO management.

“How much of [the event] was operational versus how much of it was procedural? Are there things we could do from a market perspective?” asked Director Baljit Dail.

“The prices ought to go through the roof in emergency situations,” Feldman added.

Richard Doying, executive vice president of operations and corporate services, said MISO was planning to present alternatives to the Monitor’s ELMP suggestion soon.

“I think it’s good that we have the point of view from Dr. Patton, but we’ll also get the alternatives from a practical point of view,” Director Phyllis Currie said.

Additionally, Patton said the summer was characterized by high congestion in MISO South early and high congestion in MISO North throughout August.

Director Michael Curran asked if market products were keeping pace with emerging issues. “It struck me that there are so many operational and procedural issues. It seems that the market is becoming operationally challenged, and I wonder if we have the tools,” he wondered.

Patton said the results weren’t gloomy, although MISO did experience one operating reserve shortage and local emergency conditions on several days. He said MISO was able to operate at 3% above its planning reserve margin requirement and there were no significant operating reserve shortages. He also said the market performed competitively and reliably and mitigation needs were “infrequent.”

“We’re going to be in emergency conditions much more often,” MISO CEO John Bear said. “Does that mean we’re right at the edge? No.”

Currie asked if MISO had learned any lessons in communicating with balancing authorities over the summer in light of the higher loads. “I think that the current communication protocols are sufficient today,” Ramey said.

Ramey reported that the average summer day-ahead energy price was $29.55/MWh, 3.7% higher than summer 2015, propelled by a 3% increase in load. However, summer saw a 7.5% decrease in natural gas prices compared to summer 2015, averaging $2.60/MMBtu. Wind power production grew 18% from last summer, while installed wind capacity increased by 9%. Planned generation outages averaged 6.3 GW, up 10.7% when compared to last summer, and forced generation outages averaged 14.5 GW, up 6%.

MISO Attorneys Address Board Role in Capacity Auction Conflict

With the capacity auction redesign debate as a backdrop, three attorneys were on hand to clarify the board’s role when MISO’s management, stakeholders and Monitor can’t agree. (See MISO Sees Nov. 1 Filing on Forward Auction; Simulation Shows Price Disparities.)

MISO Senior Vice President of Compliance Services Stephen Kozey said no one should govern the board’s actions, but the board should “certainly” listen to all sides.

Counsel to the board Karl Zobrist said that while the board doesn’t make design changes, it can review proposals and provide or withhold endorsement. Zobrist also said the Monitor can make recommendations and intervene in FERC filings, but the board is under no obligation to advocate the Monitor’s recommendations.

“It’s important that there be a robust dialogue,” MISO General Counsel Andre Porter added.

“We need to make sure we’re listening not only to the IMM but the Advisory Committee and the stakeholders,” Dail said. “But I don’t think we should be saying, ‘This is how market design should work.’”

Zobrist said the board should not blindly defer to management. “You have the duty of care and duty of loyalty … and if you’re confident management is making a good decision, you should support it,” he said.

— Amanda Durish Cook