By Amanda Durish Cook

CARMEL, Ind. — MISO is poised to implement a laundry list of changes intended to improve its capacity market, some of which should take effect in time for the 2017/18 Planning Resource Auction.

The most significant — and controversial — is a proposal that would apply a 50-MW physical withholding threshold to affiliated market participants on a collective basis, rather than to each affiliated company individually.

The RTO’s Independent Market Monitor recommended the change in its 2015 State of the Market report, contending it would prevent a supplier from avoiding mitigation by creating multiple affiliates to increase its withholding threshold. (See “MISO Takes 1st Steps in Monitor Recommendations,” MISO Resource Adequacy Subcommittee Briefs.)

MISO plans to file the change with FERC on Jan. 17, MISO Manager of Resource Adequacy John Harmon said during Wednesday’s Resource Adequacy Subcommittee meeting.

In light of the change, the Monitor will this year begin to review bids made by affiliated market participants during the offer window. Monitor staff will contact affiliates once to notify them of a violation, providing an opportunity for violators to resubmit offers. Affiliates that continue to exceed the 50-MW threshold after the offer window closes will be subject to sanctions.

“It’s important to remember the offer window is a three-day window,” Harmon said. “Most offers are received on the first day, but there are three days” to submit offers.

Monitor staff member Michael Chiasson said the Monitor will not tell affiliated companies the specific volume of their collective shortfall of offers.

“It’s on or off, like any other light on the dashboard,” Chiasson said. Penalties will be identical to sanctions already detailed in Module D of the Tariff, which include fines, ineligibility for revenue sufficiency guarantee payments, bans on submitting virtual transactions or a condition that all of a company’s power requirements be scheduled in the day-ahead market.

Chiasson noted that the Monitor will notify violators of shortfalls by phone or emails and rely on contact information from the operating cost survey contact list and MISO’s official market participant registry.

“I just worry about the nightmare scenario that you’re calling and no one is picking up the phone,” said Jamie Watts, an attorney with the Long Law Firm.

Harmon said that MISO would not simply “leave a voicemail with a random individual and then shrug our shoulders.”

Some stakeholders are still wary of the change, maintaining that FERC Order 697 already prohibits affiliates from colluding to dodge withholding mitigation.

“I’d love to see what antitrust officials think of this,” said David Sapper of Customized Energy Solutions. “But that’s not relevant — or it might be.”

Tariff Clarifications

MISO will revise Module D of its Tariff to allow planning resources to request facility-specific reference levels for the auction. Offers for resources that make no such request will be set to $0/MW-day, as required by FERC. (See FERC OKs MISO Use of PJM Cost Estimates for Mitigation.)

Because a cost of new entry conduct threshold continues to apply to the auction’s initial reference level, the Monitor recommends that all resources whose competitive cost of selling capacity exceeds $26/MW-day request a facility-specific reference level. The RTO and Monitor are also proposing to exempt demand resources, energy efficiency resources and external resources from mitigation measures. The changes will be filed Jan. 17.

One stakeholder contended that resources external to the RTO should also be subject to mitigation, but MISO pointed out that external resources have no obligation to offer into the market and should not be discouraged from volunteering offers at their own prices.

The RTO has yet to establish an effective date for the changes because the filing will be made so close to auction registration, according to Jacob Krouse, MISO’s corporate counsel, but implementation could occur in time for the 2017/18 auction.

Indianapolis Power and Light’s Ted Leffler said the new reference levels were confusing. “I’m hearing zero, 10% of cost of new entry, and it all seems to be a bit of mush to me,” he said.

North-South Limit Calculation Specified

MISO will update its Tariff to specify a method for calculating transfer limits of flows between its North and South regions that cross SPP’s system, as directed by FERC late last year. (See FERC Backs MISO on Transfer Limit, Seeks Details.) The new provision will direct RTO staff to determine a megawatt limit by reviewing seams, transmission service and coordination agreements. Transmission providers will then be required to conduct a feasibility analysis to determine whether tighter limits are needed.

Harmon said MISO will submit a compliance filing by the end of the month (EL16-112), but the RTO is open to receiving stakeholder feedback up until Jan. 20.

Chiasson objected to the subtraction of all firm transmission service in determining the calculation for the limit and encouraged MISO to study the probability of actual firm transmission use to come up with a more accurate limit.

“When capacity import limits and capacity export limits are determined between [other MISO] zones, those determinations don’t use any firm transmission reservations,” Chiasson said. “We think that should also be true for limits between the North and South regions.”

The Monitor is likely to protest the filing, he added.

For the FERC directive to develop going-forward costs for facility-specific reference levels, also contained in the transfer limit order, MISO will use two years of data and a formula in which the hypothetical cost of suspension or retirement at the beginning of a planning year is subtracted from costs incurred during a 24-month period if the resource retires or suspends at the end of the planning year. MISO defines going forward costs as the sum of operations, administrative, taxes and insurance, maintenance and capital expenses.

Harmon said the calculation will become effective in time for the 2017/18 auction. While FERC did not require a specific deadline for implementation, the order did stipulate that the changes become effective in “future planning years.”

Dynegy’s Mark Volpe objected to the short gap between the filing and effective date, as many auction data collection deadlines occur on Feb. 15.

“Now you’re telling us that you’ve only got two weeks to change gears,” Volpe said. “You’ve led us to believe it was on a prospective basis for the 2018/19 Planning Resource Auction. … Now you’re saying it’s the seventh inning and we’re going to switch the rules.”

Chiasson said market participant data requirements are largely unchanged from prior years, adding that the Monitor has already asked for two years of planning data.

“I don’t think it will be work wasted,” Chiasson said. “But it would have been nice to know before the work started.”

Tim Bachus, MISO capacity market administration analyst, said the 2017/18 PRA is on schedule. He said 94% of market participants have submitted data for the Generator Verification Test Capacity reporting.

Future Improvements

MISO is considering other improvements for the PRA — in addition to a proposal for seasonal categories and six new external resource zones — while awaiting FERC’s verdict on a request to implement a bifurcated capacity market.

Harmon said the RTO is seeking stakeholder evaluation of five potential changes, including:

• Penalizing participating units that expect to be on planned or forced outages for most the planning;
• Relaxing auction accreditation rules for hydroelectric assets that serve as load-serving entities, rules that MISO says might be too “onerous” and might not recognize capacity benefits;
• Improving the partial unit clearing algorithm, which Harmon says clears marginal offers on a pro rata basis “that can result in resources clearing a small percentage of their unforced capacity, resulting in capacity revenue less than their costs”;
• Creating a capacity accreditation formula for battery storage before widespread adoption of batteries occurs; and
• Clearing up MISO rules and the Tariff with respect to treatment of behind-the-meter generation in the capacity auction.

Chris Plante of WEC Energy Group asked if any of the improvements could be implemented by the 2017/18 planning year.

With stakeholder support, improvements will be discussed throughout 2017 and implemented in the 2018/19 planning year, alongside the first separate forward capacity market for retail choice areas, Harmon replied.

MISO has sidelined the discussion of seasonal and locational auction issues until February, RASC liaison Shawn McFarlane said.

“Certainly the [Competitive Retail Solution] is the primary objective and we need to get that through before we tackle too much, but we’re looking at other resource adequacy improvements, including seasonal and locational improvements,” McFarlane said.

Leffler questioned whether seasonal constructs should continue to be a priority, given that stakeholder support has cooled since MISO revealed design specifics last year.

“I’d encourage people to provide that feedback,” Leffler said to stakeholders.