By Amanda Durish Cook
CARMEL, Ind. — MISO has decided to delay the formation of external resource zones for another planning year while it tries to gain greater stakeholder support and — by extension — better chances for FERC approval.
MISO Executive Director of Strategy Shawn McFarlane said the RTO will a pursue a March filing to implement external zones by the 2019/20 planning year capacity auction, instead of the originally targeted 2018/19 period.
“Please don’t read into this as a prelude of not going into this,” McFarlane told stakeholders during a Sept. 13 Resource Adequacy Subcommittee meeting. He said the reliability concerns MISO is citing to justify the proposal will not arise until the 2019/20 planning year.
The RTO was still preparing the proposal late last month for a FERC filing this month.
“We preferred to go forward this year with it, but there is insufficient progress with stakeholder alignment … and low likelihood of FERC approval in time for the 18/19 auction,” McFarlane said.
Given a July decision by the D.C. Circuit Court of Appeals that limits FERC’s ability to issue guidance on proposals, MISO needs a “clean filing” with firm stakeholder consensus, McFarlane said. In July, stakeholders warned that FERC might be less inclined to approve a contested proposal in light of its new express prohibition from ordering changes. (See MISO Members: Court Rebuff May Reduce External Zone Chances.)
McFarlane said MISO must “contemplate a rejection” of even a carefully vetted proposal but added that the RTO was happy with its progress thus far.
“We are calling for membership to come forward with ideas, but the clock is still ticking in March,” he said. “I’ve heard from stakeholders since I’ve taken on this post that ‘MISO does what it wants,’ so here’s a case where we’re giving latitude.”
Dynegy’s Mark Volpe asked how MISO determined that a reliability risk was not imminent until 2019/20.
“We’ve been working on this for two years,” Volpe pointed out.
MISO Manager of Resource Adequacy Coordination Laura Rauch said the RTO’s concerns stem from additional generators expected to participate in MISO as capacity resources after their commitments to PJM end in the 2019/20 time frame. External zones will need to be in place to handle the added capacity.
Some stakeholders are still skeptical of the proposal, which will integrate external resource zones into the Planning Resource Auction using a single clearing price for each external balancing authority.
“What’s the longest length that a radial transmission tie can have? Hundreds of miles and still be considered [a direct link to MISO]? I think we need to keep drilling on that,” Customized Energy Solutions’ David Sapper said.
Indianapolis Power and Light’s Ted Leffler expressed concern that some resources will be forced to shut down if they are excluded from hedging by obtaining a share of excess auction revenues needed to cover generation-to-load price separation. MISO last month said it would distribute historical supply arrangement credits as a refund for price separation to external resources with long-term and consistently used historical supply agreements. (See MISO Bolsters Case for External Resource Zones.)
Rauch said MISO will next month continue stakeholder discussions about the potential make-up of hedging mechanisms to distribute excess revenues.
Seasonal Aspect Back in Conceptual Stage
MISO similarly doesn’t plan to implement seasonal capacity procurements and accreditation in time for the 2018/19 auction. The RTO will instead spend this quarter getting stakeholder input on the subject, followed by publication of a white paper.
RTO officials say the proposal is no longer as simple as applying separate clearing requirements or limits in a two-season — or even four-season — capacity auction.
“Recently, we’ve seen peaks outside of the summertime and in [shoulder months], most lately in MISO South in October,” MISO analyst Dustin Grethen said.
“The thinking has evolved,” said MISO Executive Director of Market Design Jeff Bladen. “We have to open the aperture of how we think about it. We’ll look at this without a specific solution in mind but how to scope out the issue.”
Grethen said MISO and stakeholders will spend time evaluating whether the RTO’s current resource availability requirements and price signals need to be revised in light of tightening supply from planning resources, more regular extreme weather events and an aging generation fleet more prone to unplanned outages.
Some stakeholders warned MISO that not every emergency situation can be successfully averted through planning.
“What happened in Florida in the last week could not have been prevented,” said the Minnesota Public Utilities Commission’s Hwikwon Ham, referring to widespread outages caused by Hurricane Irma. “I think we have to be very careful when planning resource availability not to try to cover transmission outages. Reliability is very important, but it’s not at any cost.”
“If we had a system that never had a max warning, would a customer want to pay for that?” added Leffler. “We have not gold-plated the system, and perhaps we should not gold-plate the system.”
Grethen said MISO would continue to hold itself to a one-day-in-10-years standard, but it wants to have a “buffer” should shoulder generation warnings occur.
Bladen noted that MISO is not yet proposing anything specific at this point. “It’s one thing to plan enough resources, but another thing to make sure that those resources are available and operational when we need them. It’s a year-round, month-to-month, hour-to-hour issue,” he said.
Sapper asked how much a new seasonal proposal may have to do with the recent U.S. Department of Energy report that urged RTOs to value “resilient” resources with on-site fuel storage, such as coal-fired plants.
“This has nothing to do with that DOE report. I think the DOE report, in many respects, is a reaction to what we’re already experiencing,” Bladen said. “I know there is an attempt to try to read into this and see a favored resource type or a political hot topic, but it’s not. We’re simply seeing a narrowed reserve margin.”
