LOUISVILLE, Ky. — The Organization of MISO States and the Independent Market Monitor on Monday resuscitated a longstanding debate over whether the RTO should adopt a sloped demand curve in its capacity auctions.
During a meeting in conjunction with the National Association of Regulatory Utility Commissioners’ annual meeting, OMS President Julie Fedorchak said the topic was “worth bringing forward again.” She noted the landscape has changed in the years since the Monitor first recommended MISO adopt a sloped demand curve.
Fedorchak said a demand curve could possibly help the footprint place more value on resource adequacy. MISO employs a vertical demand curve in its capacity auction that prioritizes reliability over economics.
Monitor David Patton said the RTO neglects the demand side of its capacity market with its focus on the supply side. He said the demand for capacity must represent the value consumers are willing to pay for.
Patton said should MISO alter the curve; most regulated utilities won’t be forced into rate increases because they carry excess capacity. He said the utilities and merchant generation that relies on the capacity market’s price signals will likely benefit from increased compensation.
“This has the benefit of being far more equitable for the regulated utilities, which carry the reliability [responsibility] for the [MISO] North and the South [regions],” Patton said.
Competitive suppliers, on the other hand, will pay more for capacity, he said.
The grid operator has resisted a sloped demand curve ever since its unsuccessful attempt in 2016 to conduct separate, three-year forward capacity auctions using the curve only for the footprint’s deregulated areas. The RTO is currently preoccupied with establishing four seasonal capacity auctions paired with availability-based resource accreditations; the plan does not call for changes to the auction’s demand curve design. (See Last-minute Unease over MISO’s Seasonal Accreditation.)
Patton said had MISO used a sloped demand curve in its 2021/22 Planning Resource Auction, it would have cleared capacity at $172.86/MW-day in the Midwest and $28.31/MW-day in the South. This year, MISO South (Arkansas, Louisiana, Mississippi and Texas) cleared at an all-time low of $0.01/MW-day while Midwestern zones 1-7 (Illinois, Indiana, Iowa, Michigan, Minnesota, Missouri, Montana and Wisconsin) cleared at $5/MW-day. (See MISO Capacity Auction Values South Capacity at a Penny.)
The Monitor has said analyses show that MISO’s capacity market is not providing revenues to keep coal and nuclear resources afloat, which are needed for reliability while the footprint decarbonizes.
