Stakeholders last week had mostly negative reactions at FERC to MISO’s bid to reconfigure its resource adequacy design into seasonal auctions with availability-based resource accreditations.
DTE Energy characterized MISO’s new accreditation as a “severe over-correction” that is “based on chance.” It predicted year-over-year capacity credit volatility and generation overbuilt at the expense of ratepayers, should the proposal go into effect.
“MISO’s proposal would inappropriately require a resource owner to do what MISO cannot or will not do, namely predict when system conditions will be tight in advance,” DTE wrote in its protest. “Even if forecasts based on weather predictions and historical patterns were accurate enough to indicate potential operating periods of concern, tight conditions are also driven by unpredictable events such as other resources’ forced outages or transmission outages.”
Louisiana utilities Entergy and Cleco also said the design would expose market participants to an “unreasonable level of volatility.”
The Coalition of Midwest Power Producers said MISO failed to show how the new auction and accreditation design would stem the RTO’s tide of reliability issues and asked FERC to order a technical conference to investigate problems with the plan.
MISO late last year sought the commission’s approval to perform four seasonal capacity auctions, with separate reserve margins, by 2024 and apply a seasonal accreditation based on a generating unit’s past performance during tight system conditions (ER22-495).
The grid operator also filed separately to establish a minimum capacity obligation. MISO load-serving entities would have to demonstrate that they have secured at least 50% of the capacity required to meet their peak load in advance of voluntary capacity auctions (ER22-496). (See FERC Grants Comment Extension for MISO Capacity Filing.)
MISO originally intended the minimum capacity requirement be included in the seasonal auction design. However, stakeholders said including it in the same filing could risk FERC’s rejection of the entire resource adequacy modification. Written opinions on the RTO’s plans were due Jan. 14.
Multiple market participants said MISO’s requested effective date was too soon, since preparations are already underway for the 2023-24 planning year capacity auction(s).
The Clean Energy Coalition, which includes the Sierra Club, Sustainable FERC Project, Natural Resources Defense Council and Clean Grid Alliance, said the seasonal design “is rigid and does not allow for a changing risk pattern that will continue into the future as the resource mix continues to evolve.” The groups criticized MISO for not considering fuel supply risks in accreditation and for using different risk hours to accredit thermal resources and wind resources. The latter will continue rely on the RTO’s existing effective load carrying capability calculation.
They also said the accreditation proposal is incomplete because it doesn’t offer a capacity accreditation approach for electric storage resources.
Ameren said while it can get behind seasonal auctions, it disagreed with the proposed accreditation because of the disparate treatment of resource types when calculating capacity credits.
WEC Energy Group objected to MISO’s plan to plump up seasons with low or no loss-of-load risk with a resource’s annual availability values for accreditation purposes. It said a resource’s capacity credits in low-risk seasons would “inappropriately include resource availability from other seasons.”
MISO’s transmission owners said while they supported a transition to seasonal auctions and availability-based performance incentives, they wanted the grid operator to explain whether it will continue to limit capacity accreditation to summer interconnection rights. In MISO, a market participant’s annual unforced capacity value cannot exceed the resource’s summer interconnection rights.
“If the proposed seasonal construct is implemented, MISO effectively will be limiting non-summer capacity accreditation to summer interconnection rights,” the TOs said.
The Organization of MISO States (OMS) was one of few to lend support to the seasonal plan, saying it represents an “improvement over the status quo.”
“While MISO cannot control when a generator or transmission line goes down or when and how an extreme weather pattern will affect the system, it can control the signals generators receive to be available in the face of uncertainty,” OMS said. “This proposal more accurately identifies seasonal risk than MISO’s current resource adequacy construct and more accurately accredits resources’ ability to contribute to the system during tight conditions.”
OMS said it is “entirely reasonable for MISO to require resources that receive capacity credit and capacity payments be available to offer energy for a large part of a given season.”
Not all state regulators were in step with OMS. The Mississippi Public Service Commission said the accreditation proposal “interferes with state jurisdiction over generation resource decisions because existing and future generation that does meet MISO’s criteria will be devalued as sources of capacity.”
The PSC said the accreditation is “untested” in any other grid operator and is “a costly experiment.”
The Louisiana PSC also panned the accreditation design as placing “too much significance on too small a sample size” of risky hours. It added that MISO’s month-long limit on planned outages in any season will cause “discriminatory treatment of generation that requires outages greater than 31 days, particularly nuclear generation.”
Manitoba Hydro also said while the filing may not be perfect, it is necessary to confront escalating reliability risks in the footprint.
International Transmission Co. invoked climate change in addition to the resource fleet’s continued transition as evidence that seasonal auctions and accreditations will be necessary. It urged FERC to adopt the resource adequacy overhaul.
Minimum Capacity Rule Draws Ire
The possible introduction of a 50% minimum capacity obligation also proved unpopular. Several said it was a pointless mandate.
The Illinois Commerce Commission protested the possible requirement as unproven and discriminatory against retail choice areas in MISO, which rely on “a robust competitive wholesale market” instead of regulated, integrated resource planning.
The ICC said the rule will “likely result in higher rates that are unjust and unreasonable and is likely to result in the exercise of market power.”
Big Rivers Electric Corp., Hoosier Energy Rural Electric Cooperative, and Southern Illinois Power Cooperative said MISO didn’t describe what reliability problems the minimum obligation is tailored to address.
Shell Energy North America similarly said MISO didn’t explain its reasoning for introducing the rule. It said the grid operator’s worries about load-serving entities’ (LSEs) increasing overreliance on its voluntary auction are overblown.
“In the last 2021-2022 Planning Resource Auction, MISO procured 96.4% of its capacity from self-scheduled and fixed resource adequacy plan resources, up from 94.5% in the 2020/2021 auction. This trend shows LSEs are acquiring more resources on a forward basis counter to MISO’s claims,” Shell Energy wrote.
Exelon called the minimum capacity obligation “a solution in search of an unsubstantiated problem, which will impose regulatory constraints that will inevitably increase costs to customers.”
However, the minimum capacity rule had its defenders. Entergy said the requirement is a “practical safeguard to ensure that LSEs engage in reasonable resource planning practices” and don’t develop a dependence on the Planning Resource Auction. DTE Energy also called it a “necessary first step in maintaining local and regional reliability.” Duke Energy characterized it as a “a much-needed backstop.”
Consumers Energy said the rule would level the playing field between the LSEs under state obligations to plan their capacity procurement years in advance and those that aren’t. It called the rule a “gentle mitigating measure.”
