The Organization of MISO States (OMS) has released a position statement in support of a downward-sloping demand curve in MISO’s capacity auction.

MISO’s state regulators drafted language that said the existing vertical demand curve may not sufficiently value the reliability contribution of excess capacity and might cause load-serving entities to over-rely on the RTO’s market to procure capacity. They also said the vertical design might be hastening resource retirements and is likely not sending price signals that would spur investment in new generation.

The regulators said the grid operator’s current resource adequacy “has led to capacity shortfalls in part of the MISO footprint, may fail to maintain appropriate price signals and may not lead to reliability going forward.”

MISO has been seriously weighing adopting a sloped demand curve since early summer, after the spring capacity auction laid bare a 1.2 GW capacity deficit across MISO Midwest. (See MISO Promises Stakeholder Discussions on Capacity Auction Reform.)

The Kentucky Public Service Commission and the Public Service Commission of Wisconsin abstained from voting on the statement, and the Manitoba Public Utilities Board did not participate in drafting the letter. However, the Kentucky commission added that it “strongly believes that MISO must immediately endeavor to address the most prominent issues with its capacity market, through actions which include, but are not limited to, implementing a downward-sloping demand curve.”   

OMS said it “looks forward to contributing to the final design of a revised demand curve” and said its “support of a revised demand curve is contingent on reviewing and approving MISO’s final proposal.”

OMS also warned that it will oppose a minimum offer price rule in the capacity auction.

During the OMS’ annual meeting in October, North Dakota Commissioner Julie Fedorchak said the organization’s members still need to know the final shape of the proposed curve and understand the options for states to self-supply or opt out in meeting their reliability needs.

Fedorchak also said the sloped demand curve’s formation should be done in conjunction with other resource adequacy measures, like improved scarcity pricing and a new generation valuation that can provide necessary system attributes. She said a sloped demand curve is “just one tool” in the quest for resource adequacy.