ORLANDO, Fla. — MISO’s Independent Market Monitor said he has uncovered a faulty assumption behind the seasonal capacity requirements, months before the RTO debuts its seasonal capacity auction.
IMM David Patton told the MISO Board of Directors’ Markets Committee Tuesday that he believes that MISO’s seasonal capacity requirements are artificially inflated in shoulder seasons because it expects generators on planned outages to offer capacity.
“MISO’s [seasonal] requirements essentially assume that all units with planned outages will be selling capacity,” he said. “Since that would reduce the average availability of capacity purchased, it raises the requirement.”
Patton said he expects that some generating units on long-duration planned outages won’t sell capacity and will seek exclusions with the IMM from market power mitigation. The exemptions allow generation owners to withhold capacity or offer it at high prices.
“This will cause the shoulder seasons to be artificially tight — and may be short,” Patton said, pointing to the fall months that are typically rife with planned outages. He said if half the units with long-term outage scheduled during next fall don’t offer, MISO will be short on capacity over the season.
If the grid operator’s planning resource auction fails to procure enough capacity in the fall, Patton said, it would be a “manufactured shortage” and “artificial tightness.” He said MISO should publish revised loss-of-load expectations or find another way to “ratchet down” the requirement.
Patton said the issue is “pressing.”
“From an economic perspective, this is really big deal,” he said. “We would have to reject exclusion requests and force such units to sell to reduce the impact of this issue. Even then, prices would be artificially inflated if suppliers include expected penalty costs in their offers.”
Patton said MISO’s seasonal capacity actions are a big undertaking, making it difficult for staff to anticipate all implications.
“Going to a seasonal market, there’s a tremendous number of changes that have to be made in a short amount of time,” he said.
Staff said they’re working with the IMM on a solution for their shoulder season requirements.
MISO will simultaneously conduct four seasonal capacity auctions this spring, with accreditation values for thermal generation that vary by season. FERC in August approved the RTO’s request to clear four separate auctions once a year and to use an availability-based resource accreditation that relies on the riskiest hours in a season. (See FERC OKs MISO Seasonal Auction, Accreditation.)
Otherwise, Patton said MISO is making good progress on his yearly bundles of market improvement recommendations. (See MISO Simpatico with Monitor’s 2022 Market Recommendations.)
“I’m super excited for what MISO is doing,” Patton told board members.
“So clearly, there is a Santa Claus,” MISO director Mark Johnson joked.
