FERC on Thursday rejected two rehearing requests over MISO’s seasonal capacity auction and availability-based resource accreditation, clearing the way for the RTO to conduct its first seasonal auctions in April.
The commission affirmed its previous decision that the seasonal, availability-based accreditation will incentivize availability and more accurately represent when generating units contribute to resource adequacy (ER22-495).
Commissioner Allison Clements, as she did in FERC’s original order last year, disagreed with MISO’s accreditation inputs, saying it “glosses over MISO’s failure to adequately justify key details in its proposal.”
Clements zeroed in on what she called “two of the most problematic design flaws”: MISO’s selection of resource adequacy hours that allow resources up to 12 hours to be counted in its operating reserve margin calculation, and the 24-hour lead time before resources are excluded from being assumed as available during those hours.
“In defense of its position, the only explanation MISO gave is that its choice of a 12-hour lead time was better than an alternative of 24 hours, which would have included even more resources incapable of delivering capacity when needed,” she wrote in a concurring opinion. “But the Federal Power Act is not a ‘Price is Right’ showcase showdown, and the fact that a proposed rate is closer than an unjust and unreasonable option does not demonstrate it to be just and reasonable. One hundred dollars for a gallon of milk is not a fair price, and the fact that $50 is a better alternative does not make it reasonable.”
Clements said MISO’s decision to credit resources that take up to a full day to start up will lead to extending credits for resources that are ineffectual during reliability issues.
“Incredibly, while MISO’s only defense of using 12 hours as the lead time threshold for including resources in its calculation of operating margin is that doing so is more accurate than using a 24-hour lead time, it proposes to use the even-less-accurate 24-hour lead time when determining which resources get credit for delivering capacity,” she said.
FERC last year approved the grid operator’s request to conduct four seasonal capacity auctions, with separate reserve margins, and apply a seasonal accreditation mostly based on a thermal generating unit’s past performance during tight system conditions. The expected and historical tight conditions are dubbed “resource adequacy hours,” covering 65 hours during the year when resource availability is less than 25% of operating margin.
Louisiana and Mississippi regulators, Consumers Energy, Entergy (NYSE:ETR), DTE Energy (NYSE:DTE) and Alliant Energy (NASDAQ:LNT) sought rehearing of the order’s accreditation portion. They said a harsher accreditation based on risky hours that can’t be predicted with certainty will result in fluctuating accreditation values, undue penalties to generation and won’t reflect MISO supply fundamentals. (See MISO’s Seasonal Capacity Proposal Opposed at FERC.)
DTE and Alliant accused the commission of “cursorily sweeping aside” concerns over accreditation instability. They said the accreditation framework could potentially cause about a “ten-fold increase in year-to-year accreditation volatility for some market participants” and could cause members to overbuild generation on the MISO system.
Entergy noted that according to the RTO’s own analysis, a quarter of all market participants’ total accredited capacity will experience a standard deviation between 7.7% and 15.5% from one planning year to the next in the spring season. Entergy said that translates into a 20% chance that a market participant’s total accredited capacity will “undergo a year-to-year change of 20%.”
The utility said a resource can experience “a significant reduction” in accredited capacity if it is unavailable during “even one or two days.” Mississippi and Louisiana agreed that the design will cause “large swings” in accreditation year over year.
Before last year, MISO accredited its thermal resources annually based on the asset’s historic three-year equivalent forced outage rates.
The commission was unpersuaded by the arguments and said the new accreditation’s benefits still stand to outweigh the small amount of aggregate volatility it introduces across planning resources’ capacity values.
FERC said the accreditation will lead to “increased accuracy, increased confidence in generator availability during high-risk hours, better coordination of resource outages and stronger incentives for resources to be available in times of need.”
The commission disagreed with a coalition of clean energy organizations that said thermal resources shouldn’t have a different accreditation framework from renewable resources. It said resource classes can be accredited using different methods.
The clean energy groups also took issue with MISO’s response should a season not have at least 65 resource adequacy hours. The grid operator will use resource performance data from other high-risk hours throughout the year as a “backfill” to ensure there are 65 resource adequacy hours.
They also said MISO’s proposal to top off the risky hours to make sure it meets a minimum 65 hours, or 3% of a season, “creates an artificial profile for these resources and assumes risk in a season during hours where there are none.” FERC responded that maintaining a minimum target of hours to base accreditation upon “mitigates the volatility concerns.”
The commission also supported MISO’s 120-day advance notice requirement for planned generator outages; a capacity replacement obligation for resources on planned outages lasting longer than 31 days; and the RTO’s plan to treat offline resources with lead times greater than 24 hours as unavailable during resource adequacy for accreditation purposes.
It resisted calls to delay the seasonal launch until the 2024-25 planning year to let market participants get their bearings in the new environment. FERC said market participants have attended stakeholder workshops that warned of the change as far back as 2019.
FERC’s decision arrives as MISO may revise the availability-based accreditation method. The grid operator wants to adjust unit-level accreditation by a capacity value determined by loss-of-load expectation rather than its existing unforced-capacity values that rely on forced outage rates.
The design would apply to all resources and require edits to the new availability-based design. MISO currently uses a unit-level effective load-carrying capability calculation based on a peak hour contribution for wind resources. (See Stakeholders Cry Foul on MISO’s Resource Accreditation Pivot.)
Clements contended that FERC violated the Administrative Procedure Act because it did not respond to arguments that many resources with nearly a full day’s startup time cannot maintain reliability when they’re offline during resource adequacy hours.
She found it “laudable” that MISO is seeking to improve “its outdated capacity accreditation framework. “
“It is clear that … today’s markets must be designed to address increasingly complex reliability challenges. Although MISO’s proposal fell short of the mark, this does not suggest that changes to MISO’s resources adequacy rules are not appropriate. To the contrary, further changes appear necessary,” she said.
