FERC once again has said it needs more information on clearing price caps before MISO can proceed with sloped demand curves in its capacity auctions. 

The commission issued a second deficiency letter April 23 on MISO’s plan to swap in sloped demand curves for its current vertical curve in its seasonal capacity auctions (ER23-2977). 

FERC asked about the sloped demand curve design’s opt-out provision to preserve state authority and lack of clearing price caps, among other details, late last year. (See FERC Wants More Detail on MISO Sloped Demand Curve Plan.) 

This week, the commission again zeroed in on MISO’s removal of its annual price cap for auction clearing prices as part of the move to sloped demand curves. It said it needs more explanation behind the RTO’s proposal to eliminate the yearly cap. 

MISO has said once it implements the new curve design, the total annual price for a local resource zone could reach as high as four times the cost of new entry (CONE), depending on whether capacity shortages occur in all four seasons of the auction. However, the RTO has not explicitly listed an annual price cap in its new tariff language, telling FERC it is not necessary because its plan is clear that clearing prices will be capped at the seasonal CONE. It also said there’s only a small chance a zone would experience shortage conditions in all four seasons and if that occurred, the more-than-$1,300/MW-day prices that ensue would properly reflect an “extreme” situation. 

MISO’s current auction design employs a 1.75-times-CONE price cap for a local resource zone. This year’s CONE averages $330/MW-day. The RTO has said its sloped demand curves would not allow prices to jump automatically to CONE values for small capacity shortages below reserve requirements, unlike the current, unyielding vertical demand curve. 

Nevertheless, FERC asked MISO to shed more light on why it believes it is appropriate for prices to go as high as four times the cost to build new generation and how those price signals could incent more generation to show up. 

FERC also asked for MISO to better explain why its current CONE cap would “degrade market efficiency and transparency when implemented with price-sensitive demand curves” like its sloped demand curve. The commission said it needed to hear more justification for the four-times-CONE construct versus the existing annual cutoff. It also questioned MISO’s stance that any “ex post adjustment of prices could lead to suboptimal resource adequacy outcomes.”