By Amanda Durish Cook

The Illinois Commerce Commission heard two very different views of MISO’s Zone 4 at a workshop last week, with some speakers claiming the region has sufficient reserves and others saying it is in dire straits.

The ICC convened the Dec. 8 workshop to hear continuing discussion on the future of resource adequacy in the RTO’s Southern Illinois zone. The commission will hold another workshop next month and then issue a summary report of stakeholder positions to Gov. Bruce Rauner by Feb. 26. It was Rauner’s office that in part sparked the workshop after sending the ICC an Oct. 26 letter asking the commission to produce a white paper and stakeholder comments on the structural challenges of Zone 4 within five days.

Dynegy representatives repeated warnings that the company could shutter one of its eight plants in Zone 4. The company operates about 6.5 GW of capacity in the zone, which contains 57 utility-scale generating stations with a combined 16 GW of nameplate capacity. Dynegy said unprofitable plants could shut down as early as the 2018/19 planning year unless changes are made to support local generation. Merchant generator owner Rockland Capital also warned in workshop comments that merchant plants will be forced to exit the market in Illinois without MISO capacity market improvements.

“We are the bearers of the risk of deregulation,” said Dean Ellis, Dynegy executive vice president of regulatory and government affairs.

Ellis also criticized the short lead time MISO provides for its annual capacity auction, with the auction taking place in early April and the planning year beginning June 1. “We have to make investment decisions involving millions or tens of millions of dollars with as little as six weeks’ notice,” he said.

Dynegy said MISO and the Organization of MISO States’ (OMS) projected capacity surplus through 2022 includes all of the company’s at-risk downstate generating units — except for Baldwin Unit 3 near St. Louis — as available capacity. The OMS-MISO resource adequacy survey predicts Zone 4 will have an average 2.62-GW surplus through 2022.

The company also warned the ICC not to count on MISO’s system support resource program, which enables the RTO to keep units online for reliability purposes: “It might be asserted that … MISO could invoke its system support resources tariff to require Dynegy to keep one or more of the retiring units in operation, while compensating Dynegy through cost-of-service-based payments under an SSR agreement. However, the MISO SSR tariff as written only provides for generating units to be designated as SSRs in order to maintain transmission system reliability (including compliance with thermal and voltage limitations under applicable NERC standards) and not to maintain resource adequacy.”

MISO ‎Executive Director Melissa Seymour confirmed Dynegy’s assessment, saying the RTO could only pursue SSR agreements in cases where reliability is threatened, but not for resource adequacy.

Ameren Illinois said it didn’t see an immediate need for action, arguing that only mid- and long-term resource adequacy is a concern for the zone.

“There are sufficient resources in the market today, and sufficient resources are forecasted to be available in the market in the next three to five years. Thus, the problem identified is mid- and long-term resource adequacy in MISO Zone 4,” the company said in comments.

AARP Senior Legislative Representative Bill Malcolm said Illinois customers should “celebrate” because energy costs are low and the wholesale market is finally working as designed in Zone 4.

Malcolm urged a slower timeline to develop a resource adequacy solution and recommended a full independent study of capacity in all of Illinois, not just the downstate market.

“This seems to be a solution in search of a problem. There is no urgent issue; we have time,” Malcolm told the commission.

Activist Tracy Fox, representing several community groups in the state, also argued for a measured response and called for an independent analysis. “If you watch these plants, they’re always broke, there’s always a fix on the horizon, and once they get it, they’re broke again,” Fox said.

Speaking on behalf of Rockland Capital, Travis Stewart of Gabel Associates cautioned against a study that relies solely on publicly available data, saying it might not paint a full picture.

RA not a Problem

Jim Dauphinais, representing Illinois Industrial Energy Consumers, said Southern Illinois does not have a resource adequacy problem.

“There has not has been a serious resource adequacy issue in the state since 1998,” Dauphinais said, referring to the premature shutdown of Commonwealth Edison’s two large Zion nuclear reactors.

Malcolm said supplies in the Midwest are so plentiful that We Energies is shutting down its Pleasant Prairie plant in southeastern Wisconsin.

Direct Energy said, if anything, there’s an oversupply issue in Zone 4, noting the $1.50/MW-day clearing prices in MISO’s most recent capacity auction. The retail electric supplier urged the ICC not to “disrupt the entire market and potentially subject customers to escalating and uncontrolled capacity costs.”

“I don’t mean to be critical, but [MISO CEO] John Bear’s letter was weak. It doesn’t present any evidence at all of a resource adequacy problem,” Fox said, referring to a May letter Bear penned to Rauner, urging the state to continue to seek solutions to a possible capacity shortfall after FERC rejected MISO’s separate three-year capacity auction proposal for retail choice areas. She conceded Bear’s point that Zone 4’s resource adequacy conditions change from year to year.

No Greener Pastures

Last month, Dynegy drafted legislation that would have the Illinois Power Agency hold a separate competitive capacity auction for Central and Southern Illinois, but the proposal failed to advance in the Illinois House of Representatives after hearings. (See Dynegy Auction Proposal Fails to Gain Ill. Lawmaker Support.) In workshop comments, Exelon said it generally supported the plan, contending it “would have ensured that Illinois would no longer be subject to the annual one-year cycle of capacity auctions and the volatility that ensues.”

A recent ICC white paper concluded that state has four options: continue to rely on existing competitive forces and market structures; impose additional capacity requirements on load-serving entities; create a reliability portfolio standard; or encourage or require utilities to switch RTOs.

Fox criticized the white paper as too heavy on MISO Zone 4 backstory and light on an examination of the solutions. “We came out with four solutions, but the solutions aren’t analyzed at all,” Fox said.

During a Dec. 4 conference in Indianapolis hosted by EUCI, ICC Commissioner John Rosales said it was interesting that the white paper offered RTO defection as an option while other Illinois generators outside of Zone 4 are considering moving from PJM to MISO. “The grass is always greener on the other side. I hate for that to be the end-all option. That’s the North Korea option. There’s a lot of repercussions to move from one RTO to the other, and I’d hate for that to happen.”

Ameren has also said it believes that reconfiguring RTO participation will “not necessarily guarantee long-term resource adequacy for downstate Illinois.”