By Amanda Durish Cook

MISO’s annual capacity auction again produced disparate, roller coaster results, with prices in three zones more than quintupling compared to last year while results in Zone 4 dropped by half.

MISO said unit retirements and capacity exports throughout its Midwest region led to six of the 10 zones clearing at $72/MW-day in the fourth annual Planning Resource Auction. In contrast, the entire MISO South region cleared at just $3/MW-day. Zones 2-7 relied more heavily on imports from other zones, driving an uptick in clearing prices:

• Zone 1 cleared at $19.72/MW-day, almost six times last year’s $3.48;
• Zones 2, 3, 4, 5, 6 and 7 each cleared at $72/MW-day, a nearly 21-fold increase for zones 2-3 and 5-7, and a 50% drop for southern Illinois’ Zone 4; and
• Zones 8, 9 and 10 each cleared at $2.99/MW-day, a 9% drop for zones 8 and 9. This was the first year for Zone 10, which covers Mississippi.

Save for Zone 4, all of the zones cleared below $3.50/MW-day last year.

MISO said 135,483 MW cleared for the planning year June 1 to May 31, 2017, a 1% drop from last year. The cleared resources include 122,379 MW of generation resources, 3,462 MW of behind-the-meter generation, 5,819 MW of demand resources and 3,823 MW of external resources.

The dip in available capacity in the 2016/17 planning year reflected data collected on the 2015 OMS-MISO Survey, the RTO said.

“The generation fleet across MISO is rapidly changing,” said Richard Doying, executive vice president of operations and corporate services in a statement Thursday. “While more generation is retiring, resulting in a tighter supply across the MISO region, the auction results show that there are sufficient resources to maintain reliability for this planning year.”

MISO said the creation of Zone 10 in Mississippi had no impact on capacity auction results.

MISO said the results were affected by FERC’s Dec. 31 order requiring the RTO to make several changes in its auction rules (EL15-70, et al.). (See MISO Seeks Adjustments on Capacity Import Limits.)

MISO’s rules allow mitigation of offers that exceed “conduct thresholds” that indicate potential economic withholding. MISO’s threshold equals 10% of the cost of new entry (CONE) plus the applicable “reference level.” Any resource desiring to offer above the threshold had to convince the RTO’s Independent Market Monitor that it had costs that warranted a higher offer.

Previously, MISO had based its reference level on opportunity costs — what a capacity resource could earn by exporting to PJM. FERC said the $155.79/MW-day maximum bid MISO used in last year’s auction was too high, because transmission constraints and PJM’s heightened Capacity Performance rules meant exporting was not an option for all capacity resources. The order required MISO to set the initial offer reference price level to $0.

In press conference Friday, Doying said most units in this year’s auction offered at prices below the conduct threshold.

The Dec. 31 order also said MISO’s approach to determining capacity import limits didn’t take into account counter-flows. MISO said the changes required “generally expanded import capability” into local resource zones and decreased local clearing requirements for most zones.

“I want to point out that supply is getting much tighter. … We expect to see further reductions in the future, so we may see more volatility in the future,” Doying said.

He also said he didn’t know where prices would have cleared without the new auction rules. “We don’t run ‘if’ scenarios,” he said.

Doying pointed out that Zone 4’s local clearing requirement was not binding this year, which contributed to it clearing uniformly with Zones 2-7. Regional constraints also were not binding, so zones were able to import and export freely with each other, and a single generator was able to set prices in multiple zones, Doying explained. On the other hand, Zone 1 had a limitation on exports, so capacity remained trapped in the zone and kept prices low.

The auction used a transfer limit of 876 MW between MISO South and MISO North/Central regions — down from 1,000 MW — as a result of the RTO’s settlement with SPP over the use of its transmission.

MISO’s Monitor has reviewed the offers and certified that the auction was conducted properly.

In a stakeholder conference call Friday, DTE Energy’s James Czech asked if stakeholders can expect changes to capacity import limits every year. Laura Rauch, MISO’s manager of resource adequacy coordination, said the limits would be recalculated for next year’s auction and were changed this year to include PJM pseudo-ties. At a Thursday Resource Adequacy Subcommittee meeting, MISO said it expects to make a CIL compliance filing by Monday.

David Sapper of Customized Energy Solutions asked MISO to explain the disparity between the pre-auction supply data and what was actually offered in the auction. “I think it’s important to understand the delta there,” he said.

Ron Ryckman, also with Customized Energy Solutions, asked for details on which facilities asked for facility-specific reference levels.

John Harmon, MISO manager of resource adequacy, said those issues would be discussed at the May 5 Resource Adequacy Subcommittee meeting.

The results were released as MISO is proposing rule changes that would result in a separate forward capacity procurement for deregulated areas such as Zone 4 and the addition of seasonality and external zone constructs. (See Stakeholders React to MISO Proposed Auction Design.)

MISO officials had hoped for an unremarkable auction after last year’s nine-fold price increase in Zone 4. Watchdog organization Public Citizen claimed Dynegy improperly withheld capacity in southern Illinois after the company acquired four Zone 4 generators from Ameren. Public Citizen, Illinois Attorney General Lisa Madigan, the Illinois Industrial Energy Consumers and Southwestern Electric Cooperative filed complaints against MISO last May and June.

The issue was also the center of a FERC technical conference in October, and FERC’s Office of Enforcement is conducting a nonpublic investigation into whether last year’s auction clearing prices in southern Illinois were manipulated. Dynegy officials insist they did nothing wrong.