By Amanda Durish Cook
FERC last week reaffirmed its rejection of MISO’s proposal to institute a mandatory capacity market, denying rehearing of its 2012 order on the issue.
In June 2012, FERC conditionally approved revisions to improve deliverability of capacity resources in the MISO footprint, but the commission rejected MISO’s request that the Planning Resource Auction become obligatory and subject to a minimum offer price rule. More than 15 entities, including MISO’s Independent Market Monitor, requested a rehearing.
Capacity suppliers complained that MISO’s capacity construct is discriminatory because it requires sellers, but not buyers, to participate. Others took issue with MISO’s use of a vertical demand curve and two-month forward period before the auction.
In its order last week, FERC again rejected MISO’s proposed mandatory auction for resource deficiencies and upheld the use of a vertical demand curve (ER11-4081-001).
Load-serving entities, “as buyers of resources, must obtain sufficient resources to meet their planning resource margin requirement or pay a significant penalty of 2.748 times [the cost of new entry]. We do not consider this requirement and its associated penalty to be a ‘free pass,’ as characterized by capacity suppliers, or that buyers have no incentive to purchase capacity, as NRG [Energy] claims,” FERC ruled.
It also said MISO had not met its burden of proving its proposal was just and reasonable.
The commission also denied rehearing of the decision to reject MISO’s proposed minimum offer price rule, again concluding that customers “lacked the incentive to suppress auction prices in the MISO capacity market.” On the other hand, FERC reiterated its defense of MISO’s fixed resource adequacy plan, saying LSEs do not “have an incentive to exercise market power in the MISO region” and market manipulation is “unlikely.”
Daily Peak Load
The rehearing request by the Coalition of MISO Transmission Customers, a group of industrial customers, challenged MISO’s use of daily peak load, a method FERC directed the RTO to use three years ago, replacing the grid operator’s proposed daily pro rata method.
“We find that the use of the daily peak load contribution methodology until sufficient data exists to use the peak load contribution methodology does not represent undue discrimination against LSEs in retail choice states. … Requiring MISO to use available historical information, as Coalition of MISO Customers recommend, does nothing to resolve this data gap because MISO cannot force electric distribution companies to provide the necessary data,” FERC decided.
To comply with the commission’s June 2012 ruling, MISO revised its Tariff language. FERC accepted the edits, conditionally approving MISO’s map of zonal boundaries that pinpoint major transmission constraints and local balancing authorities and instructing the RTO to remove a reference to a minimum offer price rule (ER11-4081-002).
In the same order, FERC responded to Illinois Commerce Commission’s concern that the Tariff could hinder state commissions’ responsibility for enforcing resource adequacy, saying it was beyond the scope of the compliance proceeding.
LaFleur: Room for Improvement
At FERC’s open meeting Thursday, Commissioner Cheryl LaFleur said she supported the order “because I believe, based on this record and in the context of the primarily vertically integrated MISO region, the resource adequacy construct that we have approved is just and reasonable.”
“I’ve often noted that we need to take account of legitimate regional differences and I think we’ve tried to do so in this order. But I do want to comment to say that a determination that a market construct is just and reasonable does not mean that it cannot be improved. I want to recognize that there are a lot of efforts underway in the MISO region to consider reforms to the adequacy construct and I very much encourage parties to stay engaged in those processes, and I’ll be continuing to follow them closely.”
