By Chris O’Malley

CARMEL, Ind. — MISO will propose closing the day-ahead market one hour earlier during Daylight Savings Time and reducing the clearing time by an hour in response to the Federal Energy Regulatory Commission’s final rule on gas and electric schedules.

MISO officials said their proposal — Alternative 3 — was an effort to balance reliability and market efficiency concerns with stakeholder preferences. Most stakeholders preferred no changes.

FERC Order 809 moved the timely nomination cycle deadline for scheduling gas transportation from 11:30 a.m. to 1 p.m. CT (from 12:30 p.m. to 2 p.m. ET) and added a third intraday nomination cycle. The commission ordered RTOs to adjust the posting of their day-ahead energy market and reliability unit commitment process results “sufficiently in advance” of the revised gas cycles or explain why it is not suitable for their markets.

Three Alternatives

The RTO rejected Alternative 2, which officials said was most in line with Order 809 but was opposed by most stakeholders. In addition to reducing the clearing time by one hour, it would have aligned the day-ahead market with the timely gas nomination cycle by closing the day-ahead two hours earlier during DST and one-hour earlier during standard time. Only 18% of stakeholders supported the change.

Alternative 3 won a bare majority with 53% support, making it the second choice to the status quo Alternative 1, which was backed by 78%.

Alternatives 2 and 3 got much of their support from gas-dependent members in Zones 8 and 9 (Louisiana, Arkansas and eastern Texas).

“I know not everybody is going to agree with [the choice] given the voting that took place. I hope that everybody can understand how we got there and [that] it makes sense,” Joseph Gardner, MISO’s vice president for forward markets and operations services, told the Market Subcommittee last week in announcing the decision.

Gardner told stakeholders MISO will have to make a partial show-cause filing to defend the choice to FERC. MISO also will ask FERC to delay the implementation of the new hours to November 2016 rather than next April as required by FERC.

More Units to Call On

Gardner said Alternative 3 had several benefits. Moving the market before the Intraday 2 gas nominations could free up about 5,000 MW more than under the current approach.

“From a reliability perspective, by moving our timeframe up by shortening our window, we bring more units into the mix. That basically allows more units to be considered as part of the normal day-to-day process, in terms of getting them online [and] in terms of committing them economically,” he said.

MISO estimates that natural gas-fired generation could rise to 50% of its generation pool in 2016/2017 as coal-fired plants are shuttered in response to the Environmental Protection Agency’s Mercury and Air Toxics Standards. EPA’s proposed Clean Power Plan is expected to spur gas use further.

From a market efficiency standpoint, Gardner pointed to the value of being able to trade during the “most liquid” time of the day “and then having that price discovery and know[ing] what price to put into the day-ahead market. So that’s a consideration, too, as to why we didn’t go with Alternative 2.”

Not Ideal for Some

The change may be hard for some stakeholders to swallow. Gardner acknowledged that many have indicated that they found ways to manage their gas supply risks and thus didn’t support moving up the day-ahead schedule.

Marc Nielsen of Alliant Energy said his company plans to add additional gas-fired generation and already conducted a great deal of modeling. “We supported Alternative No. 1. We’re able with our gas supply resources to handle things perfectly as they are now,” he said.

Gardner said he recognized Alliant’s concern. “I hope people can understand how we ended up here,” he said. “It’s been a long journey.”

But the tone among stakeholders at the Market Subcommittee was mostly supportive.

“I appreciate you guys looking at your processes and working toward also shortening the [market clearing] time. I think that was a big step, too, so thank you,” Ameren’s Jeff Moore told Gardner.

Moore asked whether Gardner thought FERC would be amenable to MISO’s choice.

“I think we have a much better chance of succeeding [than sticking with the status quo], but we still are going to have to make a good argument,” Gardner said.

PJM and SPP also will propose changes to their schedules in compliance filings due July 23. (See SPP Moving to 9:30 Day-Ahead Close.)