By Chris O’Malley

MISO told Illinois officials last week that the nine-fold price increase the state experienced in this month’s capacity auction was the result of market dynamics and not any improper conduct.

“The Independent Market Monitor reviewed the offers and determined that the final results were not impacted by physical or economic withholding and other conduct prohibited by MISO’s Tariff,” Kari A.E. Bennett, MISO’s senior corporate counsel, said in an April 24 response to a request for information from the office of Illinois Attorney General Lisa Madigan.

Madigan’s staff sent a letter April 17 to MISO Executive Vice President Richard Doying and Independent Market Monitor David Patton, asking seven questions about MISO’s third annual Planning Resources Auction, which saw Zone 4, comprising much of Illinois, clear at $150/MW-day, compared with $16.75 a year earlier. The results will boost revenues for Dynegy’s coal fleet and Exelon’s Clinton nuclear plant. (See Cornucopia of Capacity at MISO Auction.)

“This year’s auction resulted in capacity prices for central and southern Illinois that are nine times greater than last year and more than 40 times greater than other zones,” Cara Hendrickson, chief of the attorney general’s public interest division, said in the letter.

Citing the “substantial impact” on Illinois ratepayers, Hendrickson asked about MISO’s market design, including limits on imports into Zone 4.

MISO said Zone 4 imported 1,568 MW of lower-cost capacity from other zones, with the balance from resources within the zone. MISO said its annual local clearing requirement study determined that Zone 4 needed at least 85% of its capacity from resources within the zone in the 2015/16 planning year.

“The value is comparable to the average of all other zones (87%) and is lower than six other zones, which required local participation of 87% or higher,” Bennett wrote.

“Different results by location and by year can occur for multiple reasons, including the impact of commercial decisions market participants make leading up to the auction and available capacity offered into the auction,” she continued. “In Zone 4, higher priced local resources were needed to meet the local clearing requirement.

“Additionally, more capacity was procured through the auction rather than by direct contracts between parties as compared to last year. This resulted in more exposure to price-sensitive capacity offers in this year’s auction.”

Red Meat for Consumer Groups

Whatever the causes, the sheer size of the increase set off a firestorm among consumer interests in Illinois.

The Chicago-based Citizens Utility Board called for a federal investigation, saying Ameren customers in central and southern Illinois will see significant rate hikes. “CUB’s rough estimate is that this increase could force consumers on Ameren’s supply rate to pay up to $150 [in capacity charges] on their electric bills over the next year,” it said.

CUB Executive Director David Kolata said the results are another sign the electricity market “is not working for Illinois consumers,” given that the state has a surplus of electricity.

Exelon, Dynegy also Miffed

Ratepayer groups aren’t the only unhappy players.

The capacity providers accused of profiting from the auction, Exelon and Dynegy, are upset at Madigan’s office.

Dynegy said that Madigan’s team told an Illinois Senate hearing last week that the company could rake in more than $200 million as a result of the auction.

That’s far from the truth, said Dynegy spokesman Micah Hirschfield. He said that Dynegy cleared only 553 MW (excluding what it needs to cover retail load obligations), meaning it will collect about $30 million.

Exelon, likewise, said speculation that it would enjoy a $50 million windfall from the auction was off base.

The company said it bid its Clinton nuclear plant’s capacity into the auction the same way it has every year.

“We bid as a price taker, meaning we would accept the auction clearing price. Because we sold some of the plant’s capacity in retail and wholesale transactions before the auction, we realized about $13 million from the auction, not upwards of $50 million as some have speculated,” Exelon spokesman Paul Elsberg said a statement.

Moreover, Exelon said the auction results were not sufficient to make the Clinton power station profitable. The utility is still pushing for the Illinois General Assembly to act on a so-called Low Carbon Portfolio Standard that would boost the competitiveness of the company’s nuclear plants.

Bluster or Substance?

Whether Madigan’s office is just fishing or will press further on the auction results is yet to be seen.

As for MISO, the RTO “looks forward to continuing the discussion with policymakers in Illinois to address any questions and concerns around the results of the Planning Resource Auction,” spokesman Andy Schonert said.