By Chris O’Malley

MISO completed its third annual Planning Resource Auction on Tuesday, with prices falling in most zones, while the Illinois zone saw a large jump that will boost revenues for Dynegy’s coal fleet and Exelon’s Clinton nuclear plant.

With 136,359 MW committed, MISO said it has adequate capacity for the 2015/16 planning year beginning June 1 but acknowledged that the 2016/17 period could see capacity shortfalls amid the ongoing retirement of coal-fired generation.

Most of that — 122,965 MW — was generation resources. The remainder consists of 5,938 MW of demand resources, 3,986 MW of behind-the-meter generation and 3,469 MW of external resources.

The auction resulted in a slight increase in Zone 1, big drops in Zones 2-3 and 5-9 and a nine-fold increase in Zone 4:

• Zones 1-3 and 5-7, consisting of MISO North/Central but excluding Illinois, cleared at $3.48/MW-day. That compares with $3.29 in Zone 1 and $16.75 in Zones 2-3 and 5-7 in 2014/15.
• Zone 4, comprising much of Illinois, cleared at $150/MW-day, compared with $16.75 a year earlier.
• Zones 8-9, comprising MISO South, cleared at $3.29/MW-day, compared with $16.44 a year earlier.

“While Dynegy is clearly the largest beneficiary of the MISO capacity auctions results, Exelon also gains via ownership of its Clinton nuclear asset,” UBS analyst Julien Dumoulin-Smith said in a report last week.

Dynegy said in a press release that its 4 GW coal-fired Illinois Power Holdings fleet cleared 1,864 MW at $150/MW-day, including 1,709 MW to cover retail load obligations. Its separate 2,980-MW “coal segment” also cleared 398 MW at that price.

Exelon spokesman Paul Elsberg confirmed that the Clinton plant cleared the auction but said the increase was insufficient to make the plant profitable. Exelon has been pushing legislation that would charge Illinois electricity users a fee to ensure the continued operation of Clinton and two other unprofitable nuclear generators. (See Exelon-Backed Bill Proposes Surcharge to Fund Illinois Nukes.)

“The auction results reduce Clinton’s economic losses, but the plant remains uneconomic and may prematurely shut down absent Illinois legislative changes to outdated policies that do not allow nuclear energy to compete on a level playing field with other zero-carbon resources,” Elsberg said in a statement.

“The wholesale price increases from the auction are small compared to the price spikes that would occur if Clinton is forced out of the market. According to the Illinois Commerce Commission and grid operators, closing the Clinton plant alone would cause wholesale energy prices to rise by $240 million to $340 million annually.”

Clinton would earn $58 million in capacity revenue if it bid and cleared all of its 1,065 MW capacity. Elsberg declined to say how much capacity Clinton cleared.

MISO said market participants lowered offers in most zones as a result of small changes in the balance of resources and load and an increase in Fixed Resource Adequacy Plans (FRAPs).

Zone 4’s $150 clearing price resulted from less self-scheduling and the submission of “more economic, price-sensitive offers,” MISO said.

Although total offers exceeded the zone’s local clearing requirement of 8,852 MW by 2,300 MW, only 838 MW was offered through FRAPs, 9% of the LCR.

In contrast, FRAPs represented more than 90% of LCRs in Zones 1 (Minnesota, North Dakota and western Wisconsin) and 2 (eastern Wisconsin, and Upper Michigan).

Richard Doying, MISO’s executive vice president of operations and corporate services, said the voluntary auction’s “certainty and transparency” is “vital given the challenges we face with potential capacity shortfalls starting in the 2016/17 planning year.”

MISO is facing a reduction in coal-fired capacity due to retirements of aging coal plants squeezed by the Environmental Protection Agency’s tightening Mercury and Air Toxics Standards and low-cost gas-fired generation.

Coal-fired generation in MISO is expected to decrease from 46% of total installed capacity in 2013 to 36% in 2020, according to a whitepaper MISO released in March. EPA’s proposed Clean Power Plan, which would require a 30% reduction in CO₂ emissions from existing generators, is expected to further thin coal fleets.

Late last month MISO underscored the problems that coal plant retirements will cause in its 15-state region. Launching its first in a series of stakeholder workshops during the next 18 months dedicated to improving resource adequacy, MISO said its planning reserve margin requirement — peak demand plus the planning reserve margin — could dip below its target as early as 2016.

As the reserve margin declines, MISO may have to dispatch seldom-used capacity. That could include greater use of load-modifying resources, such as factories that can reduce usage by adjusting production schedules and commercial buildings that reduce air conditioning.

MISO has not called on those resources since 2006.