Proposals by the Midcontinent Independent System Operator (MISO) designed to make sure it has sufficient power supply in its footprint are getting mixed reviews from states, utilities, large energy users and renewable energy advocates in comments filed Friday at the Federal Energy Regulatory Commission.
Responding to a changing energy mix, MISO in November proposed requiring market participants representing load serving entities (LSEs) to get at least half their capacity outside of the grid operator's annual capacity auction. In a related proposal, the grid operator wants to set seasonal resource adequacy requirements coupled with "availability-based" accreditation.
The proposals are driven by power plant retirements, increased reliance on intermittent resources and a reduction in excess capacity across MISO's footprint, which runs from Louisiana to Manitoba, Canada, according to the grid operator.
MISO's process to make sure it has enough power supplies is no longer adequate, according to the grid operator.
The rise in intermittent wind and solar, plus lower reserve margins, increases in extreme weather and related power plant outages, and more unexpected outages generally, are forcing MISO to take emergency measures throughout the year to maintain reliability, according to the grid operator, which expects the problems to grow.
Currently, MISO conducts an annual, voluntary "planning resource auction," the equivalent of a capacity auction, that is based on its estimated peak load on the hottest summer day.
However, since 2015, MISO has made 40 "maximum generation" declarations to maintain reliability, with 25 of them happening outside summer months, a sign reliability issues occur throughout the year, according to the grid operator.
At the same time, some market participants are increasingly relying on the capacity auction to buy all their capacity, MISO said.
Market participants shouldn't rely only on the auction because there is no guarantee enough capacity will be available in it, according to MISO.
To spur "prudent" resource planning, MISO proposed requiring a "minimum capacity obligation," or MCO, on market participants representing LSEs. They could meet no more than half their capacity needs through the capacity auction, with a 50-MW exemption. If an LSE doesn't meet its MCO, it faces a fine for its shortfall of 1.5 times the "cost of new entry."
The Illinois Commerce Commission (ICC) urged FERC to reject the MCO proposal, saying it would drive up prices in states like Illinois that have retail competition and would create market power for capacity sellers.
The proposal would require LSEs in Illinois that acquire their capacity in the planning resource auction to buy half of that capacity in the bilateral capacity market or through resource ownership, the ICC told FERC.
"Such an obligation puts these LSEs 'over a barrel' in that resources long on capacity have no obligation to sell any of their excess capacity to LSEs with a MCO and could use the MCO obligation to their advantage," the ICC said.
Also, it's unclear the proposal would improve grid reliability, according to the ICC. Based on MISO's testimony at FERC, only 742 MW would have been affected if the requirement had been in place in the grid operator's most recent auction, or roughly half of 1% of MISO's 133,903 MW planning reserve margin requirement for the auction, the ICC said.
Exelon Generation, Ameren Services, the Retail Energy Supply Association, coalitions of renewable energy advocates, American Municipal Power and others opposed the proposal. Its supporters include the Indiana Utility Regulatory Commission, DTE Electric and Duke Energy.
MISO's separate proposal to shift to a seasonal capacity framework and adopt availability-based accreditation for demand response and non-intermittent generating resources was generally supported by the Organization of MISO States (OMS), which represents state utility regulators.
"This more granular assessment of risk across the year will allow MISO to identify each season's own unique reliability needs instead of relying on the increasingly inaccurate assumption that if resources are available for the summer peak, they will also be available to provide energy in other seasons," OMS said.
However, in separate filings, Louisiana and Mississippi utility regulators argued the proposed availability-based accreditation framework was flawed.
"It is more likely to undermine resource adequacy and reliability than improve it; and it will do so at significant cost to retail customers," the Mississippi Public Service Commission said. "It interferes with state jurisdiction over generation resource decisions because existing and future generation that does meet MISO's criteria will be devalued as sources of capacity."
MISO's transmission owners, which include utilities like Duke Energy Indiana, AES Indiana and Northern States Power, said the proposal fails to meet MISO's goals and should be revised. For example, provisions for planned power plant maintenance outages need more refinement, according to the transmission owners.
The Coalition of Midwest Power Producers said it supported addressing grid reliability, but that MISO failed to show its seasonal capacity market and accreditation proposal would improve reliability.
If FERC doesn't reject the proposal, it should hold a technical conference to help MISO and stakeholders develop "a just and reasonable approach" to capacity market reform, according to the trade group, which includes power plant companies such as Calpine and Vistra.