During the April 15, 2021 Markets Subcommittee (MSC) meeting, MISO presented a solution for activating and employing emergency pricing when the system is constrained. MISO is requesting feedback on the solution presented.
Please provide feedback by April 30
Mississippi Public Service Commission and Louisiana Public Service Commission Feedback re: Application of VOLL
Feedback Request: During the April 15, 2021 Markets Subcommittee (MSC) meeting, MISO discussed three cost allocation proposals and presented a solution for emergency pricing when the system is constrained. Stakeholder feedback is requested on the following:
Application of VOLL (MSC-2021-3) (MSC-2021-4) - MISO presented a solution for activating and employing emergency pricing when the system is constrained. MISO is requesting feedback on the solution presented.
Comments: MISO proposes not to apply VOLL administrative pricing or other Emergency Pricing algorithms (together, VOLL/EP) for Local Transmission Emergencies. The Mississippi and Louisiana Commissions support that change. It is an improvement over MISO’s earlier proposal, but it does not represent a full solution.
VOLL/EP should not be employed during any force majeure event to generators that cannot deliver or customers who cannot receive energy, whether transmission or generation-related, because such events are outside the control of market participants. There are no cost causers in a force majeure event, which by its very definition is an event beyond the control of the parties that it affects. The concept of force majeure (or superior force) is that where “an event or effect that can be neither anticipated nor controlled,” (e.g., acts of terrorism, hurricanes, natural disasters, labor strikes) a party to a contract (which includes tariffs), is excused for its failure to perform.” The parties affected by force majeure events are victims, not cost causers.
Payments made to incentivize generation that can operate and deliver energy within affected areas to help restore and/or stabilize service should be made. Those payments should be sufficient to cover the costs of that generation and a reasonable margin.
As has been explained by Dr. Patton and MISO representatives at the MSC and elsewhere, the purpose behind applying VOLL/EP is to send a price signal to promote certain behavior. It was urged that when energy is scarce, higher prices may motivate high cost generation or generation is neighboring regions (that might not otherwise run) to offer into the MISO market to serve load.
But if generation or transmission equipment is unavailable (e.g., fuel supply is unavailable, natural gas pipeline compressors are deenergized, pipelines are frozen, a generator is in an emergency outage, transmission lines are damaged/destroyed by a storm), for reasons outside market participants’ control, charging a generator owner and paying affected load serving entities VOLL/EP will not further that goal. If a natural gas pipeline is unable to deliver fuel for generation, or if there is no transmission available to deliver energy from that generator, no amount of money will make that generator available for operation or its output deliverable.
Dr. Patton suggested that VOLL/ER pricing might motivate generator owners to purchase firm fuel delivery (which is much more expensive than non-firm fuel delivery) or to winterize their generation facilities, or for transmission owners to expand the transmission system to provide redundancy.
MISO (or the IMM) has not offered any analysis indicating that the proposal will achieve the desired results. First and foremost, the vast majority of utilities in MISO are vertically integrated and plan their systems in conjunction with retail regulators (e.g., integrated resource planning or an alternative). Infrequent short-term energy price spikes, especially during emergencies, may not play a key role in transmission/distribution system planning. But that is a retail regulator decision. Second, Transmission design, including the need for redundancy, also is under NERC’s and State Commission purview and requirements.
In addition, MISO must recognize that extreme weather events like hurricanes often inflict widespread damage. The construction of redundant transmission lines in the same areas as the existing lines (particularly where MISO has advocated use of existing rights of way or transmission corridors) may result in two sets of downed facilities, additional costs, and no additional benefits.
Likewise, winterization of generators and fuel delivery firmness should be the subject of requirements and rules, i.e., an obligation that certain steps are taken to protect the generation and fuel delivery from expected potential weather conditions. However, what those protections should be must be based on engineering and cost effectiveness studies Just as a generator cannot be interconnected to the transmission system if it is unable to control its frequency and/or voltage, generators should be designed to work within the elements to which they will be exposed. And, if a natural gas pipeline is out-of-commission because of weather (freezing), the level of delivery firmness purchased will not make a difference.
Recent experiences appear to not support the benefits of higher VOLL pricing. ERCOT’s higher VOLL did not prevent the problems and outages during the February winter event. Further, MISO has provided no evidence that higher VOLL pricing would have produced a different outcome during Hurricane Laura. There must be solutions to system emergencies considered that do not bankrupt local customers and unnecessarily enrich others. The Mississippi and Louisiana Commissions fully support stable system operations during emergency/force majeure events and steps that aid quick recovery from resulting forced outages. However, there must be some rigorous analysis to support the conclusion that raising VOLL will not result in additional costs to ratepayers without corresponding benefits.
We are concerned with the lack of detail in MISO’s proposal regarding VOLL/EP in Sub Regions and Sub-Areas. MISO proposes both concepts on slide 6 of the April 15 presentation, “Application of Value of Lost Load (VOLL) during Force Majeure Events.” Its not clear how these zones/areas are defined, what circumstances will trigger VOLL/EP, and what circumstances are required to exit VOLL/EP.
We remain concerned that MISO has not yet addressed the shortcomings in its dead-bus logic process. The application of the current logic resulted in very significant energy payments during Hurricane Laura. This needs to be addressed quickly.
Finally, its critical that MISO’s approach to cost allocation be rational, consistent, and not piecemeal. First, as shown above, MISO must recognize that when it comes to force majeure events, there is no “cost causer.” Second, MISO should make clear that any proposals do not target southern footprint hurricanes only. Any rule that assigns emergency pricing and VOLL locally should equally apply to northern winter events, Midwest tornados, derecho weather and similar force majeure events throughout the MISO footprint.
Outstanding action items:
Comments of the Coalition of MISO Transmission Customers, the Association of Businesses Advocating Tariff Equity, the Illinois Industrial Energy Consumers, the Louisiana Energy Users Group, the Texas Industrial Energy Consumers, the NIPSCO Large Customer Group, the Midwest Industrial Customers, and Alcoa Power Generating Inc. Regarding the Application of Value of Lost Load Pricing During Force Majeure Events
Re: April 15, 2021 MISO Market Subcommittee Request for Stakeholder Feedback
During the January 7, 2021 MISO Markets Subcommittee Meeting (“MSC Meeting”), MISO discussed impacts and outcomes of administrative pricing during force majeure events, such as the August 27, 2020 Maximum Generation Event (“Max Gen Event”) triggered by Hurricane Laura’s landfall in Texas and southwest Louisiana and associated damage to and outages on transmission, generation, and distribution systems. MISO requested feedback from stakeholders on the use of administrative pricing during local transmission system emergencies, including force majeure events. Accordingly, on January 28, 2021, the Coalition of MISO Transmission Customers, the Association of Businesses Advocating Tariff Equity, the Illinois Industrial Energy Users Consumers, the Louisiana Energy Users Group, the Texas Industrial Energy Consumers, the NIPSCO Large Customer Group, the Midwest Industrial Customers, and Alcoa Power Generating Inc. (together, “Industrial Customers”) submitted comments to MISO, mainly highlighting the unjustness and unreasonableness of the post hoc application of Value of Lost Load (“VOLL”) pricing at $3,500/MWh in a force majeure scenario.
During the March 11, 2021 MSC Meeting, MISO announced that, in response to the concerns expressed by stakeholders, it now proposes to eliminate VOLL pricing for emergencies declared in areas comprising less than a Local Resource Zone, and for any emergency caused by force majeure events. MISO also requested formal feedback from stakeholders. The Industrial Customers submitted comments in support of MISO’s proposal from the March 11, 2021 MSC and indicated appreciation for MISO’s consideration of and incorporation of the Industrial Customers’ prior comments on this matter.
During the April 15, 2021 MSC Meeting, MISO presented the latest VOLL pricing proposal, which indicated that under the proposal, VOLL pricing or other Emergency Pricing algorithms would not be applied to Local Transmission Emergencies or Transmission System Emergencies. MISO requested formal feedback from stakeholders. The Industrial Customers appreciate the opportunity to submit further comments to MISO and submit these comments to indicate support of MISO’s proposal as an improvement over the status quo, while also emphasizing and urging that MISO should clarify and confirm in its Tariff that VOLL pricing will not be utilized to address force majeure events and that such pricing will not apply to Local Transmission Emergencies or Transmission System Emergencies.
Stakeholders, including the Industrial Customers, expressed concerns about administrative pricing during local transmission system emergencies, including force majeure events, in light of the August 27, 2020 Max Gen Event triggered by Hurricane Laura. Specific concerns related to the application of VOLL administrative pricing during force majeure events, after the fact price corrections, and dead bus price corrections. In light of these expressed concerns, MISO, during the March 11, 2021 MSC Meeting proposed to eliminate administrative pricing (Tier III pricing) at VOLL for emergencies declared in areas that comprise less than a Local Resource Zone, and/or for any emergency caused by events of force majeure resulting in significant loss of Transmission Capacity, Sub-Regional Transfer Capacity, or Local Generation Capacity. MISO now proposes to restrict the scope of its proposal by proposing only that VOLL pricing would not be applied to Local Transmission Emergencies or Transmission System Emergencies. Of particular concern is that MISO’s latest proposal does not specify that VOLL pricing will not apply to force majeure events generally, irrespective of whether the emergency is treated as a capacity or a transmission emergency.
The Industrial Customers generally support MISO’s proposal to the extent that it restricts the scope of the application of VOLL pricing relative to the status quo. Industrial Customers note, however, that our initial position was that VOLL pricing should not apply to force majeure events generally, regardless of the scope and cause of the emergency. It appears that MISO’s latest VOLL pricing proposal steps back from discontinuing VOLL pricing during force majeure events generally. As noted by MISO, the previous iteration of the proposal at issue provides a number of benefits, including mitigation of impacts of balancing congestion costs and uplift; mitigation of impacts of dead bus logic issues; ensuring appropriate pricing; ensuring reliability; and publication of prices in real-time subject to settlement.[1] Because the latest proposal appears to diminish the benefits of the previous iteration of MISO’s VOLL pricing proposal, Industrial Customers suggest that MISO specify that VOLL pricing will not apply when the emergency is created by a force majeure event, irrespective of the geographic scope of the emergency or whether the emergency is caused by a loss of transmission or generation capacity.
As part of its proposal, MISO submitted draft tariff language, which modified the definition for “Sub-Area” in Module A and added definitions for “Transmission System Emergency” and “Local Transmission Emergency”. Notably, the proposed tariff language does not explicitly state that VOLL pricing will not be applied when an emergency is a Local Transmission Emergency or a Transmission System Emergency. The draft Tariff language, instead, focuses on the geographic scope of an emergency and limits the application of VOLL pricing to emergencies that impact the MISO Balancing Authority Area or a Sub-Area. A Sub-Area is defined to include at least one MISO Local Balancing Authority Area.
Industrial Customers suggest that if MISO intends to implement its latest proposal, that additional language be added to the Tariff making it explicit that VOLL pricing will not be applied to transmission emergencies or to any emergencies that are caused by a force majeure event, irrespective of the geographic scope of the emergency. As MISO presented during the April 15 MSC, it is MISO’s intention that VOLL pricing will not apply during a Transmission System Emergency or a Local Transmission Emergency where Section 40.2.20.b.iii (for addressing capacity shortage conditions) is not employed.[2]
Industrial Customers recommend the following edits (in underline in red) to MISO’s proposed Tariff modifications to Module C: Section 40.2.20.b Capacity Shortage Conditions in the Real-Time Energy and Operating Reserves Markets:
iii. If as a result of the Transmission Provider actions pursuant to Section 40.2.20.b.i, Energy balance cannot be achieved, the Transmission Provider shall declare an EEA-Level 3 and may implement Load Shedding pursuant to the Transmission Provider’s Emergency operating procedures. Load Shedding will be implemented on a MISO Balancing Authority Area basis, or a on a Sub-Area basis if limited by transmission constraints or Sub-regional Power Balance Constraints, as required to restore Energy balance. The Load Shedding obligation of each Load Serving Entity shall be implemented through instructions to the affected Local Balancing Authorities as set forth in the protocols of the Balancing Authority Agreement. Load Shedding shall be allocated to each affected Local Balancing Authority on a pro rata, Load Ratio Share basis, determined by the ratio of the total amount of Load Shedding required to achieve Energy balance to the amount of the real-time load remaining, or if the Load Shedding is to occur in the next hour, to the projected load for the next-hour, for the Sub-Area or the entire MISO Balancing Authority Area, as applicable. During Emergency conditions where Load Shedding is instructed by the Transmission Provider when the affected area is the MISO Balancing Authority Area or Sub-Area, Real-Time Ex Ante LMPs, Real-Time Ex Ante MCPs, Real-Time Ex Post LMPs and Real-Time Ex Post Operating Reserve MCPs will be set to the VOLL, either on a MISO Balancing Authority Area basis or Sub-Area basis, as applicable, until the Emergency condition is no longer in effect. However, VOLL pricing will not apply when the emergency is created by a Force Majeure event. Also, VOLL pricing will not apply during a Transmission System Emergency or a Local Transmission Emergency.
The Industrial Customers respectfully ask MISO to consider these comments in finalizing any proposal and Tariff language that MISO intends to file with the Federal Energy Regulatory Commission. Industrial Customers request that MISO clarify that VOLL pricing will not apply when the emergency is created by a force majeure event, irrespective of the geographic scope of the emergency or whether the emergency is caused by a loss of transmission or generating capacity. Finally, Industrial Customers request that MISO expeditiously discontinue the use of VOLL pricing for emergencies declared in areas that comprise less than a Local Resource Zone, and/or for any emergency caused by events of force majeure. Thank you again for providing us an opportunity for providing these comments. If you have any questions concerning our comments, please do not hesitate to contact:
Jim Dauphinais
Brubaker & Associates, Inc.
(Consultants to ABATE, IIEC, LEUG, NLCG and TIEC)
(636) 898-6725
Ali Al-Jabir
Brubaker & Associates, Inc.
(Consultants to ABATE, IIEC, LEUG, NLCG and TIEC)
(361) 994-1767
Kevin Murray
Ken Stark
McNees Wallace & Nurick LLC (for CMTC)
(614) 719-2844
Kavita Maini
KM Energy Consulting, LLC (Consultants to MIC)
(262) 646-3981
Steve Dowell
Alcoa Power Generating Inc.
(812) 842-3377
Date: April 30, 2021
[1] See Application of the Value of Lost Load (VOLL) During Force Majeure Events, MISO Market Subcommittee, at Slide 8 (Mar. 11, 2021), available at 20210311 MSC Item 05 Application of VOLL during force majeure events 529702.pdf (misoenergy.org) (last accessed Mar. 18, 2021).
[2] See Application of Value of Lost Load During Force Majeure Events, MISO Markets Subcommittee, at Slide at 6 (Apr. 15, 2021), available at RAN Reliability Requirements and Sub-annual Construct (misoenergy.org).
DTE appreciates this opportunity to comment on the important subject of price formation during loss of load events. We appreciate that MISO is beginning to take steps toward addressing the lessons learned from the Hurricane Laura Load Shed.
In the next stakeholder presentation, DTE requests discussion and analysis of how this proposal would have changed the pricing and resulting settlement outcomes in the Hurricane Laura event. DTE also notes that a broader discussion on cost allocation is still necessary, and DTE requests that this be brought to the stakeholder process once these tariff changes have been filed, if not sooner. DTE appreciates that MISO is taking the mitigating measures it has proposed, but these are only mitigations, and do not address the core issue, which is the allocation of the costs resulting from load shed events.
MidAmerican Energy Company appreciates the opportunity to comment on the application of VOLL during emergency events.
MidAmerican supports the MISO solution where Emergency Pricing at the Value of Lost Load will not apply during Transmission System Emergencies or Local Transmission Emergencies where Section 40.2.20.b.ii of the Tariff is not employed.
We believe this will mitigate impacts of unwarranted uplift and realizes the reality that market tools are not effective during Transmission System Emergencies or Local Transmission Emergencies.
We also support the future evaluation of market enhancements such as the use of Transmission Constraint Demand Curves and the Post Reserve Deployment Constraints to develop appropriate price signals for Transmission System Emergencies, Local Transmission Emergencies and Reserve Zone energy or reserve scarcity.
For the Dead Bus logic, MidAmerican believes VOLL pricing should not apply to generation and load that’s been physically disconnected from the system and is not physically capable of reconnecting to the system. In addition, MidAmerican believes that system generated LMPs and MCPs should be used for the dead buses during these events.
Alternative proposal. It is not entirely clear to WPPI that the changes MISO is proposing to make to the application of the Value of Lost Load discussed at the MSC, 4/15/2021 (Item 05a Application of VOLL) ensure that VOLL is applied only when, essentially, the relevant MISO load(s) is near its peak. That is, if the relevant MISO load(s) is not near its peak, and sufficient capacity was procured (in the Planning Resource Auction or Fixed Resource Adequacy Plans) to meet the MISO Planning Reserve Margin Requirement overall and that of the relevant Local Resource Zone(s), yet MISO is experiencing challenges serving load, it would seem resource adequacy is not the issue. Rather the issue may be a natural disaster/act of God, transmission challenges, and/or MISO operational challenges unrelated to resource adequacy (i.e., sufficient capacity was procured for the planning year). WPPI suggests considering, as an alternative to MISO’s proposal, to limit the application of VOLL to intervals during which the relevant MISO load is near (within [5] percent of) its PRMR.
MISO’s proposal re use of emergency pricing. MISO’s proposal is consistent with limiting the application of VOLL to when the relevant MISO load(s) is near its peak in the sense that MISO is proposing not to apply VOLL (and emergency pricing generally) during transmission emergencies (local or system). However, it is unclear whether MISO’s proposal to apply VOLL, basically, at the Local Balancing Authority Area level or larger, will ensure VOLL is only applied when the relevant MISO load (s) is near its peak and will prevent the application of VOLL during a natural disaster/act of God or when MISO is experiencing operational challenges unrelated to resource adequacy (i.e., sufficient capacity was procured for the planning year). In order to better understand the impact of MISO’s proposal, please provide a comparison of the relevant pricing during Hurricane Laura (8/27/2020) and on February 15 and 16, 2021 (arctic weather) per the current tariff vs. MISO’s proposal.
Tariff. Lastly, re MISO’s proposed modifications to Module C: 30.2.1A.e Reserve Zone Reconfiguration: The term “Day-ahead Energy and Operating Reserve Market Trading Deadline” doesn’t appear to be a defined term (and, therefore, should be lower case or added to the tariff as a defined term).
WEC Energy Group believes MISO’s proposal to not apply VOLL or other Emergency Pricing algorithms for Local Transmission Emergencies or Transmission System Emergencies is a step in the right direction because a transmission constraint that is unresolvable with market redispatch (and/or TLR/M2M procedures) will remain unresolved regardless of energy price. A transmission emergency is not the result of Energy imbalance (for which VOLL pricing was intended) but the inability to manage a transmission constraint with generation redispatch. Under transmission emergencies, the applicable Transmission Constraint Demand Curve will apply.
Despite our belief the proposal is a step in the right direction, we are confused on how the proposal will apply during a Force Majeure event, like that experienced during Hurricane Laura. The issue statement for the administrative application of VOLL pricing seeks to account for load or generation that are physically unable to respond to pricing. It isn’t clear how MISO will implement the proposal when confronted with a Force Majeure event that results in transmission, generation and distribution outages and consequential load loss. A Force Majeure event often results in both Energy imbalance and transmission emergencies; it isn’t clear how the proposal will differentiate between the two and appropriately apply, or not apply, VOLL. WEC requests that MISO provide an example on the how the proposal will apply during a Force Majeure event, like that of Hurricane Laura.
NIPSCO appreciates this opportunity to comment on the application of VOLL.
NIPSCO supports MISO's proposed changes to when VOLL will be applied. Specifically, VOLL would not be applied to load shed over areas smaller than a Local Resource Zone or during any Force Majeure event (regardless of the scope of the event).
With regards to Force Majeure events, NIPSCO believes that MISO and stakeholders should reach a common understanding of what types of events would meet the definition of Force Majeure.
Finally, the issue in the Hurricane Laura event was not only the application of VOLL, but also how the resulting costs were allocated. NIPSCO recommends that when VOLL is applied, that the resulting costs are appropriately allocated to those who benefit from the load shed.