MSC: Cost Allocation Schedule 49 proposals (MSC2021-1) (20210805)

Consumers Energy supports the WPPI feedback submitted regarding the cost allocation Schedule 49 proposals.

MidAmerican appreciates the opportunity to provide feedback on the Schedule 49 cost allocation proposal. In general, MidAmerican supports the direction MISO is heading with their market based solution. MidAmerican agrees that the level of Regional Directional Transfer (RDT) congestion observed in both the day ahead and real-time markets should be used to inform the allocation process, as it appears to align with the beneficiaries pay principle.

WEC Energy Group is generally supportive of MISO's "market-based" proposal for the future allocation of Schedule 49 costs.  However, we believe that alignment of Schedule 49 costs and beneficiaries is improved if the day-ahead RDT congestion revenue is excluded from the payment of Schedule 49 costs.  Day-ahead congestion revenue is used to fund FTRs and the FTRs held by MPs may or may not represent an equivalent Load Ratio Share (LRS) of those same MPs.  In contrast, real-time congestion revenue is allocated on a LRS basis through the reduction in the Real-Time Revenue Neutrality Uplift Amount (which is allocated on an LRS basis).  Use of the real-time RDT congestion revenue to fund the Schedule 49 costs is aligned with a RLS allocation of those costs and better reflects the beneficiaries of the RDT.

Xcel Energy appreciates the opportunity to provide feedback regarding MISO's cost allocation proposal for Schedule 49.  We are generally in support of the proposal but recommend two concepts to improve alignment of costs with beneficiaries:

• If the DA congestion used to fund FTRs across the North/Central-South interface is deducted prior to using that amount to inform the cost allocation, then the remaining amount to determine the allocation based on LRS would be appropriate.
• Eliminate the monthly carryover since the benefit of the importing regions varies from month to month.  It seems more accurate to accrue the excess allocation from the RDT congestion and use it to inform the remaining allocation at the end of the year. 

MPPA generally supports WPPI Energy's feedback.

Thanks,

David Sapper

dsapper@ces-ltd.com

TO: MISO MARKET SUBCOMMITTEE
FROM: THE ENTERGY OPERATING COMPANIES
SUBJECT: COST ALLOCATION SCHEDULE 49
DATE: AUGUST 19, 2021

In response to MISO’s question concerning the Schedule 49 cost allocation methodology as presented in the August 5, 2021 MSC meeting, The Entergy Operating Companies ("EOCs")[1] are in general support of the market-based proposal for use in allocating the Schedule 49 charges as detailed below.  However, the question arises on whether or not MISO, SPP and the Joint Parties should come to terms on a new overarching Settlement Agreement, before deciding on a cost allocation methodology.

The EOCs agree with MISO’s proposed allocation methodology which would use the level of Regional Directional Transfer (RDT) congestion observed in both the day ahead and real-time markets in its calculation.  MISO makes a good case in matching benefits with costs, and makes good use of these underlying market signals.

To build on MISO’s presentation, if the RDT binds, then there has been some level of underlying market equalization/optimization in which the importing region has paid congestion with the exporting region having benefited from lower LMPs.  This fact means it is appropriate to allocate Schedule 49 via Market Load Ratio Share (MLRS) up to the amount of day ahead and real-time congestion related to the RDT.

Then conversely, if the RDT doesn’t bind, we would agree that it is likely that the importing region would have benefited with no additional congestion costs incurred.  Thereby making it appropriate to allocate any remaining Schedule 49 costs that were not covered under the MLRS allocation to the importing region. 

While the EOCs support the use of the day ahead and real time RDT congestion collected as the basis for the proposed allocation methodology, we would not support their use as a funding mechanism as proposed by MISO in the past. 

The EOCs appreciate the opportunity to comment.

The Louisiana Public Service Commission Staff generally supports the proposal to allocate the  costs  based on the level of Regional Directional Transfer (RDT) congestion that is observed in the day ahead and real-time markets.  We have no proposed changes or additional feedback at this time. 

MJMEUC supports WPPI's feedback submitted on the cost allocation Schedule 49 proposals.

WPPI has the following feedback on MISO’s proposed allocation of the Settlement Agreement payment [for flows above 1000 MW between MISO N/C and MISO S]:

(1) Are there any changes to MISO’s cost allocation proposal that could improve the alignment of costs with beneficiaries?

WPPI agrees that two aspects of MISO’s proposal align costs with beneficiaries:

• The amount of real-time congestion collected on the regional directional transfer limit [constraint between MISO N/C and S sub-regions] INFORMING the amount of the monthly Settlement Agreement payment allocated on a Market Load Ratio Share basis. This tends to align costs with beneficiaries because real-time congestion dollars are returned on a LRS basis (more specifically, reduce the Real-Time Revenue Neutrality Uplift Amount, RT_RNU, which is allocated on an LRS basis). On the one hand, RT_RNU charges will be reduced by RDT real-time congestion and, on the other hand, MISO is proposing, in effect, load use those savings to pay a portion of the monthly Settlement Agreement payment on a Market LRS basis.
• Allocating the remaining monthly Settlement Agreement payment first, to each sub-region (N/C, S) based on its MWh share of imports from the other sub-region that month and second, within a sub-region on a Market LRS basis. This tends to align costs with beneficiaries because the load in the importing sub-region benefits from the lower market energy prices due to the ability to import.

However, WPPI continues to have concerns with MISO’s proposal also to use RDT day-ahead congestion to INFORM the amount of the monthly Settlement Agreement payment allocated on a Market LRS basis because it is inconsistent with aligning costs with beneficiaries.

• If MISO did not sell Financial Transmission Rights across the N/C and S interface, then this aspect of the proposal would be similar (although less perfect) to MISO’s proposed use of RDT real-time congestion. (Less perfect because day-ahead congestion is only returned to load on an approximate load ratio share basis if FTRs are fully funded at the end of a calendar year. Granted, MISO did show that over the period 1/1/2016-7/31/2021, day-ahead congestion in excess of that needed to fully fund FTRs would cover the Settlement Agreement payments over that same time period.)
• However, FTRs can be sold across the interface and, as a result, to the extent these FTRs are funded by the RDT day-ahead congestion, these are not RDT day-ahead congestion dollars load will receive and in effect can be used to pay a portion of the monthly Settlement Agreement payment on a Market LRS basis.

As a result, WPPI would propose the following changes to MISO’s proposal to better align costs with beneficiaries:

• (a) Any RDT day-ahead congestion used to INFORM the amount of the monthly Settlement Agreement payment allocated on a Market LRS basis should be reduced by the day-ahead congestion dollars used to fund FTRs across the interface.
• (b) If RDT day-ahead congestion is not modified per (a) above, then RDT day-ahead congestion should not be part of the cost allocation calculation.
• (c) If RDT day-ahead congestion is not modified per (a) above yet continues to be part of the cost allocation calculation, then any RDT day-ahead congestion in a given month used to INFORM the amount of the Settlement Agreement payment allocated on Market LRS basis that month should be used only in that month and not carried over.

(2) Are there other factors that MISO should consider before proceeding with this proposal?

At this time, WPPI is not aware of other factors MISO should consider in finalizing its proposal.