MSC: FTR Transmission Customer Metric (TCM) (20211007)

• Should the ARR process review be added to the MSC management plan?
• Yes.  Alliant believes the ARR process should be added to the MSC management plan.  We also believe it would be beneficial to form a small, focused group of subject matter experts that can review specific items as well as large structural market changes

• Between the Annual ARR Registration, Annual ARR Allocation and RSP processes in which area are improvements most needed?  Do you have specific suggestions?
• We believe the RSP process is in the most need for reform.  Once that process is fixed, the Annual ARR Allocation process should also be improved.
• LSEs resource mix and therefore transmission usage has evolved substantially since the reference year was established.  The current RSP replacement process has failed to keep pace with these changes, thus significantly reducing LSEs FTR revenue.
• A specific suggestion for streamlining the RSP process and making it more efficient would be to re-evaluate the current process of converting PRSS entitlements to BRSS.  When a market participant’s existing BRSS MW capacity is at or above their stage cap the current process takes at least two years to complete.  For example:  Year 1 Convert BRSS to PRSS in Round 3 to make room.  Year 2 Convert PRSS to BRSS.  Solution would be to include re-evaluations of both BRSS and PRSS entitlements in Round 1 along with Termination requests. This would allow the process to be completed in one year instead of two and eliminates the “Gap” that is created in BRSS entitlements that is created.

• Should MISO pursue the changes to restrict buy bids on “.ARR” and “.MVP” nodes? Do you have specific implementation suggestions?
•  “.ARR” paths are typically associated with retired generation and therefore provide little to no hedge value for a LSE’s exposure to DA congestion.  If you restrict buy bids on these paths, it will only reduce the clearing price in the Annual FTR Auction, thus reducing the ARR revenue. 

DTE Electric supports forming an FTR TCM Task Force, as well as adding the ARR process review to the MSC management plan.

Specifically, DTE Electric would like to focus on improvements to the RSP process. It is currently difficult to optimize registration amounts because it is difficult for Market Participants to identify how many Entitlements are available for each Node that has been registered.  Additionally complicating the process, because this is an annual process and there is only 1 submission window for each submission group, it is difficult to make changes to the RSP portfolio after the initial submission if a Market Participant retires Fossil Fuel Power Plants and adds Renewable Assets during the year.  DTE Electric recommends making it easier to identify how many Entitlements are available for each Node in a Market Participant’s portfolio and/or adding a submission window for each group.

Between Annual ARR Registration, Annual ARR Allocation, and RSP processes, in which area are improvements most needed?

RSP processes

Do you have specific suggestions?

RSPs should automatically be granted to new resources that satisfy GIA requirements. The current process yields virtually no new entitlements because the SFT starts from the previous year’s allocation, which is stressed to the limit. It’s important to recognize two things (1) an RSP only allows the MP to request an allocation and (2) the ARR/FTR model is not based in physical reality because only desirable paths previously requested and granted are included in the model.

Allocation should be calibrated to grant more, not fewer ARRs. 90% funding of a 100% allocated ARR/FTR is preferable to 100% funding of a 90% allocation. The larger allocation should steer more toward those that are subject to congestion from serving load and less to financial opportunists.

Madison Gas and Electric supports both adding an ARR process review to the MSC management plan and forming an FTR Task Force to study the various TCM issues.

DC Energy agrees the ARR process review be added to the MSC management plan. We further believe flexibility to LSEs and transmission customers an important principle in increasing the overall efficiency of the market. We agree with the creation of and will participate in a new FTR TCM Task Force

MidAmerican supports the formation of a FTR TCM Task Force with the objective of determining how to better ensure congestion revenue is distributed to load serving entities.

WPPI offers the following feedback on the ARR process and an FTR TCM Task Force:

(1.)  Should the ARR process review be added to the MSC management plan?

• It is not clear to WPPI that reforming the ARR annual process will significantly increase the ARR/FTR dollars Load Serving Entities receive relative to day-ahead congestion revenue (MSC 10/7/2021, Item 03, s. 11). Consequently, we suggest that instead of adding “ARR process review” to the MSC management plan, “Improving the Transmission Customer Metric” should be added, which would facilitate the consideration of revisions to the ARR and/or FTR processes.

(2.)  Between Annual ARR Registration, Annual ARR Allocation, and RSP processes, in which area are improvements most needed? Do you have specific suggestions?

• Again, it’s not clear to WPPI that reforming the ARR annual process will significantly increase the ARR/FTR dollars LSEs receive relative to day-ahead congestion revenue. In particular, the processes listed do not determine the dollar value of ARRs, which occurs in the Annual FTR Auction. Also, the idea seems to be that if an LSE’s ARRs were better aligned with their current resources, that would increase the LSE’s ARR revenue/FTR net (of the cost to purchase) revenue. While it would improve an LSE’s ARRs from a hedging perspective, it’s not clear how it would necessarily increase the LSE’s ARR/FTR (net) revenue. In any case, we offer some initial thoughts on the specific processes.
• Annual ARR Allocation: Generally speaking, this process seems to work as intended, where a higher priority is placed on allocating ARRs associated with baseload resources. While a higher allocation of nominated ARRs would be desirable, it seems we’re up against transmission system limits.
• RSP processes: In WPPI’s experience, successfully adding/replacing RSPs is a relatively infrequent occurrence. Again, we’re up against transmission system limits. However, it would be helpful if MISO provided all available data regarding sensitivities, which would help LSEs better determine what requests (replacement in particular) might have a better chance of being awarded.

(3.)  Comments on the suggestion to form a FTR TCM Task Force

• WPPI supports forming a task force to improve the TC Metric.

(4.)  WPPI’s additional comments:

(a.)  We want to emphasize that, at this very early stage, solutions to improve the TC Metric should not be limited to the ARR process but should consider the FTR process as well. Moreover, at this very early stage, all possible solutions should be on the table.

(b.)  In response to the suggestion that monthly auction revenue be returned to LSEs rather than used to fund FTRs, MISO said that residuals are a function of participants and should remain with FTR holders. Please explain further. It is unclear to WPPI how the (excess) revenue from the monthly auction is any different from the revenue from the annual auction.

(c.)   Please provide the share of FTR MW owned by LSEs by season/year, 6/1/2015-8/31/2021.

(d.)  S. 7 “LSEs predominately obtain FTRs thru ARR conversion rather than annual or monthly, MPMA FTR auctions.” It seems an “ARR conversion” is effectively a purchase in the annual auction (albeit, not price sensitive).

(e.)  S. 8 “A simulated scenario where all Allocated ARRs are converted to FTRs shows a decrease in TCM as day-ahead congestion patterns differ from historical usage.” What happens to the TCM metric in a simulated scenario where only LSEs participate in the auctions?

MEMORANDUM
TO: MISO MARKET SUBCOMMITTEE
FROM: THE ENTERGY OPERATING COMPANIES
SUBJECT: FTR TRANSMISSION CUSTOMER METRIC
DATE: OCTOBER 29, 2021

The following feedback is offered by The Entergy Operating Companies ("EOCs")[1] in response to the request made during the October 7th, 2021 Market Subcommittee meeting concerning the request for comments on Auction Revenue Rights (ARR) process improvements. In general, the EOCs believe that ARR process improvements are merited. Below is a more detailed response to the individual questions posed by MISO. 

Comments on ARR process improvements: 

• Should the ARR process review be added to the MSC management plan?
  • The EOCs strongly believe that the ARR process review be added to the MSC management plan.  It has been shown explicitly that the current ARR process has failings that can and should be rectified.  Placing this topic on the MSC management plan will keep this on the forefront of all those involved in the MISO market and allow it the attention it merits.  Also, the EOCs strongly believe that reinstating the FTR Working Group would be instrumental to working through all the details this topic entails. 

• Between the Annual ARR Registration, Annual ARR Allocation, and the RSP processes, in which area are improvements most needed?  Do you have specific suggestions?
  • The EOCs believe that improvements can be made to both the Annual ARR Allocation and RSP processes.  Better modeling of transmission system, flowgates, transmission upgrades and outages would better reflect the appropriate allocation of ARRs (and subsequently FTRs) and ARR Entitlements.  Lastly, restructuring the Multi-Period Monthly Auction (MPMA) is needed.  This is not a well-functioning market as it has consistently been shown to not produce competitive prices and subsequently allows the exchange of valuable capacity for much less valuable auction proceeds.           

 The EOCs welcome the opportunity to work with MISO and other stakeholders to improve the ARR processes to create better value for MISO ratepayers.

Xcel Energy appreciates the opportunity to provide feedback on the ARR process improvements and the TCM metric.  We agree with MISO that the ARR annual process reform could significantly increase TCM and believe the current design of the ARR/FTR construct is outdated and inadequate.  As MISO stated, this would be a multi-year effort so we recommend strongly that MISO create a dedicated workgroup to reform the current ARR/FTR market design.  This will create a high level of engagement between stakeholders, MISO staff and the consultant to develop an ARR/FTR market that increases the ability of LSEs and Transmission Customers to hedge congestion.  Xcel Energy does appreciate MISO's willingness to include all of the submitted proposals from the last round of feedback within the scope of the RFP or provide more detail as to why these proposals are not feasible.

The OMS Markets Workgroup supports the creation of a Financial Transmission Rights (FTR) Transmission Customer Metric (TCM) Task Force. Based on MISO’s most recent presentation, MISO indicated that substantial foundational FTR rule changes could be required. Hence, it will be beneficial to have a dedicated technical group to discuss the issue in detail. This position has not presented to the OMS Board of Directors for consideration and approval.

The Arkansas Public Service Commission supports forming an FTR TCM Task Force.