In the June 9 meeting of the Resource Adequacy Subcommittee (RASC), MISO presented updates to the Minimum Capacity Requirement (MCR). Stakeholders were asked to provide input on two concepts:
The Entergy Operating Companies (EOCs) appreciate the opportunity to provide feedback on the minimum capacity requirement.
The EOCs continue to strongly support the implementation of a meaningful minimum capacity requirement. The EOCs commented extensively, in their January 2021 RASC feedback[1], March 2021 RASC feedback[2], and May 2021 RAN Workshop feedback[3], on many of the issues related to this proposal – and, rather than repeating those comments here, incorporate them by reference.
De Minimis Threshold
The presentation materials do not specify whether the de minimis threshold would exempt LSEs with less than 50 MW of PRMR from the requirement, deem LSEs to have complied with the requirement if they document an amount of capacity equal to or greater than PRMR*50% - 50 MW, or something else. In any case, the EOCs see no principled basis for a de minimis exemption.
To the extent the de minimis threshold is intended to exempt LSEs with less than 50 MW of PRMR from the requirement, the EOCs object because it would be discriminatory. Small and large LSEs should be equally responsible for maintaining resource adequacy. Small LSEs should not be exempt from this responsibility – and indeed, ELL suspects that the loads of all those small LSEs across the large MISO footprint would sum to a significant aggregate amount. Further, we note that there is no such exemption in SPP, where all LSEs are required to make a showing equal to 100% of their peak load plus a reserve margin. For the most recent demonstration period for summer 2021, all 58 LSEs successfully made the 100% showing, including all 20 LSEs with less than 50 MW of peak load. In each of the three years that the SPP requirement has been in effect, every LSE has successfully made a 100% showing.[4] SPP has demonstrated that there are no barriers to compliance for small LSEs, and it has also shown that the application of the requirement to small LSEs can be administered efficiently. There is no reason to exempt small LSEs from the requirement.
To the extent the proposal is to deem LSEs to have complied with the requirement if they document an amount of capacity equal to or greater than PRMR*50% - 50 MW (i.e., if an LSE is “close enough”), the EOCs object because it would further weaken an already extremely modest proposal. Even though FERC has accepted SPP’s 100% proposal, and even though the implementation of that 100% proposal has been accomplished effectively, MISO has proposed an extremely modest 50% requirement. It would be unreasonable to further weaken the proposed 50% requirement by deeming LSEs to be compliant if they are within 50 MW of the 50% requirement.
For example, consider an LSE with 100 MW of PRMR. While the nominal capacity requirement for that LSE would be 50 MW, the effective requirement with a 50 MW “close enough” approach would result in a 0 MW, or 0% requirement. For an LSE with 200 MW of PRMR, the effective requirement would be only 25%. And for an LSE with 500 MW of PRMR, the effective requirement would be only 40%. Such low effective requirements are inadequate. Further, they are discriminatory in that they are lower for small LSEs and higher for large LSEs despite all LSEs having an equal obligation to serve their respective retail loads.
MCR Penalty
SPP’s penalty for noncompliance is 200% of CONE when the reserve margin is less than 15%, 150% when it is between 15% and 20%, and 125% when it is above 20%. (The reserve margin in SPP is measured relative to the sum of non-coincident peak loads.) Because MISO’s proposed requirement (50% of PRMR) is so much lower than SPP’s proposed requirement (100% of peak load plus reserve margin), the MISO penalty for non-compliance should be higher than SPP’s. It should be at least 150% of CONE.
Locational Requirement and Market Power Concerns
Some MISO stakeholders have raised concerns that a minimum capacity requirement with any type of a locational requirement will result in market power issues. While it is not inconceivable that market power issues may arise in some circumstances, FERC has the jurisdiction and authority to address such instances, as FERC, itself, has acknowledged.[5]
Indeed, it is important to note, in this regard, that the concept MISO has put forward already exists and has been implemented in SPP – with no apparent adverse consequences – and SPP’s rule requires LSEs to own or contract for resources covering 100% of their load plus a reserve margin. In addressing market power concerns in the SPP proceeding, FERC found that the existing surplus relative to SPP’s 100% requirement effectively addressed market power concerns. There is a very large surplus in each zone relative to MISO’s proposed 50% requirement, which should effectively address market power concerns that stakeholders may have with a locational requirement. [6]
The EOCs continue to believe that the Minimum Capacity Requirement must contain some locational requirement in order to be meaningful and reasonable. The most meaningful and beneficial locational requirement would be an in-zone location requirement. In the event that MISO decides against implementing an in-zone locational requirement, the EOCs believe that an in-subregion (MISO South, MISO Central, MISO North) requirement is better than no locational requirement at all. Lastly, if MISO elects to move forward with a minimum capacity requirement that has no locational requirement, the EOCs would request that the proposed 50% level of the minimum capacity requirement be made more stringent to make it meaningful and impactful in terms of achieving the important objectives driving the proposal.
The EOCs appreciate the opportunity to comment.
[1] The EOCs’ January 2021 RASC comments can be found within the zip file contained at this link:
[2] The EOCs’ March 2021 RASC comments can be found within the zip file contained at this link:
https://cdn.misoenergy.org/20210414%20RASC%20Stakeholder%20Comments539041.zip
[3] The EOCs’ May 2021 RAN comments can be found within the zip file contained at this link:
[5] In re Southwest Power Pool, 164 FERC ¶ 61,092 at ¶¶ 78-79 (August 7, 2018) (FERC Docket No. ER18-1268).
[6] Id, at page 28. “We again note that, currently, SPP’s market for bilateral capacity is relatively net long compared to SPP’s proposed 12 percent planning reserve margin. Therefore, likely many sellers of capacity are available to meet LREs’ net peak demand and planning reserve margin. Over time, however, SPP’s market for bilateral capacity may begin to tighten as it approaches a level of balance closer to its 12 percent planning reserve margin. As the amount of uncommitted capacity and the number of potential sellers shrink over this period, concerns over the potential exercise of market power could arise. We continue to encourage SPP and its stakeholders to consider the potential for the exercise of market power in the market for bilateral capacity as the overall reserve margin potentially shrinks in the future.”
DTE appreciates the opportunity to provide feedback on the minimum capacity requirement in the PRA. The current proposal for both the de minimis threshold and 1.5x CONE penalty look reasonable. DTE is supportive of MISO implementing the 50% minimum capacity requirement for the PRA with these two concepts included in the proposal. DTE would also be supportive of furthering this initiative to increase the required minimum capacity amount as well as including an explicit locational or zonal component.
Comments
of the
Association of Businesses Advocating Tariff Equity (ABATE),
Illinois Industrial Energy Consumers (IIEC),
Louisiana Energy Users Group (LEUG),
Midwest Industrial Customers (MIC),
Texas Industrial Energy Consumers (TIEC),
Coalition of MISO Transmission Customers (CMTC),
Midwest Industrial Customers (MIC),
Alcoa Power Generating Inc. (APGI)
and
NIPSCO Large Customer Group (NLCG)[1]
Regarding
RASC RAN: Minimum Capacity Requirement Proposal
(RASC010, 011, 012) (20210609)
June 23, 2021
ABATE, IIEC, LEUG, TIEC, CMTC, MIC and APGI, as representatives of the End-Use Customer (EUC) Sector, and NLCG appreciate this opportunity to provide comments to MISO.
Background
At the June 9, 2021 MISO Resource Adequacy Subcommittee (RASC) meeting, MISO requested additional comments on its minimum capacity requirement proposal. Except for the addition of a proposed 1.5 x CONE penalty for not conforming to the requirement and setting the flat MW de minimis exemption for individual Load Serving Entities (LSEs) from the requirement at 50 MW, the proposal is unchanged from how it was presented at the May 12, 2021 meeting of the MISO RASC. Under the proposal, LSEs would still be required to meet 50% of their seasonal Planning Reserve Margin Requirement (PRMR) amounts with capacity they own, lease, acquire or bilaterally purchase prior to MISO conducting its annual Planning Resource Auction (PRA) and the capacity would not have to be located in the same MISO Local Resource Zone (LRZ) in which the LSE’s load is located.
ABATE/IIEC/LEUG/TIEC/CMTC/MIC/APGI/NLCG Comments
As we have indicated in our past comments of September 23, 2020, January 20, 2021, March 24, 2021 and May 28, 2021, we oppose MISO’s Minimum Capacity Requirement Proposal. MISO has not demonstrated the need to impose a forward (i.e., pre-Planning Resource Auction) capacity demonstration requirement on individual LSEs to supplement the MISO Planning Resource Auction (PRA). In particular, it has not presented evidence that its current resource adequacy construct is unlikely to attract and retain sufficient capacity to meet MISO’s one day in ten year loss of load expectation standard in the long term absent the addition of a forward capacity demonstration requirement. Nor has MISO shown that a significant capacity shortfall is imminent within MISO without the addition of a forward capacity demonstration requirement to supplement the PRA. Moreover, MISO has not demonstrated that individual LSEs are excessively relying on the PRA for their capacity requirements to an extent that threatens system reliability or that inappropriately shifts costs to other market participants. As the MISO Independent Market Monitor indicated at the June 9, 2021 MISO RASC meeting, MISO’s proposal is a solution looking for a problem. MISO has not presented a demonstrable need to impose a minimum capacity requirement on individual LSEs, even one that does not require the capacity be sourced in the same LRZ as the LSE’s load. MISO should drop any further pursuit of its minimum capacity requirement proposal.
Thank you again for providing us an opportunity to provide 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
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
[1] ABATE, IIEC, LEUG, TIEC, CMTC, MIC and APGI are all MISO Members in the End-Use Customer Sector. NLCG is a non-MISO Member stakeholder whose members include large end-use customers within Indiana that are interruptible and/or have cogeneration facilities and that take service under NIPSCO Rate Schedule 831, which allows limited market purchases through Northern Indiana Public Service Company (NIPSCO).
To prevent over-reliance on the Planning Reserve Auction (PRA), MISO is proposing a Minimum Capacity Requirement (MCR). The MCR requires that 50% of an LSE’s load must covered by resources prior to the PRA. Currently, there is no locational component requiring that these resources be procured where the load is located. Should a market participant not provide sufficient resources to meet the MCR, MISO is also proposing a penalty of 1.5x CONE short of the MW required to meet the MCR.
Hoosier Energy does not oppose the 50% MCR requirement. That percentage level should be sufficient to encourage long-term resource planning. Hoosier Energy does not support a locational element associated with the MCR. However, if MISO ultimately determines that a locational element is necessary, current resources serving load in another zone should be exempt from the requirement as the planning for such resources was performed prior to the implementation of the locational element.
With respect to the proposed 1.5x CONE penalty, Hoosier Energy supports using CONE as an incentive for long-term resource planning and to deter market participants from over-relying on the PRA for resource needs.
As part of the MCR, MISO is proposing a flat 50 MW de minimis threshold for all market participants. The purpose of the threshold is to increase participation in the PRA while providing relief to very small entities. At the June 9th Resource Adequacy Subcommittee meeting, MISO provided a chart showing the impact of the threshold on a 50% MCR.
Hoosier Energy supports a threshold low enough to discourage “free rider” behavior from smaller load serving entities. Hoosier Energy proposes that the threshold be established at 20 MW, which should limit the number of entities relying solely upon the PRA. In addition, to provide clarity to the process, Hoosier Energy would like for MISO to provide a timeline outlining the data requirements and timing of the information required to determine the threshold.
Subject: Comments on behalf of Southwest Louisiana Electric Membership Corporation (SLEMCO) and Concordia Electric Cooperative (Concordia)
Date: June 23, 2021
Southwest Louisiana Electric Membership Corporation (SLEMCO) and Concordia Electric Cooperative Inc. (Concordia) submit the following comments on the Minimum Capacity Requirement of the RAN Reliability Requirements and Sub-Annual Construct (RASC011).
SLEMCO and Concordia are transmission-dependent rural electric cooperatives in Louisiana and Load Serving Entities located in Zone 9. We continue to have concerns about portions of the proposal as well as MISO comments and recommendations as presented in the May 12, 2021 presentation to the Resource Adequacy Subcommittee. MISO requested formal stakeholder feedback on their Minimum Capacity Requirement proposal (RASC010, RASC011 RASC012) design elements by June 23, 2021 in their June RASC Meeting on June 9, 2021. Below are the comments of SLEMCO and Concordia.
Minimum Capacity Requirement: SLEMCO and Concordia agree with the comment made at the June RASC meeting which, in essence, stated that this MCR effort is “a solution looking for a problem” since there has been no demonstrated over-reliance on the PRA. SLEMCO and Concordia have commented on many of these component parts in earlier comment periods. In this Feedback Request we will specifically focus on the asked for feedback on the 50MW de minimus threshold and the Penalty Structure.
As SLEMCO and Concordia understand MISO’s current proposal, there is no recommendation to include a locational requirement and we agree with that position. If a locational requirement were re-inserted prior to filing, we would strenuously object due to the potential creation of market power within zones and regions. Layering regulatory requirements on top of a functioning market distorts market prices in ways that yield unintended consequences.
As cooperative utilities dedicated to providing least cost service to our customers, we believe this proposal, while improved, still would benefit from additional analysis and consideration to make sure it, in fact, improves resource adequacy, assures reliability and meets the needs of all customers.
WPPI continues to oppose MISO’s efforts to impose a minimum capacity requirement. The adoption and design of any forward requirement should be left to the discretion state regulators for the Load Serving Entities under their purview. As well as, the issue of reliance on PRA does not seem to be an issue of significant size today, such that MISO’s current proposal will only have a minimal impact, and may not even bring more capacity to the PRA. Therefore, there does not seem to be a substantial reason to pursue the current MISO-wide forward-requirement proposal along with the RAN proposal.
Although WPPI does oppose the MCR proposal, we offer the following comments regarding MISO’s specific questions on their proposal.
Do you support a de minimis threshold set at a flat 50 MW, or some other level?
WPPI does think that consideration of de minimis thresholds is appropriate to account for the greater difficulty that a forward capacity requirement is liable to pose for small LSEs.
A couple questions we had on MISO’s updated proposal of “a flat 50 MW de minimis threshold for all participants”.
- If MISO does adopt a locational element, would the de minimis threshold apply to each utility within each specified locational zone?
- Also, does the 50 MW de minimis threshold mean you can procure up to 50 MW in the PRA, or is it a de minimis threshold for entities with 50 MW of load or less?
Do you support the proposed 1.5 x CONE penalty at the MW-weighted CONE for relevant zonal Planning Reserve Margin Requirement (PRMR)?
With MISO still potentially including a locational element, discussion on penalties seems premature. Until we know the full proposal we are not able to comment on the appropriate penalties.
Submitted on behalf of East Texas Electric Cooperative, Inc. (ETEC):
ETEC disagrees with the Minimum Capacity Requirement (MCR) concept fundamentally. Load-Serving Entities (LSEs) in MISO conduct their own planning and hedging. MISO’s capacity auction, with its unknown and potentially volatile price, provides the mechanism and incentive for LSEs to conduct prudent planning and hedge their exposure to that auction price accordingly. The potential for CONE pricing is the extreme example of this, but the potential for MISO capacity prices to increase generally from current levels provides the necessary incentive.
Regardless of its merits, ETEC strongly disagrees with MISO’s approach in the stakeholder process around this issue. ETEC believes that MISO needs to focus its efforts on the already very large task of considering overhauling its resource adequacy processes entirely (i.e. potential shift to seasonal auctions and reworking accreditation). The scope for MISO’s efforts was a package of seasonal and accreditation with significant discussion and analysis for many months until the MCR was later and inappropriately added. The MCR is clearly a contentious issue. MISO should refocus on its original, appropriate scope. Once that effort is complete, the MCR issue can be examined.