In the May 21 Resource Availability and Need (RAN) Workshop, stakeholders were asked to submit feedback on the Minimum Capacity Requirement proposal shared with the Resource Adequacy Subcommittee (RASC) on May 12.
Comments are due by May 28.
DTE appreciates the opportunity to provide feedback on the minimum capacity requirement in the PRA. We agree with MISO that the auction is designed to balance the market and not to be a primary source of capacity for market participants. As such, DTE is supportive of MISO implementing the 50% minimum capacity requirement for the PRA and believe this is a step in the right direction. DTE would be supportive of furthering this initiative to increase the required capacity amount as well as including a locational or zonal component. It is important for LSEs to ensure resource planning occurs at the zonal level to support local reliability.
Comments on MISO’s proposal for a Minimum Capacity Requirement
Issue Tracking ID#: RASC011
Occidental Chemical (“OxyChem”) is pleased to submit comments on MISO’s proposal to require LSEs to secure a certain amount of capacity before a PRA is conducted. MISO has not yet specified the percentage amount that will be required or locational limits for such capacity. Regardless, OxyChem does not support the establishment of a Minimum Capacity Requirement in MISO’s Resource Adequacy (RA) construct for the following reasons:
1) MISO has not demonstrated that there is an actual problem in the RA construct that the Minimum Capacity Requirement would address. On the other hand, there are plenty of potential problems, raised by stakeholders in prior feedback opportunities, that the establishment of such a requirement could create.
2) It is known that in certain MISO regions, there are large Generation Owners that control most of the available capacity. in those regions. Thus, the implementation of the proposed capacity requirement raises market power concerns; especially when a locational component is included in it. Furthermore, the IMM has on several occasions clearly articulated its opposition to this requirement.
3) Finally, it is not necessary for MISO to establish a Minimum Capacity Requirement since State Regulators have the authority and mechanism under the MISO Tariff to do so.
The Michigan Public Service Commission Staff (MIPSC Staff) thanks MISO for the opportunity to provide comments on the minimum capacity requirement (MCR) proposal. The MIPSC Staff support the 50% MCR proposal but are concerned with the De Minimis threshold level for the Market Participants you are targeting to meet this requirement. MISO should set the De Minimis threshold at a minimum level that covers the Market Participants who are currently participating in the PRA for more than 50% of their requirements. Any locational requirement should be broad enough to eliminate potential market power issues and to do so, it must be for a geographic area larger than the currently defined local resource zones. Since MISO is not advancing a forward capacity requirement proposal, the MIPSC Staff recommends that MISO provides for each Zone for each year for the next five years, the Planning Reserve Margin (PRM), the PRM requirement (PRMR), the Local Resource Requirement (LRR), the Capacity Import Limit (CIL), the Capacity Export Limit (CEL), and the Local Clearing Requirement (LCR). Providing these values in the annual Loss of Load Evaluation (LOLE) report would help all Market Participants in procuring bi-lateral contracts to meet the 50% MCR and would help state regulatory authorities in their monitoring of resource adequacy requirements in the distribution utility filed cases.
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) (20210521)
May 28, 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 May 12, 2021 MISO Resource Adequacy Subcommittee (RASC) meeting, MISO requested additional comments on its capacity demonstration proposal, which it is now referring to as its minimum capacity requirement proposal. The proposal is unchanged from how it was presented at the March 2021 meeting of the MISO RASC. Specifically, Load Serving Entities (LSEs) would 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. However, MISO has indicated that it intends to pursue the following next steps:
ABATE/IIEC/LEUG/TIEC/CMTC/MIC/APGI/NLCG Comments
We appreciate the opportunity to comment again on MISO’s proposal.
As we indicated in our comments to MISO of March 24, 2021, while we appreciate that MISO has heeded our past September 23, 2020[2] and January 20, 2021[3] comments with respect to the serious market power issues that would be introduced by imposing a local (i.e., pre-Planning Resource Auction) minimum capacity requirement on individual LSEs, MISO’s continued pursuit of its minimum capacity requirement proposal, even with the local capacity portion of the proposal discarded, is still problematic. As a result, we oppose it.
In both our September 23, 2020 and March 24, 2021 written comments[4] to MISO on this topic, we expressed our concern that 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)., Furthermore, MISO has not presented any new evidence to demonstrate the need for such a requirement. 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. Therefore, 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. Given this, MISO should drop its minimum capacity requirement proposal.
With respect to MISO’s proposed next steps, while we oppose any further development of MISO’s minimum capacity requirement proposal, we nevertheless offer the following additional comments:
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
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).
[2] Our September 23, 2020 comments to the RASC on this topic can be viewed by clicking the following link:
[3] Our January 20, 2021 comments to the RAC on this topic can be viewed by clicking on the following link:
[4] Our March 24, 2021 comments to the RASC on this topic can be viewed by clicking the following link:
https://cdn.misoenergy.org/20210414%20RASC%20Stakeholder%20Comments539041.zip
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 (RASC011) design elements by May 28, 2021 in their RASC RAN Workshop on May 21, 2021. Below are the comments of SLEMCO and Concordia.
Minimum Capacity Requirement: Questions not fully addressed include:
50% PRA Procurement Cap: MISO’s proposal to require LSEs to procure at least 50% of their PRMR prior to the auction has not been shown to solve any current market concern. SLEMCO and Concordia understand the theoretical argument and the rational for mandating each entity to produce a capacity plan and not rely on the annual CRA for all its needs, although once again, this has not been an issue. The minimum level still appears arbitrary and has little evidence to support setting the requirement at 50%, however, we will not contest this part of the recommendation.
No In-Zone Requirement: We recognize and appreciate MISO’s elimination of the zonal requirement since the January comment period. In the May RASC meeting MISO personnel alluded to a locational requirement that, if pursued, would essentially bring back the zonal requirement in a different form. As we 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 continue to strenuously object due to the potential creation of market power within zones and the dilution of one of the founding principles of MISO, that of locating generation in the most optimal areas and moving energy through open access transmission thorough out the MISO footprint.
De Minimus Requirements Threshold: We support the exemption of small entities. Once again, however, the minimum level (last reported to be 50 MW) still appears arbitrary and has little evidence to support setting a requirement at this level. SLEMCO and Concordia would like to see this minimum level set as high as possible so as not to unnecessarily restrict the capacity planning decisions of small entities. Has sufficient evaluation been done at other levels, and if so, what is the differential impact? Would a 75MW or 100MW level achieve a similar result?
Other Comments:
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, specifically, in the areas of establishing the appropriate cut-off level for the small entities exemption. Once a more detailed analysis is presented for all components of this proposal, it will be important to allow time for review and comment prior to filing.
CGA Comments on MISO’s Proposed 50% Minimum Capacity Requirement
Clean Grid Alliance appreciates the opportunity to provide further input on MISO’s proposed 50% Minimum Capacity Requirement, which in earlier comments we have referred to as a Forward Capacity Requirement. In general, our position on this proposed requirement has not changed from that submitted in comments on January 20th, and March 24th. We will not take the time to reiterate all of those points as they can be found in our earlier comments posted in the MISO Feedback Tool. But all the points we have made in these previous comments still apply, except that we do appreciate that MISO has removed the in-zone requirement, which we do see as an improvement.
MISO’s proposal still is not responding to a problem that has been clearly defined or that has been shown to exist. MISO still has not provided evidence of an overreliance on the PRA. In none of the presentations to date has MISO provided any analysis that this proposal is necessary to ensure reliability. And as with our requests for analysis on other aspects of the Seasonal Capacity construct proposal, we believe that without analysis showing both the need for the proposed changes and showing that the proposed changes will actually address the need, MISO has not justified these changes.
We continue to urge MISO to remove this proposed Minimum Capacity Requirement.
Respectfully submitted by Natalie McIntire on behalf of Clean Grid Alliance.
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 minimum capacity requirement. The EOCs commented extensively, in their January 20, 2021 RASC comments[1] and March 26, 2021 RASC comments[2], on many of the issues related to this proposal – and, rather than repeating those comments here, incorporate them by reference.
The EOCs believe that the minimum capacity requirement must contain some locational requirement in order to be meaningful and reasonable. Simply put, for MISO to impose a minimum capacity requirement but allow an LSE to meet it with physical resources located potentially over 1,000 miles away from its load (e.g., an electric cooperative in Louisiana entering into a bilateral contract to buy wind from North Dakota and relying on that contract to meet a 50% requirement) would fail to address either the harm to reliability or the inequitable cost shift that is enabled under the current resource adequacy construct. Plainly, reliability demands that a significant portion of the capacity used to serve a given load is sited in reasonable proximity to that load. And if an LSE is permitted to use far-flung capacity to meet the proposed requirement, then the burden of maintaining sufficient in-zone capacity to reliably serve the load in the zone is effectively shifted to other LSEs within the zone. That result, on its face, would be unreasonable.
While including some type of locational element to the proposal is thus imperative, it is equally important that the locational element be designed in a reasonable manner to avoid unintended consequences or harm to LSEs that have engaged in reasonable long-term planning. In particular, the EOCs support exempting all current resource arrangements from the locational requirement so that LSEs can continue to benefit from the out-of-zone resources that they currently own or have contracted for.
MISO’s prior meeting materials only included a high level description of a proposal that the 50% requirement must be met by capacity located within the same LRZ as the load it serves – with no discussion of any exceptions or accommodations for legacy resources located outsize of the LRZ that have been used to serve a given load. Given the lack of detail from MISO regarding how this locational aspect of the proposal might work, it is understandable that some stakeholders expressed concerns regarding the proposed in zone requirement, and the overall proposal. To the extent that there has been stakeholder apprehension regarding the locational aspect of the proposal thus far, much of it reasonably can be attributed to the absence of more detailed information about how this element of the proposal would work.
Some stakeholders have indicated that the prospect of a zone not meeting the Local Clearing Requirement (LCR) and incurring CONE pricing is a sufficient incentive for LSEs to build or contract for in-zone generation so a locational requirement is not necessary. The EOCs disagree with this assertion. We agree with the Brattle Group, whose MISO-commissioned analysis concluded that the risk of CONE pricing was an inadequate incentive to maintain resource adequacy.
“[T]he combination of a vertical demand curve, inelastic prompt supply curve, and low price cap will produce prices that are volatile and capped at a moderate or low level. Prices will not rise high enough on average to support new entry until the reserve margin is low enough that the market is facing frequent shortages.” [3]
The PRA is not designed to ensure resource adequacy in aggregate and it is certainly not designed to ensure resource adequacy in any zone or subregion where prices, and price responses to supply additions, are likely to be even more volatile than at the aggregate level. Rather than rely on the PRA, MISO relies on LSEs, subject to oversight by state regulators, to plan enough generation to meet their needs, including their share of local needs. In the absence of a requirement to do that, some LSEs will act on the incentive created by the PRA to avoid that responsibility. This is why MISO should include a locational requirement as part of the minimum capacity requirement; if it does not, then the MISO resource adequacy construct will neither have an adequate incentive nor any requirement for LSEs to support enough local generation. MISO could continue to hope that LSEs will plan enough locally, but it would be unreasonable to expect that outcome given the PRA incentive structure, as explained by the Brattle Group.
Indeed, there is evidence that some LSEs are beginning to act on this incentive. For example, a large group of cooperatives in Louisiana (“1803”) has recently proposed a resource plan that relies heavily on PRA-sourced capacity to meet their needs. The plan includes nowhere close to enough physical capacity to meet the coops’ aggregate or local needs throughout the year. This is just one example of an LSE shirking its responsibility to conduct reasonable long-term planning, and leaning on the PRA instead. We expect that there are others pursuing or contemplating similar strategies. The LPSC will have an opportunity to determine whether the portfolio proposed by 1803 is adequate to reliably serve 1803’s load, but the resource planning activities of some LSEs are not always subject to state jurisdiction. Further, the consequences of inadequate planning are not necessarily confined to a single state. In the absence of a universally-applicable requirement for LSEs to support some amount of local generation, there will be an incentive for LSEs to shirk the obligation to plan and procure capacity adequate to serve load of the LSE.
Some stakeholders have suggested that an LSE procuring resources in a zone different from where their load is located does not present any reliability concerns if those resources have full NRIS. This reasoning is deeply flawed. The powerflow analysis used to grant NRIS is an “outlet” test – it tests whether the output of a resource can get out of the local area in which it is located; it does not test whether that resource can substitute for generation in a different local area. If it was enough to have NRIS, then there would be no need to have an LCR for each LRZ. But there is a need for LCRs – there is a need to ensure that a minimum amount of capacity is located within each LRZ – and the responsibility to support that local capacity should be shared. In sum, the MISO Planning Resource Auction is not envisioned, nor does it function, as a tool to ensure that sufficient resources exist within each area of MISO to reliably serve the load in each area. Merely requiring that resources have NRIS in order to contribute to the 50% minimum requirement is therefore insufficient to ensure the important objectives of this proposal are met and that reliability is maintained throughout the MISO footprint.
A 50% minimum capacity requirement without any type of locational requirement is such a low standard that it is difficult to see how this requirement will have any impact on future resource decisions or how it will prevent some LSEs from free-riding on the substantial local resource investments made by other LSEs. The most meaningful and beneficial locational requirement would be an in-zone locational 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 so that LSE’s can only rely on the PRA for an amount less than 50% in order to make the requirement meaningful and impactful in terms of achieving the important objectives driving the proposal.
To be clear, because MISO is proposing that LSEs only be required to demonstrate owned or contracted capacity equal to 50% of their needs, there will be an ongoing role for state regulators to ensure that LSEs plan and procure generation adequate to reliably serve local load, without shifting cost burdens on to other area LSEs. MISO should clarify that its proposed 50% requirement is inadequate to ensure reliability on its own and that state regulators have an ongoing responsibility to ensure adequate planning within their jurisdictions.
Looking ahead, as MISO further develops the minimum capacity requirement, the EOC’s believe it is important for MISO to clarify that PRA-sourced contracts, including financially-settled contracts that are not backed by physical resources, are ineligible for purposes of meeting the minimum capacity requirement. Using a PRA-sourced contract to meet the requirement is effectively the same as sourcing capacity from the PRA. For the minimum capacity requirement to be meaningful, it must be met using owned resources or bilateral contracts backed by physical resources.
The EOCs appreciate the opportunity to comment.
[1] The EOCs’ January 20, 2021 comments can be found within the zip file contained at this link:
[2] The EOCs’ March 14, 2021 comments can be found within the zip file contained at this link:
https://cdn.misoenergy.org/20210414%20RASC%20Stakeholder%20Comments539041.zip
[3] Testimony of Dr. Samuel A. Newell, Dr. Kathleen Spees, and Dr. David Luke Oates on Behalf of the Midcontinent Independent System Operator Regarding the Competitive Retail Solution, FERC Docket No. ER17-284, 11/1/2016, at 4.
The Coalition of Midwest Power Producers (COMPP) appreciates the opportunity to provide the Midcontinent Independent System Operator (MISO) with feedback on the Minimum Capacity Requirement (MCR) Proposal in response to the Resource Availability and Need (RAN) workshop that was held on May 21, 2021.
The primary focus of the May 21 RAN Workshop was the MISO capacity accreditation reform proposal. The MCR proposal was discussed more briefly. COMPP has been generally supportive of the MCR concept, but has concerns surrounding MISO’s current justification for proposal, transmission system prioritization, and the use of developing resources to meet the MCR requirements.
As previously expressed by COMPP, the MCR proposal could improve bilateral market activity and the reliability of the MISO footprint if the right resources are retained. MISO states that “all load should carry some resources within reason.” This statement is unclear and does not provide additional insight as to how MISO is seeking to ensure adequate resources are contracted to meet a semi-forward capacity requirement. To help COMPP better understand MISO’s proposal, COMPP requests that MISO define the specific quantity it believes is “within reason.” If MISO feels that 50% of the LSE’s capacity requirement is “within reason,” COMPP requests that MISO provide any reasoning as to why 50% is “within reason.” COMPP also requests for MISO to define the timeline for MCR designations. COMPP understands that MCR designations must be made in advance of the Planning Resource Auction, but we would like more details on how far in advance. (i.e. one day, one month, three months).
MISO also states, “[t]he capacity auction is designed to balance the market, not be the primary source of capacity while sending new build price signals.” Accurate price signals that communicate needs for new entry are a cornerstone to the justness and reasonableness of MISO’s Resource Adequacy Construct. “If there are future needs for local or regional capacity within the MISO region, Auction Clearing Prices should increase to reflect such needs.” Order Denying Rehearing, ER18-462 at P 108. Presently, Planning Resource Auction (PRA) clearing prices are equal to the Cost of New Entry – a new build price signal – when a capacity shortfall exists. A capacity shortfall occurs when there are too few local resources to meet Local Clearing Requirements or too few regional resources to satisfy the Planning Reserve Margin Requirement. As such, when PRA clearing prices increase to send a new build price signal, that price signal is reflective of immediate and future needs for local or regional capacity. These results are consistent with FERC’s Orders approving the existing construct.
Aside from new build price signals, COMPP notes the significance of allowing the PRA and any potential MCR to compliment state policies in regulated and retail choice jurisdictions. A complimentary PRA and the MCR can send accurate price signals when accurate metrics are used to establish resource adequacy requirements. In all of MISO’s recent whitepapers addressing Future scenarios, Long Range Transmission Planning, and Electrification, MISO highlights coincident peak load growth rates between 0.6% and 1.41%. Yet, the PRA metrics are reporting declining load without any clear justification or any articulation as to why the planning metrics are divorced from market metrics. The disconnection between the realities of the system and the parameters used in the PRA is obvious. MISO has more capacity emergency and load shed events than any other footprint because it is not securing enough capacity resources. To ensure the MCR is an effective complimentary tool, MISO must ensure the PRA metrics are accurate. Accurate PRA metrics will allow capacity resource amounts procured via the MCR to contribute to overall resource adequacy requirements that are sufficient to address the capacity emergencies and load shed events impacting MISO’s northern and southern regions. While capacity accreditation reform will assist with procuring the right quality of resources, the volume issue will still need to be addressed for MCR to be effective.
While MISO has worked with stakeholders to modify the locational element of the MCR, MISO’s current proposal to have no locational requirement in the MCR is inconsistent with existing practices. The current rules for LSEs relying on Fixed Resource Adequacy Plans (FRAP) provide,
LSEs that choose to use a FRAP must designate a sufficient volume of Planning Resources located in the same LRZ as the LSE’s PRMR to meet the LRZ’s LCR requirement. The amount of resources that must be sourced from within the LRZ to satisfy the LSE’s LCR share is equal to the load ratio share of the LSE’s PRMR multiplied by the total LCR for its LRZ. BPM 11, Section 5.3.
The MCR is requiring LSEs to FRAP certain “within reason” amounts before the PRA. Due to the way LSEs are required to FRAP certain amounts of internal resources, leaving the locational calculation out of the MCR can result in too few internal-zone resources being procured. While some LSEs may have a FRAP LCR requirement that is less than 50% of their obligation, some LSEs may have more. By exempting MCR load from some locational element, MISO would have to prioritize transmission service from external areas into each zone. Resources clearing or otherwise settling in the PRA would have subservient transmission access rights and higher price separation risk than those resources designated as part of an MCR. To ensure equitable access to the transmission system and nondiscriminatory pricing, some location element that is consistent with Section 5.3 of BPM 11 should be included in the MCR proposal. But, MISO must also install some form of market power mitigation tools. The mandatory MCR could result in certain resources and interests being subject to discrimination and being left with inequitable access to the capacity market.
Lastly, the MCR proposal does not address the treatment of new or planned resources. Any resource that has not yet reached commercial operation that is being designated in an MCR has some unavailability risk. To avoid that unavailability risk spilling into the start of the Planning Year, MISO should consider attaching credit requirements to LSEs relying on these resources. Such a credit requirement would allow for MISO to replace the capacity of the developing resource designated in the MCR if that resource is not available at the start of the Planning Year. The details of this credit calculation and financial milestones that allow for the return or partial return of credit should also be included.
Ameren Illinois is aware of MISO's desires to modify its capacity construct to require a minimum amount of capacity resources to be procured in advance of the auction. Being an entity that has no generation and acts only as the default supplier, we have concerns about how this would work in a retail choice state such as Illinois. These concerns include, but are not limited, the potential for market power for those entities that have excess capacity, the manner in which the proposal would interact with the dynamic nature of switching between Illinois suppliers, possible conflicts with existing Illinois statutes and not fully capturing the value of Ameren's robust transmission system. We would need more details from MISO before commenting further.
Arkansas Electric Cooperative Corporation (AECC) appreciates the opportunity to comment on MISO’s proposal to establish a limit on the Planning Resource Auction (PRA).
AECC appreciates that MISO is reviewing the PRA, particularly given that the MISO South PRA cleared at a penny following the February event when curtailments were required. AECC agrees with the MISO Independent Market Monitor (IMM) who stated in the MISO 2019 State of the Market Report that “the low clearing prices in the PRA … [are] attributable to a fundamental design flaw.” (page 91, paragraph 1) The IMM further states, “The demand for capacity in the PRA continues to poorly reflect the true reliability value of capacity and undermines the market’s ability to provide efficient economic signal.” (page 91, paragraph 2)
AECC recommends that the PRA be discontinued. SPP, with whom AECC is also a member, has no capacity market, and individually arranged bilateral deals meet market participant needs for capacity. Elimination of the PRA would allow for MISO staff and market participants to be relieved of the heavy administrative burden of participating in a flawed process that sends incorrect signals for reliability and resource procurement. Rather than complimenting the bilateral market, AECC believes the PRA greatly weakens and interferes with the bilateral market by incenting participants to focus on strategies to lean on the PRA for as long as possible and harboring expectations of irrationally low capacity prices. In contrast, bilateral trading involves collaboration to address capacity needs, and encourages a longer-term focus. In lieu of the PRA, MISO could implement informational mechanisms such as a ‘bulletin board’ for market participants to post capacity bids and offers.
Absent discontinuation of the PRA, AECC appreciates that MISO is proposing an auction procurement cap. A procurement cap of 50%, AECC believes, is not adequately addressing that “The capacity auction is designed to balance the market, not be a primary source of capacity…” as stated in MISO’s RAN presentation on May 21, 2021. AECC would recommend at minimum, a higher procurement cap. Specifically, AECC would recommend that the PRA be limited to meeting the reserve margin.
Again, AECC appreciates the opportunity to comment on MISO’s proposal.
MISO’s resource adequacy construct should remain limited to the upcoming planning year. Adoption and design of any forward requirement should be left to the discretion state regulators for the Load Serving Entities under their purview.
To the extent there remain concerns that Load Serving Entities are relying too heavily on the Planning Resource Auction to source their capacity, WPPI suggests that MISO consider, as a first step, increasing the capacity shortage price from the current 1x the Cost of New Entry to some multiple (e.g., 3x) of CONE. Such an increase in the shortage Auction Clearing Price should incent more capacity procurement outside of the PRA.
The minimum capacity requirement proposed by MISO has still not been justified with empirical data as Exelon and others requested in the original round of feedback on the forward commitment/demonstration proposal. Assertions that certain load serving entities were "leaning on the PRA" during various meetings on this topic have never been justified with data and the recent PRA results for 21/22 show extremely low prices and many zones with significant self-supplied resources. This requirement should be eliminated from the proposal because it has not been justified and it may still raise market power concerns.