AC 2023 Short Term Incentive (STI) (20220914)

The Power Marketers sector appreciates the opportunity to comment on MISO's Short-Term Incentive (STI) goals. It is important to differentiate goals that are within the control and influence of MISO management and staff compared to those from external factors. MISO's STI metrics should also be benchmarked against both industry standard and similar peers with some of the Threshold/Target/Excellent Performance targets clarified or improved. Finally, we believe an additional STI metric could be added to support the overall Generator Interconnection (GI) process.

Regarding STI metrics and using Reliability, Compliance & Security as an example, what is an average number of FERC or NERC violations within other RTO/ISOs, FERC regulated utilities, and NERC compliant entities? MISO's STI uses the term Minimal, but what is the quantity criteria? Is one non-minor violation enough to drop STI from Excellent to Target performance? At the very least, the exclusion for self-report does provide the proper incentives to continue to promote self-compliance within MISO staff. Another example would be benchmarking against the industry standard of unplanned critical services incidents. The STI metrics use unavailability metrics for MISO critical services with an Excellent Performance threshold of 4 hours. The historical performance average was 4.14 hours (median of 3.5) in the past 5 years. The 4 hour threshold seems more appropriate for Target Performance and not Excellent Performance. However, it could be that MISO critical services availability far exceeds industry standard, but members don't have this information available to gauge excellence. In effect, there should be no Excellent metric where historical performance meets those thresholds for a majority of historical years unless benchmark data can show performance is significantly above that of the industry. The same goes vice versa, where the Base Budget Variance metrics for Financial Control, for example, might be too narrow based on historical performance unless an industry baseline shows below average performance. We suggest those be re-evaluated on an ongoing basis.

Some of the strategic element metrics could be better quantified and improved. Since there are exactly three performance items per strategic element, one suggestion would be to split the STI into 2.5% sub-components. Thus, failure to complete a single item within a strategic element would not result in forfeiture of the entire 7.5% incentive. If different teams or staff are working on the individual subcomponents, this would help identify the successful efforts.

Finally, many of the strategic elements contains actions such as "complete, develop, or present". If there is a desire not to have Threshold/Excellent measures, then it is important to define what constitutes on Target performance. For example, how does MISO gauge that developing and presenting a roadmap for Tranche 2 LRTP meets expectations? What if the presentation severely lacked information? Simply checking a box or completing a task better represents a minimal or Threshold performance; not that it met expectations or is on Target. Continuing to use Tranche 2 as an example, a suggested improvement could be that the roadmap receives stakeholder approval (or consensus when they are items that are not voted on) and requires limited number of iterations at meetings. Significant stakeholder pushback could also imply a roadmap was not well-developed.

Separately, MISO has also strived for years to improve the overall GI process. We appreciate MISO's plan to add additional staff to address the expanding workload. This is a critical component of MISO operations and suggest an ongoing STI metric and performance goal to benchmark performance and measure progress. This will support MISO's commitment to improving this vital function, managing the reliability imperative, and recognize staff tasked with conducting GI studies. Thank you for considering this feedback.

WPPI Energy offers the following feedback on MISO’s proposed Short-term Incentive Plan for 2023:

(1.)  4. Information Technology Availability, Unavailability (hours): Results for the last several years indicate these metrics could be tightened: 4 years meet Excellent Performance while 1 year doesn’t meet Threshold Performance. Suggest reducing each level of performance by one hour, which would move three years from Excellent to Target performance.

(2.)  5a. Base Budget Variance: Results indicate these metrics could be loosened: 2 years don’t meet Threshold Performance, 2 years meet Threshold Performance, and 1 year meets Excellent Performance. E.g., increasing Threshold Performance from 1.5% to 2%, Target Performance from 0.8% to 1.5%, and Excellent Performance from 0.5% to 1%, would move two years from Threshold Performance to Target Performance.

(3.)  5b. Investment Budget Variance: Results indicate these metrics could be tightened: 3 years meet Excellent Performance, while 1 year doesn’t meet Threshold Performance and 1 year does. Suggest setting the performance levels double 5a. Base Budget Variance performance level, which would be: Threshold Performance 3% (vs. 6%), Target Performance 1.6% (vs. 5%), and Excellent Performance 1% (vs. 3%). This would move one year from Excellent Performance to Target Performance and cause one (additional) year not to meet Threshold Performance

(4.)  6a. Customer Relationship Index: It seems unlikely that the various performance levels are statistically different from each other, 81% vs. 83% vs. 85%. Consequently, suggest differences of at least 5 percentage points between the various performance levels (may still not be statistically different, but better than current levels). E.g., Threshold Performance, 80% (three years); Target Performance, 85% (one year); and Excellent Performance 90%.

(5.)  6b. Customer Interaction Index: Same comment as on 6a. E.g., Threshold Performance at 80%, two years; Target Performance at 85%, two years; and Excellent Performance at 90%.

(6.)  7.2 MISO Reliability Imperative – Operations of the Future: How does 2023 Required Performance element 3. “Develop uncertainty roadmap…”  build on 2022 Required Performance element 3. “Advance MISO capabilities to better manage uncertainty through enhancements in operational tools and processes, including an assessment of potential market enhancements?”

(7.)  7.3 MISO Reliability Imperative – Long Range Transmission Planning: Required Performance element 2. “Develop and present the roadmap for Tranche 2 by the December Board meeting.” What is meant by “roadmap for Tranche 2?”

(8.)  7.4 MISO Reliability Imperative – Market Redefinition: Required Performance element 2. “Collaborate with stakeholders to develop FERC filing alternatives for a reliability based demand curve for the Planning Resource Auction.” It is very concerning that this item is included in MISO’s proposed Short-term Incentive Plan. If MISO insists on including, suggest strike “Collaborate with stakeholders to.” While MISO collaborates with stakeholders as a matter of course on most capacity construct and market FERC filings, the role of stakeholders is only advisory.

TO:         MISO Stakeholder Relations

FROM:   MISO Transmission Owners

RE:         Stakeholder Feedback –MISO 2023 Short-Term Incentive Plan

DATE:    October 6, 2022

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The MISO Transmission Owners (Owners) thank MISO for the opportunity to provide feedback on the 2023 Short-Term Incentive Plan (STI).  As requested in prior years, the Owners encourage MISO to review the performance ranges to ensure that they promote continuous improvement, and to tighten the metric performance thresholds over time as appropriate. The Owners appreciate that MISO has continued to target performance under the Operations Metrics and Strategic Elements that will maintain reliable, safe, and economic operations during the ongoing generation fleet transition and best position MISO to mitigate challenges facing the region.

The Owners provide the following additional recommendations and comments on specific STI Metrics:

• Operation Metric 2, Unit Commitment Efficiency:  The Owners support MISO’s future development of new Unit Commitment Efficiency metrics with the goal of maintaining risk tolerance levels as MISO’s risk profile shifts. Updated metrics would more accurately and completely track MISO’s Risk Factors and Risk Capacity during a critical period of transition in the MISO footprint.
• Operation Metric 5, Financial Control:  MISO has not proposed to change STI weight or metrics for Financial Control (Base Budget Variance and Investment Budget Variance) in its 2023 STI Plan.  The Owners note, however, that the MISO’s 2023 Base Budget is proposed to increase by 9.9% as compared to 2022.  As noted in separate Sector feedback provided to MISO’s Finance Subcommittee, the Owners generally support MISO’s proposed Base Budget increase for 2023.  However, the Owners emphasize that they expect MISO to exercise increased vigilance over its Base Budget and to minimize any variances that would exceed this newly-expanded 2023 Base Budget. 
• Operation Metrics 6a (Value Alignment Survey) and 6b (Interaction Performance) Survey Questions:  The Owners support MISO’s proposed revisions to the Value Alignment Survey and the piloting of two additional questions in the Interaction Performance Metric for potential use in 2024. 
• Strategic Elements, MISO Reliability Imperative:  The Owners appreciate MISO’s continued emphasis on its Reliability Imperative (with equal attention paid to each of its four constituent components) in its STI Plan.  Success in the Reliability Imperative is foundational to ensuring safe, reliable, and economic operations in the foreseeable future. 
  • Strategic Elements Metric 7.3, LRTP:  The Owners are particularly supportive of MISO’s STI Metric tied to LRTP.  Keeping LRTP on schedule is critically important as each Tranche of LRTP Portfolios is urgently needed to address precipitously changing conditions in MISO’s footprint, in addition to increasingly frequent and severe weather events. 

Thank you for your consideration.