RASC: Seasonal Shortage Pricing Enhancement (20221130)

Feedback by Public Service Commission of Wisconsin (PSCW) Office of Regional Markets (ORM) Staff to Midcontinent Independent System Operator (MISO) on the Seasonal Shortage Pricing Enhancements 

We recommend that MISO does not proceed with this proposal as MISO did not clearly and thoroughly explain the proposal, yet if enacted, this proposal could result in administratively set ACPs that would be significantly higher than actual ACPs. In particular, MISO only provided stakeholders with two examples that involved three hypothetical zones. To evaluate this proposal thoroughly, stakeholders would need to know how often zones have historically been impacted by the same financial binding constraint, and how many zones at a time can be impacted. Furthermore, MISO did not clearly explain why near shortage and shortage conditions should be treated identically, as actual shortage in a zone is a functionally different scenario than a zone that has resources available, but at a price higher than daily CONE. As written, it appears that a zone in near shortage conditions could have their ACP raised to match a zone in actual shortage? We suggest that MISO pause, and spend more time on this. In addition to MISO’s stated aim of reducing price inequities, MISO should also aim to reduce the likelihood of the auction as a whole clearing above CONE.   

Should MISO proceed with this proposal, we put forward the following feedback:  

1. We recommend revising or clarifying the proposal in a way that specifies zones with near shortage conditions would not have their ACP increased due to an ACP in another zone. We are suggesting this because, from the way the slides are written, it appears that a zone in near shortage conditions that clears at $250/day, a zone in which there are in fact resources to meet the requirements but at a price higher than daily CONE, could need to overcompensate resources at $1000/day if another zone which happened to face the same constraint but did not have resources available, even at a higher price, reached the cap.   
2. Can MISO clarify how many zones may be impacted by the same binding constraint simultaneously, and whether the process of identifying which zones are impacted by the same binding constraint is always clear-cut?  
3. Can MISO clarify if the ACP in one zone for a season will be individual to that zone, or if the ACP in one zone sets the price for the region for the season? 

MISO RASC Feedback

Hoosier Energy Rural Electric Cooperative

Southern Illinois Power Cooperative

December 14, 2022

 Hoosier Energy Rural Electric Cooperative and Southern Illinois Power Cooperative (“The Respondents”) thanks MISO for the opportunity to provide feedback on the proposed seasonal PRA shortage pricing enhancements discussed at the November 30^th, 2022, RASC meeting.

The Respondents appreciate MISO’s proposal to clarify the scenarios in which a zone will pay Cost of New Entry (“CONE”) pricing in the Seasonal PRA construct and providing examples of when that may occur. The Respondents are customer-owned member cooperatives, therefore ensuring we provide our members with the reliable capacity and energy at the lowest cost is incredibly important. We agree that it’s important for MISO to ensure that the zonal pricing is appropriate to send signals for where new capacity is needed most. In reviewing MISO’s proposed changes, it was not clear to the Respondents in the current Tariff language that the price cap is 1.75X CONE and agrees with MISO explicitly stating the price cap is 1.75X CONE in the Tariff.

We are still concerned that paying resources more than CONE during a given annual period is overpaying for capacity but are supportive of MISO capping the maximum price in the PRA at 1.75X CONE. We would appreciate a follow-up scenario on how resources whose Ex-Post capacity price is lowered from CONE to some lower value and how the Make-Whole Payments would be administered for that resource. In that scenario it would appear that resources could get paid substantially more than 1.75X CONE if they’re prices following the PRA are capped for more than one season and would appreciate some clarity around the mechanics of this outcome.

Thank you in advance for considering this feedback.

WPPI appreciates that, as currently specified, certain combinations of shortage and near-shortage conditions could lead to higher four-month-total Auction Clearing Prices for zones encountering less-severe shortage conditions, and we agree that it makes sense to seek changes to this arrangement.  We appreciate further that little time is available to obtain approval for tariff changes prior to the PY23 PRA.  We note, however, that the approach proposed by MISO is not the only way to address this problem, and that it may be appropriate for MISO and stakeholders to consider a fuller range of possible alternatives as time allows.

ITC Holdings Corp. (ITC) appreciates the opportunity to provide feedback on MISO’s proposed enhancement to the existing Seasonal Shortage Pricing mechanism.  MISO’s proposal will better reflect incentives for LRZs which are short internal and/or external capacity to meet their Resource Adequacy Requirements on a year-round basis.  All else being equal, we expect the enhancement to help support BES reliability on a going forward basis.