In the October 10, 2024, meeting of the Market Subcommittee (MSC) stakeholders were invited to review and submit feedback on Muliti-day (MD) Forward Reliability Assessment and Commitment (FRAC) Commitments and Prorated Start-up Costs (MSC-2024-3).
For each of the proposed solutions in the posted presentation (and below for reference), do you agree with the proposals and/or have feedback to provide for MISO’s consideration?
Please provide feedback by November 1, 2024.
GRE appreciates the opportunity to comment on MISO’s proposal for multi-day forward reliability assessment and commitment (MD FRAC) and prorated startup costs. We support efforts to improve planning of generation operations and address gaps between gas pipeline and electric market rules. However, we believe more work is needed, including some examples, on how the proposed changes will be implemented within the current single-day settlement construct.
MISO’s proposal indicates the generator offers would be applied to day-ahead market commitments (i.e. 12:30 PM). However, this time is still after the natural gas trading time for next day timely cycle, so doesn’t seem to solve for the impact of needing to buy intraday gas. An improvement to the proposal would be if multi-day Reliability Assessment Commitment (RAC) processes occurred prior to next day natural gas trading (i.e. during timely cycle trading). The next day gas market is the most liquid (i.e. most sellers) so more natural gas is available, more firm, and generally less expensive.
MISO’s proposal appears focused on single fuel (natural gas) generation. Many peaking plants have fuel-switching capabilities with fuel oil on-site. This flexibility allows units to remain available to MISO when natural gas pipelines have operational constraints or force majeure events. We encourage MISO to incorporate multi-fuel capabilities and changes to dispatch capabilities and energy production costs into any multi-day forward reliability assessment and commitment.
MISO’s proposal doesn’t seem to address potential scenarios and offer price components including pipeline curtailment of gas deliveries, gas pipeline penalties, financial losses incurred through reselling gas (i.e., from a multi-day gas purchase) because of MISO curtailment, etc. GRE will submit additional questions on these scenarios directly to MISO for subject matter expert consideration.
Finally, we encourage MISO to evaluate current SPP processes that provide opportunities generators to submit actual fuel costs. SPP changed their process and now a company can submit their units at actual costs using current spot gas prices. Then, they can update the gas price based of the actual cost of the gas procured. MISO should consider whether some form of replication in the MISO market would be beneficial and should be proposed to help with cost recovery.
GRE is supportive directionally of what the MISO proposal is trying to accomplish, but believes more work is needed to adequately address the pricing exposure and operational incongruences between electric and natural gas products and industry practices.
DTE appreciates the opportunity to provide feedback on the proposed changes to the Multi-day Forward Reliability Assessment and Commitment (FRAC) Commitments and Prorated Startup Costs.
DTE is interested in understanding MISO’s proposed timing; Will the MD FRAC run concurrently with the DA solution, so that results come out at once? Will we have a multi-day award? How will MISO communicate the commitments? Will MISO broaden the date range of the MCS?
DTE requests that MISO compile a slide deck with examples of events; Particularly in different market situations, DTE would like a walk-through on what MISO does/how they would clear the market using this new multi-day commitment, and what the MP will see including the clearing files for the multiday DA/RT award, and settlements after the OD.
Generally, we are also interested in how often multiday commitments are currently occurring. With the proposed changes, does MISO expect to clear multiday commitments more frequently, or will this remain an emergency tool?
Thank you for the opportunity to comment on MISO’s proposal to move multi-day commitments into the day-ahead market. Cleco supports the general direction that MISO is going with the DA RSG MWP and looks forward to continued discussion among MISO staff and stakeholders to further vet the proposal. Cleco suggests that more examples would support stakeholder understanding.
Multi-day commitments would help with Reliability of unit commitments but would not account for market participants being on the hook for the gas purchase to cover the entire commitment period. Market participants would only be made whole to their energy offer for the gas associated with the MW that were scheduled in the DA market. (i.e., What happens with a multi-day commitment when the unit trips and gas was purchased for 4 days? The proposal does not address this problem as the market participant would be on the hook for that purchase and would more than likely have to sell it back at a loss, just like under today’s rules.
WPPI offers the following feedback on MISO’s proposals (MSC, 10/10/2024) to address certain gas unit issues:
Thank you for the opportunity to provide feedback on the proposal. WEC Energy Group recognizes the purpose of the proposed enhancement and the importance of an efficient and effective method for MISO to reliably commit and dispatch the generation fleet. WEC Energy Group provides the following comments on the proposed solutions.
It is our experience that the natural gas market does not provide many options for acquiring natural gas supply on a multi-day basis (other than on weekends and holidays) and therefore attempting to acquire a supply of natural gas for one or more Operating Days two to three days or more in the future may present challenges, including very high natural gas costs for such supplies.
During critical weather events natural gas pipeline operators often issues notices that system conditions are such that limits of varying degree are imposed on the deliverability of natural gas. In some cases natural gas that was not scheduled the day prior will not be allowed to flow; in other instances the delivery of natural gas using interruptible service is entirely unavailable. In these conditions suppliers may be unwilling to commit to a multi-day gas supply (such as over a weekend) when they don’t know on a day-to-day basis what will actually be permitted to flow and they may be unwilling to hold this pricing for more than a few minutes or hours unless they build a substantial premium into their pricing. MISO would have to issue a multi-day (MD) FRAC commitment on a timely basis to allow the generator operator (or Market Participant) to confirm the purchase at the stated pricing, but may be less likely to do so if the offered cost of the resource is significantly higher than “normal.” And the generator operator is unlikely to proceed with the purchase of the gas if it is uncertain whether the generator is going to receive a MD FRAC commitment from MISO. The result can be a “chicken or egg” scenario: the price of the gas (and thus the offer price of the generator) cannot be known unless there is a commitment decision from MISO, but MISO can’t issue a commitment decision without knowing the offered cost of the generator. As a result, both natural gas suppliers and generator operators might be incentivized to build risk premiums into their offer prices for fuel and for generation resources, which would be borne by MISO market participants. If this additional cost is considered to be a premium paid to ensure reliability, it might be a reasonable solution.
A possible solution to the chicken or egg scenario would be for MISO to make known its timing for analyzing and then issuing MD FRAC commitments for a future Operating Day (i.e., OD+2, or OD+3, etc.) in order to allow generator operators to secure gas at known prices. This assumes suppliers would be willing to offer firm pricing commitments and commit to holding those pricing levels for a few hours while MISO performs the MD FRAC.
Another solution would be for the generator operator to simply self-commit the unit to ensure it runs, but this would expose the generator operator to financial losses if fuel costs are unrecovered through LMP payments and on potentially extreme days this would likely present too much risk for a generator operator to consider this approach.
Moving the commitment into the DA solution and thus eliminating the risk of a cancelled commitment would provide assurance to the generator operator that its commitment to purchase a specific volume of natural gas will be compensated – assuming the generator starts up and operates as expected. However, moving the commitment into the DA also substantially increases the risk to the generator operator if the generator experiences an operating issue (say a key component fails between the time of MD FRAC commitment on OD-2 and OD-0; not an unlikely event during bitter cold winter conditions and one that may or may not rectified by the time the unit is expected to initiate start-up). The generator may be exposed to imbalance charges based on potentially significant RT prices—a risk that is not present with current RT FRAC commitments – as well as pay potentially substantial penalties (including losses on the resale of gas) to the natural gas supplier and/or pipelines for failing to deliver gas that had been scheduled to flow. This could cause a generator operator to incorporate an additional risk premium into its RT offered costs for its fleet of gas generators for OD+2, OD+3, etc., to partially hedge the risk of a forced outage occurring—further increasing costs to MISO market participants.
A problem also arises if a MD FRAC commitment is cancelled before the effective OD, because the provision to reimburse for prorated start-up costs is highly unlikely to compensate the generator operator for the losses incurred in selling the procured natural gas back to the gas market and paying penalties. A possible solution would be for MISO to commit to not cancelling MD FRAC commitments—but this could result in significantly higher DA and DAMAP uplift charges to market participants if conditions moderate after the MD FRAC.
If a generator operator is able to secure gas for a future Operating Day, the actual cost of delivering the gas to the generator could increase as operating conditions on the gas pipeline system change and pipelines impose additional constraints on the flow of natural gas. Depending on contract terms some/all of these increased costs could be passed on to the generator operator—or the natural gas may not flow if gas pipeline conditions degrade due to unforeseen circumstances on the gas pipelines of the sort that have arisen from time to time (e.g., a stuck valve, a compressor failure, a pipeline failure). Not only would this potentially reduce reliability, it would impose increased financial risk on the generator operator, as make whole payments are based on the lesser of As-committed/As-dispatched offer pricing and the As-dispatched offer price could be considerably higher than the As-committed gas price. For MD FRAC commitments, MISO should consider revising the make whole payment to be based on actual, verified fuel costs. We recognize this would add administrative burden to both MISO as well as generator operators, but the improvement in reliability and the reduction of risk premiums built into offers might be a reasonable trade-off. For generator operators with dual-fuel resources, this would allow them to offer resources on an alternate, on-site fuel supply (e.g., fuel oil) and improve MISO’s ability to operate reliably while providing a mechanism to adjust offer pricing after the fact and reduce make whole payments if natural gas becomes available to the generator prior to or during its commitment period.
Slide 5 of MISO’s presentation includes the statement “If fuel can’t be procured [at the time the MD FRAC commitment is received], then resource should be placed in outage.” However, given the current configuration of the natural gas market and based on our experience with procuring gas for our resources during critical days, it would not be appropriate to place a unit in outage for a future operating day based on inability to procure gas well in advance of that operating day because conditions may very well change between the timing of receiving an MD FRAC commitment and the effective operating day in which the commitment occurs. Declaring a unit to be on outage when it may not be on outage is inconsistent with market behavior principles.
It would be helpful for MISO to provide examples of how MISO anticipates the timing of commitment in the MD FRAC, how the timing of the FRAC commitment being incorporated into the DA solution would work, and how the settlement would work for different scenarios of commitment and de-commitment/cancelled commitment of a resource along the MD FRAC/DA timeline. Clarification on the settlement process needs to be thoroughly vetted to help build confidence that the proposed enhancement increases reliability and ensures financial certainty.
We look forward to the continued discussion on this topic.
Thank you for the opportunity to provide feedback. American Municipal Power and Wolverine Power Cooperative support the comments submitted by WPPI.
MidAmerican appreciates the opportunity to comment on the MD FRAC Commitments and Prorated Start-up Costs (MSC-2024-3) (20241010).
As the industry retires more coal units, it is important that MISO recognizes the electric market inadequacies and reliability implications that are caused by the timing of the day-ahead awards and the current way the natural gas market trades during extreme cold weather events. As we move forward, MISO will likely be relying on an increasing amount of natural gas generation for energy needs.
The current proposal to move multi-day commitments into the day-ahead market and give full start-up cost reimbursement for MISO cancelled multi-day and next-day commitments are a step in the right direction. Making this improvement should allow market participants to purchase natural gas when natural gas is trading. The concern now would be how much natural gas should be purchased. Using the current worst example, during winter storm URI, MidAmerican was unable to procure additional natural gas after the normal trading time frame, so by not knowing the anticipated dispatch, the market participant would not know how much natural gas to procure. Normally the risk associated with that decision is minimal. Given the current rule set, buying more gas than the unit running at economic minimum could be exposing the market participant to significant financial risk. MISO needs to keep in mind that there isn’t an obvious way to work this financial risk into the offer, given that in some cases it is when the unit is not running that exposes the market participant to the risk.
A few other comments/concerns:
Vistra Corp. (“Vistra”) appreciates the opportunity to submit feedback on MISO’s proposal to “move multi-day commitments into the day-ahead market for the effective operating day and give full start-up cost reimbursement for MISO cancelled multiday and next-day commitments.” As detailed further in these comments, Vistra is concerned that the proposed changes, without adjustments, could result in 1) significant uplift that negatively impacts consumers, 2) inaccurate pricing during scarcity events, and 3) unnecessary price spikes at the natural gas hubs.
As discussed during the October 10th Market Subcommittee meeting, MISO’s proposal ensures that resources committed by MISO multiple days in advance of potential tight operating conditions would be moved to the day-ahead solution and guaranteed start-up cost reimbursements for canceled real-time commitments; these resources would also receive Revenue Sufficiency Guarantee Payments and Day Ahead Margin Assurance Payments. With these cost recovery assurances in place, Vistra is concerned that some natural gas fueled resources receiving a multi-day commitment may become economically indifferent when purchasing natural gas because they’re assured partial or full cost recovery. This could then result in a scenario where natural gas fueled resources receiving a multi-day commitment take a more conservative, higher cost, multi-day gas nomination approach that negatively impacts load. For example: Based on the results of the multi-day forward reliability assessment, MISO may notify a group of gas fired power plants that they’re needed for a multi-day commitment. Because of the cost protections imbedded in MISO’s proposal, those resources may then decide to procure a higher priced, multi-day natural gas nomination package compared to their gas procurement strategy under the existing process which doesn’t include the same financial assurances that are imbedded in MISO’s day-ahead solution. As previously stated, if system conditions improve and the natural gas resources with a multi-day commitment are no longer needed and aren’t being dispatched by MISO for reliability purposes, load would receive a significant uplift charge so that the gas fired resources can recover their costs.
Additionally, if natural gas resources procure a higher cost multi-day natural gas package that includes gas for days where there are no tight operating conditions, the MISO market could experience lower day-ahead and real time prices that don’t accurately reflect the conditions on the system as those natural gas fueled resources bid in to the market ahead of the scarcity event. Vistra is concerned that moving multi-day commitments into the day-ahead market could lead to inaccurate price signals which then negatively impacts one of MISO’s most critical priorities-- sending consistent and efficient price signals during shortage and tight operating conditions to incentivize existing generation to remain online and encourage new build when and where it is most needed.
Finally, Vistra respectfully requests that MISO conduct further analyses, utilizing historical data, to determine the frequency of multi-day commitments in the MISO market in previous years and the potential impact the proposed multi-day commitment changes could have on the three critical market elements described in the preceding paragraphs.
MSC: MD FRAC Commitments and Prorated Start-up Costs (MSC—2024-3) (20241010)
Wabash Valley Power Alliance (“WVPA”) appreciates the opportunity to comment on MISO’s Multi-day (“MD”) Forward Reliability Assessment and Commitment (“FRAC”) Commitments and Prorated Start-up Costs proposal. Given the impacts of recent cold weather events on utilities, especially smaller entities like cooperatives, this is a timely discussion that must progress to a resolution with sufficient safeguards in place to protect Generator Owners (“GOs”) from adverse financial impacts. WVPA provides the comments and questions below on the two main provisions of the proposal.
Move multi-day commitments into day-ahead solution of effective operating day
As noted, WVPA agrees that protections must be enacted. While moving multi-day commitments into the day-ahead solution of the operating day would ensure better financial outcomes for multi-day commitments by making the transactions eligible for Day-Ahead Margin Assurance Payment (“DAMAP”) and Real-Time Offer Sufficiency Guarantee Payments (“RTORSP”), it would also increase risk for entities in force majeure events. WVPA supports the project in concept, but many questions remain on the details for how it will be achieved in practice, including what we have captured below. WVPA requests that MISO produces a whitepaper to provide more detail on this proposal and respond to stakeholder questions raised during the comment period.
Specific items to be addressed include the following:
MISO to provide full start-up cost recovery for cancelled real-time commitments that are sent prior to effective operating day that meet provision requirements.
WVPA looks forward to working with MISO and stakeholders on this proposal.
The Environmental Sector submits these comments in response to MISO’s 10/10/24 proposal to stakeholders to amend its unit commitment and startup costs reimbursement processes during extreme cold weather events. In sum, MISO’s October 10th presentation to the MSC raises several questions from our Sector that warrant additional information from MISO and discussion amongst stakeholders before this proposal moves forward.
While we appreciate MISO’s efforts to provide additional financial certainty to resources, and thereby potentially increase their availability, during a limited set of high-risk periods, the Environmental Sector needs further information on the following before we are able to determine whether we’re supportive of MISO’s proposal:
How often, or under what conditions, MISO anticipates relying on these reforms: It is still unclear to us how often the FRAC process is leveraged today and when these reforms would be leaned on in the future. Getting more specific and stringent criteria about when MISO would be looking to FRAC for gas commitments to support winter reliability would be helpful, especially to determine how much this proposal would cost and impact the market at large. We have concerns that an over-dependence on this process during periods that are not, in fact, emergencies, would lead to either more uplift for canceled commitments or more gas generation being scheduled in front of clean energy in the day-ahead market. Similarly, if MISO’s forecasts used when turning to FRAC are inaccurate, we may overcommit gas plants in non-emergencies.
Safeguards to avoid gaming the system: Specific to MISO’s proposal to provide full reimbursement for startup costs during these periods, it is unclear how MISO will determine when a resource has started up and is ready to be dispatched when it wasn’t called (and therefore is eligible for full start-up costs reimbursement). Better understanding the safeguards that MISO anticipated having in place to avoid generators gaming the system would help us feel more comfortable supporting MISO’s position.
Impacts on price suppression and/or congestion/curtailments: Some of the stakeholders at the 10/10 MSC meeting expressed concern about the price-suppression effects that could result from incorporating multi-day gas commitments into the day-ahead market solution. This is a particularly valid concern if this process is over-utilized based on loose or overly-broad criteria for when to implement this (see first bullet above). Similar to the price-suppression concerns, we also question whether this proposal would increase congestion costs or curtailments of wind resources if gas units are committed in advance or if this process is over-utilized in non-emergencies.
Verification: We would like more information on how MISO anticipates evaluating these new reforms if implemented to ensure they are having the desired effect of increasing resource availability during extreme cold events.
We request additional discussion among MISO and stakeholders on the above questions and concerns before moving forward with the current proposal. Also we would note that we view this proposal as, at best, a band-aid solution to improving winter reliability that will not obviate the need for more durable, long-term solutions such as more robust transmission, integration of storage resources, and better load and renewable energy forecasting that can help reduce MISO’s overreliance on natural gas resources during high-risk periods.
The Entergy Operating Companies ("EOCs")[1] appreciate MISO’s steps in this initiative and support the direction taken, as this sends a much more transparent market signal to multiday commitments and expectations during extreme cold weather.
While the presentation, we feel, is in the right direction, it does raise a number of questions on how the process would work:
The EOCs would invite MISO to discuss further, and/or present examples or use-cases for this process in future meetings
The EOCs appreciate MISO listening to Stakeholders on these concerns and taking steps in the right direction to align processes to issues raised.
[1] The Entergy Operating Companies are Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, Entergy New Orleans, LLC, and Entergy Texas, Inc.
Xcel Energy welcomes MISO’s efforts under MSC-2024-3 to enhance forward resource commitments and allow for costs reimbursements of those commitments. We support better forward commitment of resources to enable improved reliable and economic operations of the system. We appreciate the opportunity to provide feedback on this issue.
Extreme cold events present significant risks to utilities, particularly over longer periods and especially over a weekend. One bad weekend can wipe out a majority of annual financial gains. Gas price volatility tends to be high and supply availability more limited going into these events given the uncertainty of impacts due to duration and depth of these events. MISO’s proposal to make DA RSG MWP based on the lesser of the RT offered cost used in the MD FRAC or DA offer of the effective day presents many challenges for these reasons.
Given the increased volatility of gas prices and the uncertainty of available supply with forecasted cold events, forward prices used in resource offers for MD FRAC are indicative and may change substantially by the deadline for Day Ahead offers for the effective date. Without a liquid forward spot market for gas, Market Participants will have no visibility into expected spot prices on the days cleared through the MD FRAC. Even if gas can be purchased at the time of a MD FRAC commitment, the price will reflect market conditions for the day of the commitment, and may vary significantly from the offers into the MD FRAC. In addition, the conditions on the gas system could change quickly in the time between commitment and dispatch resulting in multifold increases in penalty costs as the system goes from normal to SOL to Critical Gas Day. As we saw during Winter Storm Uri, as we approached the long Presidents’ Day weekend, gas prices traded higher and higher each day up until Friday trading for weekend delivery. If we had been made whole to our offer at the time of commitment, we would have incurred considerable losses versus our DA offers.
SPP recognized this flaw in their initial design for make-whole payments for Multi-Day Reliability Assessment. After many SPP Market Participants faced terrific losses during Winter Storm Uri under this similar paradigm that MISO is proposing, SPP was forced to change its tariff to have DA recovery based on DA offered costs. MISO can and should look to SPP’s efforts in this area to avoid the same complications and inefficiencies.
Presented with the risk of under-recovery in this proposal, an additional concern is that offered costs for gas resources in the MD FRAC may be over-inflated to cover that risk. MISO is incentivizing MPs to include risk adders and uncertainty premiums into their offers that will increase costs just to attain more certainty in margin recovery. Will IMM reference levels be established for forward offers? How will they be established?
An alternative solution to make-whole payments based on the lesser of offered costs at the time of the FRAC versus the DA offer is to allow recovery of actual prudently incurred fuel costs. MISO could FRAC a gas unit based on heat rate efficiency, location, and availability. The gas--or alternate fuel, such as oil--can be purchased by the MP and the price will be submitted in the IMM’s OCS with documentation of the purchase. The IMM will then set the reference level using that fuel price. This will ensure that the MP’s costs are appropriately recovered and not gaming the system or offering gas units at an over-inflated price.
During extreme cold events, available supply is always questionable. Will MISO provide MPs with estimated energy needs in their MD FRAC instruction? How will MPs know how much fuel to procure if they don’t know at what dispatch and duration the unit will operate? MISO is expecting MPs to buy gas to meet unknown energy at the time of the instruction under risky circumstances. Will there be more certainty around this to better prepare us?
Xcel Energy supports the proposal to make MPs whole to start costs if a run is canceled. However, what of the fuel to actually run the unit? Fuel may have been procured to meet the minimum load for a minimum runtime. Will there be any consideration for at least that portion of the instruction in addition to the fuel needed for startup and shutdown?
As MISO and stakeholders move further into developing this MD FRAC process, Xcel Energy asks MISO to give careful consideration to how capacity accreditation will be granted for resources with lead times greater than 24 hours going into weekends and holidays for FRAC offers. Will MPs be penalized for lead times greater than 24 hours as they are under the current accreditation protocols?
Xcel Energy thanks MISO for this opportunity to provide feedback on this very important issue. We highly encourage MISO to have direct conversations with MPs to better understand their gas and electric processes and operations during these events. Xcel Energy welcomes this conversation with MISO.
Alliant Energy appreciates the opportunity to provide comments on this MISO proposal. Alliant Energy supports the concept of a MD (Multi-Day) and FRAC (Forward Reliability Assessment Commitments) that provides gas generation eligibility for Day Ahead Settlements and Make Whole Payments.
MISO has taken a meaningful first steps, however the complexity of the problem will require additional collaboration between MISO, Market Participants, and the Independent Market Monitor.
MISO’s current proposal will provide minimal support to gas generation availability and or reliability during cold weather events that coincide with weekends and or holidays. However, it’s unlikely a market participant will be able to secure gas supply for only the coldest day of a weekend, holiday, or holiday weekend during an extreme cold weather event if not committed thru the weekend.
Additional considerations include: