Monday, March 18, 2019

Stakeholders React to MISO Proposed Auction Design

By Amanda Durish Cook

A MISO proposal to hold a separate forward capacity procurement auction for deregulated areas is meeting with skepticism from some RTO members.

Dynegy's-Baldwin-Energy-Complex-in-IL MISO auction

Dynegy’s Baldwin Energy Complex in southern Illinois. Some generators in retail choice regions of MISO such as southern Illinois have exported their power to PJM, where capacity prices have been higher Source: MISO

MISO stakeholders raised their concerns at a March 28 Competitive Retail Solution Task Team discussion focusing on the Forward Local Requirements Auction (FLRA) proposed last month. (See MISO Proposes Adding Forward Auction for Retail Choice Zones.) The task team plans to turn the proposal over to the Resource Adequacy Subcommittee (RASC) this month.

Zone 4 an ‘Island’

Much attention was focused on the fully deregulated Zone 4 in southern Illinois — MISO’s only fully deregulated zone.

Aaron Patterson with The NorthBridge Group pointed out that Zone 4’s local clearing requirement of about 5 GW during the 2016/17 planning year would leave more than half the zone’s supply unused in a forward auction.

“What I’m wrestling with is — we have 10 to 11 GW of supply [in Zone 4] and sort of structurally only 5 GW” under the local clearing requirement, Patterson said. “The supply that doesn’t clear is getting a price signal that it’s not needed.”

Jeff Bladen, MISO executive director of market design, responded that leftover supply would be applied to the planning reserve margin requirement.

“A lack of a forward signal is not lack of a need,” Bladen said. “It is a lack of need for it to be a local resource.”

Others said the FLRA would make Zone 4 even more of an “island.”

2015-2016-Auction-Clearing-Price-Overview-(MISO)---content-web miso auction

Bladen said MISO would not introduce a new import constraint for the auction. Instead, the RTO plans to examine system-wide import capability. And while the grid operator does not intend to impose a minimum offer price rule, it would update its Tariff with a bright line reliability test for forward procurement.

Multiple stakeholders asked what data and forecasting methods MISO would use to calculate local clearing requirements three years into the future, questions that Bladen deferred to the April RASC. “We’ll need to discuss that with stakeholders in a little more detail,” he said.

Bladen also said the RASC could best address the concerns of stakeholders who think the FLRA will produce extremely low prices and want MISO to run simulations and present the results. Price formation is “something we’ve given extraordinary amounts of attention to,” he said.

“This might work for a partially deregulated zone, but this won’t work for a zone that’s been fully deregulated,” said Exelon’s Marka Shaw, who asked for another CRSTT meeting specifically focused on affected Illinois customers. “I don’t like the idea of this rolling into the RASC and this getting shortchanged given the tight timeline.”

David Sapper of Customized Energy Solutions wanted to know how generators could use the five-year FLRA opt-in to participate, but Bladen clarified that the opt-in applies only to load-serving entities, not generators.

In response to a question about how MISO’s new two-season construct would align with forward procurement, Bladen said seasonal constructs — currently scheduled to be enacted in the 2018/19 planning year — would apply to the FLRA as well.

“These filings are effectively being looked at in parallel,” Bladen said.

Jim Dauphinais, counsel for Illinois Industrial Energy Consumers, asked how the downward sloping demand curve would apply to market supply. Bladen stressed the curve is only applicable to the demand — not the supply — side of the auction.

“It is very feasible to have different purchase price sensitivities for different consumers, if you will, in the same market,” Bladen said.

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