Wednesday, January 23, 2019

MISO Promises External Capacity Zones After FERC Rejection

By Amanda Durish Cook

CARMEL, Ind. — MISO said Tuesday it plans to refile a plan to create external capacity resource zones with FERC by the end of the month.

And the RTO still promises to make zone determinations in time for the 2019/20 planning year capacity auction, officials say.

FERC rejected the proposal earlier this month, saying two aspects of the plan rendered it unreasonable. (See FERC Rejects MISO Plan for External Capacity Zones.) One of the rejected provisions would have allowed external resources bordering two local resource zones to choose in which zone they receive auction credits, while the other would have made holders of evergreen supply contracts eligible for excess auction revenues indefinitely.

miso ferc resource zones

Jacob Krouse | © RTO Insider

During an Aug. 8 Resource Adequacy Subcommittee meeting, MISO attorney Jacob Krouse noted the RTO asked FERC to view the proposal as an integrated package, making the rejection total.

“The commission, under the NRG paradigm, rejected the filing,” Krouse said, referring to the July 2017 D.C. Circuit Court of Appeals ruling that FERC overstepped its authority when it suggested changes to a PJM proposal. MISO stakeholders warned last year that a rejection of the proposal was possible in light of the ruling. (See MISO Members: Court Rebuff May Reduce External Zone Chances.)

But RTO leadership appears undaunted by the rejection, planning to refile the proposal with two revisions Aug. 31.

“MISO believes that with the clear guidance we received from FERC … we are going to be able to refile at the end of the month,” Krouse said. “FERC did not note any concern with the vast majority of MISO’s proposal — just those two parts.”

Under proposed revisions, border resources that have participated in past Planning Resource Auctions will be assigned to the local resource zone in which they previously participated. New external resources that border two or more local resource zones will be assigned to the zone where the unit maintains the greatest electrical connection. MISO said it will measure electrical connectivity through line ratings using a contingency basis.

“MISO is proposing to assign resources to a single [local resource zone] instead of multiple zones,” Krouse explained.

For evergreen supply contracts, MISO now proposes to allow units to collect excess auction revenues only until the end of the original term of the agreement or for two years, whichever is longer. Krouse said the RTO’s filing will also include an option that removes the two-year extension, ending hedge eligibility as soon as the original contract expires. He said MISO intends to let FERC choose the provision it prefers.

Krouse asked for stakeholders to provide reactions to the changes by Aug. 17 and said the RASC will schedule a special Aug. 22 conference call to discuss feedback.

MISO Director of Resource Adequacy Coordination Laura Rauch said the change for border resources will apply only to a small subset of MISO resources.

Some stakeholders said the proposed treatment of evergreen contracts might violate the Mobile-Sierra doctrine, which holds that rates negotiated in a contract should be presumed to be just and reasonable.

“MISO is not changing the terms of the arrangement, so Mobile-Sierra would not apply,” Krouse said, adding that the RTO is not encroaching on the terms of buying and selling power. Rather, such contracts would simply become ineligible for additional hedges from MISO after the original term of the agreement or the proposed two-year transitional period.

“We in no way intend to change or limit the terms of evergreen contracts,” Rauch said. “These contracts were signed without consideration of the capacity construct.”

Others commended the RTO for continuing to pursue external zone designation.

“I really appreciate MISO going in and being aggressive on this. … We’ve been talking about this for half of a decade,” said Coalition of Midwest Power Producers CEO Mark Volpe.