Friday, December 14, 2018

MISO Board Hears State of the Market Recommendations

By Amanda Durish Cook

MISO’s Independent Market Monitor last week gave board members an explanation of the most pressing of the nine new recommendations contained in this year’s State of the Market report, which RTO staff are reviewing for potential inclusion in its annual Market Roadmap of market improvements.

Jeff Bladen, MISO executive director of market design, said the RTO will present its response to the report in September. Under its Tariff, MISO has 120 days to reply after the delivery of the report. Some of the recommended changes had been discussed in front of board members before, though the report was released early this month. (See Monitor Recommends 9 New MISO Market Changes.)

Monitor David Patton said he and the RTO have generally been on the same page over the years when it comes to his market recommendations. “I don’t sense that we’ve disagreed a lot; there are some recommendations that aren’t feasible,” Patton said during a July 20 Markets Committee of the Board of Directors conference call.

MISO board state of the market report

MISO Markets Committee of the Board of Directors in June | © RTO Insider

However, Patton said he sometimes disagrees with MISO’s prioritization and ranking of market projects on the Market Roadmap: The RTO tends to prioritize market efficiency and cost above all, while he champions cost, benefits and reliability. The two will return to the committee to give their takes on prioritization when the list is finalized in winter, he said.

MISO South Emergency

Patton addressed MISO’s April 4 maximum generation emergency in MISO South, the first in more than a decade.

The Monitor said that new penalties on non-responsiveness, and improved communication protocols, drove load-modifying resource participation to more than 80% from just 50% during the last emergency in 2006. (See 4 LMRs Face Penalties after MISO Max Gen Emergency.)

Patton repeated his contention that the emergency might have been avoided altogether if MISO had expanded authority to coordinate transmission and generation outages. Under current rules, the RTO can only recommend a revised outage schedule when an analysis shows that reliability will be in jeopardy.

“Our recommendation is to expand that authority to address the economic inefficiencies of having poorly coordinated outages,” Patton said.

Local Reserve Product

Patton recommends that MISO develop a 30-minute local reserve product for voltage support, local reliability and subregional capacity. Some areas do not have resources that can start within 30 minutes to restore supply after a contingency, Patton said, resulting in high uplift costs. He also said that when the Midwest-to-South transmission constraint binds after a contingency, MISO also must incur uplift charges just to secure subregional capacity needs.

“If we had a product, we’d set shortage pricing and potentially reduce our revenue sufficiency guarantee by a large margin,” Patton said. He said that the pricing would require its own settlement. “You would only deploy it after a major contingency, which might only be a few times a year.”

“In most of the eastern RTOs, a 30-minute product is in use regionally and even in local areas,” Patton said, adding that that even if MISO built its own transmission to relieve the Midwest-to-South constraint, a reserve product would still be useful for local needs.

“I think you’re personally on the right track here,” Director Thomas Rainwater said.

M2M Coordination

MISO’s market-to-market coordination could also use improvement, said Patton, who recommends MISO, PJM and SPP devise a process to hand off flowgate control when another RTO’s flows are dominating a constraint.

More than $238 million worth of congestion could have been more efficiently managed in 2016 through better M2M procedures, he said.

“Increasingly, market-to-market coordination is becoming important because of pseudo-ties and the increased implementation of wind that fluctuates heavily and creates constraints. The ability to coordinate and move generation on our neighbors’ constraints … is increasingly beneficial and cost effective,” Patton said. He suggested that MISO develop a joint operating agreement with the Tennessee Valley Authority for coordinating congestion management.

PJM’s and SPP’s effects on MISO’s systems are large enough that MISO should have identified them as a M2M constraint. Because MISO has not done so, it receives no compensation when PJM or SPP dominate flows on its system.

Shortage Pricing

Patton also said MISO’s shortage pricing method needs improvement, recommending the cap on the value of lost load (VoLL) be increased to almost $12,000/MWh to create a more sloped contingency reserve demand curve.

MISO board state of the market report

| Potomac Economics

MISO’s proposed reserve demand curve — filed in May to comply by Dec. 1 with FERC Order 831 (ER17-1571) — is much flatter, hovering at $2,100/MWh for much of the curve unless MISO clears less than 8% or more than 96% of its requirement level. MISO’s flatter approach results in “overstated shortage prices for small shortages and understated shortage prices for larger shortages,” Patton said. MISO’s current curve looks similar to the proposed option but carries a $1,100/MWh value for most of the curve unless less than 89% or more than 8% of the requirement clears.

According to Patton, there is disagreement among industry studies on VoLL. “Our personal view is that you should choose a value at your highest load, and that’s why we ended up at $12,000,” he said.

Capacity Auction Rules

Patton expressed concern over MISO’s “essentially zero” $1.50/MW-day footprint-wide clearing price in the 2017 capacity auction.

“In the current context, I think what I would say is the decision not to move forward with a competitive retail solution … is something we’d like MISO to reconsider over time,” Patton said. In addition to finding a solution for the RTO’s competitive load areas, Patton still advocates the use of a sloped demand curve in the Planning Reserve Auction.

“When we have hot topic discussions, we have some sectors that pound the table in favor of a sloped demand curve, and other sectors less so,” Director Baljit Dail observed. He asked why MISO has yet to instate a sloped demand curve in the auction.

“To be honest, it’s been a journey. I always thought it’d be easier with MISO because most of the capacity in MISO is self-supply through vertically integrated utilities. In a sense, the capacity prices don’t matter,” Patton said.

Awaiting MISO Response

Board members said that they had questions but would hold off on asking them until they could review MISO’s response to the recommendations.

“There are some questions that sound like we’re waiting to ask MISO management, ‘This is a very good idea. Why hasn’t this been done?’ and I suspect we’ll get a very thoughtful response,” Director Paul Bonavia said.

Richard Doying, MISO executive vice president of operations, said the RTO should have a “fairly thorough” response by September, but more analysis may be needed.

“For some of these, we may have an indicative response and would wait until October for a full evaluation,” Doying said.

“Congratulations, you’ve worn us down,” Bonavia joked to Patton before ending the two-hour-plus conference.

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