An electric cooperative in Michigan is claiming that the Midcontinent ISO's resource adequacy rules are flawed because they allow generators to participate in planning resource auctions even when those resources are unavailable for the period covered by the auction.
At issue are MISO's rules governing its planning resource auctions, or PRAs, which are location-specific, voluntary capacity auctions aimed at providing market participants with a way to satisfy the grid operator's resource adequacy requirements. Those requirements generally oblige load-serving entities to procure sufficient capacity to meet the anticipated peak demand requirements of their customers plus an appropriate reserve margin.
But MISO's current rules, which allow resources to participate in PRAs when they are unable to perform during the planning year, have resulted in local capacity shortfalls that threaten system reliability, Wolverine Power Supply Cooperative Inc. said in a Sept. 27 complaint filed with the Federal Energy Regulatory Commission. The co-op owns seven natural gas generation facilities, holds partial ownership in three coal-fired power plants, and supplies wholesale electric power to seven members in upper and lower midwest Michigan.
In its filing, Wolverine Power Supply said its natural gas-fired Claude Vandyke power plant was forced to retire because it did not clear MISO's most recent PRA. In that auction, prices were artificially suppressed by the participation of an unspecified resource identified by MISO's independent market monitor as unavailable during the planning year, the co-op noted. The Claude Vandyke facility's first year of service was 1967, according to S&P Global Market Intelligence data.
While the PRA for the 2019/2020 planning year resulted in a clearing price of $24.30/MW-day in the local capacity zone where Wolverine Power Supply participates, the independent market monitor concluded that price should have actually been "almost ten times higher" to motivate sufficient new investment and keep older existing units in operation, the co-op said.
Without the participation of the unidentified unit, the independent market monitor determined that the clearing price in Wolverine Power Supply's local capacity zone would have cleared at $243.37/MW-day. That would have been sufficiently above the cost of new entry, a measure that describes the total annual net revenue a new generation resource would need to recover its capital investment and fixed costs, Wolverine Power Supply said.
However, the co-op added that its complaint is not intended to "short-circuit or supplant" a MISO stakeholder process that is already underway. Instead, the complaint is intended to alert FERC of "the urgent need" to amend MISO's tariff in a specific way to ensure that "the 2019/2020 PRA's unjust, unreasonable, and market-distorting outcome is not repeated in the 2020/2021 PRA," Wolverine Power Supply said.
With MISO's next PRA scheduled for late March 2020, Wolverine Power Supply requested fast-track processing so reforms can be implemented before then. (FERC docket EL19-102)
