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Texas PUC "May Consider" Whether Entergy MISO Membership Continues to Be in Public Interest Under Changed Circumstances

February 4, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

FERC-driven changes in Midcontinent ISO practices may require the Public Utility Commission of Texas to consider whether changed circumstances exist such that Entergy Texas' participation in MISO is no longer in the public interest, the PUCT said in a filing at FERC.

The PUCT was objecting to the MISO's as-filed changes to the "hurdle" rate, which governs dispatch between MISO Classic and MISO South. The rate is designed to limit intra-regional MISO flows in excess of a 1,000 MW threshold to circumstances where savings from such dispatch are greater than SPP charges resulting from the flows.

FERC had previously accepted the argument of, as noted by the PUCT, a "single party" that the Locational Marginal Price calculated by the hurdle rate should reflect only the costs of the intra-MISO flows in excess of the 1,000 MW threshold, rather than reflecting all intra-MISO flows, as designed by MISO.

MISO made a compliance filing to that effect, though MISO stated that it disagrees with the FERC-ordered changes.

"Because of the mismatch between how the Southwest Power Pool ('SPP') bills MISO under the SPP Service Agreement and how MISO collects hurdle rate revenues, MISO's calculation of the hurdle rate would increase fourfold, effectively preventing intra-regional flows above 1,000 MW. The PUCT agrees with MISO that these revisions to the hurdle rate are flawed. If accepted, MISO's Compliance Filing would prevent Market Participants from reaping the benefits of RTO participation," the PUCT said.

MISO had stated that the modifications would increase the initial hurdle rate to nearly $42/MWh and that the proposed adjustment formula revisions would further increase the hurdle rate to $170/MWh.

"As MISO shows in its Compliance Filing, this astronomically high hurdle rate would effectively prevent any market participant in MISO from realizing the benefits of intra-MISO flows between the North and South sub-regions," the PUCT said.

"Without these intra-MISO flows, the Commission effectively treats MISO as two different RTOs: MISO South and MISO North. Each would only be able to dispatch energy within its own sub-region. This is not the construct that the PUCT relied upon when considering ETI's participation in MISO," the PUCT said.

The PUCT informed FERC that:

"The PUCT notes that it conditioned its approval of Entergy Texas, Inc. ('ETI') joining MISO on its finding that ETI's integration would result in economic benefits. The PUCT is concerned that the Commission is directing MISO to make modifications to the hurdle rate that interfere with economic dispatch, rather than improve it. The PUCT may consider whether changed circumstances exist such that ETI's participation in MISO is no longer in the public interest."

"As the regulator of the ERCOT market, the PUCT favors access to organized energy markets and economic dispatch. The PUCT supported the hurdle rate concept because, as initially proposed, it would interject some economic sensibilities into the decisional matrix. The on-going dispute between SPP and MISO hampers ETI's full participation in MISO's organized markets due to uneconomic activities. The PUCT is concerned that the continuing pendency of the dispute between SPP and MISO is leading to uneconomic results for market participants and, ultimately, end-use customers. The PUCT's concern is heightened by the Commission's directive to MISO to implement a pricing policy that prevents economic dispatch necessary to realize the full economic benefits available. The economic benefits of ETI's participation in MISO were a significant basis for the PUCT's finding that ETI's integration into MISO is in the public interest. It appears now that pricing actions and policies that interfere with intra-regional economic dispatch have undermined that basis. This is the type of changed circumstance that could cause the PUCT to exercise its authority to re-evaluate whether ETI's participation in MISO continues to be in the public interest," the PUCT told FERC

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