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Alleging "Imminent Reliability Risk In Retail Choice Areas," MISO Files At FERC To Impose Three-Year Forward Capacity Obligation On Retail Suppliers

October 31, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Alleging an, "Imminent Reliability Risk In Retail Choice Areas," the Midcontinent ISO filed at FERC for approval of its proposed capacity market changes that would impose a three-year forward capacity obligation on retail suppliers in Zone 4 (Illinois) and Zone 7 (Michigan Lower Peninsula).

MISO is seeking for the new obligation to be imposed on retail suppliers effective with the 2018/19 Planning Year

Retail suppliers would be subject to the outcome of an administrative, centralized capacity auction (Forward Resource Auction or (FRA) limited to the retail choice zones, barring an LSE's election of a Forward Fixed Resource Adequacy Plan (FFRAP), that will allow entities to continue to demonstrate capacity commitments without participating in MISO’s auction processes, or a state electing a Prevailing State Compensation Mechanism.

Notably, a Forward Fixed Resource Adequacy Plan does not need to cover the entirety of a retail supplier's load.

Under the Prevailing State Compensation Mechanism (PCSM), a retail regulator exercising its jurisdictional authority, takes responsibility for long-term resource adequacy needs of its retail consumers by ensuring all competitive retail demand will be covered through a FFRAP or FRAP [Fixed Resource Adequacy Plan]. The retail regulator must indicate in its PSCM: the Market Participant(s) that are responsible for providing capacity on behalf of LSEs that are retail choice providers, and the rate of compensation for such capacity. "Alternative retail providers subject to the PSCM can procure sufficient ZRCs for all or a portion of the competitive retail demand that is served can submit [sic] a FFRAP and not be subject to the PSCM," MISO said in its filing. For LSEs serving competitive retail demand that procure a portion of their ZRCs through the FFRAP, the remainder of ZRCs necessary to serve competitive retail demand will be procured through the PSCM.

MISO proposes a transitional auction schedule that would allow for the first FRA to be conducted prior to the 2018/19 Planning Year, with subsequent Interim FRAs to be conducted for the 2019/20, 2020/21, and 2021/2022 Planning Years.

Zones and LSEs within such zones would be subject to the forward compliance obligation if their choice load reaches a Materiality Threshold. The Materiality Threshold in an Local Resource Zone is the greater of: (1) 0.5% of the system-wide 2 Planning Reserve Margin Requirement; or, (2) a quantity of demand for which failure to have its 3 Planning Reserve Margin satisfied has no more than a 0.01 impact on system-wide Loss of Load 4 Expectation (LOLE) (i.e., less than one-day-in-100 change to LOLE).

Based on such definition, Zone 2 (Upper Michigan peninsula) is not expected to be covered by the forward obligation initially.

You will see MISO refer to its proposal as the, "Competitive Retail Solution," but (given long-standing outcomes and impacts of other capacity markets) as the proposal is not competitive, has nothing to do with retail choice, and is not a solution to any problem, we decline to use the term.

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