MISO to Change Mitigation, Allocation of Revenue Sufficiency Guarantee Charges

The Midwest ISO has filed changes to tighten mitigation of payments to generators under Revenue Sufficiency Guarantee (RSG) charges, and also proposed a new allocation for RSG costs from voltage and local reliability issues.

MISO determined that beginning in January 2010, the frequency and RSG cost of resource commitments for voltage and local reliability issues on the transmission system increased significantly. The RSG costs associated with such unit commitments increased from approximately $500,000 in 2009, to $29 million in 2010.

"The increase in RSG costs resulting from local reliability commitments was also identified by MISO's Independent Market Monitor ("IMM") in its 2010 State of the Market Report, which attributed the increase to the exercise of market power," MISO noted.

However, current mitigation mechanisms were inadequate to prevent such increased costs.

To address this concern, MISO proposes to add language to the tariff that provides that the threshold for conduct for Generating Resources committed for Voltage or Local Reliability shall be an increase of ten percent (10%) in total production costs due to an increase in a Market Participant's submitted Offer from the applicable Reference Level(s) for the relevant Resource. MISO noted that the ten percent level has been found to be a just and reasonable mitigation threshold in NYISO, PJM Interconnection, and ISO New England.

Additionally, for Resources committed for Voltage or Local Reliability, any increased RSG payment (above RSG payments that would be paid based on competitive Reference Levels) for resources that have also failed the tariff's conduct tests will be mitigated to what they otherwise would be paid based on the competitive Reference Levels. That is, the impact test threshold for such Offers will be identified as "$0 per MW per Hour."

MISO asked that the new mitigation language be approved effective April 1, 2012.

Separately, MISO submitted tariff changes to allocate a greater proportion of RSG costs associated with Resources committed for voltage and local reliability requirements to the Load in the Local Balancing Authority (LBA) Area benefited by such commitments.

Current Real Time RSG costs for Voltage and Local Reliability are being allocated primarily to market-wide Day Ahead Schedule Deviations as a default mechanism in the RSG Redesign formula rate.

However, MISO noted that Voltage Support and Local Reliability commitments are being made routinely to ensure reliability of transmission facilities, and neither Day Ahead Schedule Deviations nor Deviations computed via the RSG Constraint Management Charge are primary cost causers of the resulting costs.

Specifically, MISO said that only 8 percent of the RSG costs associated with voltage and local reliability benefit the broader market, resulting in significant cost shifts occurring under the current Tariff's market-wide allocation of all such costs.

Under MISO's proposal, RSG costs will be allocated based on Commercially Significant Voltage and Local Reliability Issues in situations where MISO performs a study to determine impacted Load, and associated LBA Areas, as a means of addressing transmission issues.

In such cases, apportioned RSG costs for each LBA Area will be allocated pro-rata based on Actual Energy Withdrawals in that LBA Area.