MISO: Utilities "Indifferent" to Retail Switching, Capacity Assignment; Proposes Unwieldy Process for Retail Suppliers to Challenge Capacity Allocation

Retail suppliers in the Midwest ISO contesting their assigned demand forecasts, and the capacity obligations inherent in such forecasts, will be subject to the MISO alternate dispute resolution process, a process which MISO concedes is, "neither rapid nor free of costs."

Under MISO's resource adequacy mechanism, electric distribution companies are responsible for load forecasts, including forecasts for retail choice areas.

In an earlier order, FERC expressed concern that MISO's tariff did not provide a process for load serving entities (LSEs), such as competitive retail suppliers, to challenge demand forecasts provided by the electric distribution company, which inform MISO's cost allocation to LSEs.

MISO proposes to comply with FERC's directive to include such a process by providing that, "LSEs may challenge the EDC Demand forecast under the dispute resolution procedures pursuant to Section 12 of the Tariff, or LSEs may refer the dispute to the Commission [FERC] for resolution."

"MISO appreciates that such Alternate Dispute Resolution procedures are neither rapid nor free of costs to LSEs," MISO said. "MISO, however, believes that the proposed clarifying language is just and reasonable, in part, because EDCs are uniquely positioned in several key respects to provide accurate Load forecasts for retail choice areas. EDCs, for example, have the lengthy data history necessary, and possess a staff that is capable of producing the required forecasts."

However, MISO adds, "In addition, EDCs are indifferent to both the retail switching process and the wholesale capacity process generally." MISO offers no evidence to justify this characterization.

Although in a different RTO, one need only observe the still-unsettled debate regarding capacity obligations and capacity costs among competitive retail suppliers and the electric distribution company at AEP Ohio to see that electric distribution companies are, very much, not indifferent to both the retail switching process and the wholesale capacity process.

"MISO continues to believe that the EDCs will provide unbiased, accurate load forecasts for their service areas and thus a more complex process for challenging EDC forecasts would be imprudent," MISO said.

"MISO is also concerned that providing LSEs with more robust opportunities to challenge an EDC's aggregate forecast will result in endless disputes, because the LSEs might seek to reduce the Load forecast for purely self-interested reasons. EDC load forecasts are subject to the same MISO load forecast review process used in non-retail choice states, providing retail choice LSEs the same measure of assurance that the forecast will be reasonably constructed."

"MISO also notes that if LSEs serving Load in retail choice areas are provided with the ability to challenge the EDC forecast through processes other than existing dispute resolution procedures, the resulting change would then affect the allocations of all other LSEs in the EDC's service area; these LSEs would be likely to find it necessary to alter their allocations (or challenge the revised EDC forecast)."

"A never-ending cycle of revisions, challenges, and allocations could result," MISO said, highlighting one of the many problems with artificially created "markets" for capacity, where demand is not a function of a buyer's preferences, but rather, government-forced obligations.

Docket No. ER12-2706