MISO Posts Draft Tariff, BPMs for Chosen Forward Capacity Market Applicable Only To Retail Choice Areas

The Midcontinent ISO has posted draft tariffs and business rules for its chosen solution to implement a capacity market construct specific to those states within the RTO that have retail choice

MISO calls the mechanism the "competitive retail solution", though that's a misnomer if we've ever heard one, as it's merchant generators, not retail choice or retail providers, who are driving the adoption of a capacity market design specific to the restructured states in MISO

Though retail suppliers, in general, do face issues with having a capacity market to begin with in MISO (as certain asset-owning suppliers may more effectively weather capacity price volatility, see story here), we know of no pure-play retail suppliers begging MISO to expand its capacity market to a three-year forward market (as this solution will do), nor is there any reason to believe that MISO's current capacity auction is any way less compatible with retail choice versus the proposed new design. Rather, this change is being driven by alleged revenue shortfalls for so-called competitive generators.

Accordingly, the construct is more aptly called the "merchant generation solution."

In any event, the construct generally provides that, for retail choice areas, MISO will conduct a forward capacity auction three years in advance of a planning year

However, to the extent a state regulator requires LSEs, including retail suppliers, to comply with a long-term planning horizon, such retail choice load will not be required to be included in the MISO auction, though the state regulator may choose to allow LSEs subject to such long-term planning to use the auction to comply with any long-term planning mandates

Additionally, LSEs required to participate in the forward retail capacity auction would be permitted to use a forward fixed resource requirement plan in lieu of the auction. Furthermore, unlike in other RTOs, such forward fixed resource requirement plan would not be required to meet the entirety of the LSE's load. However, there would be certain requirements concerning the MW covered by any such fixed resource requirement plans each year to ensure LSEs are not opportunistically switching between the auction and fixed resource plan.

See more details on MISO's proposed design here:

Draft tariff

Draft business rules