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MISO Distinguishes Upcoming Resource Adequacy Proposal from PJM in Response to APPA
June 23, 2011
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Responding to the American Public Power Association's characterization of proposed changes to the Midwest ISO Module E resource adequacy construct, MISO emphasized several key differences in the MISO proposal versus the PJM Reliability Pricing Model.
Most notably, MISO confirmed that, at this time, the forward capacity obligation imposed on LSEs will not be three years or longer.
APPA recently said that, "MISO is in the process of developing a proposal for a centralized forward capacity market resembling PJM's Reliability Pricing Model."
MISO called this statement, "an inaccurate characterization of MISO's resource adequacy development activity."
Though a formal tariff filing is not expected with FERC until July 15, MISO stressed that its program will present a much more workable opt-out mechanism for LSEs not wishing to participate in the capacity auction.
While PJM's capacity mechanism does include an opt-opt mechanism, the Fixed Resource Requirement, it requires a commitment of five years, and must cover the LSE's complete capacity obligations.
In contrast, Todd Hillman, MISO's Executive Director of Market Development & Services, confirmed that MISO has shelved plans for a three-to-five year forward capacity obligation. Instead, MISO will only require LSEs to procure capacity approxiamtely two months ahead of a one-year commitment period. For example, the initial auction is to be in April 2013 for a June 2013-May 2014 delivery year
LSEs in MISO will have until approximately one month prior to the capacity auction to opt-out of the auction and make a showing of self-supplied capacity, which provides greater flexibility to use the opt-out mechanism.
Additionally, unlike with the Fixed Resource Requirement, LSEs will be able opt-out of the MISO capacity auction for a portion of their load which is self supplied (either through owned generation or bilaterally), while relying on the auction for any unfilled capacity needs.
New zonal capacity requirements may present challenges for LSEs with capacity entitlements located in zones remote from their load obligations; however, Hillman said MISO is working with stakeholders to address these challenges and allow LSEs to rely on their traditional capacity to meet their obligations.
Additionally, the presence of a centralized capacity auction may dictate pricing in the bilateral market. Similar to public power criticisms of LMP energy prices (claiming the prices render the bilateral market ineffective as contracts are indexed or tied to LMP), should the bilateral capacity market become dominated by contracts tied to centralized auction prices, the opt-out mechanism would only allow LSEs to effectively avoid auction-based prices through owned generation.
Still, MISO's proposal does offer LSEs a much more workable and practical opt-out mechanism versus the Fixed Resource Requirement.
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