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MISO Capacity Load Forecasting Proposal Harms Retail Suppliers, RESA Says
September 16, 2011
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The treatment of load forecasting under the Midwest ISO's proposed revisions to its capacity mechanism, "places non-EDC LSEs in a competitively disadvantageous position that makes the tariff provisions unjust, unreasonable and unduly discriminatory," the Retail Energy Supply Association said in a protest at FERC (ER11-4081).
RESA's protest focuses, in particular, on MISO's proposals for determining the Coincident Peak Demand for purposes of assigning a capacity obligation for the Planning Year.
RESA noted that MISO, "left all of the discretion for establishing retail load obligations in the hands of the EDC - the incumbent utility and typically a competitor of the retail LSEs in its distribution area."
"Putting substantial control of an LSE's load forecast outcome, upon which the RAR capacity obligation of the LSE is based, into the hands of a competitor gives the competitor - the LSE/EDC - a distinct, unfair, and potentially devastating competitive weapon," RESA said.
"Most troublesome with the Midwest ISO's proposal is that the EDC will have all of the information necessary to develop accurate Load Forecasts to be used to establish the capacity obligation for its distribution area and can use this information to advantage its market position. The EDC has every incentive to maximize LSEs' contribution to its costs, especially if the EDC owns and markets its own generation and serves its own Load," RESA said.
"Rather than defining and explicitly outlining simple steps for deriving LSE Coincident Peak Demand forecasts associated with customer peak demands, Midwest ISO's Tariff requires LSEs to 'work with' the [EDC] to reach agreement as to the methodology to be used to develop Coincident Peak Demand forecasts for each of the LSEs within the EDC's service area," RESA said.
If the EDC and the competitive LSE cannot reach agreement, a "default" method of load forecasting would apply; however, RESA said that this method would be unduly discriminatory to competitive LSEs.
Because this default method applies if the EDC and competitive LSEs cannot agree on load forecasting, "[t]he EDC can ... further its competitive position vis-a-vis retail LSEs by not working out an arrangement to design a Load Forecast methodology to allocate capacity costs in its zone," RESA said.
Under the default method, the daily capacity charges shall be apportioned on a daily Energy pro rata basis to load served within the EDC's area. Accordingly, an LSE's share of the Coincident Peak Demand forecast will not be known until each operating day.
"The [competitive] LSE in that situation will not be able to reliably know, understand or be able to determine its Load and the resulting capacity costs necessary to serve its customers ... [T]his will be disruptive to retail LSEs seeking to bring competition to markets, while favoring an LSE/EDC in a non-competitive area who will be fully capable of determining its own capacity obligation," RESA said.
RESA said that MISO should address load forecasting using a "customer peak" methodology similar to that used in PJM. However, two MISO EDCs in competitive areas have indicated that they do not perform load forecasting using methods amenable to determining individual customer contributions to peak.
Accordingly, RESA also offered an alternative to the "customer peak" methodology, under which all LSEs would provide their own Coincident Peak Demand forecasts, based on the customers they are serving at the time the forecasts are due to the Midwest ISO. The EDC would not have authority or responsibility for any other LSE's forecast. Retail load switching would be governed by the same process as the Midwest ISO's proposal for wholesale load switching.
In contrast, Detroit Edison offered the following support for the as-filed proposal:
"Detroit Edison supports MISO's decision to develop a capacity cost allocation mechanism for retail choice states that does not require electric distribution companies to develop and maintain an administratively costly and burdensome retail choice tracking mechanism. As explained by Mr. Larson, MISO's final proposal includes a Default Method as outlined in Section 69A.1.2.1, and an Alternative Method, as defined [in] Section 69A.1.2.2. The Company agrees with Mr. Larson's statement in the Enhanced RAR Filing that MISO's proposal, 'demonstrates MISO's efforts to recognize differences in state regulatory procedures by developing options that encourage the parties to work together to develop consensus solutions which meet state needs.'"
RESA also protested the MISO proposal for treatment of grandmothered capacity agreements, stating the MISO needs to account for the fact that retail suppliers use multiple contracts for capacity for a Planning Year rather than only a single contract for the entire Planning Year, and should afford grandmother treatment to these portfolios of contracts.
The Organization of MISO States protested MISO's proposal to implement a centralized capacity auction, stating, "[c]apacity auctions have resulted in a substantial transfer of wealth from electricity consumers to generators."
"Prior to the introduction of the PJM capacity auction, capacity costs made up less than one percent of the wholesale price of electricity, including a low of 0.04 percent in 2005. In 2010 capacity costs accounted for 18.1 percent of the total wholesale price," OMS noted.
OMS further observed that as the vast majority of MISO load is served by a traditionally regulated LSE with an obligation to serve, there is no "missing money" problem as there purportedly is in eastern RTOs.
"[T]he MISO Filing presents significant risks of present and future impingement on state jurisdictional authority, particularly in light of recent FERC orders regarding the capacity auctions of PJM and of the New England ISO, without any showing of benefits to stakeholders or to the ratepayers who will bear the ultimate burden of paying for MISO's capacity auction proposal and its resulting prices," OMS said.
Finally, OMS noted that MISO's own analysis has shown that there is no congestion problem which requires correction through the locational capacity zones proposed by MISO.
"MISO conducted a preliminary indicative analysis of import and export limitations for each of the seven LRZs. In the June 8, 2011, Loss of Load Expectation ('LOLE') Working Group and the June 9, 2011, SAWG meetings, MISO presented indicative information for the 2015 planning year. None of the candidate zones showed a binding constraint with their respective import limits and their associated Local Clearing Requirement," OMS said.
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