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Default Service Procurement Manager Weighs Potential Reconsideration Of Approach To Hedging Capacity Costs
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Citing various changes to the capacity market in the Midcontinent ISO, the Illinois Power Agency said that its latest procurement plan should include a review
of, and potentially a reconsideration of, the Agency’s approach to hedging capacity for Ameren Illinois
default service customers
The Illinois Power Agency has sought stakeholder feedback concerning capacity procurements to assist in preparing its annual draft procurement plan
"The purpose of the Agency’s capacity procurements is to provide a financial hedge against the volatility in
prices that has occurred in recent MISO Planning Reserve Auctions ('PRA'); for example, the price spikes
seen in Zone 4 (Illinois) in 2022, and Zone 5 (Missouri) in 2024. Starting in 2022, MISO changed the PRA
from procuring capacity on an annual basis to procuring capacity on a seasonal basis, and over the past
several years the Agency’s capacity procurements have not achieved their targets," the IPA said
"In light of the ongoing
evolution of the MISO capacity market design ... the market continuing to adapt
to the seasonal construct, changing approaches to accrediting capacity resources, and tightening reserve
margins in MISO, the Agency believes that the 2025 Electricity Procurement Plan should include a review
of, and potentially a reconsideration of, the Agency’s approach to hedging capacity for Ameren Illinois
eligible retail customers," the IPA said
The IPA further noted that FERC may approve a change to a sloped demand curve for the MISO
PRA starting in the 2025-2026 delivery year
Among other things, the IPA is interested in recommendations on what portion (in
% terms) of Ameren Illinois eligible retail customer capacity obligation should
be hedged (and how far in advance), and what portion (in % terms) should be
procured through the PRA, given the various changes noted above
Other specific questions issued by the IPA include, but are not limited to:
Should the IPA consider utilizing a tiered benchmark approach rather than
setting one benchmark for each season in order to potentially allow some higher
priced resources to be accepted in the procurement, but limit the price exposure
to eligible retail customers? (For example, rather than set a benchmark at $1
for 100 ZRCs; set a benchmark of $2 for up to 50 ZRCs, and $1 for the balance up
to 100 ZRCs).
Should the Agency consider a change in the timing and frequency of capacity
procurements from the current model which ties them to the Spring and Fall
procurements for block energy?
More generally, what considerations should the Agency utilize when developing
benchmarks for capacity given the ongoing evolution of the MISO capacity
market and the lack of transparent price data as can be found for block energy
products?
Should the procurement of ZRCs from renewable resources or demand response
be evaluated differently than ZRCs supported by conventional generation?
In addition to the issues raised above regarding capacity hedging for Ameren Illinois eligible
retail customers, are there issues or concerns related to the Agency’ electricity procurement
approach that the Agency should consider as it prepares the draft 2025 Electricity Procurement
Plan.
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June 11, 2024
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Copyright 2024 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com
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