MISO Delays Forward Auction Filing; Issues Draft Tariff and Business Rules
CARMEL, Ind. — After a missed July filing target and subsequent weeks of hints, MISO on Monday confirmed that it was postponing its forward capacity auction proposal until the 2018/19 planning year.
Richard Doying, MISO executive vice president of operations and corporate services, told the Markets Committee of the Board of Directors that the RTO plans to file the proposal with FERC in early November while using September and October for continued analysis with The Brattle Group.
“I’m glad we’re going to take more time. We need the community along with us,” MISO board member Jennifer Curran said.
Resource Adequacy Subcommittee Chairman Gary Mathis said stakeholders “greatly appreciate the additional time.” MISO had released the draft Tariff language and business rules at a RASC meeting last week.
IMM Wants Board Intervention
Independent Market Monitor David Patton, whose proposed changes were rejected by MISO staff, said the Board of Directors should intervene to stop the forward auction filing.
“This is the first time we’ve asked this in over a decade since the markets were created,” Patton said. “That doesn’t mean good work hasn’t been done, and I think MISO has worked very hard in the last few months. There’s a tremendous amount that we agree on, most importantly that there is a problem.
“I just haven’t been able to come up with anything that would make this market produce efficient prices” within the voluntary forward construct, Patton added.
Board member Thomas Rainwater said MISO’s plan to take more time to explain the Brattle analysis and hold additional stakeholder meetings was enough to hold off on action. However, the Markets Committee plans to hold an executive session to “evaluate the quality of the decisions being made” and determine whether to proceed with the filing.
Board members said their role isn’t to order MISO staff to adopt specific provisions, but to provide oversight. “We’re not going to adjudicate dueling economists,” Curran said.
Patton said he was concerned that MISO plans to make the forward auction voluntary, unlike those in PJM and ISO-NE, which are mandatory.
He also repeated his concern that the proposed auction’s prices will be “highly volatile.” He said demand needs to reflect reliability requirements, and current merchant demand doesn’t include planning reserve margins. (See MISO Backs Forward Auction Plan, Rejects Prompt Proposals.)
The board expressed concerns that excess regulated generation entered at the lower prices expected under the vertical demand curve in the prompt Planning Resource Auction will be “dumped” into the forward auction.
Doying said MISO will restrict the suppliers participating in the forward market to address the concern. MISO says it doesn’t plan to enact a minimum offer price rule.
Patton said he did not share the board’s concern. “That’s not dumping, that’s simply desiring to sell capacity and benefit their customers,” he said.
Rainwater wondered if Patton was paying too much attention to economics and not factoring in electricity subsidies and public policy: “the reality of the markets versus the theoretically perfect market structure.”
Patton said that in private conversations, Brattle staff shared his price signal concerns. He also said Brattle made no attempt to model forward auction participation trends, but it is “nearly unknowable.”
“It wasn’t a very satisfying reliability analysis,” Patton said.
Doying said MISO’s proposal is similar to other FERC-approved designs except for the smaller scale of the affected areas. He also told the board that the forward auction is intended to produce an efficient price, not send strong investment signals.
Meanwhile, Brattle analyst Sam Newell took aim at the hybrid prompt proposal, saying it would create price discrimination between merchant and non-merchant suppliers. He said when a utility has extra capacity to sell, mandating that the price be raised “much higher” for merchant suppliers is “clear economic waste.”
He added that “indisputable economic discrepancy” exists in the hybrid prompt proposal: a two-stage prompt auction with separate clearing prices for retail choice and regulated load.
The board also asked MISO officials about the stakeholder process over the 18 months of negotiations on a new auction design.