Dive Brief:

• The Midcontinent ISO (MISO) yesterday filed plans for a three-year Forward Resource Auction (FRA), aiming to ensure areas within the grid that allow retail choice have sufficient power to meet that demand.
• The grid operator's most recent resource adequacy survey uncovered a potential regional capacity deficit as early as the 2018 planning year, due to tightening reserve margins in the region.
• While the grid operator has filed its plan with the Federal Regulatory Energy Commission, the ISO also conceded not all stakeholders felt the plan was ready. MISO officials, however, acknowledge it is "unrealistic" to expect broad consensus on topics like resource adequacy.

Dive Insight:

It may not be perfect, and there are alternatives, but MISO explained in a blog post that a "clear majority of stakeholders agree we need to take action" to address possible near-term shortages in some areas.

“By creating a new forward-market mechanism, market outcomes will ensure efficient capacity is maintained or added as dictated by the market,” said Jeff Bladen, MISO's executive director of market services. “Competitive retail areas will benefit from knowing that future resource adequacy needs will be met.”

Known as the Competitive Retail Solution (CRS), MISO wants to establish a FRA three years in advance of the delivery planning year that targets competitive retail areas of the grid's footprint. And in addition to the forward auction, the CRS includes an alternative that would allow load serving entities and states within competitive retail jurisdictions to opt-out of the FRA and instead implement a Forward Fixed Resource Adequacy Plan.

Regulatory authorities at the state and local level charged with overseeing load serving entities for Competitive Retail Demand may also opt out of the FRA, through an election of a Prevailing State Compensation Mechanism.

MISO has been looking at possible changes to its market structure for some time, but the proposal to establish a three-year forward capacity auction in the MISO choice zones has previously drawn concern from stakeholders, in part over the implementation timeline and price formulation.

MISO acknowledged that its filing was, for some, premature. Not all stakeholders felt the final proposal was ready to file, the operator explained, and some wanted additional discussion. But with potential shortages looming, the grid operator had to act.

“A clear majority of our stakeholders agree we need to take action and address the time-sensitive resource adequacy problems that exist in MISO’s competitive retail areas,” said Bladen. “It is unrealistic to expect broad stakeholder consensus on a topic like resource adequacy. After nearly two years of planning and conversations, however, the time has come to submit a proposal to FERC and ensure we are prepared for future reliability needs.”

MISO had also considered a hybrid capacity auction model backed by the ISO’s Independent Market Monitor, but submitted the CRS auction plan after it was recommended by The Brattle Group.