MISO proposed auction design sparks concerns, questions from stakeholders

Dive Brief:

The Midcontinent ISO (MISO) is considering implementing a forward capacity auction for portions of Michigan and Illinois where retail choice has made planning for future demand particularly complicated. The grid operator last month chose a forward capacity auction design recommended by The Brattle Group instead of a hybrid model backed by their Independent Market Monitor.
Platts reports last week at a Resource Adequacy Subcommittee meeting, staffers from MISO were faced with many questions about the grid operator's plan to form a three-year capacity auction.
The remainder of the MISO grid operates under a cost-of-service model, and the grid operaters would continue to operate a prompt-year capacity auction.

Dive Insight:

Portions of Michigan and Illinois are causing headaches for the grid operator for most of the Midwest, leading to the possible creation of a new capacity market. Platts reports there is significant interest in the new market, which would be a prompt-year solicitation for the portions of those states covered by retail choice.

At a MISO subcommittee meeting last week, stakeholders asked questions about how the capacity auction would utilize the region's energy supply, and the potential for gaming the market.

Staff of the ISO aim to propose tariff language by the end of the month, so federal regulators cold approve a transitional auction for the 2017-2018 year.

In Michigan, the state enacted a partial deregulation scheme which made resource planning difficult. Utilities were unable to tell how much generation they needed to acquire from one year to the next, because customers were capable of changing their energy provider.

Stakeholders are also questioning what will happen if resources committed under longer-term capacity arrangements are presented with higher prices in MISO's already-existing market.

"It works out, in effect, to a four-year commitment," said Jeff Bladen, MISO executive director for market services, according to Platts. "It's because of those rules that we would expect any supplier to seek full value for their resources."