Reeling from high-priced MISO capacity auction, stakeholders seek transparency

Stakeholders in Midcontinent Independent System Operator are calling for more transparency ahead of future planning resource auctions, so they are not surprised by a capacity shortfall and have a chance bring more capacity to the market, according to a MISO subcommittee meeting April 20.

"The results from the PRA are astonishing," Richard Seide, the director of policy and regulation at Apex Clean Energy, said during the Resource Adequacy Subcommittee meeting.

Looking at the data that was publicly available heading into this year's planning resource auction, it appeared as though capacity in northern MISO would come in just above the planning reserve margin requirement, John Orr, director of state government affairs at Constellation, said.

But due to capacity exclusions, retirements and other factors, northern MISO came up 1.3 GW short on capacity, driving clearing prices in Zones 1-7 up to $236.66/MWd for the 2022-23 planning year starting June 1. Last year, capacity in northern MISO cleared at $5/MWd.

This year's auction, which closed March 31, was the first time multiple zones cleared at the cost of new entry, said Brandon Morris, a spokesman for MISO. In 2020, Zone 7 cleared at CONE by itself because it did not meet the local clearing requirement that year, he said in an email.

Capacity exclusions

One factor that affected the amount of capacity available in the auction was exclusion requests. MISO's independent market monitor can approve requests to exclude unoffered deliverable resources from being counted toward the physical withholding limit, said Taylor Martin, a senior associate at Potomac Economics.

Resources can request an exclusion if they can export for a better price, if they need to export for their own needs or if their costs exceed CONE, Martin said. An exclusion can also be granted if a resource would violate a law if they returned from a suspension, if they need more than 30 days to return from a suspension, or if they will be on outage or derate for 90 of first the 120 days of the planning year, he said. Many current retirements and suspensions are linked to environmental rules, he noted.

While exclusion requests must be submitted at least 17 days prior to the close of the auction, the IMM allows requests after this deadline if unforeseen events occur, Martin said. Two categories of exclusions -- uneconomic at CONE, and suspension by law – increased this year compared to prior years, according to an IMM presentation.

There were also more retirements this year than there have been for several years, according to the presentation. If a resource is retiring partway through the year, it would qualify for an exclusion, Martin said. MISO knows about retirements and suspensions well in advance of the auction, Martin said.

Some stakeholders asked why they did not have access to better information about aggregate retirements and suspensions before the auction.

"If MISO is well aware of it, the market should be well aware of it in advance of the PRA so that the market can react," said Jim Dauphinais, who represents industrial energy consumers.

Taylor said it is hard to disclose what the IMM is doing in the exclusion process because of confidentiality, but the IMM is open to discussing ways to forecast the amount of capacity that is not going to be available, he said. The IMM is also going to work on breaking down the quantity and reasons why capacity was unavailable this year in the northern MISO region.

Future changes

MISO's proposal to move to a seasonal resource adequacy construct could help alleviate some of the issues with this year's auction, Martin said. For instance, under a seasonal construct, a resource retiring in the fall could still participate in the capacity auction for the summer, he noted.

Natalie McIntire, a technical and policy consultant for the Clean Grid Alliance, asked whether increasing transmission between the MISO North/Central and South would help address the capacity shortage.

Increased transfer capability would make the auction clear more efficiently, and it could help northern MISO access the lower cost capacity in the South, said Eric Thoms, senior manager of resource adequacy at MISO. But if MISO South did not have enough capacity to make up for the shortfall in the North, CONE pricing could bleed into the South, he said.

MISO has proposed to look at transmission projects between the northern MISO and MISO South in the fourth tranche of projects in its long-range transmission plan.

The recently proposed first tranche of LRTP projects in northern MISO will also improve access to capacity, Morris said in an email. The portfolio will reduce grid upgrade costs for future projects in MISO's queue, enabling more generation to make it online, he said.