Michigan utility regulators on Dec. 21 partially lifted a ban on third-party customer demand response aggregators in a move to address recent price spikes in the Midcontinent ISO's power capacity auction.
Load-serving entities in MISO, the U.S. Midwest's 15-state regional grid operator, have been struggling to meet resource adequacy requirements as electric utilities continue to retire coal-fired power plants.
MISO's latest planning resource auction, which allows electricity providers to procure generation capacity to meet individual reliability requirements, cleared at $236.66/MW-day for the 2022-23 planning year in capacity zones covering parts of Illinois, Iowa, Michigan, Missouri, North Dakota, South Dakota and Wisconsin. In the previous year's auction, capacity in northern MISO cleared at $5/MW-day.
To help address the problem, the Michigan Public Service Commission issued a Dec. 21 order partially lifting the state's long-standing ban on third-party aggregators that register customers and bid price-sensitive reductions in demand into wholesale power markets. (Case Nos. U-21099, U-20348, U-21032, U-21225)
Voltus Inc., a demand response aggregator operating in all nine North American wholesale markets, had pushed for the change.
"Elected officials who are largely responsible for placing commissioners on [utility commissions] are very aggressively replacing commissioners that have traditionally been — to put it bluntly — in the pockets of utilities, with commissioners that have a very progressive agenda meant to mitigate these electric grid problems," Voltus CEO Gregg Dixon said in a Dec. 23 interview.
The Michigan PSC's order will only apply to commercial and industrial customers with a demand of 1 MW or greater. Voltus expects the order to unlock an additional 1,000 MW of demand response capacity in Michigan in the coming years, Dixon said.
"Big box retailers can participate, and medium commercial and industrial customers can participate as well, but it generally filters out the residential and small business customer classes," Dixon said.
The potential price impact on MISO's next planning resource auction, which covers the 2023/2024 planning year set to begin June 1, 2023, is still unclear.
"We only have about a month to sign up these new demand response loads," Dixon said. "So, although there are about 1,000 megawatts of potential that they've opened up, we might only get 100 or 200 megawatts of that into the market, and that's not going to solve the bigger problem in MISO."
Still, Dixon predicted that the PSC's order will have "a big impact" on auction clearing prices in future planning years.
The Michigan PSC's Dec. 21 order also indicated the commission may soon lift the state's ban on third-party aggregations of smaller residential consumers and commercial and industrial customers.
Under Michigan's current rules, only 10% of the state's residential electricity consumers are allowed to participate in third-party demand response aggregations through a program called Michigan Choice.
"Prior to lifting the [demand response] aggregation ban for bundled residential and smaller [commercial and industrial] customers, the commission will endeavor to outline the desired consumer protections to guard against deceptive marketing tactics that have been employed in the past by certain [alternative electric suppliers] and their third-party marketers," the Michigan PSC said.
Dixon noted that Michigan is one of five MISO states revisiting bans on third-party demand response aggregators. The other states with active proceedings on the issue are Arkansas, Kentucky, Louisiana and Missouri.
In March 2021, the Federal Energy Regulatory Commission also launched a notice of inquiry (RM21-14) into whether it should direct MISO to disregard state-level bans on third-party demand response aggregators altogether. Prior to the Michigan PSC's Dec. 21 order, all but three out of MISO's 15 states had some form of ban. That proceeding remains pending before FERC.
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