The 'sfourth annual Planning Resource Auction showed that resources are adequate to meetdemand for the coming year despite a smaller portfolio. Results of the auction were released April 14, detailinga better-than-50% drop in Zone 4 prices but a massive year-over-year increase ofalmost 2,000% for prices in Zones 2-3 and 5-7.
The latestauction, which covers the 2016-2017 planning year from June 1, 2016, to May 31,2017, yielded three different clearing prices. Zone 1 cleared at $19.72/MW-day,Zones 2-7 cleared at $72.00/MW-day and Zones 8-10, which includes MISO South, clearedat $2.99/MW-day.
"Wemay see some of the same volatility going forward," Doying said.
Lesssupply in the MISO Midwest region due to retirements and capacity exports contributedto higher clearing prices in several zones. As a result of the continued changesin the fleet, several zones relied on imports from other zones to procure adequatecapacity, according to an April 14 news release.
Auctionclearing prices came in higher than market analysts expected. After prices soared in the prior-year auction to $150.00/MW-day in Zone4, or Illinois, market analysts had expected a much weaker result for the zone inthis year's auction, with Morgan Stanley Research projecting a price of $10/MW-day to $40/MW-day.
Auction changes this year likelyaffected prices
MISOrepresentatives said this year's auction results were also likely affected by aseries of auction changes mandated by an order from the U.S. FERC.
The mostnotable of these changes affected the determination of the initial offer referenceprice level applicable in the auction, which is the basis for a general offer pricecap. Previously, the reference level was calculated as the opportunity cost of forgoingthe value of exporting capacity to neighboring regions. The order reduced the initialreference level to $0/MW-day. As a result, any resource desiring to offer abovethe conduct threshold of 10% of Cost of New Entry, or CONE, had to obtain approvalfrom the MISO Independent Market Monitor to support the offer.
Also,the order generally expanded import capability into MISO Local Resource Zones anddecreased Local Clearing Requirements for most zones. Another change in the auctionwas a decrease in the transfer limit between MISO South and MISO North/Central regionsfrom 1,000 MW to 876 MW. FERC previously approved a capacity sharing settlementbetween MISO and neighboring regions that formalized the allowable flow limits betweenthese regions.
Auction procures 135,483 MW for2016-2017
A totalof 135,483 MW of planning resources are available for the June 1, 2016-May 31, 2017,planning year. Cleared Planning Resources include 122,379 MW of generation resources,3,462 MW of behind-the-meter generation, 5,819 MW of demand resources and 3,823MW of external resources.
"Thegeneration fleet across MISO is rapidly changing," Doying said in an April14 news release accompanying the results. "While more generation is retiring,resulting in a tighter supply across the MISO region, the auction results show thatthere are sufficient resources to maintain reliability for this planning year."
The voluntaryauction is part of MISO's resource adequacy process, which also allows participantsto self-supply to meet the required reserve margin. The annual auction sets theprice paid to power plant owners that agree to have their generators available whencalled upon at peak times.
MISO'sresource adequacy mechanism ensures that resources are available to reliably operatethe electric grid. There are several ways for load-serving entities, or LSEs, todemonstrate they have sufficient capacity, either by owning resources, contractingfor resources or by entering into the voluntary planning resource auction to securecapacity.
Exelon's Clinton plant clears
Exelon Corp.'sClinton nuclear plant in Illinois clearedin the capacity auction and is committed to operate through May 31, 2017, in linewith the decision to operate the plant for one additional year. However, the plantcontinues to lose money and will have to be shut down unless a combination of marketand energy policy reforms are implemented, the company said. A decision on the futureoperations of the Clinton plant will be announced sometime this year.
Meanwhile, in addition to the megawatts that were bid to meetexisting obligations, Dynegy Inc.said it bid 2,197 MW into the recent capacity auction, with 870 MW coming from itsIllinois Power Holdings LLCsegment. These megawatts were bid at Dynegy's cost, as approved by the MISO independentmarket monitor. None of Dynegy's uncommitted megawatts cleared the auction.
Efforts continue to improve designissues
"Whilethis year shows adequate resources, industry forces are driving significant shiftsto the generating fleet in MISO. As fewer generation resources are available, MISOis working to address seasonal and locational issues while also ensuring that marketsignals provide incentives for investment where and when needed," the groupsaid.
MISOis discussing with stakeholdersmodifications to its resource adequacy construct that will provide greater operationalcertainty during both the winter and summer. Also, MISO is developing and has presenteda related proposal to refine resource adequacy planning to better reflect locationalissues. MISO plans to file both of these proposals with FERC sometime in May.
In addition,in March, MISO introduced a proposal to address price formation and timing in retailchoice areas, while still retaining the existing construct for the rest of the footprint.MISO is in the process of tweaking the proposal with stakeholders, and expects tofile it with FERC in July.