MISO 'hurdle rate' elicits mixed response: FERC filings

Aug 7, 2014

A Midcontinent Independent System Operator federal tariff filing to implement a "hurdle rate" to dispatch power between its North/Central regions and its new South Region is drawing a mixed reaction from stakeholders, according to filings.

On July 16, MISO submitted a tariff filing to the Federal Energy Regulatory Commission to implement a $9.57/MW hurdle rate for flows in excess of 1,000 MW between the "MISO classic" region and what is known as "MISO South," the footprint served mainly by Entergy utilities encompassing all or parts of Arkansas, Louisiana, Mississippi and Texas.

On April 12, MISO began limiting flows between the North/Central and South regions to 1,000 MW to limit its liabilities from a dispute with Southwest Power Pool over the latter grid operator's claims that MISO has used SPP transmission facilities in excess of the existing 1,000 MW "contract path" without appropriately compensating SPP.

The hurdle rate proposal, which addresses MISO's Sub Regional Power Balance Constraint demand curve, would allow flows in excess of 1,000 MW when the difference between prices in the North/Central regions and the South Region exceeds $9.57/MW, which equals or exceeds what MISO expects to be charged by SPP for such power flows.

As of early Thursday, two sets of comments favor the hurdle rate tariff language, two protest the tariff filing, and one comment included positive and negative reactions.

MISO Transmission Owners and the Organization of MISO States favor the new tariff language.

The new tariff language allows energy flows to "be dispatched in a more predictable and less disruptive way," states MISO Transmission Owners, which includes Ameren, Cleco Power, Duke Energy, MidAmerican Energy, Otter Tail Power, Prairie Power and several cooperatives and public power agencies.

In OMS' comments, the group of state utility regulators declares its support for the proposal "because it provides more efficient market operations across the MISO footprint than the current 1,000-MW limit and should therefore result in system-wide net production cost savings for customers."

The Mississippi Public Service Commission and Wisconsin Transmission and Distribution Utilities filed protests against the hurdle rate tariff language.

The Mississippi PSC called the hurdle rate proposal "unjust and unreasonable" because it would "distort the calculation of MISO-wide energy prices" by including in congestion costs "a nonphysical system constraint based solely on SPP transmission charges."

"This proposal would make MISO's [locational marginal price] values fundamentally different from every other regional transmission organization ... LMP or non-RTO energy price in the United States," the PSC wrote.

The hurdle rate proposal is also "inherently inaccurate and will over-constrain flows, resulting in ... inefficient dispatch and lost production cost savings," it added.

Also, any excess payments made by load-serving entities under the hurdle rate proposal would not be refunded to those same LSEs, but would be paid to holders of financial transmission rights MISO-wide, the PSC said.

Wisconsin Transmission and Distribution Utilities, representing Madison Gas & Electric and WPPI Energy, agreed with the MISO tariff proposal's goals of letting flows between MISO North/Central regions and MISO South exceed 1,000 MW "when the production cost savings exceed any applicable SPP transmission charge, and ensuring that the beneficiaries of those savings bear the associated charges."

"However, MISO has not demonstrated that its filing achieves those goals, particularly in combination with leaving unchanged its recovery of the SPP charges from the entire MISO footprint," they said.

The Louisiana Public Service Commission submitted comments in support of the tariff language, but added that it "does not support the underlying contention that the cost responsibility should be assigned to the importing region."

"MISO should be required to continue the stakeholder process to examine alternative methods to allocate the charges among MISO market participants," the PSC said. "The [Federal Energy Regulatory] Commission should, however, approve MISO's proposed demand curve modifications."

August 11 is the deadline for intervenors to file comments regarding the MISO hurdle rate tariff proposal.

For more information:

S and P Global Platts

Mark Watson
E-mail: markham.watson@platts.com

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