MSC: Options for Disconnected Node Pricing and Cost Allocation (MSC-2019-1) (20230302)

At the MSC on 3/2, MISO discussed potential changes to pricing “knocked-off” (aka disconnected) nodes and improving cost allocation during emergencies (Item 10 Continued Reforms to Improve Scarcity Pricing and Price Formation (MSC-2019-1)). WPPI offers the following feedback at this early stage:

• Pricing disconnected nodes during emergencies: In the case of a node (whether Resource or Load) disconnected during an emergency, WPPI supports setting the node’s Real-Time Locational Marginal Price equal its Day-Ahead LMP.

–   This approach is just and reasonable as well as has intuitive appeal. If the Resource or Load has a DA position and its node is disconnected, its resulting RT position will occur through no action of its own. Setting RT LMP = DA LMP settles the Resource or Load at its financially binding DA position, which the Resource or Load incurred through its own actions.

–   Resource: The presentation notes that a complication of this approach is the necessity of verifying the Resource could have delivered the DA energy if the node had remained connected. While WPPI agrees such verification would be ideal, it would likely be time-consuming, requiring discussions with Resource owners. Hence, we would be comfortable forgoing verification and assuming the Resource could have delivered the DA energy, if the node had remained connected. Improving the pricing of disconnected nodes and reducing uplift (i.e., costs not covered by market revenue, which load funds as a last resort) is outweighed by the potential that one or more Resources might unfairly benefit from setting RT LMP = DA LMP.

–   Load: The presentation notes that a complication of this approach is automating the identification of “knocked off” loads and lists several reasons load could be lower in RT. However, it was clarified at the meeting that if “knocked off” loads are limited to disconnected nodes, the process of identifying is currently automated.

–   Question: Always (not just during an emergency), should a disconnected node’s RT LMP be set qual to its DA LMP?

• Improving cost allocation during emergencies

–   Targeting cost-causers: WPPI supports allocating uplift created by an emergency to the load in the emergency area (i.e., along the lines of Schedule 52 Compensation for Restoration Energy) vs. currently it is allocated to load footprint wide.

• The intended design of MISO’s allocation of uplift is first to allocate uplift to cost-causers and then to allocate any remaining to load footprint wide. This design intention is not met for uplift created by an emergency (unless the emergency is footprint wide). A just and reasonable improvement would be to recognize that the cost-causers of uplift created by an emergency can be further identified (e.g., load in the emergency area) and allocated those costs as cost-causers (or benefitting from) vs. allocating to load footprint wide.
• In addition, it seems appropriate to allocate uplift created by an emergency to all load in the emergency area on a Load Ratio Share basis and there is not a sound basis to allocate such uplift more granularly (i.e., along the lines of Schedule 44 Voltage and Local Reliability Commitment Allocation Study and Commercially Significant VLR Issue Study).
• Potential issue: What are the challenges (if any) identifying uplift created by an emergency vs. uplift created during the hours of an emergency but not caused by the emergency?

–   Basis for Load Ratio Share: At least WPPI’s initial thoughts are to support basing Load Ratio Share on RT load during the emergency vs. RT load immediately prior to the emergency.

• These initial thoughts are based on the idea that the uplift being created by the emergency is for the benefit of the load that continues to be served, and load that is no longer able to be served is already paying the ultimate price.

DTE appreciates the opportunity to provide feedback on Options for Disconnected Node Pricing and Cost Allocation.

DTE strongly supports Observation B and the resulting conclusion: MISO should consider alternatives to the current cost allocation approach that spreads the revenue shortfall across the footprint via Load Ratio Share, resulting in unreasonable costs to entities that are neither directed nor physically able to respond to emergency conditions. DTE feels that incidents such as Hurricane Laura and the increasing pattern of extreme weather events obviate the need for an alternative and more effective method of cost allocation in the event of emergency. DTE agrees this new method of allocation should better target “cost causers” in these events, similar to the methodology utilized for either Restoration Energy (Schedule 52) or Voltage and Local Reliability events.  

Xcel Energy appreciates MISO's research and questions to develop solutions regarding the application of VOLL to dead nodes and allocation of uplift following extreme events.

We completely agree that the purpose of VOLL pricing is to incent market behavior under capacity shortage conditions.  Load that is disconnected is not incented with VOLL pricing so should not be paid at VOLL.  Disconnected load must be distinguished from connected load that receives LSE directions for load shed.   We recognize that it can be difficult to identify distribution areas that are disconnected.  However, MISO has demonstrated that it is possible and should work with LSEs to develop a streamlined process to accomplish this. 

In stakeholder meetings following Hurricane Laura, MISO recognized that the Tarif around load shed pricing allocation was developed 15 years ago with a primary focus on a system-wide type of event, so it is time to re-evaluate allocation methodologies.  In the case of Hurricane Laura, the HLLP was completely isolated from other MISO areas so the uplift should have been contained to the area that benefited.  Schedule 52 can easily be expanded to cover these types of events.  Review of transfer capabilities to the affected load pocket, zone or region should be evaluated to determine the generators and load that can provide support instead of allocating the uplift cost to the entire system.