MSC: Pricing circuit breakers for extended-duration EEA3 energy shortage events (MSC-2019-1) (20240709)

NIPSCO appreciates the opportunity to provide feedback on the issue of market price circuit breakers.  NIPSCO appreciates that MISO is attempting to provide structure as well as cap stakeholder risk during periods of extended-duration EEA3 energy shortage events.  However, NIPSCO believes that MISO and stakeholders would benefit by investigating additional options with more analysis before committing to the proposal.

As a matter of principle, the Environmental Sector supports the use of a pricing circuit breaker for use in extended EEA3 load shedding events. We believe that a step down formula, such as the one proposed by MISO, is a reasonable method in which to balance: (a) the need for VOLL to send appropriate price signals to market participants in order to incent behaviors supporting increased reliability; with (b) the need to protect customers from punitive pricing in the event of such an extended load shed event. As to the exact duration and pricing level of each step in such a circuit breaker, we believe that market participants, regulators, and consumer advocates are best positioned to opine with robust support, and thus we do not opine on the specifics of what MISO proposed during its July 9, 2024 MSC meeting, but we do offer our directional support.

The Entergy Operating Companies ("EOCs")^[1] appreciate the opportunity to provide feedback on MISO’s request on Continued Reforms to Improve Scarcity Pricing and Price Formation (MSC-2019-1).

MISO has proposed changes to scarcity pricing constructs, including VOLL and ORDC, that better reflect the short-term risks of energy and reserve shortage. MISO is considering scarcity pricing “circuit breaker” enhancements:  DA and RT VOLLs that decrease at certain time thresholds for longer duration EEA3 events and limiting the duration of Administrative RT VOLL Pricing.

The EOCs appreciate that MISO has taken into consideration the possible financial impact a sustained VOLL of $10,000MWh could negatively impact customers who would have to pay for higher load costs due to the increase in VOLL.

MISO’s current proposed options for pricing Circuit Breakers for long duration energy scarcity are 3-part:

CB1: After four hours of RT EEA3 load-shedding in a Max Gen Emergency: Reduce RT VOLL to $5,000/MWh immediately

CB2: When there is a Max Gen Emergency with EEA3 Load Shed at 1030EPT (DA Market bid/offer close): Reduce the DA and RT VOLLs to $5,000/MWh for the next Operating Day

CB3:When the Max Gen Emergency with EEA3 Load Shed continues to additional Day-Ahead Market bid/offer closings (Day 2 and beyond): Reduce the DA and RT VOLLs to $2,000/MWh for the next Operating Day

The EOCs view the three-step circuit breaker proposal positively, emphasizing its role in protecting customers from potential severe financial distress during prolonged scarcity events.

The EOCs would like MISO to provide some additional clarification on when administrative pricing would be phased out following an event.

The EOCs have no issues with The EDR Offer Cap fixed at the current $3,500/MWh. The EOCs appreciate MISO taking into account Stakeholder feedback and developing the proposed pricing circuit breakers options and look forward to continued discussion regarding this matter

1 The Entergy Operating Companies are Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, Entergy New Orleans, LLC, and Entergy Texas, Inc.

WPPI has no concerns with the market price circuit breaker to address extended-duration EEA3 load shedding events proposed by MISO at the 7/9/2024 MSC (outlined below), although we do have one question (also below).

• (CB1) After 4 hours of EEA3 conditions, the real-time value of lost load is reduced to $5K/MWh, which is half of MISO’s proposed VOLL.
• (CB2) If EEA3 conditions persist at the time of the next day-ahead market close (1030 EPT), both DA and RT VOLLs are set to $5K/MWh for the next operating day.
  • QUESTION: Is it the case that CB2 will be implemented if the effective day/time of the MISO declared EEA3 includes the day-ahead market close time, regardless of the length of time of the EEA3 declaration (i.e., even if during this single declared Max Gen Emergency cumulative EEA3 time is less than 4 hours)?
• (CB3) If EEA conditions persist at the time of additional DA market closures, DA and RT VOLLs are further reduced to $2K/MWh.
• If the circuit breaker is implemented, VOLL(s) will reset to $10K/MWh depending on when MISO terminated the Max Gen Emergency: if before DA market close, end of current operating day and if after, end of next operating day.

Also, at this time, WPPI has no concerns with the additional circuit breaker design considerations outlined below, although we do have a few questions/comment (also below).

• Within a single declared Max Gen Emergency, cumulative EEA3 time will determine if/when CB1 is implemented.
• The circuit breaker will be implemented across the MISO market (i.e., even if MISO’s Max Gen Emergency declaration applies to only a portion of its market).
• MISO is evaluating if and when “administrative” pricing should be disabled, rather than continuing to fix all prices to the RT VOLL during an EEA3.
  • QUESTIONS: Is the “administrative” pricing MISO is referring to VOLL? Also, at the meeting, MISO said if they disable administrative pricing, MISO will control prices by the amount of load shed. Please explain further the resulting prices. It’s not clear to us because a unit that would serve an additional MWh of load (the basis for a non-administrative price) isn’t available. What are we missing?
• MISO is considering increasing the DA Demand Bid Cap to allow MPs to specify prices above $2K/MWh but below DA VOLL, which would also affect other types of bids/offers (e.g., virtual demand bid, price-sensitive exports).
  • COMMENT/QUESTION: WPPI is open to having this discussion. Is MISO considering this change generally or only during the implementation of the circuit breaker?

The Arkansas Public Service Commission (“APSC”) appreciates the opportunity to express its concerns to MISO regarding the update to Value of Loss Load (“VOLL”) and Scarcity Pricing. While the APSC understands that it has been many years since the VOLL has been updated, the APSC has some concerns that MISO has not adequately explained the link between the problem the updated VOLL changes are hoping to address, and how the proposed changes actually solve that problem. Is the goal to incentivize reduction in load? Is the goal to incentivize construction of reliable, dispatchable generation? If MISO seeks the former, the changes do not address the problem that many retail customers will be unaware of the consequences of NOT voluntarily shedding load during times of Scarcity Pricing.

Further, these customers may be unable to shed load for various reasons. If MISO is intending the updates to incentivize the construction of new generation, then the APSC fails to see how MISO’s recent changes to its capacity market–including the Reliability Based Demand Curve (“RBDC”) and Direct Loss of Load (“DLOL”) Accreditation Methodology filings–do not sufficiently fulfil that role, particularly given that the proposals have not been implemented yet.

Perhaps, instead of setting a higher VOLL at this time, MISO could delay implementation until the results of its previous changes have been implemented. However, if MISO decides to pursue the increase in VOLL, then the APSC would suggest that a more tempered approach may be preferrable. The current proposal has VOLL set at $10,000 per MWh for only the first four hours of Scarcity pricing, before reducing to $5,000 MWh until it further declines to $2,000. The APSC would posit that, rather than setting VOLL at $10,000 per MWh, from the start, setting VOLL at $5,000 – with the remainder of the Circuit Breaker mechanism intact for events lasting more than 2 days – would allow appropriate increases in price signals while not overburdening retail customers.

As has been stated in numerous MISO stakeholder meetings, retail customers, including residential customers, are forced to pay for the increase in VOLL – it is not ultimately paid for by Load Serving Entities (“LSEs”). If LSEs incur scarcity pricing to purchase power in the wholesale market in scarcity pricing events, those costs are simply filtered through their retail tariff schedules to their ratepayers. Therefore, LSEs are not incentivized at all by any increase in the VOLL.

An increase of VOLL less than what MISO initially proposes may still send proper price signals to customers – assuming those customers are cognizant of those price signals and are able to respond to them – while avoiding unnecessary overburdensome energy costs for ratepayers who are struggling with the more recent higher-than-normal inflation environment.

Ultimately, Arkansas is concerned that MISO has not sufficiently articulated the specific issues the proposed changes that MISO seeks to remedy, or how those changes will effectively remedy the issue without causing unnecessary costs to captive retail ratepayers. The APSC proposes that, should MISO decide that an increase in VOLL is necessary, perhaps a more moderated increase of $5,000 per MWh would be sufficient to provide a proper price signal, especially since the proposed Circuit Breaker already imposes $5,000 per MWh after the first 4 hours. If that later is shown to be insufficient, the APSC posits that MISO can always revisit the issue and file subsequent amendments to change the VOLL.

Joint Comments
of
Association of Businesses Advocating Tariff Equity (ABATE)

Illinois Industrial Energy Consumers (IIEC)

Louisiana Energy Users Group (LEUG)

Texas Industrial Energy Consumers (TIEC)

Coalition of MISO Transmission Customers (CMTC)

Midwest Industrial Customers (MIC)

Midwest Large Energy Consumers (MLEC)

and

NIPSCO Large Customer Group (NLCG)[1]

Regarding

MISO Market Subcommittee

Pricing Circuit Breakers for

Extended Duration EEA3 Energy Shortage Events  

(MSC-2019-1)

July 26, 2024

I. Introduction and Summary of Comments

ABATE, CMTC, IIEC, LEUG, MIC, MLEC, NLCG and TIEC appreciate the opportunity to provide comments to MISO regarding MISO’s proposal to establish a pricing circuit breaker (CB) mechanism for extended duration EEA3 energy shortage events.

ABATE, CMTC, IIEC, LEUG, MIC, MLEC, NLCG and TIEC strongly support the concept of implementing a Value of Lost Load (VOLL) circuit breaker mechanism.  Such a mechanism is needed to restrict the duration of VOLL pricing in order to limit the high cost exposure to loads resulting from a VOLL pricing event. 

However, we are concerned that MISO’s proposal to maintain the VOLL level at $10,000 per MWh or $5,000 per MWh for up to 60 hours after emergency conditions are declared would unduly expose customers to excessive costs as a result of extended outage events, despite the fact that many customers are unable to effectively respond to VOLL price signals.  Therefore, the End Use Customer Sector urges MISO to modify its CB mechanism to ensure that the VOLL is reduced more expeditiously to $2,000 per MWh during extended outage events, consistent with the CB mechanism in the Electric Reliability Council of Texas (ERCOT).  This can be accomplished by reducing the VOLL in MISO to $2,000 per MWh within 12 hours after an EEA3 event is declared.  

II.  Background

During the July 9, 2024 Market Subcommittee (MSC) meeting, MISO presented its proposal for a VOLL CB mechanism for extended duration outage events.  MISO proposed a three-stage CB mechanism that is summarized below:

CB Step 1           

Reduce the real-time (RT) VOLL to $5,000/MWh after four hours of EEA3 conditions 

CB Step 2           

When EEA3 conditions persist to the next day-ahead (DA) Market close (10:30 EPT), synchronize the DA/RT VOLLs to $5,000/MWh for the next Operating Day

CB Step 3 

When EEA3 conditions persist to additional DA Market cases, further reduce the DA/RT VOLLs to $2,000/MWh

During the July 9, 2024 MSC meeting, MISO requested stakeholder feedback regarding its VOLL CB proposal.  The balance of these comments provides the feedback of the End-Use Customer Sector regarding MISO’s proposal.

III.  Comments Regarding MISO’s VOLL CB Proposal

The End Use Customer Sector strongly supports the implementation of a CB mechanism in MISO to limit the duration of VOLL pricing during extended emergency outage events, and we appreciate MISO’s efforts to develop such a mechanism for the MISO market.  As we explained in our March 21, 2024 comments to MISO on this topic, the experience of ERCOT during the February 2021 extreme weather event in Texas reinforces the need to implement a VOLL circuit breaker mechanism in MISO to limit the cost exposure of customers from extended VOLL pricing events. 

In our March 21, 2024 comments, we recommended that MISO implement a CB mechanism that is conceptually similar to the mechanism adopted by ERCOT.  The ERCOT mechanism, called the ERCOT Emergency Pricing Program (EPP), lowers the offer cap from the High Offer Cap (HCAP) of $5,000 per MWh to the Low Offer Cap (LCAP) of $2,000 per MWh if emergency conditions are declared and the market price remains at the HCAP level for 12 hours within a rolling 24-hour period.  Once the LCAP is activated, the LCAP remains in effect for 24 hours after ERCOT exits emergency operations without re-entering emergency operations.[2]    

While the End-Use Customer Sector strongly supports the concept of implementing a CB mechanism, we have serious concerns regarding the specific CB mechanism proposed by MISO.  Specifically, we are concerned with MISO’s proposal to lower the VOLL during extended duration outage events after a long period of time and in two steps, first to $5,000 per MWh and then to the $2,000 per MWh level that ERCOT applies under the EPP.  This approach undermines the value of the CB mechanism in reducing the risk exposure of loads by requiring that MISO operate under emergency conditions for an extended amount of time before it applies the VOLL level of $2,000 per MWh used in ERCOT to cap prices under its CB mechanism.  As MISO explained at slide 21 of its July 9, 2024 presentation to the MSC on this topic, under MISO’s proposal the $2,000 per MWh VOLL would only become active between approximately 1.5 days and 2.5 days after the EEA3 event started, depending on the start time of the event relative to the DA Market close.  This means that, under MISO’s proposal, the VOLL would be reduced to $2,000 per MWh no sooner than 36 hours after the initiation of the EEA3 event.  Moreover, VOLL pricing could potentially not be reduced to $2,000 per MWh until 60 hours after the EEA3 event starts.   By contrast, ERCOT’s CB mechanism would be expected to reduce the price cap to $2,000 per MWh after emergency conditions are declared and such conditions remain in place for 12 hours.

Holding the VOLL level at $10,000 per MWh or $5,000 per MWh for up to 60 hours after emergency conditions are declared would unduly expose customers to excessive costs as a result of extended outage events.  As we explained in our March 21, 2024 comments, there can be circumstances where industrial customers are not likely to respond to the pricing signals associated with a higher VOLL for safety and security reasons.  Such customers with limited price elasticity of demand could experience a very large increase in costs in a short period of time under MISO’s proposed CB mechanism, despite the fact that these customers cannot shut off or reduce their operations due to operational or other considerations, irrespective of the prevailing power price.  MISO’s proposed CB mechanism would unduly expose such customers to large cost increases, despite the fact that they are unable to effectively respond to VOLL price signals because of safety and security reasons.

For these reasons, the End Use Customer Sector urges MISO to modify its CB mechanism to ensure that the VOLL is reduced to $2,000 per MWh more expeditiously during extended outage events, consistent with the CB mechanism in ERCOT.  This can be accomplished by reducing the VOLL to $2,000 per MWh within 12 hours after an EEA3 event is declared.  This approach would enhance the ability of the CB mechanism to protect loads from extreme cost increases during extended outage events.  At an elevated VOLL level of $10,000 per MWh or $5,000 per MWh, only a few additional hours of high prices can have very large cost impacts on end-use customers in MISO.  Therefore, it is vital to ensure that the VOLL is more quickly reduced to $2,000 per MWh during extended outage events.

Thank you for giving us the opportunity to provide this feedback.  If MISO has any questions or concerns with respect to these comments, please do not hesitate to contact the following:

Jim Dauphinais

Brubaker & Associates, Inc.

(Consultants to ABATE, IIEC, LEUG, NLCG and TIEC)

(636) 898-6725

jdauphinais@consultbai.com

Ali Al-Jabir

Brubaker & Associates, Inc.

(Consultants to ABATE, IIEC, LEUG, NLCG and TIEC)

(361) 994-1767

aaljabir@consultbai.com

Ken Stark

McNees Wallace & Nurick LLC (for CMTC)

(614) 719-2844

kstark@mcneeslaw.com

Kavita Maini

KM Energy Consulting, LLC (Consultants to MIC and MLEC)

(262) 646-3981

kmaini@wi.rr.com

[1] ABATE, IIEC, LEUG, TIEC, CMTC, MIC and MLEC are all MISO Members in the End-Use Customer Sector.  NLCG is a non-MISO Member stakeholder whose members include large end-use customers within Indiana that are interruptible and/or have cogeneration facilities and that take service under NIPSCO Rate Schedule 831, which allows limited market purchases through NIPSCO.

[2] The detailed parameters of ERCOT’s EPP can be accessed using the following link:

   https://www.puc.texas.gov/agency/rulesnlaws/subrules/electric/25.509/25.509.pdf

Michigan Public Power Agency (MPPA) supports AMP's feedback.

This Feedback is submitted on behalf of the Staff of the Louisiana Public Service Commission (LPSC Staff) related to the MSC: Pricing circuit breakers for extended-duration EEA3 energy shortage events (MSC-2019-1) (20240709).  The LPSC Staff appreciates the opportunity to provide feedback to the MSC related to the MISO proposal.  The LPSC Staff continues to have concerns regarding the potential benefits of raising the VOLL levels and whether the potential costs may exceed the potential benefits. A quantification of those potential costs and benefits would be appreciated.

The LPSC Staff supports the circuit breaker concept, and the MISO 3-step proposal represents a positive step to help protect consumers from severe financial harm during prolonged scarcity events. The details of that proposal remain unclear, however, particularly regarding how the capped pricing will be phased out after a scarcity event. In addition, the LPSC Staff believes that additional analysis may be needed to determine the optimal circuit breaker caps and the optimal implementation steps and time frames.

The LPSC Staff appreciates MISO's willingness to put forth the circuit breaker proposal and its willingness to further explore this option.   

American Municipal Power (AMP) appreciates the opportunity to provide feedback on pricing circuit breakers for extended-duration EEA3 energy shortage events. AMP also appreciates that MISO is attempting to limit potential market risk associated with high prices over a sustained period of time. However, AMP offers the following comments for consideration:

• AMP is not supportive of the Circuit Breakers (CBs) tied to EEA3.
• Per MISO: https://www.misoenergy.org/meet-miso/media-center/2024/grid-conditions-explainer/
  • EEA3 is the third and final level of emergency operations and is issued to protect the electric grid from cascading outages and ensure reliability is maintained to the greatest number of consumers possible. It signals energy supply and demand cannot be balanced and power interruptions are imminent or happening.   
  • Power interruptions are always a last resort measure necessary to protect the reliability of the power grid. During these rare situations, MISO's responsibility as a grid operator is to identify the geographical area where the power interruptions need to occur along with the amount of electricity that needs to be reduced in order to balance electricity supply and demand. It is the responsibility of MISO's member utilities to implement the power interruptions and determine which of their customers will temporarily lose power.
• AMP contends that aligning the CB with EEA3 is too late. At a declared EEA3, price is no longer the issue, instead grid stability is. The appropriate time to implement a CB is prior to EEA3, at either EEA1 or EEA2.
  • EEA2:
    • EEA 2 is the second level of emergency operations and is issued to maintain reliability of the grid as operating reserves continue to decline. It signals that MISO is energy deficient and there is a need to reduce energy demand.  
    • By declaring EEA2, MISO operators are able to tap into emergency generation not available during normal conditions. Additionally, MISO operators can purchase emergency energy from neighbors (when available) and implement procedures designed to reduce the demand for electricity. One option to reduce demand is for MISO to direct its member utilities to issue an appeal for consumers to conserve power. An EEA2 declaration DOES NOT automatically mean MISO will take this step.       
  • EEA1:
    • EEA 1 is the first level of emergency operations and is issued to maintain reliability of the grid. It signals that MISO can no longer meet the forecasted demand + operating reserve requirements without taking action. Put another way, EEA1 means power demand could exceed supply if actions are not taken. 
    • By declaring EEA1, MISO operators are able to access additional generation to increase the supply of electricity.
  • By tying the CB to either EEA1 or EEA2 the system has not yet reached the critical stage of EEA3, and thus prices could still incent the voluntary reduction of demand before MISO acts to curtail load involuntarily.

Cleco power appreciates the opportunity to comment on the pricing circuit breaker discussion.  We oppose raising the VOLL to $10k/MWh price cap at this time. We think continued stakeholder discussion on the appropriate pricing is warranted before a tariff change. However, Cleco Power supports MISO’s proposal of a “Circuit breaker” mechanism to minimize the effects of extended EEA3 events to reduce steps of VOLL pricing to minimize the financial effects this would have on our retail load.

Wabash Valley Power Alliance, Wolverine Power Cooperative, Big Rivers Electric Corporation, Southern Illinois Power Cooperative, and Hoosier Energy (“the Cooperatives”) appreciate the opportunity to comment on MISO’s proposed scarcity pricing circuit breaker for extended-duration EEA 3 energy shortage events. Many catalysts such as extreme weather risks, dependence on intermittent resources, fuel scarcity, resource retirements, and forecast error increase the potential for EEA event frequency, which supports the need for better preparation.

While Value of Lost Load (“VOLL”) pricing is one mechanism to address an energy shortage event, it is an after-the-fact reaction. Instead of focusing its attention on a reactive solution, the Cooperatives request MISO focus its attention on improving and/or developing the proactive mechanisms identified below that incent resource availability before an event. This would keep the focus on the cause (resource availability) of the event before the symptom (energy shortage) occurs.

It is essential that MISO also implement a circuit breaker to mitigate the devastating financial impacts of a sustained VOLL event, regardless of whether MISO increases the VOLL price. More specifically, the Cooperatives identify the need to decrease the financial risks to Market Participants (“MP”), especially considering the outcomes in ERCOT resulting from Winter storm Uri in February of 2021 where several MPs declared bankruptcy or saddled their members/customers with excessive long-term costs. Unlike MISO, it is important to note, ERCOT has fewer tools to address an energy shortfall because it does not have a capacity product to incentivize resource additions. Furthermore, ERCOT recently reduced their VOLL equivalent from $ 9,000/MWh to $5,000 /MWh, as a means to reduce the financial impact.

While the Cooperatives support the concept of a pricing circuit breaker to decrease financial risks, we request that MISO provide additional context to support outage duration designations as referenced in the presentation “Continued Reforms to Improve Scarcity Pricing and Price Formation (MSC-2019-1)” at the July 9, 2024, Market Subcommittee Meeting. Principally:

• The MISO Planning Resource Auction (“PRA”) provides revenues for capacity to incentivize resource additions. Should the PRA be effective, its incentives would render charging the extreme VOLL price for energy during emergencies unnecessary.
• The Cooperatives recommend MISO retain the current $3,500/MWh maximum VOLL with downward ratchets for tiers 2 and 3.
• The Cooperatives request that MISO show data related to historic EEA levels 1, 2 and 3 event designations and durations or other pertinent data to substantiate the recommended tiers.
• VOLL pricing does not address underlying electric and gas wholesale market coordination issues and multi-day commitment which was included as a May 23, 2024 Market Subcommittee agenda item. The Cooperatives suggest MISO and stakeholders address this critical and challenging issue to support reliability.
• VOLL pricing does not address the underlying issues with resource development, particularly MISO’s clogged generation queue where adding resources may take 5 to 6 years. In the meantime, excessive fees may harm MPs with little means to proactively respond with new resources.

The Cooperatives believe that before making drastic VOLL changes, MISO must assess the results of recent reforms, such as:

1. MISO’s capacity market, including the Reliability Based Demand Curve and Resource Accreditation,
2. MISO’s generator interconnection process, and
3. Gas-Electric coordination (e.g., multi-day commitment).

MISO should only consider proposing incremental VOLL changes once more information is available regarding the impact of those reforms. Regardless of the VOLL price changes, the Cooperatives request MISO implement a circuit breaker.

Mississippi Public Service Commission (“MPSC”) Response to Feedback Request

MSC: Pricing circuit breakers for extended-duration EEA3 energy shortage events (MSC-2019-1)

As the MPSC emphasized in prior feedback regarding MISO’s proposed updates to the value of lost load (“VOLL”) and the design of the operating reserve demand curve (“ORDC”), in advancing modifications to administrative scarcity pricing, “MISO must ensure – and demonstrate – that higher prices imposed on ratepayers will not exceed a level that incentivizes needed supply and demand behavior.”[1]  The MPSC requested that MISO provide stakeholders with data or analysis that would quantify what price levels are needed during shortage and/or emergency conditions to induce needed behavior from supply and demand.  To date, MISO has not done so. 

The MPSC acknowledges MISO’s responsiveness to stakeholder feedback and requests for a circuit-breaker mechanism that would limit the application of extreme scarcity prices during prolonged emergency conditions.  MISO’s proposal is a step in the right direction, but it suffers from the same deficiencies as the VOLL/ORDC proposals in that MISO has not provided a basis for what impacts are expected from different price levels.  It is impossible to evaluate whether prices proposed under the circuit-breaker mechanism (or under the initial VOLL/ORDC proposal) are set correctly to promote the needed behavior without penalizing rate payers. 

The MPSC’s concern is illustrated by a simple example:  as a consequence of a winter EEA3 Max Gen Emergency, energy prices are set to a high administrative price (i.e., the MISO-selected VOLL value of $10,000/MWh).  The high price induces some quantities of increased generation, increased imports, and decreased load, but not sufficient to eliminate the EEA3 conditions, so VOLL pricing persists.  Residential customers continue to use a base quantity of energy for heating during winter conditions.  If residential load is partly served by market purchases (i.e., load is not fully hedged via utility generation), customers will be exposed to very high energy prices under circumstances where those high prices are having no incremental effect on resolving the emergency conditions. 

The proposed circuit-breaker would provide some relief, by lowering prices first to $5,000/MWh, and subsequently to $2,000/MWh.  But the automatic application of the circuit-breaker itself raises the (unanswered) question of what prices are in fact necessary to support system reliability and help resolve a system emergency.  If $10,000/MWh does not resolve the emergency, and (by assumption) a lower circuit-breaker price has no negative impact on system reliability, then it must be the case that a $10,000/MWh price is far too high, is economically inefficient, and would impose punitive costs on customers who cannot safely reduce their exposure to the price.

Ultimately, stakeholders simply do not know whether the proposed VOLL pricing or the circuit-breaker prices are appropriate, because MISO has provided no basis for the expected effects from the respective price levels, nor the necessity of those prices to supporting reliability and helping resolve emergency conditions.

MISO must provide data and analysis to justify its proposed prices during emergency load shedding conditions and describe the impacts on needed supply and demand behavior that are expected from different price levels. To date, MISO and the Independent Market Monitor appear content with simply imposing very high prices during scarcity conditions, with no assessment of impacts on reliability or on customer costs. 

It may be difficult to conduct an analytic evaluation of expected impacts, particularly given the historical rarity of example emergency events.  If that is MISO’s explanation for not performing such an analysis, then it is imperative that additional customer protections be incorporated in the circuit-breaker process.  MISO has insisted on an “automatic” process for application of VOLL and the circuit-breaker, but such insistence increases the risk that customers will be forced to bear extreme costs for no reason.  The MPSC proposes that MISO develop methods to assess the impact of high administrative pricing and retain the ability to suspend or otherwise modify pricing when it is apparent that high scarcity pricing is having no beneficial incremental effect on system reliability.

The MPSC continues to believe that the circuit-breaker mechanism does not resolve its concerns about appropriate pricing.  It is far more important to get prices right in the first place – and specifically to establish that higher shortage pricing would produce cost-effective benefits to ratepayers. Some relevant and still unanswered questions/requests posed by the MPSC in its feedback on MISO’s VOLL/ORDC proposal to the current feedback request include:

• Re: the potential adoption of a new VOLL value as an administrative price and cap, and the proposed redesign of the ORDC, “MISO must ensure – and demonstrate – that higher prices imposed on ratepayers will not exceed a level that incentivizes needed supply and demand behavior. To date, MISO has not done this.”
• Re: MISO’s purported analytical basis for a new VOLL value and a new ORDC curve: “Since a $10,000/MWh class weighted VOLL is evidently wrong for many MISO customers, the critical concern should instead be: what price levels are needed during shortage and/or emergency conditions to induce needed behavior from supply and demand?” MISO has not provided data or analysis that would adequately address this, and the MPSC again requests that MISO do so. 
• Re: the derivation of the proposed ORDC curve from an operating reserve shortage target cost of $35,000/MWh linked to system VOLL, weighted by estimated loss of load probabilities, which is no more reliable than the $10,000/MWh VOLL: “What prices are necessary and sufficient to incentivize behavior?” MISO should focus on evaluating the expected benefit – short-term and longer-term – of new shortage and emergency pricing.   
• The proposed ORDC redesign also points to a dynamic problem. MISO establishes the ORDC shape based on the modeled probability of load shed for each quantity of reserve shortage.  But if the new ORDC is justified because it would improve reliability – i.e., decrease the probability of load shed – wouldn’t then the basis for the ORDC shape change over time?
• While MISO has shown that it is possible to devise methods to set VOLL and design the ORDC, MISO has not demonstrated what effects are expected from resulting prices. “MISO should evaluate and present expected reliability benefits from new pricing under its proposals, including: increased resource availability during extreme system conditions, increased system support from imports, and increased capacity investment over time.  Such assessments should account specifically for incremental effects from proposed administrative pricing changes.  For instance, the improved resource availability that MISO has described from seasonal accreditation and outage scheduling improvements should be accounted for separately.” 

Footnote (1) Mississippi Public Service Commission Response to Feedback Request MSC: Proposal to Update VOLL and ORDC (MSC-2019-1)

The OMS Markets Work Group and Resources Work Group (OMS WGs) provide this feedback to MISO on its Market Pricing Circuit Breaker proposal for extended duration EEA3 energy shortage events. This feedback is from OMS work groups and does not represent a position of the OMS Board of Directors.

On May 9, 2024, the OMS WGs submitted feedback to MISO encouraging the inclusion of a VOLL circuit breaker mechanism(s) in its overall scarcity pricing reform package. The OMS WGs appreciate MISO’s receptiveness to this request as demonstrated by the presentation at the July 9th MSC. MISO’s proposed circuit breaker mechanisms and associated sequencing appear to be a reasonably structured and substantiated means of protecting end-use customers from prolonged exposure to MISO’s proposed $10,000/MWh VOLL.

To increase understanding, the OMS WGs recommend that MISO provide additional justification on the decision to reduce real-time VOLL under CB1 after EEA3 load-shedding has existed for four hours. Are there studies of customer willingness to pay, market participant behavior, or other MISO market dynamics that indicate four hours is the appropriate number? Additionally, while the OMS WGs appreciate the desire for circuit breaker logic to be automated, we ask that MISO consider whether some discretion for MISO operators is warranted if VOLL pricing is not effectively motivating the desired market participant behavior after four hours of EEA load-shedding. The OMS WGs also encourage MISO and stakeholders to explore whether the circuit breaker mechanisms should apply footprint-wide during more localized max generation events (e.g., a portion of the footprint).

Despite these questions, the OMS WGs view MISO’s proposed circuit breaker mechanisms as a workable solution within MISO’s overall scarcity pricing reform effort and one that offers more protection to ratepayers than a multi-day/week-long event under today’s VOLL of $3,500MWh.