MSC: Updating of VOLL and EDR Offer Cap Solutions (MSC-2019-1) (20240118)

The appropriate Value of Lost Load (VOLL), once determined, should be used for both Price Caps and EEA3 administrative price. MISO should exercise caution not to rashly increase VOLL, dislocating the market and shocking its participants. The real life economic impacts of an extended period of time with VOLL pricing need to be mitigated by a reasonable increase in VOLL from the current $3,500/MWh, a “circuit breaker” mechanism to cap market losses, or both.

MidAmerican Energy appreciates the opportunity to provide feedback on the updating of VOLL and EDR offer cap solutions (MSC-2019-1).

MidAmerican would like MISO to better explain why it makes sense to tie the value of lost load to the financial loss experienced by the actual customer. Under most electric tariffs, there is no mechanism for that customer to receive any payment for lost service.

MidAmerican is also concerned that the use of value of lost load doesn’t truly penalize the market participant that should be penalized.  That could be best explained through an example. Assume two market participants with one being 1,000 MWs short in the day ahead market compared to load (MP1) and the other being 1,000 MWs long compared to load (MP2). If MP2 loses 1,000 MWs in real time requiring load shed, MP2 will be the one that experiences the financial pain in addition to having to share load shed with MP1 on a load ratio share even though MP2 was able to generate their own needs in real time. Although this is the how it would work today, raising VOLL only further exacerbates the inequities of the current market design. MISO should also consider that if you raise VOLL too high, that could potentially also cause inefficiencies in the market. At some point, if the risk gets high enough, market participants may be too conservative with things like load forecast or generator availability.

Like many other MISO market participants, MidAmerican is a rate regulated vertically integrated utility, whose main objective is to keep rate payer rates low, while providing them reliable energy. Given that structure, MidAmerican believes that use of a higher VOLL would be appropriate to incent additional LMRs and future peaking type generation that can be captured in real time when not committed in the day ahead market, but severe financial punishment to those that lose generation in real time should not be considered lightly, as it eventually will end up resulting in higher rates to customers.

Advanced Energy Management Alliance

MISO Market Sub-Committee (MSC)

“Updating of VOLL and EDR Offer Cap Solutions (MSC-2019-1) (20240118)”

February 8, 2024

Advanced Energy Management Alliance (“AEMA”) ^[1] respectfully submits the following comments to the MISO Market Sub-Committee (“MSC”) on the feedback request made by MISO at the January 18, 2024, meeting of the MSC.^[2] AEMA is a trade association under Section 501(c)(6) of the Federal tax code whose members include national distributed energy resource companies and advanced energy management service and technology providers, including demand response (“DR”) providers, as well as some of the nation’s largest demand response and distributed energy resources. AEMA members support the beneficial incorporation of distributed energy resources (“DER” or “DERs”), including advanced energy management solutions, into wholesale markets as a means to achieving electricity cost savings for consumers, contributing to system reliability, and ensuring balanced price formation. These comments represent the collective consensus of AEMA as an organization, although they do not necessarily represent the individual positions of the full diversity of AEMA member companies.

At the January 18^th meeting of the MSC, MISO reviewed their proposal to update the Value of Lost Load (VOLL) calculations and highlighted multiple MISO Tariff items that are connected to the VOLL. One of the impacted items identified by MISO staff was the implications to Emergency Demand Response (EDR). MISO staff shared multiple alternatives to potentially removing the direct Tariff link between EDR Offer Cap and VOLL. One of the options suggested by MISO staff would be to “retire and/or replace the EDR instrument.”

AEMA supports the update of VOLL and related revisions to Offer Caps within the MISO market; however, AEMA does not support retiring the EDR instrument and offers the following comments:

• EDRs are an Important Market Participation Option: As MISO continues to examine the resources needed to support system reliability, MISO should be examining additional models for participation and not eliminating existing models that provide important options for participants. In the case of EDR, this option is the primary mechanism for a customer who is willing to respond during a system emergency to avoid load shedding procedures but does not want to respond to daily market signals. For some customers, there is a willingness to respond to system emergencies to support their communities and avoid unplanned outages. The EDR model allows those customers to signal their willingness to respond.
• EDR Facilitates a Compensation Mechanism: Additionally, the EDR participation model gives a compensation mechanism that is not otherwise available for emergency only resources. The EDR pricing point triggers compensation for the impact on customer operations similar to Price Responsive Demand. The EDR is one of the few proxies for Price Responsive Demand within the MISO system. MISO should examine additional ways to incorporate demand response into the market systems with compensation mechanisms that do not require full market participation. For example, could MISO establish a pre-emergency price responsive option that bridges between emergency only and daily market participation? These resources could be activated at high prices, but still ahead of VOLL, potentially reducing overall market costs to consumers.
  
  
• EDRs Allow Participants to Mitigate Risk: The ability of a market participant to cross-register an LMR capacity resource as an EDR allows for those resources to collect financial compensation for each successful EDR This compensation covers the opportunity costs of associated curtailments and mitigates the risk uncertainty associated with an uncertain number of deployments. Currently, the only compensation mechanism for an LMR is through capacity accreditation, but the actual performance obligations for LMRs is highly uncertain. Some planning seasons include LMR activations, but many seasons have no activations at all. In other words, allowing a price point for EDR participation allows participants to supplement the capacity offer with the actual opportunity cost of an emergency deployment, which can be significant for some customers. This can be likened to traditional power plants that are compensated for their capacity benefit and their energy costs as committed in the market. Demand-side resources, including emergency only demand resources, should have the same options for compensation.
  
  
• Examination of Additional Participation Models: During the MSC, MISO indicated that the number of registered EDRs was not significant and suggested that this low participation level might be a reason to eliminate the EDR model. AEMA encourages MISO to examine the reason for low EDR registrations, particularly as joint LMRs. MISO should ask why resources are not cross registered to obtain additional financial remuneration. An understanding of the reasons that this resource type is not being fully utilized may help create better market options for resources that could be available to MISO Operations as price-responsive demand.

AEMA appreciates consideration of these comments by MISO staff as part of reforms to improve scarcity pricing and price formation in MISO. We welcome any questions, and encourage you to contact either Katherine Hamilton, Executive Director of AEMA, or DeWayne Todd, representative of AEMA, should you wish to discuss this with AEMA members.      

Respectfully Submitted,

Katherine Hamilton
Executive Director, Advanced Energy Management Alliance
Katherine@aem-alliance.org
202-524-8832

or

DeWayne Todd
DDT LLC
dewaynetodd1297@gmail.com
812-573-8052

[1]  For additional information, see AEMA website: http://aem-alliance.org

[2]  20240118 MSC Item 06 Continued Reforms to Improve Scarcity Pricing and Price Formation (MSC-2019-1).pdf

WPPI offers the following feedback on the 1/18/2024 MSC presentation, Item 06 Continued Reforms to Improve Scarcity Pricing and Price Formation (MSC-2019-1) - Updating VOLL and EDR Offer Cap:

• (1) “What value of Value of Lost Load (VOLL) would be appropriate to serve as the [a.] Locational Marginal Pricing (LMP)/Marginal Clearing Price (MCP) Price Cap and [b.] Administrative price applied during MISO-directed load-shedding (EEA3)”
  • WPPI’s observations:
    • VOLL estimates across customer load segments vary widely (s. 33-35).
      • Across all 3 customer load segments, VOLL estimate for an 8-hour outage was highest: residential $8K, small commercial/industrial $266K, and large commercial/industrial $175K.
      • Range of remaining VOLL estimates by customer load segment:
        • Residential: $3k-$5K, midpoint of range, $3800.
        • Small C&I: $77K-$178K, midpoint of range, $127K.
        • Large C&I: $26K-$68K, midpoint of range, $47K.
    • Focusing on Capacity Emergencies with MISO-directed load-shedding (s. 9): average duration (10 and 2.3 hours), 6 hours.
      • Following MISO’s 8/31/2021 filing “Addressing the Applicability of Value of Lost Load Pricing During Emergency Events” (effective 10/31/2021), Local Transmission Emergencies (and Transmission System Emergencies) will no longer have VOLL pricing applied in the case of MISO-directed load-shedding.
      • QUESTION FOR MISO: Under that MISO 8/31/2021 filing, what would the status of each of the Capacity Emergencies (Hurricane Laura, Winter Storm Uri) listed on the slide be? Would it still have been a Capacity Emergency, or would it have been a Local Transmission Emergency or Transmission System Emergency?
    • Combining VOLL estimates across customer load segments, using interclass weights (s. 13) or survey results of % of total load shed (s. 15):
      • VOLL for a 6-hour outage: $86K - $109K (6/8 of results for an 8-hour outage).
      • Using midpoint of range of remaining VOLL estimates: $44K-$57K.
  • WPPI’s initial thoughts on value of VOLL that would be appropriate to serve as the (a.) LMP/MCP Price Cap and (b.) administrative price applied during MISO-directed load-shedding:
    • Focus on value of VOLL for purposes of reasonable compensation.
      • Moreover, in the case of (b.) during MISO-directed load-shedding during a Capacity Emergency, vs. value of VOLL for punitive purposes, given no one (especially utilities) need to be convinced to try to avoid MISO-directed load-shedding.
    • It seems reasonable to consider an LMP/MCP Price Cap that is lower than the administrative price applied during MISO-directed load-shedding.
    • Even statistically valid ways to combine VOLL estimates across customer load segments result in values of VOLL that seem far too high for residential customers.
    • Aside from the residential customer VOLL estimate for an 8-hour outage ($8K), updated residential VOLL estimates ($3K-$5K) are in the ballpark of the current $3500 VOLL.
    • Taking all the above into account, WPPI does not see a compelling reason to change the current $3500 VOLL. However, WPPI can see a reasonable case for changing VOLL to $6K (6/8 of residential VOLL estimate for an 8-hour outage). At that level of VOLL ($6K), WPPI would be fine continuing to use it for both the LMP/MCP Price Cap and administrative price applied during MISO-directed load-shedding.
    • If MISO proceeds with a new value of VOLL that is materially higher than residential VOLL estimates, MISO should provide Load Serving Entities the ability to make price responsive demand bids in real-time (analogous to current Day-ahead Price-sensitive Demand Bids).
• (2.) “Preferred direction for Emergency Demand Response (EDR) Offer Cap (see slide 19 in Item 06 posted presentation).” WPPI addresses each of the alternatives MISO is exploring to remove the direct Tariff link between the EDR Offer Cap and VOLL:
  • A. Retain the existing EDR infrastructure and set the EDR Offer Cap to a fixed value, such as the Energy Offer Hard Cap of $2000/MWh.
    • WPPI is open to this alternative if the EDR Offer Cap fixed value is set at or above the current allowed value of $3500.
  • B. Utilize the same offer validation process as for other resources.
    • WPPI is also open to this alternative.
  • C. Retire and/or replace the EDR instrument, which as further described on the slide means file with FERC to remove Schedule 30 Emergency Demand Response Initiative from the Tariff.
    • WPPI does not support this alternative. The EDR Initiative facilitates the participation of resources in MISO during an emergency, when they are most needed. In addition, through the EDR Initiative, Load Modifying Resources can surface to MISO their cost information that can then inform market energy prices.

WEC Energy Group does not have a specific VOLL in mind to serve as the Locational Marginal Pricing (LMP)/Marginal Clearing Price (MCP) Price Cap and Administrative price applied during MISO-directed load-shedding (EEA3).  VOLL should be high enough to incent proper supply and demand side behavior but not irrationally high in relation to the price caps in other markets.

Illinois Commerce Commission (ICC) Staff appreciates MISO’s discussion regarding updating the VOLL figure and scarcity pricing. The current value of VOLL is likely too low and should be set higher to properly value energy and incentivize generator performance during periods of scarcity. Given the magnitude of potential increase in VOLL and that, in some cases, higher prices may be unactionable due to issues such as transmission constraints or generator operating limits, MISO should also investigate some sort of circuit breaker option to protect load from undue energy prices.

Please note that this feedback is from the ICC Staff and does not represent an official position of the ICC or any of its Commissioners.

Mississippi Public Service Commission (MPSC) Response to MSC: Updating of VOLL and EDR Offer Cap Solutions (MSC-2019-1) (20240118)

In the January 18, 2024, meeting of the Market Subcommittee (MSC), stakeholders were invited to review and submit feedback on the Updating of VOLL and EDR Offer Cap Solutions (MSC-2019-1) by Thursday, February 8, 2024. NOTE: The presentation has been updated and reposted to include more descriptions about MISO's VOLL Study approach, and more detailed VOLL results.

MISO is especially interested in:
   • What value of Value of Lost Load (VOLL) would be appropriate to serve as the:
      o Locational Marginal Pricing (LMP)/Marginal Clearing Price (MCP) Price Cap; and
      o Administrative price applied during MISO-directed load-shedding (EEA3)
   • Preferred direction for Emergency Demand Response (EDR) Offer Cap (see slide 19 in Item 06 posted presentation)

Feedback is due 2/8/24.

Feedback

VOLL

The MPSC believes that Value of Lost Load (VOLL) calculations should not be used to set an energy locational marginal price (LMP) cap, including during emergencies, for the following reasons:

First, it’s inherently inaccurate as between different types of customers (retail, commercial and industrial), different locations (state, zones, subregions) and different durations. A customer’s willingness to lose electrical service in southern Mississippi is likely very different from a customer in Illinois. And, averaging the values ensures that each customers’ value is wrong (i.e., by design, it underestimates the value to some customers and overestimates the value to others). Averaging may simplify the process for MISO but it in no way accurately predicts any single customer’s value.

Second, VOLL calculations rely on assumptions that do not reflect reality at the time power is lost. For example, the value to an aluminum smelter that is not producing aluminum at the time power is lost is significantly less than a smelter in the middle of a production run.

Third, FERC issued Order No. 831 to address emergency pricing, including a cap, for energy.

Fourth, Southwest Power Pool (SPP) does not use VOLL for any purpose. Considering the amount of interchange between MISO and SPP, use of a common pricing methodology would eliminate a seam (difference) between MISO and SPP.

EDR Offer Cap

The MPSC takes no position on EDR.

FEEDBACK ON VOLL ISSUES ON BEHALF OF THE LOUISIANA COMMISSION STAFF

At the 1/18/24 MSC meeting MISO made a presentation on "Continued Reform to Improve Scarcity Pricing and Price Formation – updating VOLL and EDR Offer Cap."  It seeks feedback on what VOLL would be appropriate to serve as the LMP/MCP price caps and the administrative price applied during MISO-directed load-shedding EEA3.  MISO also seeks feedback for the EDR offer cap.

• The Louisiana Commission Staff (LPSC Staff) takes no position at this time on the EDR offer cap.

• As to VOLL, the LPSC Staff recognizes the need to have a mechanism in place to attract generation, especially during EEA3 events when firm load shed is imminent or in progress. And it recognizes that there can be significant economic consequences to load interruptions.

• However, calculation of those economic consequences through an increased VOLL is not the only factor that should be considered. The VOLL value varies widely between ratepayer classes (residential, commercial, industrial), geographic and socioeconomic factors, customer sizes, flexibility and costs of industrial processes, and whether customers have access to backup generation. A single VOLL value that averages the VOLL value for industrials, commercial customers, and residential customers may no longer be appropriate.  Simply averaging the values ensures that each customers’ value is wrong (e., by design, it underestimates the value to some customers and overestimates the value to others).

• It is important to ensure there are ratepayer protections to ensure an increase in VOLL does not result in unnecessary financial hardship to ratepayers, particularly residential and small commercial customers. MISO has mentioned the use of a "circuit breaker" as one method of ratepayer protection. It will be important for MISO to provide a detailed analysis to provide financial implications on the typical residential and commercial ratepayers if a higher VOLL is instituted and goes into effect.

• Perhaps, VOLL could have different levels depending on its purpose or dependent on its circumstances. For example, MISO could evaluate whether VOLL values could be higher for life-threatening circumstances (g., very extreme cold or heat) and lower otherwise.

• VOLL should never be higher than necessary to attract needed resources. Thus, perhaps the VOLL calculation should consider the costs of needed additional generation in addition to customer valuations of lost load.

• It appears MISO believes that instituting a higher VOLL will increase available resource supply. While in theory, this can be expected, the MISO footprint is dominated by vertically integrated LSEs with their own resources. It does not seem certain that a higher VOLL necessarily will achieve higher results. In any case, it will be important for MISO to provide market intelligence/analysis regarding the approximate MW increase in supply that a higher VOLL will bring to the MISO footprint. This market intelligence/analysis is important to ensure market theory results in the desired results.

• The VOLL values that MISO provides on Page #13 of its presentation can be misleading to the typical ratepayer as distribution outages of several hours per year are typical. Ratepayers are assimilated to distribution system outages, so it appears there is a disconnect between what these VOLL values tell us and what is reality. How does MISO view this conflict?

• Caution should be exercised when determining VOLL, as standby/backup generation is rather widespread, and a high VOLL to owners of standby/backup generation can be financially harmful if they do not have the visibility to determine when/if they are economically better off accessing that backup/standby generation. Does MISO consider the proliferation of backup/standby generation in its VOLL calculations?

• The table on page #13 references inter-class weights. A more detailed description and documentation is requested supporting these inter-class weights.

• The table on page #13 is not clear. For example, is the VOLL value for an outage duration of 2 hours equal to the corresponding value in the table divided by 2 or is it the actual value posted? Please clarify.

• Does MISO consider load shed is typically on a rotating basis. Did MISO consider this aspect of load shed when evaluating VOLL for longer term outages?

• MISO provided a table on page #9 of the presentation that appears to lead one to believe an increase in VOLL would have reduced the magnitude of these load shed events. Does this accurately represent the message MISO wishes to convey? For example, the 2020 load shed event was related to Hurricane Laura. Can MISO advise as to the impact a higher VOLL would have had on this load shed when considering the magnitude of major backbone transmission outages in the area? What impact would a higher VOLL have on Local Transmission Emergencies experienced in 2021? Since the 2021 Capacity Emergency was a function of SPP and the Joint Parties not allowing an increase in flows across the RDTL, would a higher VOLL have mitigated this load shed event?

• Any increased VOLL should be fully supported with an analysis that it is needed, that it will produce the intended results, that it is no greater than needed to incent access to needed reserves, and that the harm to ratepayers is minimized. This process should be fully transparent and fully vetted in the MISO stakeholder process.

American Municipal Power (AMP) appreciates the opportunity to provide feedback on updating of VOLL and EDR Offer Cap and provides the following comments.

VOLL

• AMP agrees that shortage prices should properly reflect the risks of the current operating conditions.
• VOLL can vary by market segment, geographic location, temporal factors, duration and frequency of outages, and the amount of advance notification before outage. Therefore, if MISO’s intent is to use only one VOLL, MISO and stakeholders need to have a better understanding of how the Local Balancing Authorities (LBAs) determine which customer classes are impacted when carrying out MISO’s load-shedding directives.
• More information and examples are also needed regarding the price formation opportunities listed on slide 7 of MISO’s posted presentation to better understand the impacts before stakeholders can make recommendations or take a position.
• Given the small percentage (22%) of total load shed for the Small Commercial & Industrial (C&I) customer class shown on slide 15 of MISO’s posted presentation, AMP would be opposed to using the Small C&I customer class as a basis for VOLL.

EDR Offer Cap

• Alternatives A and B on slide 19 of MISO’s posted presentation are potential alternatives that should be further explored and vetted by MISO and stakeholders.
• AMP does not believe alternative C (retire and/or replace the EDR instrument) on slide 19 of MISO’s posted presentation is a suitable alternative, as currently the EDR framework is the only means for load with costs above the current MISO market offer caps to participate. This makes EDR important for encouraging price responsive demand to reduce prior to involuntary load shed. MISO’s goal should be to encourage load participation that helps MISO operations. MISO should not remove or limit options for market participation altogether for some load, where some load would cease market participation.

Wolverine is not convinced that the current VOLL price needs to change. As explained below, Wolverine is concerned that increasing the VOLL price will only result in punitive damages and do little to improve the reliability of the grid. Therefore, Wolverine requests MISO cautiously approach increasing the VOLL price and appropriately consider the intended purpose of a scarcity price mechanism as well as the unintended consequences (e.g., bankruptcy, public health). Wolverine may have additional comments and positions that arise from MISO’s upcoming February presentation.

1. Electricity is an essential service. For many users, particularly residential, losing electricity is a life-or-death situation where there is little-to-no concern about the cost. This is especially important during inclement/extreme weather where heating and cooling are the primary contributors to demand. One would expect this life-or-death scenario to be more critical during the colder winter season, so it is surprising that MISO’s data on Slide 33 of the January 18, 2024 MSC presentation represents that residential customers would be more willing to shed load at a lower price in the winter than in the summer. This scenario only worsens as beneficial electrification (which includes transition of heating devices from fossil fuels fired to electric resistive or heat pumps) increases the reliance to keep the electric service on, not curtail it or administratively set high prices. 
2. Extended emergency events with extended periods of VOLL pricing has the likely potential to bankrupt organizations and customers. Look no further than the recent emergency events in ERCOT and PJM that have resulted in litigation, and in some instances settlements. Wolverine encourages MISO to implement processes that limit the duration of VOLL pricing such as a “circuit breaker” mechanism.
3. If the intent and purpose of implementing VOLL pricing is to incentivize more supply, then connecting the ORDC with VOLL initially appears reasonable. If the intent is to encourage load shed/reduction, then MISO should not connect the ORDC with VOLL.

Lastly, implementation of VOLL pricing is a reactive measure, and Wolverine encourages MISO to focus more attention on proactive measures that would better support the reliability of the grid before an issue arises. While these proactive measures may initially appear to result in higher costs, these costs are likely far lower when compared against the costs incur from implementing VOLL pricing – e.g., better incentives for DR/LMR to participate in DA/RT markets or establishment of multi-day commitments for forecastable extreme events.

Vistra Corp. (“Vistra”) appreciates MISO providing parties with the opportunity to submit feedback on the “Continued Reforms to Improve Scarcity Pricing and Price Formation” presentation that Staff shared during the January Market Subcommittee (MSC) meeting. Vistra encourages MISO to strongly consider improvements to the formation and slope of the Operating Reserve Demand Curve (ORDC) to ensure that the ORDC properly reflects the reliability value of reserves; this includes increasing the lower and upper bounds of the ORDC and eliminating the current stair-step pricing methodology in favor of a sloped curve that will properly reflect the value that reserve resources provide in preventing load shed at each point on the curve. The recent extreme weather events that have impacted the MISO system highlight the need for accurate pricing leading up to and during scarcity and emergency conditions to signal the value of reserve products over a range of reserve shortage levels. Over the long term, an improved ORDC from MISO will act as a critical price signal to encourage new generation investment when and where it is needed most.  

Vistra looks forward to additional discussions on the ORDC during the February MSC meeting.

The Entergy Operating Companies ("EOCs")^[1] appreciate the opportunity to provide feedback on Updates to Value of Lost Load (VOLL) and Emergency Demand Response (EDR) Offer Cap. The EOCs comments regarding the feedback requested is provided below. 

 What value of Value of Lost Load (VOLL) would be appropriate to serve as the:

• Locational Marginal Pricing (LMP)/Marginal Clearing Price (MCP) Price Cap; and
• Administrative price applied during MISO directed load directed load--shedding (EEA3)

1. The first consideration is the real-time response of resources – initially, the EOCs would want MISO to examine what implied additional real-time resource response, questioning if resources unresponsive to $3500 might react to a higher price. Entergy acknowledges the potential for increased availability, but as an LSE, Entergy has concerns about a higher VOLL negatively impacting customers who would have to pay for higher Load costs due to the increase in VOLL. Additionally, the EOCs seek insights into market volatility at various VOLL levels, emphasizing the need to understand the supply side response and urging caution in rising the cap until MISO’s studies clarify the potential impact on supply and demand.
2. The EOCs would also be interested in any long-term response of resources – will this lead to additional generation to be built or DRR/LMRs to enter the market? Are there demand-side customers that would curtail at a higher price that aren’t curtailing now – if so, how many MW? MISO current capacity market and new capacity market design should be considered with raising this Cap value. Has MISO conducted any studies to know if raising this price Cap brings on any incremental supply by doing this? We ask that MISO provide clarification or information to Stakeholders on how do Market Participants weigh the additional supply against the increased market volatility? It’s important for MISO to present both aspects for Market Participants to make an informed decision.

In summary, the EOCs refrain from taking a strong stance on raising the current VOLL, advising MISO to approach cautiously and thoroughly discuss the consequence of a higher VOLL

Preferred direction for Emergency Demand Response (EDR) Offer Cap

The EOCs suggest that, due to the limited use of EDRs by MISO in the past and the difficulties associated with dispatching EDRs that MISO pointed out, perhaps a better use of time and resources would be to focus more on DRRs and LMRs as a way to provide demand-side and distributed energy and capacity.  The EOCs recommend that MISO take into account existing comments and feedback from Stakeholders regarding LMR accreditation reforms, aiming to improve the program and optimize the utilization of LMRs/DRR assets more efficiently.

The EOCs are not against to the retirement of the EDR instrument altogether.

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

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)

NIPSCO Large Customer Group (NLCG)[1]

Regarding

MISO Market Subcommittee

Updating of VOLL and EDR Offer Cap Solutions

(MSC-2019-1)

February 8, 2024

I. Introduction and Summary of Comments

ABATE, CMTC, IIEC, LEUG, MIC, NLCG and TIEC appreciate the opportunity to provide comments to MISO on the topics of the Value of Lost Load (VOLL) and Emergency Demand Response (EDR) service.

With respect to VOLL, the End Customer Sector opposes any changes in VOLL pricing at this time based on analysis provided by MISO to date which has not provided adequate support or analysis to justify increasing the VOLL.  In particular, MISO has not considered the impact that such action would have on customers.  The VOLL should be based on a thorough analysis and accurate data because a higher VOLL could create a significant risk of imposing much higher costs on customers.  Moreover, a higher VOLL may not induce incremental generation availability due to non-economic restrictions on generators that are independent of market price.  We urge MISO to conduct full and thorough analysis that includes consideration of customer perspectives, and to impose appropriate limitations on the application of VOLL pricing to avoid unnecessarily and unreasonably exposing customers to higher costs.

With regard to EDR service, the End Use Customer Sector opposes MISO’s proposal to eliminate the product offering.  MISO should retain the current EDR product, but with appropriate reforms if needed to make the product more valuable to MISO during system emergencies.  We are opposed to discontinuing the EDR product because such an action would remove one option that is currently available to address system needs under emergency conditions.  Rather than discontinuing EDR, it would be more appropriate for MISO to retain this product and to work with demand response aggregators and customers to explore ways to reform the product to make it more useful to MISO’s operators.  Moreover, instead of increasing EDR participation, MISO’s suggestion of lowering the EDR offer cap to the energy offer hard cap would likely make the EDR product less attractive to customers and reduce EDR participation by artificially restricting the upper bound of EDR offers.  Consequently, we are opposed to proposals to reduce the current EDR offer cap. 

II.  Background

Through the MISO Market Subcommittee (MSC), MISO is undertaking an ongoing initiative to revisit its scarcity pricing policies.  As part of this effort, MISO is working through the MSC to evaluate the merits of potentially increasing the VOLL from its current level of $3,500 per MWh that was last set in 2009.  The VOLL is used to administratively establish the energy market price during system capacity emergencies, and it is also used to administratively establish the upper bound for operating reserve prices under conditions of tight operating reserves.

MISO recently updated its VOLL modeling and calculations.  MISO’s analysis relied on a meta-analysis of VOLL developed by Lawrence Berkeley National Laboratory (LBL), but using MISO-specific drivers.  MISO states that this was the same approach that MISO used to develop the current VOLL that was established in 2009.  The analysis produced differentiated VOLLs by state, outage duration, season, time-of-day, and industry type.  MISO developed updated VOLL estimates for one hour, two hour and eight hour outage durations.  Outages with an eight hour duration had the highest VOLL estimates.  MISO asserted that a VOLL that reflects an eight-hour outage duration is most consistent with the duration of previous load-shedding events in MISO.  MISO’s analysis resulted in a wide range of estimated VOLLs that vary significantly by customer class, outage duration and other factors.  MISO presented information to stakeholders regarding its updated VOLL analysis during the January 18, 2024 MSC meeting.  MISO provided supplemental information regarding its VOLL analysis on January 19, 2024. 

In parallel with its scarcity pricing initiative, MISO is reevaluating its EDR product.  MISO’s Tariff establishes several types of demand response service, one of which is EDR service.  As an EDR, customers can offer to reduce their loads specifically when MISO declares an emergency event (e.g., NERC EEA2 or EEA3 events).  During the January 18, 2024 MSC meeting, MISO stated that there is a limited amount of capacity registered as EDRs, and pointed out that MISO has only deployed EDRs once since the inception of the service.  Consequently, MISO is evaluating the merits of either discontinuing EDR service or establishing a new mechanism to establish the offer cap for EDR service.   Specifically, MISO is exploring three alternatives to the status quo for EDRs, including potentially discontinuing EDR service entirely due to its limited use and encouraging existing EDRs to convert to Load Modifying Resources (LMRs) or Demand Response Resources (DRRs).  In the alternative, MISO is considering the possibility of setting the EDR offer cap at a fixed value, such as the energy offer hard cap of $2,000 per MWh.  A third option would be to allow EDR offers above the soft and hard energy offer caps, but with verification of the offers by the MISO IMM.

During the January 18, 2024 MSC meeting, MISO requested stakeholder feedback regarding the VOLL level that would be appropriate to serve as the energy market price cap and the administrative price applied during MISO-directed load-shedding (EEA3) events.  In addition, MISO solicited feedback regarding the preferred direction with respect to the EDR offer cap.  The balance of these comments provide the feedback of the End-Use Customer Sector regarding these topics.

III.   Comments Regarding the VOLL Update

MISO has not provided adequate support or analysis to justify increasing the VOLL in MISO.  In particular, MISO has not considered the impact that such action would have on customers.  A higher VOLL creates a significant risk of imposing much higher costs on customers and failing to induce incremental generation availability due to non-economic factors that are independent of market price.  For these reasons, we oppose changes to VOLL pricing at this time, and urge MISO to proceed cautiously and to conduct additional analysis regarding the VOLL prior to taking any measures to change the status quo in this regard.  Our concerns are discussed in more detail below.

The End Use Customer Sector appreciates the information that MISO has provided to date regarding its VOLL update methodology and analysis, including the expanded information that MISO provided in Appendix 2 of its updated January 19, 2024 scarcity pricing presentation regarding the steps that it undertook in its VOLL analysis.  However, in order to provide stakeholders an adequate opportunity to provide fully informed feedback regarding MISO’s VOLL analysis, we urge MISO to provide the complete model and inputs that it relied upon to develop its MISO VOLL estimates.  In particular, we request access to MISO’s full analysis that it used to develop the Willingness to Pay study and the associated data cleaning steps that MISO conducted as part of its modeling and analysis, as summarized on slide 32 of MISO’s updated presentation.  Access to this modeling and data would allow us to better understand the development of MISO’s VOLL estimates and enable us to provide more informed feedback regarding MISO’s analysis.

Based on the information and data that MISO has provided to this point, it appears that the Willingness to Pay calculation that MISO used to develop its VOLL estimates partially relies on the results of customer surveys, a process that is fairly subjective.  As we understand it, the Willingness to Pay estimates were obtained by analyzing the results from 28 customer value of service reliability surveys/studies conducted by 10 major U.S. electric utilities over a 16-year time period from 1989 to 2005.  The baseline data used in MISO’s study was derived from a VOLL paper prepared by the Lawrence Berkeley National Laboratory (LBL).  As the LBL’s VOLL paper notes, half of the data from LBL meta-database is taken from customer surveys that were already 15 or more years old at the time that the LBL paper was published in 2015.  Moreover, the customer surveys were conducted at different times using varying survey designs, which can lead to inconsistent survey results.  For these reasons, the LBL paper emphasizes the need for a coordinated, nationwide survey effort that collects interruption cost estimates for many regions and utilities simultaneously, using a consistent survey design and data collection method, in order to enhance the quality of the VOLL estimates.[2]  The VOLL estimates developed by MISO using the LBL meta-database should be interpreted and applied very conservatively, with these concerns and limitations in mind.

Furthermore, MISO should develop a benefit-cost analysis that provides a sound economic basis for updating and resetting the VOLL.  This analysis will help MISO evaluate the impacts that raising the VOLL to a specific level would have on customers.  Importantly, the analysis would demonstrate whether a higher VOLL level provides benefits to customers through a reduced cost of out-of-market generation dispatch that exceeds the incremental cost that customers would incur through higher energy market and Operating Reserve Demand Curve (ORDC) prices during periods of system scarcity.  Absent this type of analysis, customers have no analytical basis to assess whether a specific higher VOLL level would be beneficial relative to the status quo of relying on generator redispatch to ensure adequate generation availability during periods of power supply scarcity.  A higher VOLL is only a more efficient outcome from the customer perspective if the higher scarcity pricing induces incremental generation availability through the market at a cost that is lower to customers than the cost of directing the out-of-merit redispatch of generation to balance the system.  It is important that MISO assess the merits of implementing a higher VOLL from this perspective.   

 We also caution that establishing a higher VOLL may not induce significantly higher generation availability during system emergencies due to extreme weather conditions, emissions limitations or other operating restrictions that limit generation availability under emergency conditions, irrespective of the market price.  These non-economic limitations on generation availability should be considered when evaluating the merits of resetting the VOLL.  If these operational limitations restrict significant quantities of incremental generation from offering into the market during system emergencies, a higher scarcity price will not bring significant amounts of new generation to the market during tight system conditions.  Instead, a higher VOLL would increase costs to customers without the asserted benefit of inducing incremental generation availability.  MISO should keep these concerns in mind and proceed conservatively as it considers updates to the VOLL. 

During the January 18, 2024 MSC meeting, MISO asserted that a VOLL that reflects an eight-hour outage duration is most consistent with the duration of previous load-shedding events in MISO.  However, MISO’s assessment of the typical outage duration appears to be based on a very limited data set of only six outages, as shown on slide 9 of MISO’s January 19, 2024 updated MSC presentation.  Moreover, in the data set provided, only two out of the six outages exceeded eight hours in duration, and four of the six outages were 5.5 hours or less in duration.  Further, only two of the six listed outages were capacity emergencies that would trigger administratively-induced energy pricing at VOLL.  Based on the data that MISO provided, we disagree with the premise that a resetting of the VOLL should be determined using VOLL estimates for an eight hour outage duration.  Instead, a shorter outage duration assumption to establish the VOLL would be more appropriate.

During its MSC meeting presentation, MISO observed that residential loads are more likely to be shed during system emergencies relative to other customer classes.  We agree with this observation.  We also note that large customer classes who incur higher economic losses during service interruptions are the most likely to reduce their economic losses and to mitigate the cost of power interruptions through measures such as installing backup generation.  Consequently, in considering an appropriate VOLL value, MISO should focus on the VOLL estimates associated with residential customers, as they have the highest exposure to service interruptions and the lowest VOLL estimates of the customer classes modeled in MISO’s VOLL analysis.  Setting energy scarcity prices at levels that reflect the initial cost of shedding residential load, as opposed to the outage costs associated with other customer classes, would more accurately reflect the marginal cost of shedding firm load during system emergencies.  This approach would also avoid an outcome that sets VOLL at the unreasonably high levels modeled by MISO for the small and large commercial and industrial classes.

Finally, we emphasize that resetting the VOLL at a higher level significantly increases customer risk. Specifically, a higher VOLL level would expose customers to substantially increased costs even if the VOLL price is only applied for a short period of time.  A higher VOLL could lead to more frequent periods of extremely high LMPs in the MISO energy market and/or much higher levels of LMPs during such events.  Even short periods of elevated energy prices set at VOLL can have substantial impacts on customer bills. 

The experience of the Electric Reliability Council of Texas (ERCOT) during Winter Storm Uri in February 2021 underscores this concern.  During that extreme weather event, the decision to administratively-induce extremely high scarcity prices for an extended period of time imposed enormous costs on market participants with a large exposure to real-time market prices.  Notably, the high prices failed to induce a market response sufficient to balance the system because non-economic constraints on generation availability made incremental generation unavailable at any price.  As a result, customers were exposed to both high real-time energy prices and extended blackouts.  

These concerns highlight the need for MISO to impose appropriate limitations on the application of VOLL to reduce customer exposure to high costs.  This could be accomplished by applying some form of the Peaker Net Margin calculation used in ERCOT to reduce the energy market price cap below VOLL when the market generates sufficient revenues to cover the margin that a new peaking unit would require to enter the market.  Alternatively, MISO could consider limitations on the duration of the application of VOLL during emergency events or caps on the revenues collected through VOLL prices, with the goal of reducing customer exposure to the risk of extended periods of VOLL pricing.  We urge MISO to explore potential approaches to limit customer risk associated with VOLL pricing, in conjunction with stakeholders.

IV.  Comments Regarding EDR Service

The End Use Customer Sector urges MISO to retain the current EDR product, but with appropriate reforms if needed to make the product more valuable to MISO during system emergencies.  Members of the End Use Customer Sector do participate in EDR and see value in the EDR product.  We are opposed to discontinuing the EDR product because such an action would remove one option that is currently available to address system needs during emergencies.  Rather than discontinuing EDR, it would be more appropriate for MISO to retain this product and work with demand response aggregators and customers to explore ways to reform the product to make it more useful to MISO’s operators under emergency conditions.  The system is better off with more optionality during system emergencies, not less.  Consequently, EDR should be retained with appropriate reforms to enhance its functionality if MISO’s operators currently find it difficult to timely dispatch EDR during emergencies.

In addition, MISO should more thoroughly explain the problems that it perceives with the current EDR product.  Specifically, MISO should identify and explain the specific factors that have resulted in the EDR product being thinly subscribed and infrequently dispatched.  Stakeholders can then work with MISO to explore methods of addressing these concerns.  As suggested above, EDR demand response aggregators and customers may have useful insights regarding potential means of increasing the value of the EDR product and expanding customer participation.

In its January 18, 2024 MSC presentation, MISO proposed two EDR offer cap solutions.  Specifically, MISO is considering the possibility of setting the EDR offer cap at a fixed value, such as the energy offer hard cap of $2,000 per MWh.  In the alternative, MISO suggested that it could allow EDR offers above the soft and hard energy offer caps, but with verification of the offers by the MISO Independent Market Monitor (IMM).

Under the status quo, the EDR offer cap is set at VOLL.  MISO has not made a sound case for resetting the EDR offer cap at a level that is lower than VOLL.  Moreover, MISO has not thoroughly explained the merits and disadvantages of its two proposed EDR offer cap solutions.  In particular, MISO should explain how either suggested offer cap option could remedy MISO’s stated concerns that EDR service is poorly subscribed and infrequently dispatched.

Instead of increasing EDR participation, lowering the EDR offer cap to the energy offer hard cap, as suggested by MISO, would likely make the EDR product less attractive to customers and reduce EDR participation by artificially restricting the upper bound of EDR offers.  Consequently, we are opposed to proposals to reduce the current EDR offer cap.  The asserted problems with the current EDR product that MISO has identified could potentially be addressed through reforms to the product other than adjusting the offer cap.  MISO should explore alternative approaches to address these concerns with impacted stakeholders, and MISO should provide opportunities to allow customers interested in the EDR product to interface directly with MISO on any potential reforms.    

With regard to the specific merits of the two EDR offer cap alternative solutions proposed by MISO, a fixed offer cap seems to be an arbitrary approach, as a fixed cap could unnecessarily restrict higher EDR offers that could be justified on the basis of cost.  Therefore, if MISO decides to propose an adjustment to the EDR offer cap despite the concerns expressed in our comments, allowing higher EDR offers above the soft and hard energy offer caps, subject to IMM verification, appears to be a more reasonable approach that would not restrict valid EDR offers.

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)

(262) 646-3981

kmaini@wi.rr.com

[1] ABATE, IIEC, LEUG, TIEC, CMTC and MIC 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] Lawrence Berkeley National Laboratory, Updated Value of Service Reliability Estimates for Electric Utility Customers in the United States, January 2015, page 48.

The Environmental Sector appreciates the opportunity to submit the following feedback regarding MISO’s anticipated VOLL reform and consideration of modification to current rules applicable to EDR resources.

Appropriate LMP/MCP Price Cap for VOLL:

According to the spoken part of the January 18, 2024 presentation, in 2009, VOLL was set assuming: a) a one-hour duration (therefore, $/MW = $/MWh); and b) a ratio of 85% Residential and 15% Small C&I, which was representative of how MISO believed LBAs would direct load shed in 2009. At the time, this led to VOLL being set at $3,500/MWh.

As stated by MISO staff during the presentation, if that same formula was used today, VOLL would be set somewhere between $15,000 and $16,000/MWh. Indeed, applying the values presented on slide 13 indicate that this 85:15 ratio would lead to a VOLL of $15,831.20/MWh.^[1]

Since 2009, MISO’s own surveys, interviews, and research has shown that the impact of load shed would be felt differently across the three main customer classes: Residential, Large C&I, and Small C&I. Slide 15 indicates that in MISO’s most recent LBA survey, the customer classes to initially be shed in a wide area request would be divided as follows:

• Residential: 48 percent
• Large C&I: 30 percent
• Small C&I: 22 percent

Using the same methodology that MISO applied in 2009, but with updated load shed ratios, a VOLL calculated using all other considerations that MISO made in 2009 would lead to a value of $28,735.66/MWh. We note that this is lower than the inter-class VOLL shown on slide 13 of $36,888/MWh.^[2]

The question then becomes, are all the other considerations that MISO made in 2009 still valid today? If not, what impact do new considerations have on a new, more appropriate VOLL. At the very least, we present the following factors that should be considered:

• Inflation: Unlike in 2009, whatever formula MISO uses to establish a new VOLL should account for inflation.
• Duration: MISO indicates on slide 16 that “[a]n 8-hour value is most consistent with previous load-shedding events.” However, we don’t believe that VOLL should be adjusted to account for the 8-hour duration $/MW values shown on the VOLL tables as we believe that it is more important to avoid the first hour than it is the last hour, and thus a VOLL based on 8-hour duration $/MW values would undervalue all preceding hours of load shed, potentially providing a lowered incentive for LBAs to ensure that load shed doesn’t occur in the first place.
• Curves and Tiers: MISO indicated during the presentation that it is looking into the possibility of using a demand curve to set VOLL, and we support such a shift. We acknowledge that developing a demand curve for VOLL, and presumably for price floors and ceilings at various MaxGen Event steps, will likely be complicated, but we support the effort regardless. However, if MISO elects to keep a tiered structure, we believe that MISO will also need to reexamine these values alongside its examination of VOLL.
• Investment Signal: MISO should consider the effect that a VOLL curve will have on sending an appropriate investment signal to LBAs to ensure that there are sufficient resources to avoid load shed. We recognize that this is a role of the PRA, but we don’t believe that the fact that the PRA is designed to ensure resource adequacy should then mean that such factors can’t be considered when calculating VOLL.
• Disparate Impacts: While customer-class specific VOLLs are a rough proxy for each respective class as a whole, MISO should recognize that the most under-resourced residential customers are often those least likely to afford mitigation measures and thus, these customers may be more impacted than the average customer within the Residential class. The same may be said of differing business types within both Large and Small C&I. Likewise, when a particular customer is not able to afford to install mitigating technologies this does not mean that they don’t value them more greatly than is often assumed in VOLL studies.
• Seasonal Adjustments: MISO should be sensitive to the changing nature of seasonal risk and be prepared to update its underlying VOLL calculations to incorporate more than just two “seasons.”. In using the “seasons” of Summer and non-Summer,^[3] one risks undervaluing VOLL in winter months when lost load can have dire, even life-threatening impacts.
• Periodic Readjustments: Likewise, MISO should more frequently reevaluate its own application of the LBL meta-analysis to ensure that the variables it uses to calculate VOLL reflect the most up-to-date figures, including the time-of-day risk. Instead of a generalized commitment to reexamine VOLL from time to time, we suggest that MISO commit to a particular cadence, e.g. every X years. This is especially important as we see increased electrification and decarbonization across the economy.

In addition to the above factors, we pose the following questions:

• How does MISO consider the relationship between VOLL and resource adequacy?
• Considering that VOLL traditionally only considers short-term costs, does MISO have any plans to include long-term adaptive costs in its evaluation of VOLL?
• How does MISO weigh private and public benefits when determining VOLL?
• Considering that the consequences of a bulk power system interruption tend to be significantly greater than that of local system interruptions, how does MISO incorporate the indirect costs associated with load shed at the bulk power system level?

We believe that these considerations, on net, suggest that although $28,735.66/MWh is a good starting point for determining the appropriate VOLL, there are still many more considerations that MISO and stakeholders need to explore before settling on a final value. Regardless, we do believe that the factors and questions posed above suggest that the $28,735.66/MWh value should be the lowest VOLL that MISO would consider, and that MISO should not shy away from examining a higher value. Any final VOLL must include an annual inflation adjustment to help maintain the value’s ongoing relevance.

Finally, we strongly encourage MISO to invite LBL to provide an update regarding their recent research regarding VOLL. The Environmental Sector has been in contact with individuals at LBL who are doing this research and we are happy to work with MISO to bring LBL researchers in for a presentation at the next MSC. 

Administrative price applied during MISO-directed load-shedding (EEA3)

The Environmental Sector sees no reason why the administrative price applied during firm load shed (EEA3) should not be set at the VOLL. This would act as a very strong incentive for market participants to build the resources and infrastructure needed to avoid a load shed event, and it would further incentivize stronger ties with MISO’s neighbors. However, we also believe the use of VOLL as the administrative price applied during MISO-direct load-shedding should take into account the existence of congestion so as not to reward those resources that are unable to actually contribute to resolving the imbalance that is forcing MISO to direct load shed in the first place.

Direction for Emergency Demand Response (EDR) Offer Cap

The Environmental Sector has no preference for which of the three options presented MISO may choose, but no matter which choice MISO proceeds with, MISO should ensure that the role that EDRs provide to support the wholesale market and system reliability be maintained. This is especially important given the widely recognized growth in severe weather risks that are stressing MISO’s system with greater and greater frequency.

We also note that even if EDRs were only deployed once since they were first introduced, they still serve an important role just by the mere fact that they are available. However, the fact that EDRs were only deployed once may also suggest the need to adjust how they are deployed so that they are a more useful tool for system operators.

^[1] We note that while a January 26, 2024 update to the presentation slides changed the units on the VOLL tables in MISO’s presentation from $/MWh to $/MW, the numerical values in the one-hour duration columns consequently maintain the same meaning as on the original version of the presentation.

^[2] Even though slide 13 of the presentation indicates a different weighting: “34% Large C&I, 31% Small C&I, 35% Residential,” for the purposes of this feedback response, we believe it is more appropriate to use the information provided by MISO that corresponds with their own research into how LBAs would act today, as summarized on slide 15. However, if MISO has a justification for using different percentages on slide 13 we would like to know what that is, and are of course we are open to supporting those percentages subject to a reasonable explanation.

^[3] See MISO Presentation at slide 11, upper right box.

Voltus Comments to MSC on “Updating of VOLL and EDR Offer Cap Solutions (MSC-2019-1) (20240118)”

February 8, 2024

Voltus appreciates the opportunity to comment on proposed changes to the Value of Lost Load (VOLL) and related impacts. Voltus supports the proposed updates to VOLL and to Offer Caps for related Tariff items. However, on the January 18th, 2024 meeting of the MISO Market Sub-Committee (“MSC”), MISO staff considered options for removing Tariff links between VOLL and Emergency Demand Response (EDR) resource Offer Caps. 

One such option suggested by MISO staff was to “retire and/or replace the EDR instrument”. Voltus does not support this suggestion. As the first and largest aggregator of retail customers (ARC) representing residential, commercial, and industrial demand response megawatts as EDR resources in the MISO market, Voltus submits the following comments:

EDR Resources and compensation

A load asset can register as a Load Modifying Resource (LMR) resource to receive capacity accreditation in exchange for its commitment to provide curtailment during emergencies, just as a power plant receives capacity accreditation for committing to be available to MISO with a must-offer requirement. However - and in contrast to power plants - LMR resources are not compensated for energy provided during emergency deployments, despite a requirement to be available for up to 16 deployments per planning year. For many LMRs, the compensation they receive through capacity accreditation covers the fixed costs of their participation - developing a curtailment plan, on-site training, testing, and administrative costs - and the EDR program provides a crucial mechanism to ensure the variable costs of participation would be covered on a per-dispatch basis. If the EDR program is terminated, many existing LMRs may choose to no longer participate, which will raise costs for ratepayers and degrade system reliability. Similarly, there is a high degree in uncertainty in how many events may be called in a planning year  - if many events are called, and the cost of curtailment for resources climbs proportionately without the per-event compensation EDR provides, the performance of those resources may degrade as LMR compensation is outweighed by the cost of participation, which will degrade system reliability.

Differences in EDR and DRR resources registered as Planning Resources

Participating facilities may enroll as Demand Response Resources (DRRs) as Planning Resources and receive capacity accreditation as well as compensation for energy provided when deployed. However, there are differences between the parameters of the DRR and EDR instruments that mean facilities that may be able to enroll as EDRs are unable to enroll as DRRs, especially if a facility needs a notification time of 2 hours or greater. BPM 026 specifies that EDR assets “reduce their gross loads specifically when MISO declares an Emergency event”, while DRR assets are instead deployed by following MISO instructions typically related to pricing signals. For many end use facilities, their ability to curtail is limited to emergency situations - they are able to provide relief in the form of curtailment to the MISO system in order to help preserve system reliability and protect against involuntary load shedding, but are unable to provide curtailment for purely economic reasons. Without the capability to enroll as an EDR, such facilities would choose not to enroll at all instead of enrolling as a DRR. For this reason, the existence of the EDR instrument expands the pool of potential demand response resources that are capable of providing relief to the MISO system during system emergencies, which in turn increase system reliability.

Respectfully Submitted,

Sean Shafer

Senior Energy Markets Analyst

Voltus, Inc

The OMS Markets Work Group and Resources Work Group (MWG & RWG) provide this feedback to MISO on its Value of Lost Load (VOLL) presentation. This feedback is from an OMS work group and does not represent a position of the OMS Board of Directors.

The MWG & RWG are supportive of MISO’s efforts to reform scarcity pricing and the Value of Lost Load (VOLL) and view this initiative as an important tool to enhance MISO’s resource adequacy construct in addition to energy and ancillary service markets. MISO’s current VOLL of $3,500/MWh has not changed since 2009, and the IMM recommended in his 2022 State of Market Report that MISO implement a revised VOLL of $25,000/MWh. Given the significant increase in VOLL as proposed by the IMM and through MISO’s 2023 nominal values, the MWG & RWG recommend that MISO and stakeholders explore certain consumer protection measures.

If MISO intends to revise VOLL consistent with this range of values, the MWG & RWG recommend that MISO decouple VOLL from the LMP price cap. Similarly, the MWG & RWG also recommend that MISO consider implementing some form of a “circuit breaker” or other price mitigation mechanism in MISO’s real-time energy markets if they experience extremely high prices for a persistent period of time.

The MWG & RWG also request that MISO explain in detail how the weighting of the various VOLL class values is determined and how MISO intends to “sum” those values to determine a single VOLL. The MWG & RWG also request that MISO clearly state whether it intends to calculate a single VOLL or multiple VOLLs for each rate class. If MISO pursues multiple VOLLs per rate class, please explain how that can be implemented in light of the current tariff. Additionally, as this proposal progresses, our expectation is that MISO will share more analysis to justify the identified VOLL class figures and to demonstrate a tangible connection between those values and desired market participant outcomes.