The absence of a sloped demand curve in the Planning Resource Auction (PRA) continues to result in inefficient market outcomes and inefficient price signals. Moreover, the current vertical demand curve in the PRA has consistently produced clearing prices that are divorced from the marginal value of reliability and the capacity needs of the region. Consistent with the Independent Market Monitor’s State of the Market Report Recommendation 2010-14, “A reliability-based demand curve that is sloped (rather than vertical) would more accurately reflect the reliability value of capacity in excess of the minimum requirement. It also would produce more efficient and stable capacity prices, particularly as the capacity market moves toward the minimum planning reserve requirement.” See, 2021 MISO State of the Market Report at 127. This Recommendation continues to caution that “Understated capacity prices are particularly harmful to MISO’s integrated utilities, most of which own surplus capacity and are compelled to sell it at inefficiently depressed prices. They are also problematic for unregulated participants that rely on the market to retain adequate resources to ensure reliability.” Id. As such, MISO, the Organization of MISO States, and market participants should work to improve the modeling of demand in the PRA. Otherwise, the region will continue to experience a high number of emergency actions as needed resources leave the footprint due to improper economic signaling.
Continued discussion of reliability-based demand curves with emphasis on three key design elements. MISO's proposal better aligns the RA construct with MISO's Markets Guiding Principles. MISO proposed a three-year historical data-based net-CONE methodology. The proposed seasonal co-optimization and annual commitment model adds transparency and efficiency to the PRA. MRI-based RBDC provides an appropriate reliability-based design. Feedback requested by March 17.
RASC discussion continued with emphasis on key design elements. Key Takeaways: Incremental capacity above the PRMR has reliability value to MISO and stakeholders and should be reflected in the PRA
construct; construction of reliability based demand curves moves forward with emphasis on the finalization of marginal reliability impact curves and development of RBDC curves. MISO provides rationale on key features of the following design elements: seasonal co optimization and annual commitment model; Advanced FRAP alternative; NET Cone methodology. Stakeholder feedback requested by February 1.
MISO IMM shared comments as well as OMS. Refer to posted documents. MISO continued discussion of RBDC with emphasis on four key design elements and sought stakeholder feedback by December 30. Discussion will continue in January 2023.
MISO provided review of how a reliability based demand curve enhances the value proposition and discuss next efforts. The current resource adequacy construct fails to create efficient market-based incentives for investment and retirement decisions. Incremental capacity above the PRMR has reliability value to MISO and stakeholders and should be reflected in the construct. Alternative reliability-based demand curves are being considered as a viable approach.
Name changed to Reliability Based Demand Curve.
Issue moved into Active status. Initial RASC discussion scheduled for Q4 2022.
Moved to the Parking Lot as part of the 2019 Integrated Roadmap prioritization process.