Statement of Commissioner James P. Danly
August 31, 2022
Docket Nos. ER22-495-000 and ER22-495-001
I join the Commission’s decision to accept Midcontinent Independent System Operator, Inc.’s (MISO) proposed tariff revisions, effective September 1, 2022, subject to condition.[1] As an initial matter, I agree with MISO that changes are needed to its resource adequacy construct in light of “[t]he MISO Region . . . experiencing significant shifts in generation resource retirement, increased reliance on intermittent resources, significant weather events with correlated generator outages, and declining excess reserve margins.”[2]
I have become increasingly concerned by MISO’s ever-decreasing excess reserve margins[3] and MISO’s apparent inability to retain sufficient dispatchable generation to ensure reliability and resource adequacy. MISO’s interconnection queue, which is composed almost entirely of intermittent generation,[4] shows that MISO is unlikely to obtain much more dispatchable generation any time soon. Right now, the combined effects of the market’s price signals and the state and federal policies under which the market must operate has brought MISO to the point where the total quantity of nameplate capacity is rising, but the quantity of accredited capacity is decreasing.[5] This is a problem that should not be ignored, and the need for dispatchable generation cannot be overstated.[6] A market’s failure to procure sufficient capacity with the needed characteristics is a flaw so fundamental that it calls the justness and reasonableness of a market’s resulting rates into question. Perhaps, given this systemic failure, Vistra Corp. was correct in describing MISO’s capacity market as “irreparably dysfunctional.”[7]
And perhaps the Commission should consider action pursuant to Federal Power Act section 206.[8] While I think that further action is needed, even with the Commission’s approval of this proposal, to address the reliability and resource adequacy risks faced by the MISO region, MISO’s decision to establish a seasonal resource adequacy construct is a just and reasonable step in the right direction to mitigate the effects on reliability of MISO’s increasing reliance on intermittent generation and the decreasing excess reserve margins. And the question before the Commission is not whether there are other changes that should be made to MISO’s construct, or whether this proposal is better than MISO’s existing tariff; rather, the question is whether MISO has demonstrated that this proposal is just and reasonable[9]—which indeed it has.
For these reasons, I respectfully concur.
[1] See Midcontinent Indep. Sys. Operator, Inc., 180 FERC ¶ 61,141 (2022).
[2] Transmittal at 2.
[3] See 2022 Summer Reliability Assessment, N. Am. Elec. Reliability Corp., at 4 (May 2022), https://www.nerc.com/pa/RAPA/ra/Reliability%20Assessments%20DL/NERC_SRA_2022.pdf (“Midcontinent ISO (MISO) faces a capacity shortfall in its North and Central areas, resulting in high risk of energy emergencies during peak summer conditions.”); id. (“Capacity shortfall projections reported in the 2021 [Long-Term Reliability Assessment (LTRA)] and as far back as the 2018 LTRA have continued. Load serving entities in 4 of 11 zones entered the annual planning resource auction (PRA) in April 2022 without enough owned or contracted capacity to cover their requirements.”); id. (“More extreme temperatures, higher generation outages, or low wind conditions expose the MISO North and Central areas to higher risk of temporary operator-initiated load shedding to maintain system reliability.”); id. at 15 (“Tighter than normal operating conditions are anticipated, particularly in the MISO North/Central region[s], which cleared too little capacity in the 2022–2023 PRA. The PRA capacity shortfall of 1,230 MW signals a potential for operating risk during peak summer conditions.”); id. (“Expected resources do not meet operating reserve requirements under normal peak-demand and outage scenarios.”).
[4] See Managing Reliability Risk in the MISO Footprint, MISO, at 8 (June 16, 2022), https://cdn.misoenergy.org/20220616%20Board%20of%20Directors%20Item%2008a%20Reliability%20Imperative625168.pdf.
[5] See id. at 5.
[6] See 2021 State of the Market Report for the MISO Electricity Markets, Potomac Economics (The Independent Market Monitor for MISO), at 22 (June 2022), https://www.potomaceconomics.com/wp-content/uploads/2022/06/2021-MISO-SOM_Report_Body_Final.pdf (explaining “the importance of having sufficient dispatchable resources available to satisfy the system demands when intermittent generation is not available”).
[7] Vistra Accelerates Pivot to Invest in Clean Energy and Combat Climate Change, Vistra Corp., https://investor.vistracorp.com/2020-09-29-Vistra-Accelerates-Pivot-to-Invest-in-Clean-Energy-and-Combat-Climate-Change (Sept. 29, 2020) (announcing that Vistra Corp. “expects to retire seven Luminant power plants, of which the company owns a combined capacity of more than 6,800 MW, between 2022 and 2027,” explaining that “[t]hese plants, especially those operating in the irreparably dysfunctional MISO market, remain economically challenged”); see also Edward Klump, E&E News, Vistra touts major zero-carbon push as it unplugs coal, E&E News (Sept. 30, 2020), https://www.eenews.net/articles/vistra-touts-major-zero-carbon-push-as-it-unplugs-coal/ (“Vistra pointed to a number of issues, including what it called a systematic failure of the MISO capacity market to provide Illinois power plants with adequate revenues.”).
[8] 16 U.S.C. § 824e.
[9] See Neb. Pub. Power Dist. v. FERC, 957 F.3d 932, 943 (8th Cir. 2020) (recognizing that “courts have made it clear that FERC ‘restricts itself to evaluating the confined proposal’” and “[t]herefore, FERC ‘need only find the proposed rates to be just and reasonable.’”) (citations omitted); Advanced Energy Mgmt. All. v. FERC, 860 F.3d 656, 662 (D.C. Cir. 2017) (“When acting on a public utility’s rate filing under section 205, the Commission undertakes ‘an essentially passive and reactive role’ and restricts itself to evaluating the confined proposal.”) (quoting City of Winnfield v. FERC, 744 F.2d 871, 875-76 (D.C. Cir. 1984)).