Public Service Commission of Wisconsin
Ellen Nowak, Chairperson
Phil Montgomery, Commissioner
Mike Huebsch, Commissioner
610 North Whitney Way
P.O. Box 7854
Madison, WI 53707-7854
February 15, 2016
TO:
COMPETITIVE RETAIL SOLUTION TASK TEAM (CRSTT)
RE:
Response of Public Service Commission of Wisconsin (Response) to
MISO Request for Presentations for CRSTT due February 22, 2016,
Stakeholder Presentation
I. Identification of Public Service Commission of Wisconsin (PSCW)
The PSCW is generally charged by the Wisconsin legislature with regulating public utilities
(except cooperatives) providing electric service in the state of Wisconsin. In addition to
regulating the retail rates for electric service, the PSCW is authorized in Wis. Stat. §§ 196.49 and
196.491 to determine whether large electric generation plants and transmission facilities are
reasonably needed, provide proportionate value for their cost, and are in the public interest.
These certification decisions take into consideration issues such as energy efficiency,
environmental concerns, fuel diversity, and projected long-term energy needs. If sufficient
investment in transmission or generating facilities are not being made, the PSCW under Wis.
Stat. § 196.487 is empowered to direct utilities to invest in needed generation and/or
transmission facilities.
The PSCW also actively participates in both the MISO stakeholder processes and the
Organization of MISO States, Inc. (OMS), through its Division of Regional Energy Markets,
under the oversight of Commissioner Michael Huebsch.
II. Comments Regarding Process
The PSCW appreciates MISO’s ongoing planning efforts regarding resource adequacy reaching
back to 2013 and earlier. While MISO may see an opportunity to combine resource adequacy
changes with those measures ordered in the decision of the Federal Energy Regulatory
Commission (FERC) on December 31, 2015 in its Public Citizen decision,1 the PSCW
respectfully submits that procedures remain separate. Specifically, the PSCW believes that
measures to address the Illinois situation, whether ordered by Public Citizen or not, should
remain a distinct stakeholder process separate from any capacity market development for the
MISO footprint, in whole or in part. The comments below illuminate the substantive concerns
that warrant continued separation of the procedures.
1
Order Granting in Part and Denying in Part Complaints, Public Citizen, Inc. v. Midcontinent Independent Sys.
Operator, Inc., 153 FERC ¶ 61,385 (Dec. 31, 2015) (Public Citizen).
Telephone: (608) 266-5481
Fax: (608) 266-3957
TTY/TextNet: In Wisconsin (800) 251-8345, Elsewhere (608) 267-1479
Home Page: http://psc.wi.gov
E-mail: [email protected]
PSCW Response to CRSTT
February 15, 2016
Page 2
More immediate, however, is the problematic procedural timeline for the CRSTT that leads to a
May 5, 2016, filing with FERC. It is unduly short. Most critically, it lacks an adequate
stakeholder process relative to the importance of the issue for state jurisdictions,2 and because of
the lack of a strawman proposal unfairly constrains the ability of state commissions to participate
meaningfully without concern for potential prejudgment of an issue yet to arise clearly in the
CRSTT process. Moreover, all stakeholders are being deprived by MISO of focused leadership
of discussion of the issues that is buttressed by adequate data and analysis of information within
MISO’s control and expertise.
Consequently, absent MISO reformation of its CRSTT process, the PSCW must reserve, and
does not waive, a continuing objection that this process is not adequate for purposes of the
Federal Power Act, MISO’s FERC tariff, and relevant regulations. Therefore, these comments
and any that staff of the PSCW’s Division of Regional Energy Markets proffer as technical
solutions going forward, are specifically conditioned upon this continuing objection.
III. General Comments
The PSCW has two principal concerns: (1) MISO should separate the procedures for addressing
local Zone 4 (Illinois) as the only retail choice area having resource adequacy issues, and (2)
MISO must “do no harm” to other jurisdictions in the MISO footprint when resolving Zone 4
issues.
Separating Issues
The PSCW perceives MISO as earnestly attempting to mesh two different problem-solving
processes, but making things more difficult to resolve than necessary. MISO asserts that
resource adequacy in the MISO footprint been raised as an issue for stakeholder engagement
since at least March 2015 and even earlier.3 Weighing against that concern is FERC’s holding
on rehearing, in MISO’s 2012 resource adequacy filing,4 that the MISO market has been
successfully supplying adequate resources. Traditional fully regulated jurisdictions, such as
Wisconsin, have been ensuring their public utilities have adequate reserve margins. MISO has
“State commissions” means those in the MISO footprint and for convenience also refers to the City of New
Orleans.
3
https://www.misoenergy.org/Library/Repository/Meeting%20Material/Stakeholder/SAWG/2015/20150305/201503
05%20SAWG%20Item%2002%20Resource%20Adequacy%20Issues%20Statement.pdf
4
“[T]here is nothing in the record to demonstrate that an auction with a long forward period is necessary to
encourage long-term investment in markets such as in MISO, where traditionally-regulated utilities predominate. In
MISO, most generation is either under long-term contract or owned by utilities regulated under cost-of-service
regulation. Either of these models provides long-term revenue assurances of cost recovery to new resources.” Order
on Rehearing, Midcontinent Indep. Sys. Operator, Inc., 153 FERC ¶ 61,229, P 138 (Nov. 20, 2015).
2
PSCW Response to CRSTT
February 15, 2016
Page 3
recognized this role in its Module E-1 provision5 that has MISO defer to any state’s
determination of resource adequacy margins for its load serving entities (LSEs).
The decision in Public Citizen was issued on December 31, just before MISO’s first CRSTT
telephonic meeting on January 15, 2015, and an in-person meeting in Chicago on January 29,
2016, at the offices of the Illinois Commerce Commission. The scope of the decision in Public
Citizen is not a forward-looking action mandate from FERC. Public Citizen does not appear to
be as broad as MISO’s apparent reading, based upon meeting and other staff discussions. The
December 31 decision does not require any kind of resource solution, e.g., a capacity auction
market (including issues of a sloped demand curve and a minimum offer price rule (MOPR)), to
resolve any perceived issues of resource adequacy in MISO Zone 4—or other similar areas in the
MISO footprint. The decision merely “recognizes”—it does not endorse—work of MISO
elsewhere:
176. We will not address potential revisions to MISO's capacity construct,
including a sloped demand curve, longer forward period, and a Minimum Offer
Price Rule, here because they are beyond the scope of these proceedings.
However, we recognize that MISO is working with stakeholders to explore
potential revisions to the capacity construct, including concerns specific to
Zone 4, and we encourage them to continue doing so. [Footnote omitted.]
Public Citizen, 153 FERC ¶ 61,385, P 176. If MISO believes that the quotation is an
endorsement of a “solution,” in particular a capacity market, a state commission would be
equally entitled to believe that FERC in the above statement is endorsing meaningful cooperation
and collaboration with stakeholders, which does not appear to be present in the CRSTT process
at this time.
From the initial in-person meeting on January 29, 2016, the PSCW received the impression that
MISO is inclined to promote a capacity auction market for Zone 4 (Illinois) and any other retail
choice areas.6 This latter, open-ended clause extending the concept beyond Zone 4 concerns the
PSCW because Zone 2, which is in large part served by LSEs of the WEC Energy Group,
includes retail choice areas in the Upper Peninsula of Michigan.
MISO Tariff, Module E-1, 68A.1, Establishment of Planning Reserve Margins, 30.0.0, eff. Nov. 19, 2013: “The
Transmission Provider will determine a Planning Reserve Margin (PRM) using analytical study methods described
in Section 68A.2, provided that if a state regulatory body established a PRM for its regulated entities that is higher
or lower than the PRM determined by the Transmission Provider, then the state-established PRM will apply to the
Coincident Peak Demand of LSEs under that state’s jurisdiction.”
6
MISO meeting materials address other retail choice areas besides Zone 4. See page 4, point 2, of the meeting
materials referencing “entities that depend on market mechanisms.”
https://www.misoenergy.org/Library/Repository/Meeting%20Material/Stakeholder/CRSTT/20160129/
20160129%20CRSTT%20Item%2002%20Stakeholder%20Feedback%20and%20Framing%20Document.pdf. Also,
Mr. Jeff Bladden of MISO made oral comments at several meetings to the effect that MISO was not addressing just
Zone 4, but any jurisdiction relying on market signals for resource adequacy.
5
PSCW Response to CRSTT
February 15, 2016
Page 4
The PSCW respectfully submits that MISO should separate and solve Zone 4 issues, and then—
if warranted—use a larger stakeholder process to address resource adequacy concerns. That
latter process would necessarily engage a far larger range of relevant issues, current practices,
and affected stakeholders. For now, the PSCW believes MISO’s approach in the CRSTT should
limit itself to Zone 4, where the auction results triggered the Public Citizen complaint. The
implication of the locus of the problem in Zone 4 is that elsewhere, the great use of bilateral
contracting, as described in ER14-4081, is working satisfactorily.
“Do No Harm” to Other Jurisdictions
Any MISO so-called “solution” must meet the criteria of “doing no harm” with respect to (1)
grid reliability, (2) state jurisdictional prerogatives, (3) market efficiency, and (4) identification
of specific benefits. Moreover, any “solution” needs proper data, analytical and modeling
support.
The above four enumerated factors track fairly closely with MISO’s “foundational principles,”
but the PSCW believes a proper consideration of their implications does not necessarily lead to
the complexity of a sub-regional capacity market, as MISO (so far) apparently believes. First,
nothing in the necessary criteria of a regional transmission organization (RTO), 18 C.F.R. §
35.34, compels any specific construct of running the grid. For example, the centralized capacity
market is a mechanism that has not been shown to be overly effective when PJM, after many
years, has frequently had to impose revisions. Most recently, PJM, to address capacity
performance, determined to penalize generators that failed to perform when called upon and to
pay a premium to those generators that meet strict performance requirements.7 There are other
recent manifestations of problems with PJM’s approach. For example, First Energy and AEP are
asking the Public Service Commission of Ohio to approve new Power Purchase Agreements
(PPAs) that would provide income guarantees and effectively tie their retail loads to affiliateowned generation facilities in Ohio. In addition, Exelon is requesting out-of-market payments
from the State of Illinois.
Second, most jurisdictions within MISO are responsible for adequacy of their generation
resources and perform their duties through integrated resource planning, or, as in Wisconsin, a
strategic energy assessment that audits utility resources and analyzes expected future resource
needs. These state avenues to future resource adequacy do not need any kind of mechanism that
tends to undercut the decisions of state commissions authorizing construction or procurement of
generation resources for the benefit of the state residents. The U. S. Supreme Court has
recognized state utility regulation as a part of a state’s police power.8 Generation of adequate
7
See FERC dockets EL15-29 and ER15-623. A related news story is available at http://www.rtoinsider.com/fercpjm-capacity-performance-approved-15642/.
8
“[T]he regulation of utilities is one of the most important of the functions traditionally associated with the police
power of the States. See Munn v. Illinois, 94 U.S. 113, 24 L.Ed. 77 (1877).” Arkansas Elec. Co-op. Corp. v.
Arkansas Pub. Serv. Comm’n., 461 U.S. 375, 377 (1983).
PSCW Response to CRSTT
February 15, 2016
Page 5
power for the safety and welfare of state citizens is a matter of political accountability as the
state’s officials balance need, cost, and state policies respecting energy and the environment.
Sections 201(a)-(b) and Section 215(i),9 and other relevant provisions of the Federal Power
Act,10 recognize and affirm generation as within the state’s responsibility.11 For the foregoing
reasons, MISO should not intrude without specific warrant upon state choices respecting
resource adequacy. The complementary proposition is that MISO should permit Illinois to
resolve Zone 4 issues to the extent feasible and consistent with MISO grid reliability mandates.
Third, efficiency of the market is not the sole market metric of concern. Market stability is an
equally important value for wholesale and retail markets. A two- or three-year capacity market
affecting jurisdictions beyond Zone 4 undermines the planning expectations of supply and
demand as they affect state-regulated generation and transmission construction and,
consequently, retail rates. Load serving entities could be obliged, especially if a sloped demand
curve and a MOPR are imposed, to potentially pay twice for the reserve capacity that the state
commission had previously approved for construction and for which it allows cost recovery in
retail rates. The PSCW believes that to the extent market efficiency must be respected as a
“solution” criterion, a major burden is on MISO to show why more bilateral contracting for
resources for Zone 4 should not be the principal component of any “solution.” Long-term
contracting by Zone 4 LSEs, out three and four years or more, could potentially resolve the
concerns prompting the complaints addressed in Public Citizen.
Fourth, the idea of a market within a market is neither tested nor known. Without extensive
research, analysis, and modeling, neither MISO nor any other stakeholder can ensure that the
“solutions” proposed for Zone 4 and any other retail choice locations will do no harm to the
remaining jurisdictions in the MISO footprint. The PSCW is particularly concerned that
jurisdictions not within Zone 4 be effectively obliged to subsidize any “solution” for Zone 4. An
additional concern is that many related seams issues in PJM and MISO have been debated at
length and remain unresolved.12 Those issues surely need to be resolved, or materially advanced
to agreement, if any “solution” for Zone 4 is to avoid doing harm to the remainder of the MISO
footprint.
Finally, MISO’s seeming objective for regional benefits through a capacity market must be
properly supported by relevant evidence. In particular, a cost-benefit analysis of the
administrative cost of running a capacity market for the portion of the MISO footprint containing
Zone 4 and other small retail choice zones, must be compared to benefits that the construct could
9
16 U.S.C. §§ 824 and 824o, respectively.
16 U.S.C. §§ 792, et seq.
11
The majority discussion and the holding of the U.S. Supreme Court in FERC v. Electric Power Supply Ass’n.,
2016 WL 280888 (Jan. 25, 2016), while examining the relationship of wholesale and retail markets under the
Federal Power Act, do not address the issues of state authority and responsibility for generation resources or
resource adequacy generally.
12
See FERC Docket AD14-3-000. In particular, interface pricing and the benchmark for free flow entitlement
(FFE) remain unresolved.
10
PSCW Response to CRSTT
February 15, 2016
Page 6
produce, and the likely lesser cost of a regime, just for Zone 4, based upon substantially
increased bilateral contracting by LSEs in that zone.
All of the foregoing general concerns reflect the PSCW’s desire to keep intact what is working
reasonably well in MISO’s role as a RTO that backstops state resource adequacy determinations.
MISO need not make unneeded, unstudied, complex and costly changes lacking material benefit,
when other solutions, especially a mechanism for bilateral contracting, may well suffice. MISO
recognized a primary state role in securing the goal of resource adequacy with Module E-1. In a
similar vein, MISO could well promote more bilateral contracting as the primary resource
procurement device consistent with Zone 4’s regulatory framework as maintained by Illinois.
These comments were authorized by the Public Service Commission of Wisconsin on
February 11, 2016.
Thank you for an opportunity to enter this comment.
Respectfully submitted,
/s/ Michael Huebsch
Michael Huebsch
Commissioner
Public Service Commission of Wisconsin
cc: Jeff Bladen, MISO ([email protected])
Joe Milli, MISO ([email protected])
Melissa Seymour, MISO ([email protected])
Sally Talberg, OMS President ([email protected])
Tanya Paslawski, OMS Executive Director ([email protected])
Talina Matthews, OMS, Member Services and Advocacy ([email protected])
MV:ev:DL:01297554