On June 18, 2010, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) rejected the resource adequacy compliance filing by the Midwest Independent Transmission System Operator, Inc. (“Midwest ISO”) for failing to develop a permanent approach to congestion that limits aggregate delivery.  In rejecting the filing, FERC again ordered the Midwest ISO to consider using location-specific capacity requirements in its resource adequacy plan. 

In February 2009, the Commission accepted Midwest ISO’s proposal to resolve deliverability issues as part of its long-term resource adequacy plan, but directed the ISO to create a more robust and permanent approach to congestion management that limits aggregate deliverability in the resource adequacy markets.  FERC directed Midwest ISO to evaluate location-specific capacity requirements used by other Regional Transmission Organizations (“RTOs”), such as ISO New England, Inc. (“ISO New England”) and the California Independent System Operator, Inc. (“California ISO”).  FERC prefers that regional markets use a location-specific model to send price signals for the construction of new generating capacity where it is needed.  FERC stated that such price signals could be lost in the Midwest ISO’s region-wide capacity approach. 

In August 2009, the Midwest ISO submitted its compliance filing to FERC, stating that it did not have stakeholder support for adopting the locational capacity requirement used by other RTOs.  Midwest ISO said that its current Tariff, without modification, sufficiently addresses congestion that may inhibit aggregate deliverability.  Midwest ISO also claimed that many of the concerns raised in February 2009 have since been remedied.  In addition, Midwest ISO said it was unnecessary to adopt locational capacity requirements similar to ISO New England or California ISO because its resource adequacy plan is based on the premise that a robust transmission system is needed in order to give load serving entities access to a fleet of resources to meet their planning reserve.  Furthermore, Midwest ISO contended that adopting location-specific capacity requirements would interfere with the use of Planning Resource Credits to meet adequacy requirements.  Finally, Midwest ISO listed three other reasons that the local capacity requirements are deficient: (1) they do not address then entire system and what led to local congestion; (2) they do not ensure aggregate deliverability of resources; and (3) they do not comport with the Midwest ISO’s construct of resource adequacy.

In rejecting Midwest ISO’s compliance filing, FERC stated that Midwest ISO again failed to identify a permanent approach to address congestion that limits aggregate deliverability in the resource adequacy markets, and thus was not in compliance with the February 2009 Order.  FERC reiterated its directive that Midwest ISO and its stakeholders evaluate the programs of other RTOs and develop a plan that details how elements from the other RTO models will be incorporated into the Midwest ISO’s Resource Adequacy Plan.  The Commission ordered Midwest ISO to submit its plan within six months.

The order is available at: http://www.ferc.gov/EventCalendar/Files/20100608143554-ER08-394-024.pdf.