On April 2, 2013, FERC conditionally accepted the Midwest Independent Transmission System Operator, Inc.’s (“MISO”) proposed Open Access Transmission, Energy and Operating Reserve Markets Tariff (“Tariff”) revisions to address resource adequacy requirements for New Load-Serving Entities (“LSEs”).  The proposed Tariff revisions effectively apply the existing MISO Module E-1 annual resource adequacy requirements to New LSEs, taking into account the circumstances of these new entities.  In September 2012, FERC rejected MISO’s first attempt to set up resource adequacy requirements (“RAR”) for New LSEs, finding that MISO did not demonstrate why their proposal was not unduly discriminatory against the New LSEs.  In the April 2, 2013 order, however, FERC found that MISO’s proposed Tariff revisions give New LSEs the same opportunities to fulfill resource adequacy obligations as LSEs under Module E-1 of the Tariff.

In its September 2012 filing, MISO attempted to address timing challenges for New LSEs joining MISO due to the annual resource adequacy process.  The proposed Tariff revisions attempted to address compliance obligations of New LSEs during a “transition period” until the New LSE’s assets were included in the annual MISO RAR process.  In some cases, MISO would prohibit a New LSE from participating in annual auctions if the New LSE had not met certain requirements.  The Commission rejected these proposed Tariff revisions, and found that denying New LSE’s participation in energy and operating reserves market was unduly discriminatory and preferential.

In a February 1, 2013 filing, MISO proposed under a new Module E-2 to require New LSEs to meet resource adequacy obligations through a combination of four alternatives: (1) submitting a Fixed Resource Adequacy Plan (“FRAP”); (2) acquiring capacity from the MISO annual planning resource auction or a transitional planning resource auction; (3) self-scheduling its capacity resources; and (4) paying a capacity deficiency charge.  MISO further proposed to apply the system-wide planning reserve margin for all New LSEs for the planning year, absent another planning reserve margin set by a retail regulatory authority.  Under the proposed Module E-2, MISO would assign New LSEs to Local Resource Zones, and where a New LSE’s load is not located within an existing zone, set up new zones pursuant to Module E-1 of the Tariff.  MISO also proposed to apply the Zonal Deliverability Charge to New LSEs that submit a FRAP to meet all or a part of their capacity obligations.  Under Module E-2, MISO would also grant New LSEs a “Grandmother Agreement,” or “hedge” against the Zonal Deliverability Charge for resources procured or developed on or before July 20, 2011.  Pursuant to MISO’s proposal, these Grandmother Agreements would last for two planning years after the New LSEs’ first or “transition” year.

The Commission conditionally accepted MISO’s proposed Module E-2, but ordered several items on compliance within 30 days of its order.  The Commission directed MISO to revise certain sections of Module E-2 to be consistent with Module E-1 concerning the FRAP option.  FERC also directed MISO to clarify that procedures would apply to New LSEs, no matter whether load was assigned to a new or existing Local Resource Zone.  In addition to matters of consistency, the Commission directed MISO to clarify that market participants other than New LSEs can participate in the transitional resource planning auction; however, only capacity resources not otherwise committed for the planning year can participate.  The Commission further directed MISO to clarify that resources clearing in the transitional auction will get the clearing price established in that auction.

A copy of FERC’s order is available here.