On February 9, 2015, FERC approved the Midcontinent Independent System Operator, Inc.’s (“MISO”) request for a temporary waiver of its $1,000/MWh energy offer price cap. FERC’s approval will now allow generators with actual, verifiable costs above the $1,000/MWh energy offer price cap to receive make-whole payments by increasing the “No Load” component of their offer after consultation with MISO’s Independent Market Monitor (“IMM”). The waiver of the energy offer price cap runs from December 20, 2014 to April 30, 2015.
In requesting the waiver, MISO stated that the natural gas price spikes during the 2013/2014 winter season resulted in MISO generators experiencing economic restraints when they were not able to offer output at its true incremental cost. MISO added that as a result of those constraints and the potential for similar price spikes during the 2014/2015 winter season, it requested waiver of the energy offer price cap so that generators could recover all verifiable incremental costs, not just fuel costs, when costs exceeded $1,000/MWh. MISO stated that due to potential software complications in their marketing systems, it would not be able to process offers in the Day-Ahead and Real-Time markets that exceeded 1,000/MWh, so instead, costs that exceeded the 1,000/MWh threshold would be placed in the No Load portion of the offer. These offers would then be reviewed in consultation with the IMM to determine whether they are eligible to receive a make-whole payment.
In addition to the energy offer price cap waiver, MISO also requested waiver of the processes the IMM uses to establish reference levels for generation resources in MISO. MISO stated it requested this waiver so that the IMM may establish cost-based reference levels when generators’ marginal costs will likely exceed the energy offer price cap.
In approving the energy offer price cap waiver, FERC determined that the waiver addressed a concrete problem that, if not remedied, would discourage generators from offering service at a time when they are most needed. FERC also noted that it has previously granted similar waivers in the past, including energy offer price cap waivers for PJM Interconnection, L.L.C. (see January 26, 2014 edition of the WER). Therefore, FERC stated that granting the waiver would ensure that generators are not placed in the position of offering electricity at levels below their actual costs, or choosing not to offer their electricity in the market during an especially high-cost period. In addition to approving the waiver, FERC directed MISO to institute a true-up mechanism so that costs in excess of $1,000/MWh would only result in the recovery of actual and verifiable costs. Finally, FERC directed the IMM to develop the procedure it will use in determining the new cost-based reference level, and submit an informational filing that identifies certain data associated with the waiver of the energy offer price cap within 30 days of the expiration of the waiver.
A copy of the order is available here.