On October 7, 2016, FERC rejected Midcontinent Independent System Operator, Inc.’s (“MISO”) submitted revisions (“Compliance Revisions”) to Schedule 2 for Reactive Supply and Voltage Control from Generation or Other Sources Service of its Open Access Transmission, Energy and Operating Reserve Markets Tariff (“Tariff”) to comply with FERC’s June 16, 2016 order to show cause (“Show Cause Order”). Going forward, MISO must amend its Compliance Revisions and resubmit within sixty days.

FERC’s Show Cause Order was issued to MISO pursuant to a Federal Power Act (“FPA”) Section 206 proceeding in which FERC directed MISO to either: (1) revise its Tariff to ensure that a generation or non-generation resource owner will no longer receive compensation for reactive service after it has deactivated or transferred its unit to another owner and to clarify the treatment of reactive service revenue requirements for such unit(s); or (2) show cause why it should not be required to do so. Notably, FERC issued a similar order directing PJM Interconnection L.L.C. (“PJM”) to revise its tariff provisions on compensation for reactive service in November of 2014.

On June 13, 2016, MISO submitted the Compliance Revisions amending its Tariff to require that a resource owner make an FPA Section 205 filing or an informational filing when that resource owner deactivates a unit or transfers a unit to another owner. MISO explained that its Compliance Revisions take the same approach as approved by the Commission in PJM’s reactive service proceeding, with one notable difference. MISO’s Compliance Revisions would require only that a generation owner make its filing on or before the date of the change in status for a generation resource, whereas PJM now requires a generation owner to make such a filing ninety days in advance of a change in status for a generation resource.

In rejecting MISO’s Compliance Revisions, FERC concluded that “they are insufficient to ensure that any . . . termination of, or reduction in, compensation occurs early enough to ensure that a generation or non-generation resource owner will no longer receive compensation for reactive service for units that have been deactivated or transferred to another owner.” FERC noted that MISO’s omission of advance notice constitutes a fundamental difference from the approach it approved for PJM. FERC stated that the advance notice aspect was consistent with its directive to ensure that generation owners will not unjustly receive Reactive Service compensation for deactivated or transferred units.

The Order Rejecting Compliance Filing is available here.