On December 6, 2016, FERC issued an order partially denying and partially granting a complaint brought by a coalition of transmission customers (“Coalition”) of the Midcontinent Independent System Operator, Inc. (“MISO”). The Coalition argued that MISO misapplied portions of its open access transmission tariff (“OATT” or “Tariff”) regarding the 2016/2017 planning year resource auction. Although the Commission rejected the Coalition’s argument that MISO utilized an unjust and unreasonable methodology for calculating Sub-Regional Export and Import constraints for the 2016/2017 auction, FERC found that prospective application of those methodologies was no longer just and reasonable, and directed MISO to modify its Tariff accordingly.

MISO’s yearly planning auction establishes the auction clearing price and secures the least-cost capacity requirements for each of MISO’s ten Zones, which are divided into two sub-regions: MISO Midwest (Zones 1-7) and MISO South (Zones 8-10). In February 2015, FERC approved a MISO proposal to address certain sub-regional transfer problems through the introduction of, among other mechanisms, Sub-Regional Import Constraints and Sub-Regional Export Constraints. The following January, FERC approved a settlement agreement between MISO and the Southwest Power Pool, Inc. (“SPP”) by which MISO established a 2,500 MW transfer limit from MISO South to MISO Midwest—approximately 1,624 MW of which was taken up by firm capacity supplied by NRG Energy Inc (“NRG”). The settlement agreement obligated MISO to list NRG’s total firm capacity from MISO South to MSIO Midwest for the 2015/2016 to 2018/2019 planning years, thus, MISO determined the Sub-Regional Export Constraint from MISO South (and consequentially, the Import Constraint for MISO Midwest) by subtracting NRG’s firm load from the total transfer limit, resulting in a 876 MW total export/import limit between MISO South and MISO Midwest. These calculations were published in MISO’s business practices manual for resource adequacy, effective July 15, 2016, as opposed to being included in its Tariff.

In a September 8, 2016 complaint, the Coalition challenged MISO’s Sub-Regional Export and Import constraint calculations, arguing that MISO misapplied its Tariff when conducting the 2016/17 auction because there was no proof that NRG was using its entire firm transmission reservation, and therefore, it was inappropriate for MISO to subtract that full amount from the 2,500 MW power transfer limit between MISO South and MISO Midwest. At a minimum, the Coalition contended, MISO should have considered the roughly 206 MW of counter-flows between the two MISO sub-regions when calculating the export and import constraints. As a result of MISO’s alleged miscalculations for the Sub-Regional Export and Import constraints, the Coalition argued that MISO failed to minimize the cost of capacity in its yearly auction, as required by the Tariff. The Coalition also requested that the Commission audit the MISO Market Monitor’s approval of facility-specific offers during the 2016/2017 auction.

FERC denied the Coalition’s complaint regarding MISO’s Sub-Regional Export and Import Constraint calculations for the 2016/2017 auction. The Commission determined that, although MISO could have considered factors like counter-flows when calculating the constraints, the Tariff only required that the constraints be in accordance with applicable seams agreements, coordination agreements, and transmission service agreements. Because MISO relied on its settlement agreement with SPP in making the relevant calculations, there was no Tariff violation. FERC also rejected the Coalition’s request to audit the offers made into the 2016/2017 auction. The Commission stated, there was “no reason to believe that the facility-specific costs were not as the Market Monitor determined them to be.” As MISO’s generation fleet ages, FERC noted, such costs undoubtedly increase, leading parties to make improvements and repairs which will necessarily be included in their auction offers.

Notwithstanding that FERC largely rejected the Coalition’s complaint for the 2016/2017 auction, the Commission granted the complaint to the extent that MISO’s Tariff did not sufficiently set-out its Sub-Regional Export and Import Constraint calculations nor provide adequate detail regarding going-forward costs and how to calculate facility-specific reference levels. Because such provisions materially affect rates, the Commission concluded that it was not just and reasonable to exclude them from MISO’s Tariff. FERC directed MISO to address this deficiency through a compliance filing no later than 55 days from the date of the order.

A copy of FERC’s order can be found here.