CERAWeek 2008 - Quest for Security: Strategies for a New Energy Future

EPSA Urges FERC to Address Changes to Midwest ISO Resource Adequacy Plan

February 7, 2008 // Published as a news service by IHS

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The Electric Power Supply Association (EPSA) filed comments with the Federal Energy Regulatory Commission (FERC) to ensure that a resource adequacy plan be implemented in a timely manner in the Midwest Independent Transmission Service Operator (Midwest ISO) region.

These comments respond to a proposal the Midwest ISO made in December 2007.

According to the EPSA filing, the Midwest ISO request for a 180-day extension on filing its financial settlement framework is unacceptable. EPSA said the extension of what is essentially the enforcement mechanism for meeting resource adequacy requirements would unduly delay the implementation of the resource adequacy plan.

"EPSA does not foresee an improved potential for consensus through more stakeholder discussion, and further delay of this essential element of resource adequacy creates real reliability concerns for the region," EPSA said in its motion to intervene and comment, also noting there could be a delay in the implementation of the overall plan beyond the 2009/2010 planning year if the extension were to be granted.

EPSA said the timing of implementation is important because reserve margins have been shrinking on a locational basis in recent years. "It is essential that a comprehensive resource adequacy plan consistent with the economic fundamentals facing the power sector be implemented in the most timely manner possible," said EPSA.

EPSA also said a uniform planning reserve margin (PRM) is the only way to fully reap the benefits of a Regional Transmission Organization (RTO) in the context of accurately planning for long-term resource adequacy.

However, the Midwest ISO proposal does not mandate a uniform PRM. EPSA stated that standard reserve margins would alleviate the concern that states with larger reserve margins could be forced to compensate for states with lower reserve margins, eliminating a "free-rider" scenario.

The EPSA filing advocates a more balanced approach to load forecasting. "EPSA does not agree with Midwest ISO's approach to good forecasting through 'shaming' of those who deviate from their forecasts. EPSA proposes that Midwest ISO perform and aggregate the load forecasts with each local balancing authority. Attention would be focused on developing a centrally supervised process instead of on local energy utilities," said the association.

EPSA expressed concern with the ambiguity of a liquidated damage provision in the Midwest ISO filing, saying "The last minute inclusion of the ambiguous liquidated damage provision in Midwest ISO's filing leaves several questions for interpretation by stakeholders." The EPSA filing states that contracts with liquidated damage provisions should not be allowed to count as a capacity resource.

EPSA points out that the provision leaves certain terms to be determined by the Business Practices Manual, a manual not under FERC review. EPSA members are concerned that this provision could be misinterpreted by market participants, leading to double counting of resources.

Source: Electric Power Supply Association (EPSA).