On December 31, 2015, the Federal Energy Regulatory Commission (FERC) issued an order directing the Midcontinent System Operator (MISO) to make changes to the capacity auction rules, including requirements to stop relying on PJM Interconnection prices to set maximum bids and increase the amount of electricity available in the Illinois market area. FERC found that the $155.79/MW-day maximum bid for MISO’s 2015/16 capacity auction was too high and that MISO did not accurately calculate electricity exports. The FERC Order requires MISO to set a $0/MW-day reference level to replace MISO’s current practice of allowing offers based on the estimated opportunity cost of exporting capacity. It also requires MISO to implement revisions to consider counter-flows created by capacity exports to neighboring regions.
The Order responds to multiple complaints that the results of MISO’s 2015/16 capacity auction held in April 2015 were the product of market manipulation and were unjust and unreasonable for Zone 4, which covers Central and Southern Illinois. The price per megawatt-day for capacity in this region increased from $16.75 to $150.00 per megawatt-day – a nine-fold increase from the 2014/15 auction result and up to 40 times greater than clearing prices in other MISO zones, which averaged only $3.75. On May 28, 2015, consumer advocacy group Public Citizen filed a complaint alleging that Houston-based Dynegy manipulated the April 2015 capacity auction by withholding capacity. The Illinois Attorney General Lisa Madigan also filed a complaint on May 28, 2015. Southwestern Electric Cooperative, and Illinois Industrial Energy Consumers filed complaints on May 29, 2015 and June 30, 2015, respectively. MISO operates the electricity grid in portions of 15 states in the Midwest and South.
The Citizens Utility Board (CUB), a nonprofit representing the interests of utility customers in Illinois, has also urged for reforms in the Illinois power market. In an October 2015 release, CUB stated that power generators would profit from the higher power prices in the 2015/16 auction. For example, Exelon’s nuclear power plants and Dynegy are reportedly set to receive $13 and $29 million in additional revenue, respectively. The increase would require an extra $131 per year from the average residential customer in some areas.
The FERC Office of Enforcement is conducting a formal, non-public investigation into whether market manipulation occurred before or during the 2015/16 auction. FERC stated that it will determine the appropriate action in a subsequent order. Consumer advocates, including Madigan, have stated that utility customers should receive millions in refunds if the FERC investigation reveals violations in MISO’s 2015/16 capacity auction.
Originally published by EnerKnol.
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