MISO Rebuffs Ameren Illinois on Zone 4 Rate Hike

by | Jul 8, 2015

Ameren Illinois, which serves about three-quarters of that state’s market, has become the latest utility to ask the Federal Energy Regulatory Commission (FERC) for answers about the recent spike in energy capacity prices. On June 30, the company filed intervening comments to the complaints made on April 28 by Illinois Attorney General Lisa Madigan, advocacy group Public Citizens, and the Southwestern Electric Cooperative, which serves about 17,000 ratepayers in the state.

These parties assert that the Midcontinent Independent System Operator’s (MISO’s) capacity planning auction, held last April, resulted in “unjust and unreasonable capacity prices for utility customers in central and southern Illinois.”

Ameren Illinois is required to procure electric capacity at the auction price from MISO – the independent operator that manages the energy wholesale power market in the Midwest and ensures that adequate supply is available to meet customer demand. Under MISO’s recent federally approved capacity auction, Ameren protested, “the capacity price for Zone 4, which includes Ameren Illinois customers, was more than 40 times the price charged in other MISO zones.”

As a result of the auction, Zones 1-3 and 5-7 cleared at $3.48/MW per day; Zone 4 (much of Illinois) cleared at $150.00/MW-day; and Zones 8-9 (MISO South), cleared at $3.29/MW-day, Fierce Energy reported. Capacity charges are included in the overall cost of energy supply, which Ameren Illinois passes on to customers without mark-up.

“Since the auction results were announced, we have been in discussions with MISO officials to explore any available avenue to provide our customers with relief from this unexpected surge in capacity prices,” said Ameren Illinois President Richard Mark.

In light of these discussions, Mark said that MISO had agreed to refund about $84 million to load serving entities in Zone 4 (central and southern Illinois), which will be passed on by the utility to ratepayers to help mitigate the increased cost of capacity.

In comments the company filed in response to the complaints already before FERC, Ameren Illinois shared the concerns raised by those parties and asked FERC to review and ensure that the results of the auction had been above-board. Ameren Illinois also sought a review of the market rules that will be applied in future capacity auctions. “This is about ensuring that our customers pay a fair price for electric supply today while putting in place safeguards to make sure that a spike in capacity costs does not occur again,” said Ameren’s Mark.

“MISO does not issue refunds,” Jay Hermacinski of MISO corporate communications told Fierce Energy, pushing back on Ameren’s characterization of the discussions. “Rather, as part of the auction process, a credit is applied to electricity providers in Zone 4 during the settlements process. The reason for the credit relates to the lower priced capacity purchased from outside of Zone 4 that could be imported to meet the overall capacity needs of the zone. MISO’s tariff (or rule book) recognizes that in circumstances where some of a zone’s capacity is met by lower-priced capacity from outside of the zone, a credit is due.”

Following these discussions, in a 186-page report filed on July 2 with FERC – just before the July 4 weekend – MISO insisted that it followed commission-accepted rules (EL15-70), despite prices in Zone 4 clearing at $150/MW-day compared with just $16.76 a year earlier.

“This is a case about MISO following its FERC-accepted tariff.” Hermacinski told Retail Energy Buyer in an email summarizing the RTO’s response.

“The tariff contains rules that apply to MISO’s Planning Resource Auction. MISO followed its commission-accepted, tariff-based rules, and its Independent Market Monitor confirmed that the auction both complied with the tariff and produced the results it should have produced.” Hermacinski explained, adding, “Although MISO followed its tariff, the auction produced higher prices than previously experienced in one particular region of MISO – Local Resource Zone 4. Those higher prices are the source of the complainants’ discontent. However, MISO conducted the auction exactly as required under its tariff, and none of the complainants provide[s] any evidence to the contrary.

“Accordingly,” he said, these complaints should be dismissed with prejudice.”

Finally, MISO said the fact that the auction prices vary sharply from one year to the next does not establish that prices are unjust or that they are “the product of any lack of oversight or administration on MISO’s part; or that the price was the product of market manipulation.”

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