Midwest monitor asks FERC to drop MISO hurdle rate

OREANDA-NEWS. The independent market monitor for the Midcontinent Independent System Operator (MISO) called on federal regulators to reconsider actions taken over the past year to deal with MISO's use of the Southwest Power Pool (SPP) transmission system.

Potomac Economics, the MISO market monitor, joined a chorus of comments saying the Federal Energy Regulatory Commission (FERC) erred in December when it ordered MISO to recalculate a temporary surcharge called the "hurdle rate" to address constraints on power flows between MISO's midwest territory and its Gulf coast region.

The market monitor said price distortion will be magnified under FERC's modified hurdle rate and "will exacerbate the problems it is intended to address."

The nearly year-old squabble between MISO and the adjacent SPP erupted when Entergy and other utilities in Arkansas, Louisiana, Texas and Mississippi joined MISO in late 2013. Internal transfer capacity between the existing MISO territory and the new MISO south region is limited to a single 1,000MW transmission line.

The southwest pool began billing MISO when transfers exceeded the 1,000MW physical limit, calling it a violation of a joint operating agreement. In March 2014, FERC allowed the southwest pool to impose charges and ordered parties to hold confidential settlement talks.

The pool has billed MISO about \\$50mn, which MISO has not paid.

MISO responded by working to limit power flow, then by introducing a hurdle rate of \\$9.57/MWh on transfers in excess of 1,000MW to allow power flow only when production cost savings would exceed the transmission charge. In December, FERC accepted the hurdle rate, but told MISO to recalculate the rate, increasing it significantly.

MISO already asked FERC to rehear that order, saying the recalculation would increase the initial hurdle rate to a level that would eliminate "any opportunity to realize the benefits associated with allowing flows to exceed the 1,000MW limit."

In a separate filing, the Public Utility Commission of Texas also asked FERC to reject the modified hurdle rate and threatened to revisit its action to allow Entergy Texas to join MISO.

The state is "concerned that [FERC] is directing MISO to make modifications to the hurdle rate that interfere with economic dispatch, rather than improve it," the Texas regulator said.

State regulators in Arkansas, Louisiana and Mississippi also want FERC to rehear the December order.

Instead of the hurdle rate, the MISO monitor said a market-to-market coordination protocol set to begin 1 March is "the most reasonable means to establish and enforce economic property rights to network flows that address the types of equity issues SPP raises in its [initial] complaint."

The monitor asked FERC to consider pending rehearing requests and to end the settlement talks.

"We believe the settlement discussions have been productive, and we are optimistic a settlement can be achieved over the next few months with continued commitment by the involved parties," SPP said.