E-6: Commissioner Chang’s Dissent to Order Accepting Tariff Revisions, Subject to Condition

Docket Nos. ER25-1886-000, ER25-1886-001

I dissent from today’s order (Order) because MISO has not met its burden under FPA Section 205 to demonstrate that its proposed tariff revisions are just and reasonable and not unduly discriminatory.  While I broadly support MISO’s ongoing efforts to reform its demand-side programs,[1] the record reflects well-supported concerns that this proposal will disproportionately and adversely impact legitimate demand-side resources that MISO, states, and load-serving entities rely upon to ensure resource adequacy.[2]  Given MISO’s failure to adequately justify key aspects of its proposal, I would reject MISO’s filing with guidance to help MISO revise and resubmit a more balanced proposal.

Background

Demand-side resources broadly encompass two different types of resources: load-based demand-response resources (“Demand Response”) and generation located behind-the-transmission-meter (“Demand-Side Generation”).  MISO’s proposed tariff includes

two core participation models.[3]  The first model is the traditional emergency demand response participation option (“Emergency” participation model)[4] where resources provide capacity during periods of system stress to reduce the net load that the MISO system must serve.  The vast majority of demand-side resources, nearly 95%, participate as Emergency resources.[5]  The second demand-side participation model is for resources that fully participate in the MISO markets as supply-side resources (“Economic” participation model) as contemplated by Order Nos. 719[6] and 745.[7]  Economic resources that offer in the capacity market have a must-offer obligation in the energy and ancillary services markets, similar to other resources that clear MISO’s capacity market. 

Resource accreditation is the process used to determine a resource’s contribution to resource adequacy, which sets the accredited capacity that a resource may subsequently offer into MISO’s capacity market.  Accreditation methods typically involve using a resource’s actual historical performance over a so-called “lookback” period.  The duration of the lookback period determines the amount of data used to calculate a resource’s accredited capacity and can have significant impacts on both a resource’s capacity value as well as the change on that value year-to-year.[8]  MISO focuses this lookback period on times of greatest system risk during each season,[9] and currently, all MISO resources may submit three or more years of performance data.[10] 

Discussion

As discussed below, MISO’s filing includes four discrete proposals that uniquely and adversely affect Emergency resources without adequate justification: (1) the adoption of a one-year lookback period for capacity accreditation; (2) the elimination of an exemption for planned maintenance outages; (3) the adoption of an “availability cap”; and (4) the requirement that fast-response demand-side resources have 5-minute metering.  Protesters raise legitimate and well-documented concerns about these components of MISO’s proposal, which will unnecessarily disadvantage this class of resources by increasing risk and volatility in their accreditation and reducing eligibility, notwithstanding the existence of reasonable alternatives that can accomplish MISO’s legitimate goals while mitigating those adverse effects.   

MISO’s lookback proposal creates unnecessary and unjustified volatility in accreditation for Emergency resources

MISO proposes a one-year lookback period for Emergency resources, which is both different and shorter than the three-year lookback period for non-Emergency resources.  I disagree with the Order’s approval of MISO’s proposal, as MISO has not adequately demonstrated: (1) why subjecting Emergency resources to a different lookback period compared to non-Emergency resources is appropriate, and (2) why the increased volatility in accreditation for Emergency resources resulting from MISO’s proposal is just and reasonable.

As discussed above, the lookback period defines the relevant data set used to determine resource capacity accreditation, and shorter lookback periods can create additional volatility in that accreditation, given the more limited information used to assess a resource’s performance.  Unfortunately, MISO’s proposal creates this volatility for one set of resources without adequate justification.  By using a one-year lookback period, MISO’s proposal decreases the number of hours considered for Emergency resource accreditation and creates both unnecessary volatility in Emergency Resources accreditation and disparate treatment between resources providing the reliability services during periods of high-system stress.[11]  As the Independent Market Monitor points out, increased volatility in accreditation makes it more likely that a resource’s capacity value is overstated in some years and understated in others.[12] Therefore, accreditation under a one-year lookback is less likely to be representative of a resource’s ability to deploy when called upon.

MISO defends its one-year performance lookback for Emergency resources by arguing that it ensures a “strong signal to be available is sent without creating the possibility of a Season with reduced availability overly impacting a resources [sic] accreditation.”[13]  That argument misses the mark because a longer lookback period can provide a comparable signal without the volatility discussed above.  As noted by the Independent Market Monitor,[14] both a one-year lookback and three-year lookback provide comparable incentive for resources to perform, with the key difference being a trade-off between the timing of the change in accreditation.[15] 

The Order’s defense of MISO’s proposal is not well supported.  In finding the proposal is not unduly discriminatory between demand-side Emergency and non-Emergency resources, the Order concludes that demand response resources have multiple participation options, which is not relevant to differentiation for the purposes of resource accreditation.[16]  Under that rationale, MISO could impose any condition on one class of resources, regardless of how arbitrary or unjustified it is.  The Order further argues that an incentive “…more closely tied to recent performance will help ensure resources are available…”[17]  Given that the incentive for performance between the two approaches is comparable, this argument does not hold.  The Order also finds that Emergency resources are not similarly situated to front-of-meter non-Emergency resources (Schedule 53A resources) because the latter set of resources is obligated to offer into the Day-Ahead energy market.  Again, this rationale is a non sequitur; that distinction is not relevant to differing treatment MISO proposes because there is no connection between a resource offering into the Day-Ahead market and its appropriate lookback period for determining resource accreditation.

Given that a three-year lookback period provides a comparable incentive to perform without the volatility of a one-year lookback period, I would reject MISO’s proposal with guidance to consider adopting a consistent three-year lookback period for both Emergency and non-Emergency resources. 

MISO has not justified its proposed reduction in capacity accreditation for Emergency Demand-Side Generation due to planned maintenance outages

Currently, all generation resources in MISO have exemptions in their accreditation calculations for planned outages, and as a result, they are not penalized for lack of performance during outages that are planned well in advance.  Here, MISO proposes to remove that planned outage exemption[18] for Demand-Side Generation that participates as Emergency resources.  Consequently, these resources’ accreditation, and thus their capacity values, will uniquely decrease based on their lack of availability during planned outages.  MISO has not met its burden to demonstrate that differing treatment of these resources is warranted and that its proposal is just reasonable.

As discussed above, accreditation rules are foundational to determining the capacity value of individual resources and thus their economic and reliability value to load serving entities and the market as a whole.  MISO now proposes differing treatment for Emergency and non-Emergency generation[19] that would grant an accreditation exemption during planned maintenance outages to non-Emergency generation while denying the same to Emergency generation.  Protesters object to this disparate treatment, arguing that planned maintenance activities are part of good utility practice[20] and that Emergency Demand-Side Generators are willing and able to coordinate their outage planning with MISO,[21] including providing the same 120 day notice required of non-Emergency generators.[22]  As the record shows, MISO’s proposal will unjustifiably reduce accreditation for resources that are able and willing to participate as Emergency resources,[23] which in turn would reduce the incentives for resources to actually participate and contribute toward meeting MISO’s resource adequacy needs.

The Order relies on MISO’s argument that the treatment is not unduly discriminatory, stating that: (1) Emergency resources are not obligated to participate in outage coordination with MISO (2) Emergency resources do not have real-time telemetry that would allow MISO to monitor their hourly performance and direct dispatch control, and (3) Emergency resources can choose to be Economic resources instead and not be subject to potential accreditation reductions resulting from planned outages.[24]

As the record demonstrates, Emergency resources are both willing and able to voluntarily participate in outage coordination with MISO.[25]  The fact that they are not obligated to participate in outage coordination is beside the point.[26]

The Order asserts that Emergency and non-Emergency resources are not similarly situated because Emergency resources do not provide MISO with real-time monitoring, and that this distinction supports the differing treatment.  However, neither MISO nor the Order explains the connection between the absence of real time monitoring or direct dispatch control and why Emergency resources with planned outages that are studied and scheduled months in advance would present greater risks for MISO’s system than non-Emergency resources.[27]  In the absence of further explanation, the distinction has no relevance to MISO’s proposal.

The Order’s second argument is that the differing treatment is acceptable because these resources can participate as Economic resources instead.  Again, this has no relevance to MISO’s specific accreditation proposal; that particular resources could consider alternative participation models does not justify a requirement that unnecessarily and unduly penalizes specific resources by reducing their accreditation.  Taken to its logical conclusion, this rationale could be used to justify any disparate treatment, no matter how unwarranted.

Given the legitimate concerns raised in the record and the absence of a sufficient justification by MISO, I would reject the proposal and provide guidance to develop voluntary outage coordination for Demand-Side Generation similar to that of other resources and allow for planned outage exemption for Demand-Side Generation that participates as Emergency resources participating in voluntary outage coordination.

MISO’s use of an availability cap creates an “all-or-nothing” accreditation framework that does not represent a resource’s contribution to resource adequacy

MISO proposes to subject Emergency resources to a strict “availability cap,” through which these resources will receive zero accreditation value if they are unavailable during any portion of a system event.[28]  I disagree with the Order’s approval of MISO’s proposal, which creates an “all-or-nothing” result that does not sufficiently reflect the contribution of Emergency resources to system reliability and thereby creates a disincentive for demand-side resources to participate in the market.

Under MISO’s proposed tariff, Emergency resources will be accredited at the lower of either the resource’s capability to respond during high-stress hours or a newly introduced “availability cap.”[29]  MISO’s availability cap proposal, which applies only to Emergency resources, requires that a resource be available in every hour of an event or that resource is treated as unavailable for all hours of a system event.[30]  This creates an all-or-nothing dynamic where a resource’s availability is not considered for every hour that it responds to MISO’s needs, but rather through an event-based success or failure count, regardless of the duration of an event; it effectively treats unavailability for any hour as unavailability for all hours.[31]  This treatment does not reflect the Emergency resource’s reliability contribution to the.[32] 

The Order accepts MISO’s proposal on the basis that it creates a standard framework to evaluate performance and that it reflects resources’ contribution to system adequacy.  I am unpersuaded by the Order’s finding that the availability cap accurately reflects a resource’s reliability contribution to resource adequacy or that MISO has struck a reasonable balance of enabling demand-side participation while incentivizing availability during periods of high system stress.  While resources that do not respond to events or with lesser availability during high-stress periods should receive lower accreditation, MISO’s proposal is overly restrictive in its definition of availability and is likely to disincentivize participation.  Specifically, Emergency Demand Response resources are customers that are willing to curtail their primary use of energy, including suspending commercial and industrial processes, in exchange for compensation in the capacity market.  However, the incentive for a Demand Response resource to participate in the capacity market may be severely diminished if that resource has an unrepresentatively low accreditation value, particularly if such low accreditation is caused by arbitrary rule to discount the resources’ performance.  Absent a more compelling explanation of the need for this drastic impact, I do not believe MISO has adequately justified its proposal. 

Rather than accept this proposal, I would reject with guidance to enable MISO to develop a more balanced approach that reasonably reflects the reliability contributions to resource adequacy during events.

MISO’s metering requirements for fast-response Emergency resources are unnecessarily strict and exclude resources that are willing and able to perform

As discussed below, MISO proposes to require 5-minute interval metering for resources enrolled in its fast-response Emergency response participation option.  This proposal is stricter than necessary and will therefore exclude technically capable resources from participating.  I would reject this proposal with guidance because MISO has not met its burden to demonstrate that this proposal is just and reasonable.

Under MISO’s proposed tariff revisions, Emergency resources with a registered response time of one hour or less must provide 5-minute metering to MISO.  MISO also requires that, to be eligible to participate as a fast-response Emergency resource, the resource must have a registered response time of 30 minutes or less.[33]  As reflected in the record, retail utility data is often reported in 15-minute intervals,[34] and many demand response resources, especially residential customers, use meters that are capable of providing 15-minute but not 5-minute interval data.  As a result, MISO’s proposed requirement, resources that rely on retail utility data with 15-minute interval metering would not be able to participate as fast-response resources even if they are willing and able to respond within the 30 minutes, as defined by MISO.    

Notwithstanding these concerns raised in the record, the Order finds that MISO has sufficiently supported its proposal, citing MISO’s arguments that: (1) 5-minute metering will allow MISO to verify performance of fast-response resources; (2) participation as a fast-response resource is “voluntary;” and (3) MISO has reasonably balanced the cost burden of installing new metering technology with its stated need for visibility into the resource’s performance.[35]

I find these arguments unavailing.  MISO has not demonstrated why a 5-minute metering requirement for resources capable of performing within 30 minutes as fast acting Emergency resources is just and reasonable.  While I agree that sub-hourly metering is useful, MISO neither justifies why 5-minute metering is necessary nor explains why that 15-minute metering would be insufficient to demonstrate performance.[36]  Furthermore, the fact that participation in this program is “voluntary” is unpersuasive for the same reason noted above; that rationale could be used to justify any restriction, without support.  Given MISO’s inadequate support for its 5-minute requirement, I am not persuaded that the proposal is nonetheless fine because customers can simply replace their 15-minute meters to satisfy the stricter requirement.  Those costs to individual customers can be significant and therefore are not a reasonable solution to the metering issue created by MISO’s proposal.

Accordingly, given these concerns, I would reject MISO’s metering proposal with guidance to either adopt 15-minute metering or provide further justification for MISO’s 5-minute metering proposal.

Conclusion

Demand side resources play an increasingly important role in MISO’s resource mix, and it is therefore critical that MISO strikes a reasonable balance that facilitates their participation while holding them accountable for their performance obligations, particularly during periods of system stress.  Unfortunately, MISO has not demonstrated that key aspects of its proposed reforms appropriately strike that balance.  Instead, the likely effect of MISO’s proposal will be to exclude or devalue legitimate resources that are able and willing to provide critical reliability and resource adequacy support to the system.  Rather than accept MISO’s proposal, I would reject it with guidance to enable MISO to develop a more balanced approach that achieves MISO’s goals and fairly captures these resources’ capacity contributions.

For these reasons, I respectfully dissent.