The Illinois Commerce Commission, "believes that the results of the 2015-2016 auction demonstrate that certain design elements of MISO’s capacity auction process need to be re-examined," the ICC said in comments to FERC regarding complaints filed against the recent Midcontinent ISO capacity auction

"The design elements at issue include: (1) reference levels; (2) local clearing requirements ('LCR'); and (3) local resource zone ('LRZ') configuration. Specifically, the Commission should reexamine the effectiveness of MISO’s current method for calculating the reference level as a means to mitigate market power and whether the 'safe harbor' reference level concept should be abandoned in favor of unit-specific cost offers, particularly in the presence of a pivotal supplier," the ICC said.

"The reference level is a threshold upon which MISO heavily relies to protect against the exercise of market power. So long as the generator’s offer prices to supply capacity are under the threshold, or reference level, they are neither investigated nor mitigated, but the ICC submits that this practice does not necessarily prevent the exercise of seller market power," the ICC said in a news release

"If the reference level is set above what would be set by a competitive market, a bidder is able to exercise market power. An excessive reference level allows a pivotal supplier to use its market power and extract monopoly rents," the ICC noted

In the news release, the ICC further notes that local capacity zones that are too small, "can increase the ability of pivotal suppliers to exercise their market power."

"ICC submits that FERC should properly configure the zones within the MISO region and consolidate zones 4 and 5 to dilute the ability of a pivotal supplier to exercise its market power," the ICC said.

Tags:
Capacity Market   FERC   Wholesale   Illinois   MISO  

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