The State of Michigan and the Midcontinent ISO have announced that they have reached an agreement on resource adequacy issues that includes the use of a "State Compensation Mechanism" applicable to retail electric suppliers

Specific mechanics of the state compensation mechanism were not discussed, and whether it differed from state compensation mechanism provisions included in MISO's draft proposal to address the capacity market in states with retail choice

In PJM, the state compensation mechanism, which works as part of utilities' fixed resource requirement capacity market opt-out, has been used as a hindrance to retail choice, with a notable example being at AEP in Michigan (with choice sales dropping to zero after a state compensation mechanism was adopted there).

A news release from the office of Michigan Gov. Rick Snyder said:

"Under the proposed framework, states would have an option to select a 'State Compensation Mechanism' for procuring electrical resources. Under that mechanism, the Michigan Public Service Commission (MPSC) would set a capacity charge after a contested proceeding. An alternative electric supplier would have an opportunity to find other capacity (presumably at a lower price) or pay that charge to the utility with the responsibility for procuring capacity to cover that load in the last resort (e.g. DTE or Consumers Energy). The utility that had to purchase capacity would have three years to purchase that capacity. MISO would be in charge of setting amounts of capacity to be procured to meet reliability rules, and evaluates capacity arrangements used to meet resource adequacy requirements.

The full news release from Synder's office, which is scant on specifics, is below. RetailEnergyX.com disclaims any responsibility for the content of the release below, and makes no averment as to its accuracy or statements

Michigan and MISO develop solution to electric capacity

Legislative efforts can now focus on key state law energy issues

Monday, September 19, 2016

Gov. Rick Snyder today announced that discussions between the State of Michigan and the Midcontinent Independent System Operator (MISO) have produced a framework that facilitates a state approach for establishing adequate electrical resources to meet reliability requirements.

The jointly implemented solution, if approved by the Federal Energy Regulatory Commission, will create a system that strives to keep prices as low as possible with regulatory assurance that monies will be spent to secure needed electric capacity.

“This process will produce real solutions to a serious problem, and shows the positive outcomes that are possible when there is a spirit of partnership between the state and MISO ,” said Snyder. “This will allow our state legislature to focus on improvements to existing laws so we can ensure Michigan’s energy future is bright.”

MISO CEO John Bear also recognized the teamwork that led to this solution. “MISO has collaborated with the Michigan Agency for Energy and Michigan Public Service Commission to develop a provision designed to meet Michigan’s resource planning needs,” stated Bear. “We plan to include language memorializing this solution in the Competitive Retail Choice proposal, which we expect to submit for FERC’s approval in early November.”

Under the proposed framework, states would have an option to select a “State Compensation Mechanism” for procuring electrical resources. Under that mechanism, the Michigan Public Service Commission (MPSC) would set a capacity charge after a contested proceeding. An alternative electric supplier would have an opportunity to find other capacity (presumably at a lower price) or pay that charge to the utility with the responsibility for procuring capacity to cover that load in the last resort (e.g. DTE or Consumers Energy). The utility that had to purchase capacity would have three years to purchase that capacity. MISO would be in charge of setting amounts of capacity to be procured to meet reliability rules, and evaluates capacity arrangements used to meet resource adequacy requirements.

“This proposal identifies the resource adequacy requirement three years in advance of the need, and creates the opportunity to procure any needed capacity resources,” said Sally Talberg, chairman of the MPSC. “The overall solution lets the MPSC and MISO work together to make sure the right kind of tools and incentives are in place for the state to use its authority to oversee resource adequacy by directing its utilities to use any funds collected for investment in capacity resources.”

In order to ensure that the critical issue of resource adequacy is addressed and our best options are utilized, legislative action in the energy arena is still needed.

“We will continue to work with our partners in the Legislature to enact needed reforms. While we have identified a clear path to solving a key reliability issue, we need action to ensure that no matter what the federal government does, Michigan will be able to meet its responsibility to ensure resource adequacy,” said Valerie Brader, executive director of the Michigan Agency for Energy. “Moreover, we need state law changes to ensure our most adaptable, affordable, and environmentally protective solutions can compete on equal footing. For instance, we need to remove the cap on reducing energy waste, and allow our pre-approval process to be used for renewable energy options.”

The Governor praised the passage out of committee of both the Senate and House packages for energy reform, and remains hopeful that both chambers will act on this important topic by the end of the year.

Tags:
Michigan   Capacity Markets   MISO   Resource Adequacy  

Comment on this story


ADVERTISEMENT
NEW Jobs on RetailEnergyJobs.com
TPV-SALES-EXECUTIVE -- Back Office Provider -- Other
Sr-Market-Risk-Analyst -- Wholesale Supplier/Trader -- New York - New York City Metro
Energy-Regulatory-Specialist -- Other -- Other
More Stories on RetailEnergyX.com:
SPP, MISO Institute Rotating Outages, Showing ERCOT 'Energy-Only' Market Design Not Cause Of Outages
ERCOT IMM Files State Of The Market Report; Net Revenues Exceeded CONE For CT, CC In All Zones
PJM IMM Finds Costs Of Maryland FRR Only 6% Higher Than Capacity Market, Under One Pricing Scenario
PJM Submits MOPR, Capacity Market Compliance Filing At FERC
Report: Customers Overpaying By $4 Billion In PJM Capacity Market Due To Over-procurements