UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION

Transcription

1 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Midwest Independent Transmission System ) Operator, Inc. ) Docket No. ER PROTEST TO COMPLIANCE FILING OF THE RETAIL ENERGY SUPPLY ASSOCIATION Pursuant to Rule 211 of the Federal Energy Regulatory Commission s ( Commission ) Rules of Practice and Procedure, 18 C.F.R , and the Commission s Notice issued on December 28, 2012, the Retail Energy Supply Association ( RESA ) 1 hereby files this Protest of the Midwest Independent Transmission System Operator, Inc. s ( MISO s ) compliance filing in the above-referenced proceeding. MISO s compliance filing is deficient and fails to protect LSEs from paying what could be excessive claimed administrative costs incurred by the provider of last resort ( POLR ) for procuring planning reserve margin requirement for any remaining demand under MISO s resource adequacy program. MISO must be directed to include in its Tariff the explicit requirement that any claimed administrative costs must be direct and verifiable costs that are incremental to what the POLR had to do for itself in performing its obligations under the RAR construct. In addition, costs should not be recoverable until MISO submits the costs for recovery under FPA Section 205. In support of this Protest, RESA submits as follows: 1 RESA s members include: Champion Energy Services, LLC; ConEdison Solutions; Constellation NewEnergy, Inc.; Direct Energy Services, LLC; GDF SUEZ Energy Resources NA, Inc.; Hess Corporation; Integrys Energy Services, Inc.; Just Energy; Liberty Power; MC Squared Energy Services, LLC; Mint Energy, LLC; NextEra Energy Services; Noble Americas Energy Solutions LLC; NRG, Inc.; PPL EnergyPlus, LLC; Stream Energy; TransCanada Power Marketing Ltd. and TriEagle Energy, L.P.. The comments expressed in this filing represent the position of RESA as an organization but may not represent the views of any particular member of RESA

2 - 2 - I. BACKGROUND As part of the Midwest ISO s efforts to design a voluntary capacity market, on July 20, 2011, Midwest ISO filed to develop Local Resource Zones to ensure that sufficient qualified Planning Resources can be relied upon to meet Load within each portion of the MISO region. 2 The Midwest ISO proposed to determine the geographic boundary of each Local Resource Zone. Midwest ISO then proposed to develop Local Resource Zone capacity requirements. LSEs serving load in a Local Resource Zone will meet the Planning Reserve Margin Requirements either through participation in a Planning Resource Auction process, through acquiring Planning Resources via bilateral contracts, or through opt-out procedures identified in the Tariff. Determination of an LSE s capacity requirement is based on a forecast of annual peak demand at the time of the Midwest ISO system peak (a Coincident Peak Demand forecast). When there is only one LSE in a distribution area (i.e., where there is no retail competition and the LSE is also the Electric Distribution Company ( EDC )), deriving a single Coincident Peak Demand forecast for the Planning Year is not controversial because the LSE/EDC will provide a forecast of its own peak demand. The capacity obligation will be known prior to the Planning Year. However, when the distribution area of an EDC comprises an area where there is retail competition meaning multiple LSEs and the EDC determining the Coincident Peak Demand for purposes of assigning a capacity obligation for the Planning Year (the Planning Reserve Margin Requirements ( PRMR )) is a critically important component of the price offered customers in the competitive market. 2 Midwest ISO July 20 Filing Letter at 7.

3 - 3 - MISO left all of the discretion for establishing retail load obligations in the hands of the EDC, requiring LSEs to work with the LDC to reach agreement as to the methodology to be used to develop Coincident Peak Demand forecasts for each of the LSEs within the EDC s service area. Midwest ISO is left to review the results. MISO uses the peak load contribution methodology - using individual customer peak load contribution ( PLC ) - as its default methodology for assigning capacity obligations to LSEs. If an EDC does not have the data to derive the peak load contribution, as some EDCs claimed, MISO will use the daily peak load method, and EDCs are required to provide to Midwest ISO the necessary daily peak load data. Over time, by collecting this historical data Midwest ISO will be able to utilize the peak load contribution methodology for LSEs in an EDC s area. See June 11 Order at P On September 28, 2012, MISO filed in Docket No. ER , tariff language to address two risks that it identified with its capacity allocation methodology applicable to retail access states: (1) that some Planning Resource Margin Requirement may not be sufficiently accounted for and modeled at the time of the Planning Resource Auction; and (2) that some Load may switch providers during the planning Year, which would result in an originally serving LSE having over-procured capacity and the LSE acquiring the new load having under-procured sufficient capacity. 3 MISO proposed to modify Section 69.A.1.1 of the Tariff to specify that an EDC must provide either Coincident Peak Demand or each retail customer s peak load contribution to both Midwest ISO and the LSEs by December 15. Any LSE that knows of any retail load switches for the upcoming Planning Year would be required to notify Midwest ISO. Midwest ISO will publish the calculation of transmission losses for each LBA by the first Business Day in December, rather than in January. 3 September 28 filing at 3.

4 - 4 - If there is a gap unassigned forecast demand once information from LSEs has been provided and the EDC has performed its coincident peak calculation, the POLR will procure that capacity for the service area, apparently via the annual auction. Specifically, In Section 69A a of its proposed Tariff revisions, the Midwest ISO proposal requires an LSE in a state that permits retail load switching to notify the Transmission Provider by January 15 regarding the LSE s proportion of the EDC s forecast Demand that it expects to serve on June 1 of the next Planning Year [emphasis added]. The EDC will add up the expects to serve forecasts and compare the total with the EDC s own area forecast. The so-called gap is the remaining Demand, which according to the proposed tariff will be allocated to the LSE that is the provider of last resort ( POLR ). In addition, Midwest ISO proposed changes to the provisions governing retail Load switching during the Planning Year. Midwest ISO proposed the amend Section 69.A.1.2 so that a daily rate will be applied to Load that switches during the Planning Year. If the relevant Load Zone applies the preferred default method costs will be allocated on a daily basis to LSEs by multiplying the peak load contributions for load served by the LSE by the Auction Clearing Price for the Local Resource Zone where the Load is located less any zonal delivery benefits. For LSEs that use the daily peak load default methodology, costs will be allocated on a daily basis to such LSEs by multiplying the load served by the LSE as a percentage of the EDC s load during the Hour of Midwest ISO s peak load, multiplied by the Planning Reserve Margin Requirement for the EDC s Coincident Peak Demand forecast times the Auction Clearing Price for the Local Resource Zone where the Load is located less any zonal deliverability benefits. 4 4 Id. at 6.

5 - 5 - On October 19, 2012, RESA filed a Protest of MISO s filing, arguing that MISO was overly complicating what should be a simple derivation of coincident peak demand each LSE should be permitted to derive its coincident peak demand and rely on its calculation to procure necessary resources under the MISO RAR construct. With respect to filling the gap noted above, RESA pointed out some of the logical and mechanical faults with this proposal, including noting that the proposal doesn t address what happens if the sum of the LSE forecasts is more than the EDC s forecast. In its November 27 Order, the Commission denied RESA s protest and accepted MISO s filing, subject to a compliance filing. As relevant here, FERC found that MISO did not specify how the POLR can recover the administrative cost of procuring the planning reserve margin requirement for any demand that it must obtain. See November 27 Order at P.27. FERC directed MISO to propose language to address the issue in its compliance filing. On December 27, 2012, RESA filed a request for rehearing, arguing that the Commission erred when it ordered MISO to include language to permit the POLR to recover undefined, unknown and likely non-existent costs. MISO also filed a request for rehearing on the same issue. Both RESA and MISO filed affidavits showing that there would be no administrative costs. These requests for rehearing remain pending. Also on December 27, 2012, and in purported compliance with the Commission s November 27 Order, MISO made its compliance filing. In its filing, MISO proposes to add language to Section 69.A.1.1.1a to provide that: the POLR may submit to the transmission Provider documentation of any administrative costs that it incurs related to procuring the PRMR for remaining demand. The Transmission Provider will review the reasonableness of any such administrative costs and will allocate the costs determined to be reasonably related to the PRMR procurement by the POLR to the LSEs that serve Demand in

6 - 6 - the POLR s service territory that benefitted from the POLR s PRMR procurement. The provision, as drafted, is unjust and unreasonable because it affords MISO unbridled discretion as to Commission-jurisdictional costs that would be recovered from LSEs. As will be shown in more detail below, MISO must revise the language (if it is not removed pursuant to RESA s and MISO s requests for rehearing) to require MISO to file any direct, verifiable costs claimed by a POLR (which may or may not be the EDC) with the Commission prior to collection from LSEs. II. ARGUMENT MISO s proposed Tariff language to provide a mechanism for a POLR to recover administrative costs associated with procuring the PRMR for remaining demand is unjust and unreasonable. MISO has not identified what sorts of administrative costs are recoverable and MISO has retained sole discretion to determine whether the costs are recoverable, with the right to assess LSEs to collect them. A MISO Must Specify that Any Costs That May Be Recoverable Are Limited to Verifiable, Direct Costs that Are Incremental to the Costs Incurred by the POLR in Procuring/Registering Its Own Load MISO has placed no limitation or description as to what types of charges are recoverable from LSEs under its provision. The POLR s only limitation appears to be whatever MISO thinks is appropriate. This unbridled discretion in MISO and the POLR renders the provision unjust and unreasonable. First, the Commission should require that any administrative costs are directly and solely related to the POLR s role in procuring the planning reserve margin requirement for remaining

7 - 7 - demand. The costs should be limited to costs that the POLR would not have incurred absent the minor administrative activity necessary. The POLR should not be permitted to submit as recoverable administrative costs, its overhead, capital and employee-related salary and pension costs, among other costs associated with its POLR obligations or other procurement functions. Second, the costs must be verifiable and documented with precision, with sufficient backup so that the Commission can assess whether the costs are permissible and recoverable administrative costs. LSEs must be able to understand and know any costs that they must bear, especially if they cannot avoid them. Third, the costs must be disclosed to all market participants. As noted in Argument B below, these costs must be filed with the Commission for approval under FPA Section 205. In addition, these costs, including the back-up, support and documentation must be reviewable by any market participant. Finally, the language proposed by MISO should be revised to reflect the fact that the POLR is not necessarily the EDC or local utility in the load zone. It is possible that any entity could act as a POLR under the MISO Tariff and relevant state laws and procedures. RESA has expressed, via the affidavit submitted with its Request for Rehearing, its view that there are no administrative costs associated with the limited function to be undertaken by the POLR. The action required by the POLR is a technical formality resulting from the voluntary nature of the capacity auction, that entails no work, no cost and no risk to the POLR. The POLR remains revenue neutral so that there is no financial risk associated with performing the limited function. However, MISO and the Commission must ensure that if there are any administrative costs claimed by a POLR, that these are verified, legitimate administrative costs solely

8 - 8 - associated with the POLR s performance of what is an extremely limited and minor administrative function. B. Any Costs Recovered from LSEs Associated with a POLR s Administration of the PRMR Procurement Process Must be Filed With and Approved By, the Commission RESA remains concerned that this administrative charge provision can be used by the POLR to collected unwarranted and unjustified costs. The Commission has improperly authorized collection of a rate, the level of which has not been determined. In order to collect a rate, Federal Power Act Section 205 requires that the rate be filed with the Commission for approval. Thus, MISO must not be permitted to give itself the discretion to determine what is and what is not a proper administrative cost that MISO can then collect from LSEs. If the Commission is going to require MISO to permit the POLR to recover a rate for administrative costs, that rate must be subject to review and approval by the Commission. LSEs must be provided the opportunity to review and comment/protest the rate, the level of costs, or the methodology used to determine the rate. To do otherwise would be to violate the filed rate doctrine. III. CONCLUSION RESA members are active participants in retail markets in MISO s footprint. RESA has raised a number of issues with respect to the capacity procurement processes in MISO. RESA, along with MISO, filed Requests for Rehearing of the Commission s November 27 Order, showing that: (1) the Commission erred when it imposed the requirement that the MISO allow POLRs to recover administrative costs; and (2) there are no administrative cost to

9 - 9 - recover. RESA now objects to MISO s filing in purported compliance with the November 27 Order. MISO s filing in compliance with the November 27 Order is unjust and unreasonable. Any rate for the recovery of those costs should be filed with the Commission prior to recovery from LSEs. The Commission must require that any administrative costs are directly and solely related to the POLR s role in procuring the planning reserve margin requirement for remaining demand. The costs should be limited to costs that the POLR would not have incurred absent the minor administrative activity necessary. The costs must be verified, documented and disclosed to all market participants in a filing to the Commission under FPA Section 205. Finally, the language proposed by MISO should be revised to reflect the fact that the POLR is not necessarily the EDC or local utility in the load zone. It is possible that any entity could act as a POLR under the MISO Tariff and relevant state laws and procedures. WHEREFORE, RESA respectfully requests that MISO s compliance filing be modified as described in this Protest. Respectfully submitted, Of Counsel: /s/elizabeth W. Whittle Elizabeth W. Whittle Counsel to The Retail Energy Supply Association Nixon Peabody, LLP 401 Ninth Street, N.W. Suite 900 Washington, DC ewhittle@nixonpeabody.com Dated: January 17, 2013

10 CERTIFICATE OF SERVICE I hereby certify that I have this day served the foregoing Motion to Intervene and Protest via on each person listed on the Commission s official service list. Dated in Washington, DC this 17 th day of January, /s/elizabeth Whittle Elizabeth W. Whittle