6.1. ERMUSR 01-14-2014 - Laserfiche WebLink

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- 2 - RTOs' mandatory forward capacity market constructs and minimum-price rules, especially as they adversely impact the ability of LSEs, with long-term obligations to serve and the ability to make long-term commitments to do so, to self-supply their resource adequacy requirements.3 The Staff Report (at l)°recognizes that the eastern RTOs' constructs were developed for regions that have largely deregulated their retail markets, and thereby limited the ability of LSEs to commit on a long-term basis. Midwest TDUs will leave to others—those three regions' stakeholders, affected states, and the Commission—whether and how to improve the resource adequacy model in those regions so that it better bridges the gap between year-to-year retail service subscriptions and long-lived resource adequacy assets. However, we urge the Commission to disregard remarks made at the Technical Conference suggesting that eastern capacity market constructs be extended to regions where, as in MISO, retail service remains predominantly under the traditional obligation-to-serve, state-regulated regime.5 3 E.g.,Comments of Supplier/Customer Coalition Regarding the Use of Minimum Offer Price Rules in Eastern Capacity Markets. See also Comments of James F. Wilson,Sept.9,2013,eLibrary No.20130909-5355. "Centralized Capacity Market Design Elements,Commission Staff Report,Aug.23,2013,available at http://www.ferngov/CalendarFiles/20130826142258-Staf%20Paper.pdf. 5 For example,PJM Executive Vice President Andrew Ott suggested(Tr. 37)that MISO's capacity construct is "not...sustainable"because MISO is"resorting to surveys of their members to determine if they have enough resources in the future because they're dealing with such uncertainty."That suggestion fails to recognize the fundamental difference between the MISO and PJM resource adequacy constructs. MISO relies on LSE-initiated forward procurement,as has been working to assure resource adequacy in the midcontinent states for decades,and leaves time for such procurement to work. PJM, in contrast,effectively calls a halt to LSE-initiated forward procurement three years out and interjects a PJM-operated centralized forward market. It is therefore not surprising that PJM has more centralized forward decision-making and associated information than does MISO. But that does not make the MISO process inferior,or incapable of meeting the challenge that both regions face in addressing ongoing coal plant retirements. To the extent it indicates a potential capacity shortfall in 2016,the MISO/Organization of MISO States survey could feed useful information into LSE and state processes,as well as MISO's transmission planning. But the survey is not the mechanism to assure resource adequacy in MISO. Nor is it clear that when corrected and properly interpreted,its final results will project a major shortfall. The survey's • preliminary results(to the extent disclosed)are under review,correction and analysis by stakeholders,state regulators,and MISO,and those preliminary results may be treating LSEs as deficient when they are still comparing alternative forward resources,even if the LSE plans to select an identified alternative in time to meet its resource adequacy obligations. PJM's three-year forward market,on the other hand,has not insulated PJM from unexpected retirements. For example,FirstEnergy's October 2013 closure of 2 GW of coal-fired capacity at five Hatfields' Ferry and Mitchell units was announced in July 2013,and surprised PJM to the point that PJM initially directed 117