United States: FERC Reaffirms Current MISO Resource Adequacy Program, Cites Recent D.C. Circuit Decision In Separate Rejection Of Other Resource Adequacy Proposals On Remand

In dual orders issued on February 28, 2018, FERC affirmed that the current resource adequacy requirements of the Midcontinent Independent System Operator, Inc. ("MISO") remain just and reasonable, and simultaneously rejected an earlier MISO filing that would have imposed additional resource adequacy program changes. The rejection of MISO's earlier filing came after the United States Court of Appeals for the D.C. Circuit ("D.C. Circuit") granted FERC a voluntary remand to reconsider its previous conditional acceptance in light of NRG Power Marketing, LLC. v. FERC ("NRG").

In a 2011 filing made under Section 205 of the Federal Power Act ("FPA"), MISO proposed significant revisions to its resource adequacy requirements ("2011 Filing"), which FERC conditionally accepted in 2012, and again on rehearing in 2015. In those orders, FERC largely approved of MISO's resource adequacy proposal, but conditioned its acceptance subject to certain revisions, namely, that MISO strike aspects that would otherwise (1) implement a mandatory auction, (2) apply a Minimum Offer Price Rule ("MOPR"), and (3) permanently exempt Load-Serving Entities ("LSEs") with certain legacy agreements from zonal deliverability charges. Various parties appealed FERC's decisions, arguing, among other things, that FERC should not have changed MISO's proposal. Following the D.C. Circuit's July 2017 decision in NRG, however, on October 30, 2017, FERC was granted a voluntary remand to reconsider its conditional acceptance of the 2011 Filing.

According to the D.C. Circuit in NRG, FERC has limited authority to modify tariff proposals filed under Section 205, even if the regulated entity consents to FERC's modifications (see July 17, 2017 edition of the WER). Although "minor deviations" from a tariff proposal may be permitted, the D.C. Circuit held that FERC may go no further, and must assume a "passive and reactive role" in considering utility tariff proposals under Section 205, in contrast with FERC's broader authority to impose new rate schemes under Section 206 of the FPA.

To protect against potential market disruptions following FERC's post-NRG reconsideration of the 2011 Filing, on December 15, 2017, MISO submitted another filing seeking FERC's reaffirmation that various approved aspects of the 2011 Filing—which MISO had already implemented—remained just and reasonable (the "2017 Filing"). Several parties intervened to protest that MISO's filing should be rejected for failing to include essentially the same resource adequacy program aspects that FERC had rejected in MISO's 2011 Filing.

On consideration of the 2011 Filing voluntary remand, FERC concluded that its hands were tied in light of NRG. FERC clarified that even though MISO consented to the revisions that FERC had requested, such revisions were likely more than "minor deviations," and thus, impermissible under FPA Section 205. Because FERC found that it could not accept the 2011 Filing without the revisions, FERC rejected the filing in its entirety.

In its concurrent consideration of MISO's 2017 Filing, however, FERC reaffirmed that the aspects of MISO's existing resource adequacy scheme—some of which had been initially part of the 2011 Filing—remained just and reasonable. FERC dismissed calls to reject the filing for failing to, inter alia, include a MOPR to prevent uneconomic generator bids. FERC stated that, due to regional differences and varied industry composition across organized markets, FERC has consistently rejected a one-size-fits-all approach to tariffs filings. For instance, according to FERC, unlike in other organized markets, around 90 percent of MISO's load is served by vertically-integrated load serving entities subject to cost-of-service regulation. Because the likelihood of price suppression and market manipulation increases with the degree of competitive supply, FERC determined that a MOPR was inappropriate for MISO's market at this time. FERC similarly rejected other calls to "improve" upon MISO's 2017 Filing—noting that a proposal can still be "just and reasonable" even if there are other reasonable methodologies and options available.

A copy of FERC's Order rejecting MISO's 2011 Filing can be found here.

A copy of FERC's order accepting MISO's 2017 Filing can be found here.

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