United States: FERC Denies Wisconsin Power And Light’s Request For Waiver Of MISO Tariff Provisions

On March 24, 2015, the Commission denied Wisconsin Power and Light Company's ("WPL") request for waiver of certain provisions of the Midcontinent Independent System Operator's ("MISO") Open Access Transmission, Energy and Operating Reserve Markets Tariff (the "MISO Tariff") dealing with annual capacity obligations.  Despite denying WPL's request, the Commission noted that it was concurrently issuing a separate order to modify the MISO Tariff which would, according to the Commission, provide WPL with the relief it sought.

On January 16, 2015, WPL requested waiver of: (1) the "must-offer" requirement that accompanies capacity obligations; and (2) the requirement to purchase replacement capacity for units that do not meet their capacity obligations.  The waiver was requested in response to what WPL referred to as a "compliance dilemma."  Pursuant to a 2013 consent agreement entered into with the EPA to resolve alleged violations of the Clean Air Act, WPL had agreed to retire its Nelson Dewey Units—two coal-fired generation units located in southwestern Wisconsin—by December 31, 2015.  After WPL informed MISO of the proposed retirement, MISO determined that the Nelson Dewey Units could not retire before the start of the 2015-2016 MISO Planning Year on June 1, 2015.  However, the MISO Tariff requires that capacity used to meet a Planning Resource Margin Requirement (like the Nelson Dewey Units) must offer into the energy and ancillary services markets for each hour of each day for the entire Planning Year.  MISO's 2015-2016 Planning Year ends May 31, 2016—five months after the December 31, 2015 retirement date in the EPA consent agreement.  While the MISO Tariff permits such capacity to be retired during the MISO Planning Year, it also requires that the Market Participant procure replacement capacity for the remainder of the Planning Year.

In its March 24, 2015 order, the Commission found that WPL had not demonstrated that a concrete problem needed to be remedied.  The Commission noted that WPL had indicated in its pleading that it would be able to satisfy its Planning Reserve Margin Requirement without relying on the Nelson Dewey Units' capacity as a self-supply resource.  While acknowledging that a resource must be available for the entire Planning Year in order to participate in the MISO Planning Resource Auction, the Commission stated that WPL was in essence asking for "the opportunity to sell the Nelson Dewey Units' capacity in the Planning Resource Auction without having to purchase replacement capacity for the period after the Nelson Dewey Units retire."  According to the Commission, this would effectively relieve WPL of its obligation to deliver a full year's worth of capacity to the purchaser(s) of that capacity, while nonetheless permitting it to be compensated for a full year's worth of capacity through the Planning Resource Auction.

In its ruling, the Commission noted that WPL was in a "fundamentally different" position than Indianapolis Power & Light ("IPL")—an entity that had successfully obtained waiver of the exact same requirements of the MISO Tariff in 2014 (see October 27, 2014 edition of the WER).  The Commission distinguished the two cases by noting that IPL had sought waiver of the aforementioned MISO Tariff provisions in order to use its coal units as a self-supply resource in its capacity portfolio for the 2015-2016 Planning Year, and to shield its ratepayers from the cost of potentially expensive replacement capacity.  In contrast, the Commission found that WPL did not plan to use the Nelson Dewey Units' capacity as a self-supply resource.

Despite denying WPL's request for waiver, the Commission noted that it was concurrently accepting revisions to the MISO Tariff that would give WPL the ability to sell capacity bilaterally, and to participate in MISO's energy and ancillary services markets for the first seven months of the 2015-2016 Planning Year.  According to the Commission, this relief would provide WPL with the appropriate opportunity to obtain revenue for the seven months that the Nelson Dewey Units are operational, and simultaneously enable it to comply with the requirements of the EPA consent agreement and the MISO Tariff, without being required to procure replacement capacity for the final five months of the 2015-2016 Planning Year.

A copy of the Commission's order may be found here.

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