A select group of Midcontinent Independent System Operator (MISO) Transmission Owners is asking the Federal Energy Regulatory Commission to allow them to stop paying renewables developers for reactive power. FERC must reject this proposal and remain fair to independent power producers and renewables developers.
There are more protestors than supporters of this proposal. Since FERC initiated a Notice of Inquiry in November 2021, there has been no action from FERC. Commissioners need to take action, such as releasing a Notice of Proposed Rulemaking on reactive power compensation.
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Competitive concerns
MISO TOs have filed a proposal that stops reactive power and voltage support compensation for renewables developers. Renewables developers and their associations have protested vehemently at FERC in docket ER23-523. If FERC accepts this proposal, renewables developers fear that no one but MISO TOs will be able to provide critical reliability services like reactive power. As a market regulator, FERC must pay attention to the anti-competitive concerns raised by the protesting organizations.
Clean Grid Alliance and American Clean Power Association noted that MISO TOs Nov. 30 filing would not result in a comparable treatment for all generation resources within MISO. The Solar Energy Industries Association (SEIA), Natural Resources Defense Council (NRDC), and the Sustainable FERC Project also commented that the MISO TOs proposal would “squeeze wholesale sellers, who have no captive customers to charge, out of the wholesale market by paying them nothing for providing Reactive Power within the deadband.”
Perhaps the strongest objection to the MISO TOs proposal came from a renewable developers group called Clean Energy Generation Owners (CEGO), which represents the interests of Invenergy, NextEra, National Grid Renewables, Savion, DE Shaw, EDP Renewables, and RWE Renewables, among others. CEGO is concerned that Independent Power Producers will be forced “out of the marketplace because of economic unviability, leaving a gap for MISO TOs and their affiliates to fulfill with new generation.”
Lastly, FERC should note that only 23 TOs out of the 57 total (40%) have filed this proposal, as pointed out by CEGO.
The Electric Power Supply Association (EPSA), a national trade association of competitive power suppliers, is also opposed to this filing and asked FERC to initiate a “generic proceeding to broadly examine its policies with respect to compensating reactive power capability in order to ensure that it is available from resources which can provide this service both within and outside the deadband, or standard power factor range.”
Orsted Wind Power North America LLC also protested and pointed out that MISO TOs did not follow a stakeholder process to discuss “the proposed changes, the impact of the changes on generation resources in MISO or possible alternatives.”
Others include EDF Renewables, which has multiple wind facilities in MISO, the Coalition of Midwest Power Producers and Rainbow Energy Center, an IPP located in North Dakota and owner of Coal Creek Station, Wolverine Power Supply Cooperative, and AQN Wind Projects (indirectly owned by Algonquin Power & Utilities Corp).
Reactive power and voltage support are compensated outside the market
Reactive power and voltage support are compensated in the MISO market as a Schedule 2. Unlike the energy market, reactive power is settled at a transmission owner zone, not a market node. For example, in Dec. 2022, at zone 16 NSP Companies (Xcel Energy), the MISO rate for providing Schedule 2 was $1,500 per MW-year. Similarly, at zone 18 Otter Tail Power Company, the rate was $5,672 per MW-year, one of the highest among MISO TOs for that month. Both these TOs are part of this select group that filed this proposal.
These rates change monthly according to the transmission system usage. For instance, in June 2022, Xcel Energy had a rate of $574 per MW-year, and Otter Tail had a rate of $641. In that June month, City Water Light & Power, a TO (part of this select group) in Springfield, Illinois, had the highest schedule 2 rates at $7,487 per MW-year. Hence these Schedule 2 rates vary depending on the transmission system usage.
So, each TO pays renewable developers to provide these reactive power services. As a transmission provider, MISO collects revenue from renewable developers for accessing the transmission system to provide those same services and distributes the revenue to TOs according to their respective rates. Hence, reactive power is part of transmission settlements, not market settlements.
Blackstart service (Schedule 33) is another service similarly settled at the transmission owner zone.
Comments siding with MISO TOs
The Iowa Association of Municipal Utilities (IAMU) supports the MISO TOs proposal asserting that this proposal results in lower rates across the board for all transmission customers and does not impact the grid reliability.
Alliant Energy Corporate Services (AECS), a MISO transmission customer, also supports this proposal asserting that the current Schedule 2 is unjust and unreasonable, and the MISO TOs proposal results in a just and reasonable rate. But Alliant sold its transmission assets to ITC Midwest, which didn’t sign onto this proposal. So, the transmission customer (Alliant) thinks this is a good proposal, but the transmission owner (ITC Midwest) doesn’t?
Alliant’s main argument is that it is spending much time protesting the current reactive power compensation requests by generators in Iowa and Wisconsin. It says, “many generation project owners in MISO have filed greatly inflated reactive power rate proposals.” If true, FERC should investigate this. But as SEIA pointed out in their comments, FERC initiated a Notice of Inquiry (NOI) in Nov. 2021. So, I am unsure why this group of MISO TOs filed this Section 205 a year later.
Lastly, the Organization of MISO States (OMS) and DTE Electric support MISO TO’s proposal.
MISO TOs who didn’t sign onto this proposal
The list of 30+ MISO TOs who didn’t sign onto this reactive power compensation Section 205 filing features some big transmission owners, such as American Transmission Company in Wisconsin and International Transmission Company in Michigan. Additionally, independent transmission companies like GridLiance Heartland LLC (a NextEra company), Pioneer Transmission LLC (a joint venture between AEP and Duke Energy), and Republic Transmission LLC (an LS Power company) also didn’t sign onto this proposal.
Conclusion
Renewable developers don’t think it is just and reasonable for MISO TOs to cut one of their revenue sources. There are more protestors (at least 10) than the 4 supporters of this proposal. Accepting this reactive power proposal sets a bad precedent for renewable developers at MISO and other independent system operators. FERC must reject this MISO TO proposal.
