Michigan and Midcontinent Independent System Operator Develop Electric Capacity Solution

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Gov. Rick Snyder today announced that discussions between the State of Michigan and Midcontinent Independent System Operator, an Indiana-based independent system operator and regional transmission organization, have produced a framework that facilitates a state approach for establishing adequate electrical resources to meet reliability requirements.

“MISO has collaborated with the Michigan Agency for Energy and Michigan Public Service Commission to develop a provision designed to meet Michigan’s resource planning needs,” says John Bear, CEO of MISO. “We plan to include language memorializing this solution in the Competitive Retail Choice proposal, which we expect to submit for (Federal Energy Regulatory Commission’s) approval in early November.”

He says the solution will create a system that aims to keep prices as low as possible with regulatory assurance that monies will be spent to secure needed electric capacity.

Under the proposed framework, states would have an option to select a “State Compensation Mechanism” for procuring electrical resources. Under that mechanism, the Michigan Public Service Commission would set a capacity charge after a contested proceeding. An alternative electric supplier would have an opportunity to find other capacity or pay that charge to the utility with the responsibility for procuring capacity to cover that load in the last resort.

The utility that had to purchase capacity would have three years to purchase that capacity. MISO would be in charge of setting amounts of capacity to be procured to meet reliability rules, and evaluate capacity arrangements used to meet resource adequacy requirements.

“This process will produce real solutions to a serious problem, and shows the positive outcomes that are possible when there is a spirit of partnership between the state and MISO,” Snyder says. “This will allow our state legislature to focus on improvements to existing laws so we can ensure Michigan’s energy future is bright.”

The Michigan Public Service Commission’s five-year outlook through 2020 shows the overall tightening of electric capacity supplies, which includes the amount of electricity demand that utilities have to meet in both the state and the Midwest. By 2018, the commission’s findings show that the Midwest region as a whole will not be able to meet margin requirements.

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