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State of Michigan and MISO Propose Retail Capacity Charge

September 23, 2016 By Cheryl Kaften

Michigan Governor Rick Snyder (R) announced on September 19 that discussions between the state and the regional transmission organization (RTO), Midcontinent Independent System Operator (MISO), have produced a plan will keep energy rates as low as possible, even as it provides regulatory assurance that monies will be spent to secure needed electric capacity.

The jointly implemented solution still must be approved by the Federal Energy Regulatory Commission (FERC).

“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,” said Governor Snyder.

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

Under the proposed framework, states would have an option to select a “State Compensation Mechanism” for procuring electrical resourcesThe MPSC would set a capacity charge after a contested proceeding. An alternative electric supplier would have an opportunity to source the capacity – presumably at a lower price – or to pay the charge set by the  responsible utility (for example, DTE or Consumers Energy). The utility would have three years to purchase that capacity.

MISO would be tasked with setting amounts of capacity to be procured to meet reliability rules, and to evaluate the capacity arrangements used to meet resource adequacy requirements.

This proposal identifies the resource adequacy requirement three years in advance of the need, and creates the opportunity to procure any needed capacity resources,” said Sally Talberg, chairman of the MPSC. “The overall solution lets the MPSC and MISO work together to make sure the right kind of tools and incentives are in place for the state to use its authority to oversee resource adequacy by directing its utilities to use any funds collected for investment in capacity resources.”

The partners to the proposal also stressed the importance of passing state legislation to embed the plan.  “We will continue to work with our partners in the Legislature to enact needed reforms,” said Valerie Brader, executive director of the Michigan Agency for Energy.  While we have identified a clear path to solving a key reliability issue, we need action to ensure that no matter what the federal government does, Michigan will be able to meet its responsibility to ensure resource adequacy,”

The Governor’s Office “praised the passage out of committee of both the Senate and House packages for energy reform, and remains hopeful that both chambers will act on this important topic by the end of the year.”

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