FERC grants waiver for Energy Offer Price Cap in MISO's energy markets

The price spikes during last year's sustained polar vortex had a lasting impression on nearly all participants in the electricity markets. Last December, the Midcontinent Independent System Operator, Inc. issued a formal request to the Federal Energy Regulatory Commission asking for a waiver for the $1,000/MWh Energy Offer Price Cap.

Earlier this month, FERC granted MISO its desired waiver, though on a temporary basis, according to a document released by the Commission.

Why MISO requested the waiver
According to the formal request document, MISO requested a limited, one-time waiver of specific aspects of the Open Access Transmission, Energy and Operating Reserve Markets Tariff. In particular, MISO wanted the Commission to temporarily waive the established $1,000/MWh Energy Offer Price Cap in the ISO's day-ahead and real-time energy markets. Additionally, it also asked that provisions regarding the process the Independent Market Monitor uses to establish cost-based reference levels for generation resources.

The request explained that the waiver would be necessary for participants in MISO's market to recoup their costs beyond the $1,000/MWh cap in the event that fuel costs increase to high levels similar to last year's price increases due to the extreme weather circumstances.

MISO justified the waiver by pointing out that it would be a temporary arrangement - lasting from December 2014 to April 2015 - and will help all market participants by limiting energy offers to $1,000/MWh, even when their fuel costs lead to higher incremental costs.

FERC grants MISO a temporary waiver
FERC gave MISO its official approval on Feb. 9. With the Commission's approval of the waiver, generators with verifiable costs above the $1,000/MWh energy offer price cap can receive make-whole payments, which are payments designed to compensate generators that expect to operate but don't, by increasing the "No Load" component of their offer. From there, generators may be eligible to obtain recompense after consulting with MISO's Independent Market Monitor, the Commission's document read.

FERC also determined that by waiving the price cap, it would remedy the problem of potentially discouraging generators from supplying power when it is most needed during the cold winter months. The Commission stated that without the waiver, generators would be forced to choose between supplying electricity below cost and not providing at all during high-cost periods.

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