Escanaba says MISO support for two coal units is justified

The city of Escanaba, Mich., told the Federal Energy Regulatory Commission on Nov. 13 that a ground-breaking System Support Resource (SSR) agreement that would keep two of its coal units operating while those units are sold and converted to biomass is justified.

Escanaba owns a power plant consisting of two 12.5 MW (nameplate) coal-fired steam turbines (Units 1 and 2) and one 18 MW (nameplate) diesel-fired combustion turbine (CT) unit. Escanaba is working to sell the coal units to Escanaba Clean Energy LLC, which will convert them to biomass.

The city in December 2011 wanted to shut the units as uneconomic during the June 2012-June 2015 period. But the city won an SSR from the Midwest Independent Transmission System Operator that would keep the units going, with the cost of that underwritten by MISO members, some of whom have protested the need for this agreement and whether MISO has adequately proven this was a “last resort” option. This is the first SSR that MISO has worked out, so how it is dealt with by FERC will set some precedent. MISO has requested an effective date of June 15, 2012, for both the SSR agreement as well as a cost allocation.

In the Nov. 13 filing, Escanaba said there are two questions presented in these two dockets: whether MISO’s SSR agreement with Escanaba effective June 15, 2012, is just and reasonable; and whether the costs of the SSR agreement are appropriately allocated to ATC zone load-serving entities as of June 15, 2012.

“The first question must be answered in the affirmative,” the city argued. “Under the MISO tariff, SSR service is a ‘contracted service’ between only MISO and the owner of the unit, and the June 15, 2012 effective date for the SSR Agreement reflects the fact that Escanaba must be compensated from that point forward for the reliability service it provides. If the Commission finds that waiver of the prior notice rule is not justified as to the second question (allocation of the costs of the SSR Agreement to the ATC zone), the Commission could order MISO to develop a more equitable cost allocation for the time period between the June 15, 2012 effective date of the SSR Agreement and the effective date for Rate Schedule No. 43.”

Escanaba argues for an SSR that is retroactive to June 15

Regardless of how the commission treats Rate Schedule No. 43, Escanaba should be appropriately compensated for providing a critical reliability service to MISO, at MISO’s request, and by maintaining its units beyond the notice period required by the MISO tariff, the city said. “While Escanaba is sympathetic to the prior notice concerns voiced by some load-serving entities in the ATC zone to whom costs are allocated under Rate Schedule No. 43, there are strong countervailing concerns that justify the June 15, 2012 effective date for the SSR Agreement,” it added.

  • “First, Escanaba submitted its Attachment Y notices because the City was losing money by continuing to operate the two steam turbines that are the subject of the SSR Agreement. As established in MISO’s filing, the Escanaba units are dispatched too infrequently to recover their full fixed and variable costs of operation. Owners of generating facilities in MISO have full rights to retire or mothball their facilities as long as they comply with the requirements of the tariff and comply with the Attachment Y notice provisions. Escanaba satisfied those tariff requirements and was permitted to mothball the units on June 15, 2012 unless MISO determined they were needed for reliability. However, once MISO determines that a unit is needed for reliability, the MISO tariff requires the unit to maintain its availability in return for SSR compensation.”
  • “Second, the filed rate doctrine requires fully compensating Escanaba for its SSR service. As noted by MISO, Section 38.2.7 of the MISO Tariff provides that SSR Units are due ‘equitable compensation.’ Moreover, in approving the SSR program, the Commission clearly explained that that SSR Units should be ‘fully compensated’ and that ‘nothing in the SSR program would require a generator to absorb any uncompensated going-forward costs.’ In its recent order accepting amendments to the SSR provisions to the MISO tariff, the Commission re-affirmed the need to fully compensate units for SSR service.”
  • “Third, general equitable principles require compensating Escanaba for its service. As explained by MISO, Escanaba fully complied with the notice provisions of the tariff and has maintained its units since June 15, 2012, continuing to operate at a loss, at the request of MISO and under the full understanding it would be compensated for the service. There was an unfortunate delay in filing this agreement because the tariff in effect before the recent amendments did not set aside additional time for negotiating the SSR Agreement after the notice period expired. In addition, as MISO noted, it had never executed an SSR Agreement before and neither party understood the time it would take to formulate compensation and negotiate the agreement, insofar as there was no precedent. In other words, it would be fundamentally unfair to penalize Escanaba simply for being the first entity to be asked to provide SSR service. Further, it would be unfair and confiscatory not to allow MISO to honor its commitment to the City and reimburse it for the reliability service it provided during the period before the agreement was filed.”

To the extent that FERC believes that waiver of the prior notice requirement is not warranted regarding charges to ATC zone load-serving entities, Escanaba suggested that the notice issue is only an infirmity to the requested effective date for Rate Schedule No. 43, the cost allocation rate schedule in Docket No. ER13-37. It should not stand in the way of granting the June 15, 2012, effective date for the SSR Agreement itself in Docket No. ER13-38, the city said. “While that solution raises a question about who pays the costs of Escanaba’s SSR service from the June 15, 2012 effective date of the SSR Agreement to a later effective date for Rate Schedule No. 43, the Commission could require MISO on compliance to file an appropriate cost allocation proposal for that period.”

Escanaba noted that Wisconsin Public Service Co. and Upper Peninsula Power Co. ask for assurance that, if a June 15, 2012, effective date is granted, Escanaba will not double recover for both the SSR costs and its market activities after June 15, 2012. Escanaba agreed that implementing the June 15, 2012, effective date will require netting out any market revenues received since that date from any compensation under the SSR agreement so that Escanaba does not double-recover. “Indeed, such netting would be required by operation of the SSR Agreement, which requires the netting out of market revenues during the term of its SSR service, regardless of whether the units were dispatched for reliability or market economics,” it said.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.