On June 16, 2016, FERC directed the Midcontinent Independent System Operator, Inc. (“MISO”) to either: (1) revise its Tariff to ensure that a generation or non-generation resource owner will no longer receive compensation for Reactive Supply and Voltage Control Service (“Reactive Service”) after it has deactivated or transferred its unit(s), and to clarify the treatment of Reactive Service revenue requirements for such unit(s); or (2) show cause why it should not be required to do so. FERC also directed MISO to post and maintain a chart listing all resource owners receiving compensation for Reactive Service, along with their current Reactive Service revenue requirements.
In MISO, compensation for Reactive Service is governed by Schedule 2 of the MISO Tariff. In accordance with that schedule, on March 2, 2016, Consumers Energy Company (“Consumer Energy”) filed with FERC revisions to its reactive power revenue requirement to reflect the updated status of certain generation units that had been acquired, sold, retired, or were scheduled to be retired. On April 28, 2016, FERC accepted the revisions, instituted a Federal Power Act (“FPA”) section 206 proceeding, established hearing and settlement proceedings, and referred to the Office of Enforcement its concern that “Consumers Energy may have continued to receive payments for Reactive Supply Service based on a revenue requirement that included the retired units, after it retired those units, and, thus, after their units were no longer capable of providing that service.”
In its June 16, 2016 Order to Show Cause, FERC noted the Consumers Energy filing, stating that “[t]he MISO Tariff neither explicitly states that compensation for Reactive Service will cease when a generation or non-generation resource owner has deactivated a unit such that the unit is no longer capable of providing the service, nor does the MISO Tariff explain whether or how compensation for Reactive Service is adjusted when a unit is transferred from a fleet.” FERC concluded that “[p]aying for a service required under the Tariff where . . . the generation or non-generation resource owner is no longer capable of providing that service is unjust and unreasonable.” FERC then directed MISO to either: (1) revise its Tariff to eliminate such payments; or (2) show cause why it should not be required to do so. FERC also referred its concern to the Office of Enforcement “for further examination and inquiry as may be appropriate.”
Going forward, FERC directed MISO to maintain a chart on its website listing all resource owners receiving compensation for Reactive Service, along with their current Reactive Service revenue requirements. In doing so, FERC noted that the Commission has imposed similar requirements on PJM Interconnection, L.L.C., and that “the availability of such information would increase the transparency of Reactive Service compensation under the MISO Tariff.”
FERC directed MISO to submit Tariff revisions addressing its concerns, or show cause why MISO should not be required to do so, within 30 days of the date of the June 16, 2016 order.
A copy of the June 16, 2016 order may be found here.