RTO Insider, December 3, 2019

Tom Leckner

SAN ANTONIO — Two environmental groups that say regulated utilities’ practice of self-committing coal plants is costing ratepayers have a point, RTO officials said Monday, even as they challenged the groups’ estimates. 

The issue is also attracting scrutiny from state regulators. The Sierra Club released a study last month that estimates that “captive ratepayers” in MISO, SPP, ERCOT and PJM paid $3.5 billion more for energy from 2015 to 2017 because of the “noneconomic dispatch relative to the potential procurement of energy and capacity on the market.”

Meanwhile, the Union of Concerned Scientists (UCS) will release a study early next year that indicates that if MISO economically dispatched all its generation, average wholesale power prices would rise 3% but production costs would drop 11%. That would lower consumer costs, UCS Senior Energy Analyst Joe Daniel said during a Nov. 19 breakfast panel at the National Association of Regulatory Utility Commissioners’ annual meeting. “The market surplus, the relative profitability of the MISO system, would improve by 64%,” Daniel said.

The group, along with the Sierra Club and consumer advocates, has raised concerns about coal plants owned by vertically integrated utilities that self-commit, or run out of merit at times when their production costs exceed the wholesale market price.

The Sierra Club said out-of-merit operations suppress market prices, estimating that MISO’s median hourly market price would have been about $7.70/MWh (30%) higher if coal units had economically dispatched in 2017. “Improved dispatch practice would reduce customer costs, improve market revenues for efficient generators and renewable energy operators, and substantially reduce emissions,” it said.

Annie Levenson-Falk, executive director for the Minnesota Citizens Utility Board, noted that the UCS study indicates that the state’s two largest entities — Xcel Energy’s Northern States Power and ALLETE’s Minnesota Power — could have realized $85 million to $90 million in gross savings had their coal units been dispatched economically. 

“Those are substantial numbers, and it raises concerns for us,” Levenson-Falk said during the NARUC session. “Clearly, this is a problem in the way the plants are operating. In Minnesota, we’re moving quickly to a much higher level of renewable power. You talk about not just generating to meet load, but scheduling variability.”

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