Increasing complexity and faster change are expected to increase the Midcontinent Independent System Operator’s costs 46% faster over the next five years, compared with 2018-2021, MISO Advisory Committee members learned June 16, which may result in increased administrative rates applied to power moving through the system.
During a Finance Subcommittee presentation, Mitchell Myhre, Alliant Energy’s regulatory affairs manager who chairs the MISO subcommittee, said MISO expects cost growth to average 4.9% a year for 2022-2026, compared with 3.5% for 2018 through 2021.Factors driving costs include:
A changing generation fleetA more complicated and volatile power marketChanging regulatory issuesA need for flexible infrastructure to accommodate people, policy and technology changesA need to upgrade protection against cyber and technology threatsRegarding changing generation, S&P Global Platts Analytics forecasts coal-fired generation’s share of MISO’s output to fall from about 39% in 2021 to less than 33% in 2026, while gas-fired generation’s share would climb from about 26% to more than 28%, wind’s share would rise from about 14% to more than 17%, and utility-scale solar’s share would climb from less than 1% to more than 4%.
System being ‘stressed’Regarding a more complicated and volatile power market, MISO CEO John Bear in a recent Edison Electric Institute event noted that “five of the six events that have stressed our system … have been non-summer cold weather events.”
For example, during the winter storm of Feb. 15-17, real-time on-peak locational marginal prices at the Indiana Hub averaged almost $153/MWh, compared with an average of less than $25/MWh for the same period of the previous five years, according to the Platts price database.
But prices — and the fundamentals on which they are based — can also vary widely during summer months. For example, when a heat save triggered several maximum generation alerts and warnings across MISO the week of June 2, in which Indiana Hub real-time on-peak LMPs averaged almost $41.75/MWh on June 7-8, compared with averages of less than $29.40/MWh for the same period of 2016 through 2020.
Effect of salaries, benefitsThe biggest impact on total costs 2022-26 from all this complexity and change is salaries and benefits, according to Myhre’s presentation, boosting merit raises for existing employees by $34 million to $38 million, while salaries and benefits for increasing head counts could raise costs by $11 million to $13 million.
The next-largest category is for increased computer maintenance costs, an estimated $12 million to $15 million.
MISO derives most of its income from administrative rates charged to market participants, which rose from 37 cents/MWh in 2016 to 45 cents/MWh in 2020, while the budget for 2021 includes a 44 cents/MWh administrative rate.