MISO SSR Unit’s Recovery of Fixed Costs Upheld

By Amanda Durish Cook

FERC last week issued two orders reaffirming earlier rulings on MISO’s disputed system support resource agreement with Illinois Power’s Edwards Unit 1 generator in Peoria, Ill.

The SSR agreement took effect in January 2013 to keep the Edwards unit operating to address thermal and voltage problems until transmission upgrades can be completed in December 2016. Dynegy’s Illinois Power unit acquired the plant from Ameren in December 2013.

In the first order, the commission affirmed its July 2014 finding that a generator should be allowed to recover its fixed costs through a full cost-of-service rate when it is forced to continue operating for reliability reasons (EL13-76-001, et al.).

MISO industrial customers and the PJM Market Monitor challenged the 2014 order, arguing that uneconomic generators targeted for retirement are not recovering their fixed costs from the market and should not receive a “windfall” because they are needed for reliability. (See PJM IMM Questions MISO Cost Recovery Ruling.)

The commission saw it differently. “Although a retiring generator may view undepreciated costs as being sunk and may write-off any loss at the time of retirement, the fact remains that MISO has the ability to unilaterally delay this decision,” FERC said. “During this delay, an SSR unit owner is providing utility service, and … when a generator is required to provide utility service, it should be permitted to recover costs beyond going-forward costs.”

Last week’s order also affirmed the commission’s earlier ruling that the Federal Power Act prevents the commission from providing retroactive cost-of-service recovery. The order left the commission’s previous rulings regarding Edwards’ 2013 and 2014 costs unchanged.

In the second order, FERC denied requests for rehearing of the commission’s March 31 order that renewed Edwards’ SSR agreement for one year through 2015 (ER15-943-002, et al.).

Hoosier Energy Rural Electric Cooperative, Illinois Municipal Electric Agency, Prairie Power, Southern Illinois Power Cooperative and Wabash Valley Power Association sought rehearing on the basis that MISO needed to conduct a new reliability analysis to re-evaluate the need for Edwards as an SSR unit. The companies contended MISO’s 2013 analysis may be out-of-date. FERC agreed with MISO that there were “no significant changes” that would necessitate a new analysis.