posted on Thursday, August 31, 2006 12:52 AM by Andrea Kells

Will High Congestion Costs Lead to More Defections from MISO?

Already one set of utilities has withdrawn from the from the Midwest Independent System Operator (MISO) after concluding membership in the regional transmission organization was providing inadequate benefits.  Now another utility has threatened to do the same.  In a recent filing at the Wisconsin Public Service Commission (PSC), Wisconsin Public Service (WPS) suggested that if new interstate power lines are not constructed to relieve grid constraints, it may withdraw from MISO, as did LG&E Energy and Kentucky Utilities [see Kentucky PSC Allows Utilities to Leave Midwest ISO].  

Wisconsin joined MISO based on the existence of temporary congestion cost protections.  As these protections are set to end in 2010, further congestion cost increases now loom for the Wisconsin-Upper Michigan System (WUMS), the most constrained region in MISO.  Due to an inability to import more power from outside of the state, WPS is forced to maintain a reserve margin of 18 percent, in contrast to the reserve margins of 12 to 14 percent maintained by other MISO-area utilities.  In addition, the WUMS experienced 94 hours with prices above $200/MWh in 2005, compared to 83 hours at that level for the rest of the market.  WUMS averages day-ahead and real-time clearing prices 33 percent higher than Minnesota and Chicago and 15 percent higher than Michigan.   

To combat these congestion costs, WPS suggested the PSC should require American Transmission Co. (ATC) to construct at least three of the interstate transmission lines that ATC proposed in an August 2005 study identifying several power line construction options from Wisconsin to Iowa, Illinois and Minnesota.  The PSC has yet to approve any of the options.  WPS argues that eliminating transmission constraints in the WUMS could permit it to reduce its reserve margin, saving ratepayers $20 million a year.  Should the PSC continue to delay in approving any new projects, WPS suggested it might withdraw from MISO.