Duke files letter from MISO
in effort to move to PJM
August 12, 2010

Duke Energy filed a letter at FERC yesterday -- as part of the IOU's efforts to move from MISO to PJM -- that called into question the Midwest ISO's (MISO) compliance with FERC rules against making transmission decisions to benefit generation.  The letter was from MISO CEO John Bear and said that his market could offer Duke's Cincinnati-area utilities PJM capacity prices if they were to stay put.  The letter was sent three months before MISO filed a protest in the same docket, claiming the Duke move was meant to capture higher capacity prices for its generation fleet (RT, Jul-28).

          PJM is better suited for retail choice states in part due to its reliability pricing model that ensures enough generation is built in such jurisdictions, noted Duke.

          As seen in Duke's submission, Bear wrote Duke Energy Commercial Businesses President Keith Trent on May 4 outlining steps MISO planned to take to address concerns in retail choice states.

          The letter talked about setting up a capacity auction to be run by MISO or simply taking prices that PJM's RPM would pay FirstEnergy's Ohio utilities and paying them to Duke's utilities in the state.  That would let Ohio see "a common result for capacity pricing regardless of whether the LBA [local balancing authority] was in the Midwest ISO or in PJM," said the letter.

          Setting up such a system for Ohio would take longer than other options brought up in the letter, Bear wrote.

          Duke did not believe MISO stakeholders would be keen on developing a capacity market or other measures that would make the wholesale market match up better with retail choice states since the ISO had been shot down time and again in its quests to make such changes, said the IOU.  Most MISO members operate in states without retail choice thus the process is tilted against that.

          The utility avoided comparing MISO to PJM -- noting that it believes the former's value proposition works for its Indiana subsidiaries that have no plans to leave.  Differences between individual ISO/RTOs create legitimate rationales for a utility to prefer membership in one over another, said Duke.

          MISO claimed making Duke's Cincinnati area customers pay RPM prices would "harm" them but did not explain why it was willing to propose the same pricing three months earlier in the letter from Bear.  The ISO also does not explain how the FERC-approved market could produce unjust rates for Duke's consumers but be just and reasonable for others in PJM's vast footprint.

          The protest MISO filed in Duke's case also brought up FirstEnergy's recently approved move to PJM and the latter utility said the first market operator "doth protest too much."

          MISO's 'value proposition' can compete in the marketplace of ideas, which is by nature competitive, but the grid operator uses "coercion where persuasion fails," said FirstEnergy.

          Both FirstEnergy and Duke want FERC to shoot down arguments that the latter's move should be stopped since it amounts to MISO's eastern border "eroding." That would involve setting up a new public interest standard in RTO-departure cases that has not previously existed.

          Established law says RTO membership is voluntary and the terms of exit are defined in the Federal Power Act and relevant market tariffs, said FirstEnergy.


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