The Midcontinent Independent System Operator (MISO) is set to open its 2025/26 planning resource auction on March 26, 2025, with results expected on April 28. This year’s auction comes amid significant changes to testing requirements for demand response, adjustments to capacity accreditation methodologies, and the introduction of a Reliability-Based Demand Curve (RBDC). Together, these changes point to a higher likelihood of increased capacity prices, mirroring trends observed in PJM’s recent auction.
As MISO stakeholders prepare for the auction, understanding the impact of these changes is critical. From stricter testing for demand response resources to adjustments in Zonal Resource Credits (ZRC) policies, MISO may see higher capacity prices for a variety of reasons.
Increased testing scrutiny for DR and lower accreditation ratio
MISO is seeing testing inconsistencies between MPs of LMRs, particularly for demand response. MISO had 7,770 MW of LMR-DR in the last auction for summer on an installed capacity basis. If MISO is reviewing MP-submitted test data for DRs closely, I would expect the offered DR in the 2025 auction to be reduced.
MISO has changed how it accredits capacity based on the seasonal availability of resources since the 2023 auction. From the Installed Capacity (ICAP), MISO calculates Unforced Capacity (UCAP), which is ICAP times the forced outage rates of generators. From the UCAP, MISO calculates an Intermediate Seasonal Accredited Capacity (ISAC). The ratio of UCAP/ISAC is important because it shows how much haircut the capacity resources are getting when MISO is done with its capacity accreditation process that is based on seasonal Resource Adequacy (RA) hours called Tier 2 Hours and Non-RA hours called Tier 1 Hours.
MISO’s UCAP/ISAC ratio has dropped in 2025 summer. Last summer, MISO had 110.1 GWs of UCAP and 105.5 GW of ISAC, hence the ratio was 1.04. This summer, MISO is projecting 105.2 GWs of UCAP and 106.3 GW of ISAC, hence the ratio is lower at 0.99. For UCAP, this means generator retirements and lack of new generator additions from the queue have reduced UCAP this summer compared to last, which could lead to higher capacity prices.
For ISAC, the slight increase this summer compared to last is due to the increased performance of units during critical RA hours, specifically for the new year of operational data (9/2023 – 8/2024), according to MISO. The RA/Non-RA split was 70/30 in the last auction, and it will be 80/20 in 2025. The RA/Non-RA split started at 60/40 in the 2023 auction, which was the first time MISO implemented seasonal capacity market changes.
Serving a new curve in 2025
The big new change at this MISO’s 2025 planning resource auction is the implementation of a Reliability Based Demand Curve (RBDC). MISO’s Independent Market Monitor (IMM) has been asking for this market improvement for a while now, and only recently did MISO gain FERC approval for this change. Previously, MISO used to have a vertical demand curve.
According to MISO’s analysis, RBDC increased summer capacity prices from $30 per MW-day to $140 per MW-day, when MISO applied RBDC to the 2024 auction after the fact. MISO stated in that analysis that on a system-wide basis, RBDC cleared more capacity than without RBDC in the 2024 auction. Most importantly, in the summer season, RBDC cleared 3.2% more capacity than without. This could mean that, in the 2025 auction with RBDC, there could be a need for more cleared capacity. Still, if that capacity is retired or stuck in the queue, there is a higher chance of an increase in capacity prices, and MISO’s analysis on the 2024 auction indicates this jump could be as high as 367%.
LMR ZRC Replacements
Another change MISO is allowing under limited circumstances is the replacement of LMR ZRCs if the underlying contracts have been terminated by the end-use customers behind the demand response resources. This allowance is not codified in the FERC tariff and MISO is seeking stakeholder feedback on what conditions to impose on MPs to allow such a replacement. ZRCs are traded bilaterally among MPs.
MISO stated that under the current FERC tariff, planning resources (resources that apply for capacity qualification in the auction) are allowed to replace their ZRCs only if the following conditions are met: if the resource is suspended, if the resource is retired, if the generator had a catastrophic outage, if the generator is on a full or partial outage, and is the resource applied for an ICAP deferral. Because these conditions are almost exclusively applied to generators or generator-related outages in MISO’s outage management system, they don’t apply to LMRs.
MISO also admits to self-reporting to FERC for allowing LMRs to replace ZRCs that do not meet these conditions. Hence, as a part of this self-reporting process, MISO is committed to making tariff changes, according to MISO. I am unclear on the impact of auction clearing prices with the allowance of LMRs to replace ZRCs.
