OREANDA-NEWS. The Midcontinent Independent System Operator (MISO) plans to move forward with proposed changes to its emergency pricing rule with a tariff filing with federal regulators next month, targeting summer 2016 for implementation.

The operator of the second-largest US power grid is unhappy with current pricing rules, because it is possible for wholesale prices to fall during emergency conditions when load rises and operating reserves drop. MISO wants to ensure prices reflect the high cost of bringing capacity on line when MISO declares a maximum generation emergency event.

MISO's independent market monitor noted that pricing during emergency hours plays "a crucial role in sending efficient long-term economic signals to maintain adequate supply resources and to develop additional demand-response capability."

The proposed change would use proxy offers for resources scheduled during shortage events by establishing two emergency "floor," or minimum, prices.

The tier I price floor will be the highest available offer in the affected emergency area at the beginning of the emergency event. If system conditions become more severe, the tier II price floor will be the highest available offer in the affected area at the point when demand response and other load-modifying resources are called on.

The goal is to escalate marginal prices until enough resources are drawn into the market. The current emergency pricing mechanism assigns a value of zero to some demand response and export curtailment bids, bringing down market prices amid an emergency alert.

MISO's \$1,000/MWh energy offer price cap will not apply to the emergency offers, so that all available resources are encouraged to supply the market.

The debut of extended locational marginal pricing this month will facilitate changes needed to create appropriate emergency prices that reflect true production costs when resources are scarce, staff said yesterday at MISO's market subcommittee meeting in Carmel, Indiana.

Extended locational marginal pricing ensures that market prices incorporate commitment costs for fast-start resources and emergency demand response to minimize uplift charges. The costs of start-up and staying connected to the grid at minimum generation levels will lift the emergency offer floor while the \$1,000/MWh cap will apply only to the incremental energy cost.

Committee members asked the staff to include tariff language to address how the emergency prices end as grid conditions return to normal.

MISO staff will seek comment from stakeholders for the next two weeks before filing a tariff revision request with the Federal Energy Regulatory Commission in April. MISO wants to implement the change by summer 2016.