Electric System Reliability and 

EPA’s Clean Power Plan: 

The Case of MISO

 

Analysis Group

Susan Tierney

Paul Hibbard 

Craig Aubuchon

June 8, 2015
MISO: Electric System Reliability and EPA’s Clean Power Plan 

Analysis Group 

Acknowledgments

This report provides an assessment of various reliability issues facing the Midcontinent 

Independent System Operator and the states in the MISO region, as they look ahead to 

implementation of the Clean Power Plan, proposed by the U.S. Environmental Protection 

Agency on June 2, 2014.

This report is the third in a series of reports, and supplements analyses we presented in our first 

report (February 2015) on EPA’s Clean Power Plan. In that report, we assessed the readiness of 

the nation to ensure a reliable electric system while moving to reduce carbon pollution from 

existing power plants. Our second report focused on the PJM Regional Transmission 

Organization (March 2015). 

This is an independent report by the authors at the Analysis Group, supported by funding from 

the Energy Foundation. The report, however, reflects the analysis and judgment of the authors 

only.

About Analysis Group

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Analysis Group’s energy and environment practice area is distinguished by expertise in 

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as significant experience in environmental economics and energy infrastructure development. 

The practice has worked for a wide variety of clients including: energy producers, suppliers and 

consumers; utilities; regulatory commissions and other public agencies; tribal governments; 

power system operators; foundations; financial institutions; and start-up companies, among 

others. 
MISO: Electric System Reliability and the EPA’s Clean Power Plan

Analysis Group 

Table of Contents

Executive Summary 1

Our Prior Reliability Studies 4

Spotlight on the MISO Region: Why Focus on this Part of the Country? 5

A Large Regional Transmission Organization Spanning a Significant Portion of the 

Continental U.S. Land Mass 5

A Multi-State RTO with Many Seams with Other Electrical Regions 5

A More Traditional Utility Industry Structure Under State Jurisdiction 8

Active Involvement of State Regulators in Regional Coordination 8

A Changing Mix of Power Supplies 10

The MISO Region’s Success in Addressing Reliability Challenges Associated with MATS 

Compliance 16

MISO’s Outlook for the Region’s Resource Adequacy under the Clean Power Plan 18

The Resource Outlook in Advance of the Clean Power Plan 18

MISO’s Analysis of Clean Power Plan Impacts 20

Reliability in the MISO Region: Tools 22

MISO’s Business-As-Usual Reliability Tools 22

Resource Adequacy: The Role of MISO 25

Resource Adequacy: The Role of the States, Utilities’ Integrated Resource Planning, and 

Competitive Markets 29

Regional Collaboration 31

Conclusion 38
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 1

The MISO Region

Source: 

https://www.misoenergy.org/Planning/InterregionalCoordin

ation/PublishingImages/IPSAC_MISO_Map.png

Executive Summary 

The Midcontinent Independent System Operator (“MISO”) has responsibility for reliable 

electric system operations in all or parts of a 15-state area in the middle of the U.S. The large 

geographic region covered by its footprint (shown below) makes MISO the largest grid 

operator in the U.S. in terms of area served. MISO is the second-largest Regional 

Transmission Organization (“RTO”) in the U.S. in terms of electrical load.

In this report, we analyze reliability considerations in the MISO region as the stakeholders 

there anticipate compliance with the U.S. 

Environmental Protection Agency’s 

(“EPA”) Clean Power Plan. As we 

concluded in our prior reports about the 

PJM Interconnection region and the 

nation as a whole, we find that MISO 

is well positioned to use existing tools 

and operating procedures to maintain 

electric system reliability at the same 

time the region lowers carbon 

pollution from power plants. 

The MISO region is interesting to 

analyze for a number of reasons: 

 Like PJM, MISO is one of the

largest organized, competitive wholesale power markets in the U.S.; but unlike PJM, most 

of the 15 states served by MISO have vertically integrated investor-owned electric utilities 

subject to state regulation, as well as numerous municipal utilities and electric 

cooperatives. 

 MISO faces complicated Clean Power Plan compliance issues due to: the sheer size and 

economic diversity of a region involving almost a third of the Lower 48 states; the 

combination of a centralized wholesale electric market with most retail electricity 

customers in the region served by traditional utility-industry structures; the mix of 

industry players that will be involved in Clean Power Plan planning and compliance; the 

extensive number of boundaries with other, non-MISO electric systems; and the region’s 

heavy reliance on coal-fired power plants. 
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 2

 MISO is already actively engaged with states and others to examine how controlling 

carbon dioxide (“CO2”) emissions might affect the region’s electric system. And the 

MISO states are discussing how their own State Plans might be designed to align with the 

structure of the regional power market. 

Our review concludes that:

 The parties responsible for electric system reliability in the MISO region are well 

positioned to address collaboratively and constructively the reliability issues that might 

arise from the electric industry’s compliance with the Clean Power Plan.

 With or without the Clean Power Plan, the MISO region has to address relatively nearterm resource-adequacy issues. As a region historically – and still – highly dependent on

coal for power generation, the MISO states’ electric systems have been undergoing 

significant changes in recent years. Until recently, it has had significant surplus capacity. 

It has seen (and will likely see more) retirements of coal-fired generating units, increased 

reliance on natural gas to produce power, integration of significant quantities of 

electricity generated by wind, and significant expansion of the transmission system.

 Like all RTOs, MISO starts with a strong tool kit for managing the “Essential Reliability 

Services” needed to assure high-quality electric service. Performing various resourceadequacy and system-security functions to ensure continuous operational security of the 

electric system is MISO’s normal job, which it carries out in conjunction with the states, 

investor-owned utilities, cooperatives and municipal electric systems, other market 

participants, and other reliability organizations. 

 Given the electric industry structure in the MISO region, there is a strong culture and 

practice of planning involving the local utilities and their regulators/boards along with

MISO. Each plays different roles in assuring electric system reliability. MISO establishes 

recommended resource-adequacy targets for the states and the industry, while the 

utilities develop packages of resources consistent with state planning requirements.

 MISO supports this process through various assessments, including the MISO 

Transmission Expansion Planning (“MTEP”) process and its unique approach – the 

“Multi-Value Projects” (or “MVP”) process – for identifying transmission projects that 

support reliability, economic efficiency and policy goals of the states and which provide 

broad benefits to the region.

 The region has a long history in which states rely upon integrated resource planning

(“IRP”) to provide electricity supply. These IRP processes are a key tool through which 
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 3

utilities assemble their supply portfolios. Many states in the region use IRP processes in 

conjunction with the MISO markets, competitive-power procurements, and energyefficiency programs for consumers. This set of tools will help the states and the industry 

with Clean Power Plan compliance. 

 The MISO region and the states also have a history of constructive collaboration that is 

serving them well as they attempt to overcome the complicated issues they face in 

integrating major quantities of distant renewable resources, and as the states prepare to 

comply with the Clean Power Plan. MISO’s and others’ analyses suggest that the more 

the states collaborate on a regional, market-based approach, the more this approach will 

enable the region to comply at a lower cost while also ensuring reliability.

 Finally, the flexibility that EPA has granted states in designing Clean Power Plan 

implementation plans leaves the door wide open for states to propose in their plans the 

specific mechanisms needed to ensure that Clean Power Plan compliance does not 

compromise system reliability. 

This paper, which is the third report that we have written in 2015 on electric system 

reliability issues related to the EPA’s Clean Power Plan,1 is designed to: 

 Put a spotlight on the MISO region, by describing the characteristics of its generation 

mix, its reliance on coal-fired power plants, and the evolving conditions on the 

system as some units retire and other resources enter the market. 

 Provide context on how MISO routinely navigates changing system conditions and 

the roles it plays vis-à-vis other actors (including the states, the utilities and other 

market participants) in assuring system reliability. 

 Summarize the results of analyses of the impacts of alternative Clean Power Plan 

approaches on the MISO system.

 Explain the array of tools relied upon in the MISO region to ensure reliability.

 1 Our first report examined concerns raised by stakeholders across the country about whether the EPA’s proposed rule would 

jeopardize electric system reliability; we concluded it would not. See: Susan Tierney, Paul Hibbard, and Craig Aubuchon, 

“Electric System Reliability and EPA’s Clean Power Plan: Tools and Practices,” February 19, 2015. 

http://www.analysisgroup.com/uploadedfiles/content/insights/publishing/electric_system_reliability_and_epas_clean_power_pl

an_tools_and_practices.pdf. Our second report focused specifically on reliability issues in PJM, the nation’s largest and oldest 

grid operator that administers a centralized wholesale electric market. See: Susan Tierney, Paul Hibbard, and Craig Aubuchon, 

“Electric System Reliability Issues and EPA’s Clean Power Plan: The Case of PJM,” March 16, 2015. 

http://www.analysisgroup.com/uploadedfiles/content/insights/publishing/electric_system_reliability_and_epas_clean_power_pl

an_case_of_pjm.pdf.
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 4

Our Prior Reliability Studies

Table 1 summarizes the key findings of our two prior reports, which provides good context 

for our in-depth review of the MISO region. 

Table 1

Key Findings from Our Prior Reports on Electric System Reliability and EPA’s Clean Power Plan:

“Tools and Practices” (2-2015) “The Case of PJM” (3-2015)

Looking across the nation as a whole, we found that CO2

emissions can be controlled at existing power plants without 

adversely affecting electric system reliability.

 Warnings about reliability are common whenever there is 

major change in the industry, and play an important role in 

focusing the industry’s attention on the issue. 

 Given the major shifts already underway in the electric 

system, the industry would need to adjust its operational 

and planning practices to accommodate changes even if 

EPA had not proposed the Clean Power Plan. 

 The standard reliability practices that the industry and its 

regulators have used for decades are a strong foundation 

from which any reliability concerns about the Clean Power 

Plan will be addressed. 

 EPA’s proposal provides a wide range of compliance 

options that can prevent reliability issues while also 

reducing CO2 emissions and compliance costs. 

 Many reliability concerns raised by stakeholders presume 

inflexible implementation, are based on worst-case 

scenarios, and assume that parties will stand on the 

sidelines until it is too late to act. There is no historical 

basis for these assumptions. Reliability issues will be 

solved by the dynamic interplay of actions by regulators, 

entities responsible for reliability, and market participants 

with many solutions proceeding in parallel. 

 There are many capable entities focused on ensuring 

electric system reliability, and there are many things that 

states and others can do to maintain a reliable electric 

grid. We identify a number of actions that the Federal 

Energy Regulatory Commission, grid operators, states, and 

others should take to support system reliability as the 

electric industry transitions to a lower-carbon future. 

 In the end, the industry, its regulators and the states are 

responsible for ensuring electric system reliability while 

reducing CO2 emissions from power plants as required by 

law. These responsibilities are compatible and need not 

be in tension as long as all parties act in a timely way and 

use the tools at their disposal. We observe that, too often, 

commenters make assertions about reliability challenges 

that really end up being about cost impacts. It is 

important to separate reliability considerations from cost 

issues to avoid distracting attention from the actions 

necessary and feasible to keep the lights on. 

PJM and the states in the PJM region are well 

positioned to lower CO2 emissions from existing 

power plants while relying on the reliability tools and 

operating procedures they have already used with 

great success.

 PJM is already adapting effectively to changes 

underway in the electric industry.

 PJM’s analysis of compliance options 

demonstrates that regional, market-based 

approaches can meet Clean Power Plan goals 

across PJM states at lowest cost, with retirements 

likely spread out over a number of years. The 

results indicate that expansion of energy 

efficiency and renewables can reduce retirements, 

and that the market is responding with proposals 

for new projects.

 PJM and the PJM states have extensive authorities 

and experience with administrative mechanisms 

to resolve potential reliability violations 

associated with the retirement of power plants. 

 PJM has demonstrated success with reliability

challenges in the past, including retirements 

related to low natural gas prices and the Mercury 

Air Toxics Standard (“MATS”), and stresses on the 

fleet during the winter 2014 “Polar Vortex.” 

 Given the robustness of existing reliability tools 

and the flexibility in the Clean Power Plan, we are 

not convinced that a Reliability Safety Valve, as 

proposed by PJM, is either needed or practically 

workable. If EPA wishes to include some sort of 

reliability “back stop” mechanism in the final 

carbon rule, we think EPA should design it in a 

way that creates appropriate incentives for 

reliance upon normal reliability tools and thus 

makes it unlikely that a waiver will need to be 

called upon. If EPA includes one, it should be 

accompanied with a requirement to offset any 

emissions associated with implementing the

reliability mechanism. And its design should 

ensure that any requested waiver is approved only 

if it is appropriate, transparent, equitable,

equivalent, and cost-effective. 
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 5

Spotlight on the MISO Region: Why Focus on this Part of the Country?

What is particularly interesting about the MISO electrical region that caused us to focus on it 

for this report? The MISO region is an important case study for several reasons. In 

particular, MISO regional processes illustrate many of the tools and practices available to 

state and regional officials, including grid operators and market participants, to assure both 

electric reliability and compliance with limits on carbon pollution. This area has: 

A Large Regional Transmission Organization Spanning a Significant

Portion of the Continental U.S. Land Mass

First, MISO has the largest physical footprint of any organized wholesale market 

administered by an independent system operator (“ISO”) or an RTO in the U.S. (as shown in 

Figure 1). MISO is second in size after the PJM region, in terms of population served and 

peak electrical demand, and has approximately the same amount of generating capacity 

(total megawatts (“MW”)) as PJM.

2

 

A Multi-State RTO with Many Seams with Other Electrical Regions

Second, MISO serves an area encompassing all or parts of 15 states: Arkansas, Illinois, 

Indiana, Iowa, Louisiana, Kentucky, Michigan, Minnesota, Mississippi, Missouri, Montana, 

North Dakota, South Dakota, Texas, and Wisconsin (Figure 1). Due to its size and the history 

of different transmission companies joining MISO, this RTO includes many states that 

participate in more than one RTO.

 2 Comparison of the size of the various RTOs:

Regional Transmission Organizations (2014)

CAISO* ERCOT ISO-NE MISO NYISO PJM SPP

Population served 30 million 

(consumers)

24 million 

(consumers)

14.5 

million 

(people)

42 

million 

(people)

20 

million 

(people)

60 

million

(people)

15 

million 

(people)

Number of states affected 2 1 6 15 1 13 + D.C. 14

Summer Peak Load (GW) 44.67 66.73 24.39 114.86 29.78 141.67 46.14

Operating Capacity (GW) 69.92 99.23 35.81 199.32 44.27 202.78 72.60

Actual Net Energy for Load 

(GWh) 232,696 341,311 128,651 685,593 160,028 797,648 62,390

Source: SNL Financial for electric industry facts; population and customer information from each RTO.

* This reflects CAISO’s grid / transmission system operations. Note that with the recent integration of PacifiCorp into CAISO’s 

Energy Imbalance Market (“EIM”) and the upcoming integration of NV Energy in the Fall of 2015, CAISO’s EIM will serve 44 

million people and parts of 7 states. http://www.caiso.com/Documents/FastFactsEIM-NVEnergy.pdf
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 6

Source: FERC

Figure 1: 

Regional Transmission Organizations

MISO operates as an 

integrated regional electric 

system and power market. 

By contrast, EPA’s proposed 

regulatory framework 

under Section 111(d) of the 

Clean Air Act (“CAA”) 

provides for state-specific 

CO2-emission-reduction 

targets for the 49 states that 

have power plants covered 

by the proposed regulation.3

This creates a complicated 

set of potential compliance 

design options and 

challenges, because the proposed emission-reduction targets (in terms of pounds of CO2 per 

MWh) vary considerably from one MISO state to another. (See Figure 2, below.) Under the 

EPA proposal, each state will have the option to decide whether to prepare a State Plan for its 

state alone or as part of a multi-state program. Some of the MISO states (such as Illinois, 

Kentucky, and Indiana) have generating units in that RTO as well as generating units in 

either another RTO or outside of an RTO region.4 In theory, the power plants participating in 

MISO’s wholesale market could end up being covered by as many as 15 different state plans,

a single regional design coordinated across states, or some different mixture of approaches.

 3 There are fossil-fuel power plants covered by the Clean Power Plan in all states/districts except for Vermont and the District of 

Columbia. 

4 Illinois has generating units in both PJM and MISO, as do Indiana and Michigan. Kentucky has generating units in two 

different RTOs (PJM and MISO), and in areas without an RTO (e.g., power plants owned by the Tennessee Valley Authority). 

North Carolina has generating units in PJM as well as in areas without an RTO.
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 7

Figure 2

Interim Period (2020-2029) Rate-Based Targets by State

Source: EPA, Clean Power Plan Technical Support Document

MISO’s extraordinary number of boundaries (“seams”) with other RTOs and non-RTO 

regions creates some potentially challenging issues in the context of Clean Power Plan 

implementation and electric system reliability. Several factors complicate the seams issues: 

In addition to the MISO states having different CO2-emission rates and targets, the borders of 

the MISO footprint do not match up with states’ own borders and vice versa. There are 

many pockets of small electric systems inside of MISO that do not participate in the MISO 

markets. Individual MISO states may consider whether to develop State Plans with one 

approach for their power plants in MISO and another for their other power plants, and MISO 

will incorporate reliability practices (and potentially other actions) to accommodate different 

0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000

Idaho

Washington

Maine

Oregon

New Hampshire

California

Connecticut

New York

New Jersey

Massachusetts

Nevada

Mississippi

Arizona

Florida

South Dakota

Rhode Island

South Carolina

Texas

Virginia

Georgia

Minnesota

Delaware

Oklahoma

Louisiana

Arkansas

North Carolina

Alaska

New Mexico

Alabama

Colorado

Pennsylvania

Michigan

Tennessee

Wisconsin

Iowa

Maryland

Illinois

Utah

Hawaii

Ohio

Kansas

Nebraska

Indiana

Missouri

West Virginia

Wyoming

North Dakota

Kentucky

Montana

KY: 1,844

MT: 1,882

MO: 1,621

IN: 1,607

MN: 911

TX: 853

MS: 732

ND: 1,817

Lbs of CO2/MWh

SD: 800

IL: 1,366

AR: 968

LA: 948

WI: 1,281

MI: 1,227

IA: 1,341
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 8

conditions at the boundaries of its system with neighboring systems. 

A More Traditional Utility Industry Structure Under State Jurisdiction

Ninety percent of the MISO region’s electrical load served by vertically integrated utilities, 

including investor-owned utilities, municipal utilities and cooperatives.5 Few of the MISO 

states have retail choice.6 Within the region, the states maintain the authority and 

responsibility for ensuring resource adequacy, but they do so in close collaboration with 

MISO.7,8 This collaboration includes coordination in setting reliability requirements, 

transmission planning to increase regional import capacities and accommodate integration of 

remote generation resources, and participation in the MISO Planning Reserve Auction 

(“PRA”) that is used to procure market-based capacity obligations and send price signals for 

new investment. 

The MISO region combines state-regulated, vertically integrated utilities participating (with 

attendant operational and planning obligations) in a regionally coordinated bulk power 

system and wholesale market. While this hybrid design and high level of state responsibility 

may not be necessary for effective functioning of RTOs, the parties in the MISO region 

already have this asset, which will be a helpful platform for developing robust responses to 

the changes that may arise in conjunction with the Clean Power Plan.

Active Involvement of State Regulators in Regional Coordination 

Fourth, representatives from the public utility commissions (“PUC”) of states served by 

MISO work together through an active association – called the Organization of MISO States, 

Inc. (“OMS”) – that has been in place for over a decade. At OMS, the states discuss 

wholesale market rules, transmission planning assumptions, and other emerging regulatory 

issues, and attempt to inform each other and identify points of agreement. OMS sometimes 

 5 See, for example, MISO Staff, Issues Statement on Facilitating Resource Adequacy in the MISO Region, March 2015, page 7. 

Available: https://www.misoenergy.org/Planning/ResourceAdequacy/Pages/ResourceAdequacy.aspx

6 Only Illinois and Michigan have retail choice in the MISO footprint. Texas has retail choice in the part of the state served by 

ERCOT, but not in the MISO footprint.

7 Resource adequacy is governed by Module E of the MISO tariff. Module E-1, section 68A, explicitly states: “Nothing in this 

Module E-1 affects existing state jurisdiction over the construction of additional capacity or the authority of states to set and 

enforce compliance with standards for adequacy.”

8 We note here that virtually all states throughout the country maintain the ultimate jurisdiction for resource adequacy 

requirements, regardless of their participation in a RTO or ISO or whether they allow competitive retail service. As discussed

throughout this report, a unique feature of the MISO region is the extent to which many states still serve load through vertically

integrated utilities, in combination with a centralized, multi-state wholesale market. 
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 9

takes positions in formal regulatory proceedings (e.g., at the FERC).9 This helps to make 

MISO an interesting case study from the perspective of potential multi-state collaboration. In 

particular, MISO and the states have a unique history of regional transmission planning 

coordination for non-reliability projects, through its Multi-Value Portfolio process (which we 

discuss further below).

Additionally, many of the MISO states’ energy and environmental regulators have been 

convening in the recent past to discuss, explore and assess implementation options to meet 

the proposed Clean Power Plan requirements in their states. This group, called the 

Midcontinent States Environmental and Energy Regulators (“MSEER”) group, includes state 

officials from 14 midcontinent states,10 and is an example of proactive involvement of the 

states to address issues of common interest in their regional power market.

 9 See Organization of MISO States’ “Business Model V2 5/11/2014,” available: 

https://www.misoenergy.org/Library/Repository/Meeting%20Material/Stakeholder/AC/2014/20140423/20140423%20AC%20Item

%2002a%20Regulator%20Sector%20Business%20Profile.pdf

10 As of the end of 2014, the MSEER discussions have brought together representatives from Arkansas, Illinois, Indiana, Iowa, 

Kentucky (observer only), Louisiana, Michigan, Minnesota, Mississippi, Missouri, Montana, South Dakota, and Wisconsin. 

“North Dakota representatives have expressed support for the effort to explore implementation options but have not to date 

participated in the discussions.” http://bipartisanpolicy.org/wp-content/uploads/sites/default/files/files/ MSEER.pdf, MSEER 

letter to Gina McCarthy, September 4, 2014, available: http://bipartisanpolicy.org/wpcontent/uploads/sites/default/files/files/MSEER.pdf. http://bipartisanpolicy.org/wp-content/uploads/sites/default/files/files/ 

MSEER.pdf. See also: Jeffrey Tomich, “Behind the noise, central states study EPA rule cooperation,” EnergyWire, December 3, 

2014, http://www.eenews.net/energywire/stories/1060009833. 
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 10

A Changing Mix of Power Supplies 

As recently as 2012, the MISO region was one of the most coal-dependent RTOs, with 56 

percent of the power produced by coal-fired power plants.

11 Several states (Kentucky, 

Indiana, Missouri, and North Dakota) generated more than 75 percent of their power from 

coal. (See Table 2.) For years, it had substantial surplus capacity. A relatively low share of 

MISO’s electricity has come from nuclear and natural-gas-fired power plants. Several MISO 

states (especially Iowa and Minnesota) have robust output at wind farms, but overall reliance 

on renewables has also been relatively low. 

MISO’s generation mix has changed in recent years, however. With lower natural gas prices, 

existing gas-fired generating capacity has operated more. To date and compared to other 

RTOs, there has been a relatively modest amount of retirements of older and less-efficient 

coal-fired generating resources, although more capacity is scheduled to retire.12 The overall 

MISO generation mix has also become more diverse with the integration of Entergy’s utilities

into MISO, and the new southern zones have considerably more natural gas-fired capacity 

than the rest of MISO. Also, MISO states have continued to experience development of new 

wind-generating capacity.13 The MISO region has six of the U.S.’s top 15 states in terms of 

 11 Capacity (MW) and generation (MWh) are for 2012. 

Percent of Generating Capacity (MW) by Fuel (2012)

Generating Asset by Fuel Type CAISO ERCOT ISO-NE MISO NYISO PJM SPP USA

Coal 3% 20% 6% 39% 6% 40% 36% 29%

Nuclear 12% 5% 12% 7% 12% 16% 4% 9%

Natural Gas 53% 61% 43% 38% 51% 30% 43% 41%

Hydro, Wind, Biomass, Solar, 

Geothermal 31% 13% 17% 13% 18% 8% 15% 17%

Other 1% 0% 22% 3% 12% 6% 3% 5%

Total 100% 100% 100% 100% 100% 100% 100% 100%

Percent of Generation Output (MWh) by Fuel (2012)

Generating Asset by Fuel Type CAISO ERCOT ISO-NE MISO NYISO PJM SPP USA

Coal 5% 31% 3% 56% 3% 44% 59% 38%

Nuclear 23% 11% 30% 14% 29% 33% 6% 19%

Natural Gas 47% 50% 51% 22% 44% 18% 25% 30%

Hydro, Wind, Biomass, Solar, 

Geothermal

25% 8% 15% 8% 22% 4% 10% 13%

Other 0% 0% 1% 1% 2% 1% 0% 1%

Total 100% 100% 100% 100% 100% 100% 100% 100%

Source: SNL Financial

12 During 2013-2014, several regions saw coal-fired power plant retirements (4,610 MW in PJM; 74 MW in NYISO; 295 MW in 

ISO-NE; and 488 MW in MISO). SNL Financial.

13 Andrew Gelbaugh and Jesse Gilbert, “Generation Investment in RTO Markets - The Challenge and Opportunity,” SNL 

Energy, May 2015 (hereafter “SNL RTO Generation Investment Report”), page 15.
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 11

installed wind capacity.14 (See Figure 3.) As of 2013, renewable generation, comprised 

primarily of wind, represented nearly 9 percent of total generation that year.15

Table 2

Percent of Generation by Fuel (2012): US, MISO and the States in MISO

(Ranked by Dependence on Coal as a Share of Total Generation)

Coal Nuclear Natural Gas

Hydro, 

Wind, 

Biomass, 

Solar Other

Kentucky 94% 0% 3% 3% 0%

Indiana 82% 0% 12% 4% 3%

Missouri 79% 12% 6% 3% 0%

North Dakota 78% 0% 0% 21% 1%

Iowa 63% 8% 3% 26% 0%

MISO 56% 14% 22% 8% 1%

Montana 52% 0% 2% 45% 1%

Wisconsin 52% 22% 18% 8% 0%

Michigan 47% 25% 21% 6% 0%

Minnesota 44% 23% 14% 19% 0%

Illinois 41% 49% 6% 4% 0%

USA 38% 19% 30% 13% 1%

Texas 33% 9% 50% 8% 0%

Louisiana 25% 15% 54% 3% 3%

South Dakota 24% 0% 2% 74% 0%

Mississippi 14% 13% 71% 2% 0%

Arkansas 10% 0% 52% 23% 15%

Source: SNL Financial

Given the carbon intensity of coal, this historical lack of fuel diversity and current reliance on 

coal for over half of the region’s generation output exposes many of the MISO states to 

potentially greater amounts of retirements, more significant fleet turnover, and changes in 

the system’s capacity mix and system operations under the Clean Power Plan.

 14 As of the end of 2014, the following MISO states have significant wind-turbine capacity: Iowa (5,688 MW), Illinois (3,568 

MW), Minnesota (3,035 MW), North Dakota (1,886 MW), Indiana (1,744 MW), and Michigan (1,525 MW) South Dakota (803 

MW)), Wisconsin (648 MW). American Wind Energy Association, “U.S. Wind Industry Fourth Quarter 2014 Market Report,” 

2015. 

15 SNL Energy.
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 12

Figure 3

Total Installed Wind Capacity by State (as of the end of 2014)

Source: American Wind Energy Association, “U.S. Wind Industry Fourth Quarter 2014 Market Report,” 2015.

As shown in Figure 4, MISO’s coal-plant retirements are relatively small compared to PJM’s

and those parts of the U.S. not served by an RTO – both of which are (like MISO) heavily 

dependent upon coal-fired generation. In recent years, some of the anticipated coal-plant 

retirement plans in MISO have been modified, and are now undergoing conversions to 

natural gas. Figure 5 indicates the location of anticipated retirements and conversions of 

coal-fired power plants in MISO as of the end of 2014, with Table 3 providing state-specific 

information about retirements, including not only coal-fired plants but also relatively small 

and inefficient natural-gas-fired and oil-fired generating units.
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 13

Figure 4:

Retirements of Coal-Fired Generating Capacity by RTO: 

2010-2014 (Actual) & 2015-2018 (Announced) - Cumulative MW of Capacity Since 2010

Source: Data from SNL Financial
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 14

Figure 5

Location of Coal-Fired Power Plant Retirements and Conversions to Natural-Gas 

Source: data from Michael Niven and Neil Powell, “Coal unit retirements, conversions 

continue to sweep through power sector,” SNL Energy, October 14, 2014.

Table 3

State Coal Oil Gas Other Total Gas Solar Wind Other Total

Kentucky - - - - - - - - - -

Indiana 1,773 60 17 5 1,855 680 89 20 25 814

Missouri 17 10 34 - 61 49 6 - 14 69

North Dakota 2 14 11 - 26 358 - 1,422 - 1,780

Iowa 802 84 184 - 1,070 712 - 2,560 11 3,283

Montana - - - - - 96 - - - 96

Wisconsin 613 8 259 - 880 74 1 187 126 388

Michigan 1,465 53 453 - 1,971 941 0 1,494 100 2,535

Minnesota 416 63 75 - 554 226 2 1,560 23 1,811

Illinois 709 278 315 - 1,301 7 40 1,031 - 1,078

Texas - - 112 - 112 390 - - 50 440

Louisianna - 16 820 114 950 680 - - 50 730

South Dakota - - - - - 300 - 668 - 968

Mississippi - - 407 - 407 285 - - - 285

Arkansas - 5 1,522 - 1,527 - - - 1 1

Total 5,797 590 4,209 119 10,715 4,797 137 8,942 401 14,277

Notes and Sources:

All Resource Retirements and Additions (including planned units in advanced development or under construction) reflect operating capacity, using 

SNL Financial data, accessed May 2015. 

Michigan solar additions are less than 0.5 MW and round to zero in this table.

Generator Retirements, Additions, and Reliability Planning, by State, 2010-2018

Retirements (MW) Additions (MW)
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 15

“SNL Energy projects a modest decline in coal generation in MISO over the next several 

years in response to the EPA MATS rule, with natural gas and renewables picking generation 

lost to coal retirements. By 2021, SNL Energy projects coal will lose some market share in 

MISO, dropping to 52.20% of generation, with gas climbing to about 23% of total MWhs and 

renewables contributing nearly 10%.”16 

For years, MISO has had substantial surplus capacity. But with the anticipated level of 

retirements between 2010-2018, MISO’s latest member survey (in summer 2014) of upcoming 

changes in the fleet of power plants indicated a tightening of reserve margins in the northern 

half of the MISO system, with the need to add some 2,300 MW of capacity by 2016 to meet 

resource-adequacy requirements. (The survey found that there was more than that amount 

of surplus in the southern part of the system, but that transmission constraints would only 

allow the transfer of 1,000 MW from south to north.)

These trends, combined with policies (e.g., renewable portfolio standards (“RPS”), preapproval of investment in wind projects) in many MISO states, have stimulated investment 

interest. Modeling by SNL Energy indicates that approximately “4,940 MW of new capacity 

will be added in MISO in 2015-2021 made up of 2,351 MW from firm new projects and 

uprates at existing plants, roughly 2,500 MW from new gas capacity needed to meet reserve 

margin targets, and 110 MW of capacity contribution from renewables needed to meet state 

RPS requirements.”17 (Note that as shown in Table 3, more than 8,940 MW of wind capacity 

is in development, but due to its intermittency, its capacity value for resource adequacy 

purposes is discounted to the amount expected to be available on peak.18)

Together, these changing conditions in MISO’s fleet – becoming somewhat more diverse in 

its generation mix, experiencing new investment to modernize parts of the system while 

shifting to somewhat greater reliance on natural gas, developing local wind resources, and 

anticipating tightening reserve margins – position MISO and the MISO states to play an 

active role in managing the transition from such historical reliance on highly carbonintensive generation. While this trend is happening already as a result of market forces, it

will also be affected by compliance requirements with EPA’s Clean Power Plan.

 16 SNL RTO Generation Investment Report, page 16.

17 SNL RTO Generation Investment Report, page 16.

18 MISO assigned a 14.7-percent capacity value to wind for resource adequacy purposes. See 

https://www.misoenergy.org/Library/Repository/Meeting%20Material/Stakeholder/LOLEWG/2014/20141215/DRAFT%202015%

20Wind%20Report.pdf.
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 16

The MISO Region’s Success in Addressing Reliability Challenges 

Associated with MATS Compliance

Finally, MISO is interesting also because it has recently had to navigate reliability issues as 

some of the system’s coal-fired power plants faced compliance deadlines associated with the 

MATS rule, which went into effect on April 16, 2015.19 Many units have been allowed an

extra year to comply, meaning that they are allowed to operate up until April 16, 2016. 

Under the MISO tariff, any generator intending to retire must provide notice to MISO by no 

later than 26 weeks in advance of the proposed retirement date. Many but not all generators 

have filed such notices to date.20

Several generators did, however, signal their intention to retire by April 2016, by seeking 

relief from their obligations under MISO’s Planning Reserve Auction (“PRA”) rules (which 

include a must-offer requirement for all weeks of a Planning Year, which ends at the end of 

May of each year). A MATS-related retirement coincident with a MATS compliance date of 

April 16, 2016, would have left these generators in violation of the FERC-approved MISO 

tariff (the PRA rule) for the six weeks between mid-April and the end of May 2015. Because 

 19 When the EPA issued its regulatory package relating to the MATS rule, the agency included a specific statement of 

enforcement policy to explain that, “[w]here there is a conflict between timely compliance with a particular requirement and 

electric reliability, the EPA intends to carefully exercise its authorities to ensure compliance with environmental standards while 

addressing genuine risks to reliability in a manner that protects public health and welfare.” EPA December 2011 MATS 

Enforcement Response Policy, page 1. http://www2.epa.gov/enforcement/enforcement-response-policy-mercury-and-air-toxicsstandard-mats. To provide the electric industry and its regulators greater assurance of the agency’s intention to support reliable 

electricity supply while also reducing toxic air emissions, the EPA incorporated into the MATS rule a “reliability safety valve,”

allowing the owners of particular generating units an opportunity to request a one-year extension in the compliance time lines if 

a unit could not meet the deadlines in EPA’s regulations, and the unit was needed for electric system reliability. The extra year 

potentially available under the MATS reliability safety valve would be in addition to an extra year available to companies 

making good-faith efforts to comply but needing additional time beyond the April 2015 deadline. Note that MATS includes a 3-

year compliance period, with an extension of the compliance deadline for a 4th year for units able to demonstrate to state 

permitting authorities that additional year is needed for installing technology. In some cases a 5th year may be allowed, in light 

of EPA’s intention to allow use of administrative orders “...with respect to sources that must operate in noncompliance with the 

MATS for up to a year to address a specific and documented [electric] reliability concern.” EPA December 2011 MATS 

Enforcement Policy, page 2. This would extend MATS compliance deadlines from April 2015 to April 2016 for certain units. 

 Since EPA issued that guidance, affected power plant owners in MISO and elsewhere have been taking steps either to bring 

their generating units into compliance or to plan for their retirements. So far, very few owners of power plants (and RTOs, in 

support of them) have requested a waiver for reliability purposes.

20 Based on its survey of information from generators as of April 21, 2015, MISO reported the following information about 

retirements and requests for compliance extensions: of the 74.8 GW of capacity (312 total units) in MISO that has been affected 

by MATS, the breakdown of units was as follows: 

- 17.1 GW (50 units) did not require any additional action pursuant to the MATS rule; 

- 17.7 GW (57 units) had completed compliance actions; 

- 29.5 GW (81 units) required additional action; 

- 0.6 GW (1 unit) was undergoing repowering; 

- 1.4 GW was undergoing a fuel conversion; 

- 2.0 GW had already retired; and 

- 7.1 GW is still to be determined (in terms of retirement or other outcomes). 

https://www.misoenergy.org/Library/Repository/Meeting%20Material/Stakeholder/PAC/2015/20150415/EPA%20Survey%20Q1

%202015.pdf (document properties April 21, 2015).
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 17

resource obligations are for the entire planning year (as opposed to a month-by-month 

requirement), these units would need to purchase replacement capacity for the entire 2015/16 

planning year to cover the six-week gap. Thus, several generators sought waivers from the 

reliability rule.21 While doing so would not literally produce a resource-adequacy violation, 

it would require that the generators purchase replacement capacity.

MISO urged FERC not to grant the waivers, and was reported to say that “entering a 

planning year already knowing that a unit being relied upon to meet planning reserve 

margin requirements will be unavailable for a portion of that year ‘contributes to the erosion 

of the resource adequacy planning process.’”22 MISO did, however, attempt to address the 

generators’ concerns by proposing “to essentially exempt those market participants from 

physical withholding mitigation measures if they choose to completely opt out of the market 

for the year.”23

Ultimately, through a process of coordination and eventual FERC review, most of the 

waivers were granted. FERC concluded that the retirements would not lead to a reliability 

problem. FERC did encourage continued coordination among MISO, the states and market 

participants in the region to address both near-term resource adequacy issues and eventual 

compliance with the Clean Power Plan’s upcoming compliance requirements.24

 21 The resources for which waivers were sough include: Indianapolis Power and Light (216 MW), Consumers Energy (940 MW), 

DTE Electric (120 MW), MidAmerican Energy (496 MW), Duke Energy Indiana (668 MW), and Wisconsin Power and Light (200 

MW). FERC approved the waiver of must-offer requirements for all resources except Wisconsin Power and Light (Docket No. 

ER15-872), which sought an exemption for the five months between January 1, 2016 and May 31, 2016. In denying the request, 

FERC noted that the MISO Tariff allows Wisconsin Power and Light the ability to sell capacity bilaterally and participate in the 

energy and ancillary services market.

22 Marcy Crane, “MISO asks FERC not to grant MidAmerican's MATS-related waiver request,” SNL Energy, November 18, 2014.

23 Marcy Crane, “Over MISO's objections, divided FERC grants MATS-related waivers for 4 companies,” SNL Energy, February 

23, 2015.

24 “In granting this relief, we remain cognizant of the Commission’s responsibilities under the FPA [Federal Power Act] for the 

reliability of the bulk electric system and the oversight of the regional electricity markets to ensure that they sustain reliability at 

just and reasonable rates... We note that the limited relief granted herein does not implicate resource adequacy requirements for 

the 2015/16 Planning Year... [and] that the Commission continues to monitor resource adequacy in the MISO region... and 

remains committed to working with the States, MISO, and stakeholders to ensure resource adequacy in the MISO region. 

Again, utilities and other resources need not wait until State Implementation Plans are finalized to begin planning for future 

regulations. Instead, they can – and are – taking advantage of the policies and procedures in place today to begin shaping 

investment decisions for tomorrow.” FERC, Order Granting Request for Waiver, February 20, 2015, Docket No. ER15-592-000, 

150 FERC ¶ 61,126, ¶69. 
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 18

MISO’s Outlook for the Region’s Resource Adequacy under the Clean 

Power Plan

The Resource Outlook in Advance of the Clean Power Plan

The MISO region is not without its own resource adequacy challenges, however, with or 

without the changes that will be introduced with the EPA’s proposed Clean Power Plan. As 

its surplus capacity has been slimmed down with asset retirements in recent years, MISO and 

other stakeholders have been working to assess the outlook for resource adequacy under 

various assumptions about events and trends that could affect demand levels, retirements, 

investment cycles, fuel prices, and so forth. 

As noted above, the MISO region forecasts declining reserve margins with the potential to 

fall below the planning reserve target as early as 2016 (when MISO anticipates reserves 

would be at 13.2 percent). Looking beyond 2016, MISO forecasts that with further 

retirements, and assuming no new capacity entering the market, the region’s reserve margin 

could fall to as low as 4.9 percent by 2024.25 

Other assessments focus on these near-term challenges. For example, the National Energy 

Technology Laboratory (“NETL”) recently reported on resource adequacy issues in MISO, 

stating that MISO 

...is facing a number of challenges to their resource adequacy.... Regardless of 

what may transpire in the mid-to long-term for MISO, the current short term 

(2014-2016) focus identifies potential issues associated with generation 

retirements and retrofits and transmission system issues.

Large amounts of coal-fired generation (~11 GW) are expected to retire in the 

MISO region by 2016. These units have been rendered uneconomic due to the 

declining price of natural gas, expensive retrofits necessary to maintain 

compliance with new environmental regulations, and advanced age. MISO is 

also projecting nearly 2 GW of other retirements, mostly older, uneconomic gasfired plants. However, new generation is not expected to come online in 

amounts sufficient to offset these retirements. These circumstances are a cause 

for concern over MISO’s ability to maintain sufficient capacity to meet demand in 

the next few years. 26

 25 See, for example, MISO Staff, “Issues Statement on Facilitating Resource Adequacy in the MISO Region,” March 2015, page 3. 

Available: https://www.misoenergy.org/Planning/ResourceAdequacy/Pages/ResourceAdequacy.aspx

26 C. Elise Logan, John Brewer, Thomas Davis, and Robert Wallace (Booz Allen Hamilton, Inc.), “Profile of Resource Adequacy 

in the MISO Region,” Energy Sector Planning and Analysis, NETL, U.S. Department of Energy, March 17, 2015. DOC/NETL2015/1706. (hereafter, “NETL Report”), page 1 of Executive Summary.
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 19

The NETL Report also states that reserve margins may be even lower in the North and 

Central regions, falling to 12.9 percent by 2016. This value is also reported in the 2014 Long 

Term Resource Assessment published by the North American Electric Reliability 

Corporation (“NERC”), based on analyses provided by MISO.27 

Assessments, like MISO’s and NETL’s and others’, are part of the normal processes through 

which grid operators and other parties provide information to signal that actions will be 

required to assure electric system reliability. MISO, the states, electric utilities, and other 

market participants have different roles and responsibilities for reliability matters in the 

MISO region.28 

The NETL Report, for example, identifies a number of things that MISO has been doing to 

address resource adequacy issues, including: providing information to the states and to 

market participants so that they can respond; adjusting maintenance schedules of generators 

to accommodate generating-unit retrofits for MATS compliance; and entering into System 

Support Resource (“SSR”) agreements (similar to reliability must-run (“RMR”) contracts in 

other regions), which prevent or postpone generating units from retiring until reliability 

issues can be adequately addressed. 

These are tools available to the grid operator sequence retirements when needed. Also, 

many market participants offer other remedies. including readiness to bring new power 

plant projects, gas infrastructure, demand-side measures, and other solutions into the electric 

system) where needed.29 For example, INGAA has described the capability of the natural gas 

pipeline industry to add new infrastructure.30 Calpine has stated its readiness (along with 

 27 As described in the NETL Report, this analysis was the product of a number of changes MISO made to its resource-adequacy 

forecast between 2013 and 2014. These changes include: a decrease in total load, an increase in new resources, the inclusion of 

all available unclaimed generation that have not contracted with LSEs, the exclusion of resources committed to PJM through its 

capacity auction, and a review of firm interconnection rights to existing generators based on potential discrepancies with 

nameplate and reported capacity values. See NETL Report, pages 6 and 7.

28 Examples include various processes and actions that support reliability in the face of changing system infrastructure, 

including utilities’ integrated resource plans, regional transmission plans, project development proposals, and potential changes 

to MISO rules. 

29 Although we think it is ultimately a good thing that the industry is paying close attention to reliability issues – so that any 

potential problems can be avoided through planning and infrastructure – we do note that serious questions have been raised 

about the assumptions used in recent reliability assessments performed by NERC. For example, Brattle Group’s February 2015 

report found that NERC failed to account for how industry is likely to respond to market and operational changes resulting 

from the Clean Power Plan. See Jurgen Weiss, Bruce Tsuchida, Michael Hagerty, and Will Gorman, “EPA’s Clean Power Plan 

and Reliability: Assessing NERC’s Initial Reliability Review,” The Brattle Group, February 2015.

30 Comments of the Interstate Natural Gas Association of America (“INGAA”), submitted to the EPA regarding the Clean Power 

Plan, Docket ID No. EPA-HQ-OAR-2013-0602, filed December 1, 2014.
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 20

other market participants) to add new gas-fired generation (and to offer under-utilized 

capacity already existing on the system).31 

A recent, specific example is the recent actions of the Minnesota PUC to approve several 

actions by Xcel Energy: two power-purchase agreements (one with Calpine for the output of 

a 345-MW expansion at its Mankato plant, and another with Geronimo for 100 MW of solar)

and installation of a new 215-MW combustion turbine at its own Black Dog facility. The 

Minnesota PUC considered four projects with a combined capacity of 840 MW for a 2017 

need of 150 MW (increasing to 500 MW by 2019), and stated in its order that it was approving 

resources in excess of the short-term identified need because, given future uncertainty, “the 

risk of possibly being overbuilt was preferable to the possibility of being underbuilt.”32 

MISO’s Analysis of Clean Power Plan Impacts

In addition to its standard resource assessments, in November 2014 MISO published the 

results of its initial review of the implications of the Clean Power Plan for the region. To 

date, the focus of MISO’s analyses has been more on the economics of different compliance 

approaches, rather than the reliability implications of potential approaches.33,34 

 31 Comments of Calpine Corporation, submitted to the EPA regarding the Clean Power Plan, Docket ID No. EPA-HQ-OAR2013-0602, filed November 26, 2014.

32 See: Minnesota PUC Staff Briefing Papers, Docket No. CN-12-1240/M-14-788/M-14-789, Issued April 9, 2015, pages 2, 11; 

Minnesota PUC, “Order Approving Power Purchase Agreement with Calpine, Approving Power Purchase Agreement with 

Geronimo, and Approving Price Terms with Xcel,” Docket No. CN-12-1240/M-14-788/M-14-789, Issued February 5, 2015, page 1.

33 For example, MISO’s analyses look at the cost per ton of emissions reductions associated with different strategies, noting that 

regional compliance approaches can reduce estimated costs by 40 percent. Also, MISO’s assessment indicates that Interim 

targets could be met by 2020 through the retirement of MATS-related coal units, without the need to add new natural-gas 

combined cycles (“NGCCs”), but that a lower-cost compliance path would include additional coal retirements with new 

NGCCs. MISO, “Analysis of EPA’s Proposal to Reduce CO2 Emissions from Existing Electric Generating Units,” November 

2014 (hereafter “MISO Clean Power Plan Analysis”), page 12 and 17. Available: 

https://www.misoenergy.org/WhatWeDo/EPARegulations/Pages/111%28d%29.aspx. 

34 In our initial report discussing reliability implications of the Clean Power Plan, we noted that “too often, commenters make 

assertions about reliability challenges that really end up being about cost impacts.” We made the following findings after 

reviewing many parties’ comments to the EPA: “In the end, the industry, its regulators and the States are responsible for 

ensuring electric system reliability while reducing carbon emissions from power plants as required by law. These 

responsibilities are compatible, and need not be in tension as long as all parties act in a timely way and use the many reliability 

tools at their disposal. We observe that, too often, commenters make assertions about reliability challenges that really end up 

being about cost impacts. Although costs matter in this context, we think it is important to separate reliability considerations

from cost issues in order to avoid distracting attention from the actions necessary (and feasible) to keep the lights on. There may 

be “lower cost” options that reduce emissions some part of the way toward the target reductions, but that fail to meet acceptable 

reliability standards. We do not view such ‘solutions’ as the lowest cost solution precisely because they fail to account for the 

cost of unacceptable system outages to electricity consumers. Any plan that starts with consumer costs and works backward to 

reliability and then to emission reduction is one that fails to consider the wide availability of current tools that have served grid 

operators for more than a decade to meet reliability needs. There is no reason to think that cost and reliability objectives cannot 

be harmonized within a plan to reduce carbon pollution.” Susan Tierney, Paul Hibbard, and Craig Aubuchon, “Electric System 

Reliability and EPA’s Clean Power Plan: Tools and Practices,” February 19, 2015, page ES-5.
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 21

One of MISO’s concerns, however, is that the region could face incremental challenges 

associated with compliance on top of the nearer-term resource-adequacy issues faced even 

before the 2020 start date of the proposed Clean Power Plan’s interim compliance period. 

MISO estimated that between 10 and 12 GW of coal-fired generating capacity will retire by

2016 for MATS compliance and that an additional 11 GW will retire by 2020 to meet the 

Clean Power Plan’s interim emission-reduction goals. MISO commented that in order to 

avoid going below the region’s planning reserve margin (“PRM”) targets, future retirements

of coal-fired capacity would require a 1-to-1 replacement of capacity at the time of retirement 

to maintain reliability. Based on its estimates of lead times for replacement capacity, MISO 

believes that “[t]his is well before sufficient replacement capacity can be placed into 

service.”35

This theme of needing more time to adjust the system’s infrastructure, including through 

adding electric transmission and natural-gas pipelines, was mentioned in comments by 

several utilities, state regulators and grid operators at the FERC technical conference on 

reliability issues held in the Midwest in April 2015.36 

In subsequent correspondence between the EPA’s and FERC’s leadership, EPA has indicated 

that “we recognize, as we emphasized in our presentations, that it is incumbent on us to craft

a rule that provides sufficient time, flexibility and latitude for states, utilities and reliability 

entities to take the actions that they must take to ensure system reliability. In addition, 

commenters have provided us with a number of important suggestions for addressing 

reliability concerns directly through a variety of substantive and procedural mechanisms. 

We are reviewing these carefully and weighing several for possible inclusion in the final 

rule.”37 The response from the five FERC commissioners reiterated that “[a]s your letter 

recognizes, EPA’s final rule should provide enough time and flexibility for affected entities to 

take the actions that they must take to ensure system reliability....Thus, we trust EPA will 

consider the concerns raised with the interim goals, and other views expressed on this issue, 

 35 Comments of MISO submitted to the EPA regarding the Clean Power Plan, Docket ID No. EPA-HQ-OAR-2013-0602, 

November 25, 2014. MISO assumes that: new gas-fired generating units (NGCCs) or combustion turbines typically require three 

to six years, from the start of development to entering commercial operation; new transmission expansion requires at least six to 

ten years; and new natural gas delivery infrastructure requires several years. MISO Clean Power Plan Analysis, pages 3 and 17. 

36 Jeffrey Tomish, “States to FERC: Clean Power Plan too much, too fast,” EnergyWire, April 2, 2015. 

37 Letter from Janet McCabe, Acting Assistant Administrator for Air and Radiation, U.S. EPA, to Chairman Norman C. Bay of 

the FERC, May 6, 2015.
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 22

as EPA finalizes its rule. Various commenters indicated, for example, that more flexibility on 

the interim goals may lessen reliance on other processes for addressing reliability.”38 

Reliability in the MISO Region: Tools

In the end, securing reliable system operations in the MISO region throughout the Clean 

Power Plan transition will be supported by the combination of many things: MISO’s 

“business-as-usual” reliability procedures, which include (among other things) generationretirement notification requirements and review process; other obligations of MISO-member 

utilities to participate in MISO to maintain system reliability; MISO’s comprehensive 

resource-adequacy assessment processes, coordinated with the states and market 

participants; the states’ own resource adequacy processes; and a demonstrated and 

historically successful level of multi-state coordination around MVP projects and other 

planning tools. We discuss each of these tools, below.

MISO’s Business-As-Usual Reliability Tools 

In our first report,39 we described the wide range of planning and operational tools used by 

system operators, regulators, and other entities to maintain power system reliability. 

Although these tools are well-established, grid operators (like MISO) and utilities (including 

in the MISO region) are already looking at what adjustments may be needed to stay abreast 

of, understand, and adapt to changes already underway in the industry. Some of these 

transitions are already affecting the MISO region years in advance of the proposed start of 

the Clean Power Plan’s interim period in 2020. 

Every region – including MISO – has shown the resilience of processes in place to maintain 

system reliability in the face of major resource changes. These regions have demonstrated, 

time and time again, their ability to absorb and process such changes in a way that meets 

efficiency and reliability objectives. The tools available to maintain reliable system 

operations in the face of short-notice retirement decisions or loss of resources extend – when 

needed – well beyond the “normal” planning and market structures that govern most 

outcomes. 

 38 Letter of FERC Chairman Norman Bay and Commissioners Philip Moeller, Cheryl LaFleur, Tony Clark, and Collette 

Honorable, to Janet McCabe, Acting Assistant Administrator for Air and Radiation, U.S. EPA, May 15, 2015.

39 Susan Tierney, Paul Hibbard, and Craig Aubuchon, “Electric System Reliability and EPA’s Clean Power Plan: Tools and 

Practices,” February 19, 2015.
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 23

As we noted above, MISO and the MISO states have already begun to experience changes in 

the overall generation mix. MISO is managing to integrate increasing amounts of variable 

energy resources and rely upon them during extremely cold winter conditions (including 

during the Polar Vortex). It is adapting to changes in dispatch as the relative prices of coal 

and natural gas have changed in recent years. It is overseeing reliability as the industry 

responds to a more restrictive set of air-pollution-control mechanisms under MATS (as 

compared to the Clean Power Plan). 

MISO, the states, and the industry have multiple “business-as-usual” mechanisms to assure 

system reliability:

• Planning and market/regulatory outcomes that address most resource retirements. MISO

and others conduct “what-if” analyses of potential resource changes based on industry 

forecasts and individual unit economics. A formal notice to deactivate or retire a 

generating unit spurs system studies to evaluate reliability impacts related to the overall 

level of resources on the system (i.e., resource adequacy) or the impact of the loss of a 

generating source on local and regional system operations (i.e., system security). Market 

outcomes or utility resource planning/procurement requirements then typically cause the 

development and operation of new resources as needed to meet resource-adequacy and 

system-security needs. If the loss of a resource is found to cause security violations on 

the transmission system that are not or cannot be addressed through resource additions, 

regional planning processes are initiated for the development and construction of 

transmission system upgrades to eliminate the reliability issues. For the most part, 

changes to electric systems are gradual over time, and effective planning and market 

structures allow for the orderly replacement and addition of transmission and generation 

infrastructure (and demand-side resources) to address evolving needs. 

• With short-notice retirements, resources may be retained for an interim period until 

reliable solutions are developed. On occasion, changes on power systems occur without 

sufficient notice for typical planning and market procedures to cause timely replacement. 

Certain losses of resources cannot be delayed (e.g., due to an accident or safety 

considerations). But the request to promptly deactivate or retire a resource for economic 

reasons triggers an immediate review of system impacts, and in most cases the 

deactivation of the unit is delayed if the shutdown of the unit would violate 
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 24

transmission-security standards. In MISO, the rejection of a deactivation request 

typically leads to an SSR contract until other solutions can be put in place.40

• Even in rare cases where a short-notice loss of resource cannot be delayed, system 

operators and utilities have tools to maintain reliability until replacement resources or 

upgrades are in place. The industry has a number of tools to fill in the gap left by the 

sudden loss of a resource on the system that is needed for reliability. System operators 

can and do take emergency actions as needed to protect system security, including 

operating procedures that provide for accessing in-region and neighboring regions’ 

reserves, posturing units to manage flows on the transmission system, initiating demandresponse resources and voluntary curtailments, and other actions. Utilities can do other 

things, including such things as: solicitation of additional energy efficiency, load 

curtailment and/or demand response; installation of moveable generation as needed to 

support system operations; re-wiring components in the electric system to allow changes 

in flows; and immediate development of temporary generation through utility self-build 

projects or fast-track solicitations (e.g., “gap RFPs”).

Power system reliability remains a high priority in the MISO footprint. MISO and the 

utilities and power suppliers that are members of MISO have provided reliable energy 

supply on a continuous basis. And given their business-as-usual roles, responsibilities and 

practices – in combination with the active role of utilities and utility regulators in the MISO 

states – there is no reason to believe that these entities will do anything short of what is 

required to assure resource adequacy and operational security in the MISO footprint, even 

with the advent of the Clean Power Plan. 

Furthermore, the flexibility that EPA granted states in designing Clean Power Plan 

implementation plans leaves the door wide open for states to propose in their plans the 

specific mechanisms needed to ensure that Clean Power Plan compliance does not 

compromise system reliability. 

 40 MISO maintains the ability to retain generators as an SSR asset under Attachment Y of the MISO tariff. Currently, resources 

must provide at least 26 weeks of notice to retire. During that period, MISO evaluates the retirement request for reliability 

needs. If a need is identified, MISO and the affected transmission owner work to identify alternative solutions, before 

negotiating an SSR. MISO did not execute an SSR until 2012, and since that time, has issued eight agreements – with seven still 

in effect as of June 2014. These SSRs cover 1,027 MW of capacity, primarily located in the upper peninsula of Wisconsin and 

Michigan. See MISO, MTEP 2014, page 79.
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 25

Figure 6

Source: MISO

Resource Adequacy: The Role of MISO 

More specifically, MISO operates on a platform of rules, processes and member obligations 

that creates a strong foundation for maintaining reliability. These include requirements that 

member utilities participate in region-wide planning and abide by MISO processes to

support regional resource adequacy, ensure system security, and assess potential reliability 

issues. Although there are differences in the specific processes and practices in place in 

MISO compared to other regions, there are fundamental services provided by MISO that are 

parallel to those that exist in all parts of the U.S. This is a key support structure upon which 

the various players – states, owners of power plant assets, providers of transmission service, 

the grid operator, and others – consider and address changes that are occurring in the 

resource mix, including any changes in state policy related to the Clean Power Plan. 

MISO sets resource adequacy targets 

Under its current tariff, MISO is responsible for setting the PRM target for the applicable 

planning year. For the 2015/2016 planning year, the PRM is set at 14.3 percent,41 based on the 

1-day-in-10-year loss of load expectation (“LOLE”) standard in the region. 

This process involves collaboration with others at every step. For example, MISO first 

develops its load forecast 

based on the demand forecasts of 

each individual utility or other loadserving entity (“LSE”) in the region. 

Although the states maintain the 

ultimate authority to set a different 

PRM, which would be adopted by 

MISO in setting its system-wide 

margin,42 in practice the states have 

adopted MISO’s recommendation. 

MISO also separately models 

locational requirements within each 

 41 “Planning Year 2015-2016: Loss of Load Expectation Study Report,” MISO Loss of Load Expectation Working Group, 

November 2014, page 31. MISO reports the planning reserve margin in both Installed Capacity (“ICAP”) and Unforced 

Capacity (“UCAP”) terms. UCAP accounts for the availability of generators throughout the year, based on historical and 

planned outage schedules. Throughout our report, we provide ICAP planning reserve margins, unless otherwise noted.

42 Resource Adequacy Business Practice Manual, BPM-011-r14, page 27.
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 26

of nine transmission zones (Figure 6). This is used to set a separate local clearing 

requirement (“LCR”) that takes into account the local reliability requirement (“LRR”) needed 

to meet local peak demand and the capacity import and export limits into and out of each 

region.43

These LCRs are important for several reasons. First, they provide market signals throughout 

the MISO region and indicate where new generation is likely to be most needed, based on 

local changes in demand or supply conditions. Second, the LCRs also tie into MISO’s

regional transmission-planning processes – the more general MTEP process, or the more 

specific MVP process – by illuminating capacity import limits between zones which, if 

mitigated, might allow for excess generation in one zone (or state) to meet the local resource 

adequacy need of another.

Once established, LSEs in all states can meet their respective resource-adequacy 

requirements in a number of ways. These include: the option for companies to self-schedule 

supply (for example, through their own resources or the use of bilateral contracts), submit a 

Fixed Resource Adequacy Plan (“FRAP”) that demonstrates compliance through its own 

resource plan, or purchase zonal resource credits through the MISO PRA process. Most LSEs 

satisfy their capacity obligations through self-scheduling their supplies and FRAPs. Any 

resource that is submitted as part of a plan is converted to a zonal resource credit (“ZRC”) 

based on its qualified unforced capacity, and any resources that wish to retire before the end 

of the planning year are required to replace the respective capacity through additional ZRCs 

or must face a deficiency charge.

Resources that are submitted as a part of the PRA or a FRAP are subject to must-offer 

requirements and performance standards, which are reviewed on an ongoing basis by 

MISO’s Independent Market Monitor. At the same time, an LSE can also choose to not meet 

a resource adequacy requirement and instead pay a deficiency charge.44

The MISO Planning Resource Auction allows market participants to adjust 

their resources over time and sends signals to investors

As noted above, under MISO’s current market design, as a means for LSE to demonstrate 

that it has sufficient capacity to meet its own obligations, an LSE may participation in the 

 43 Resource Adequacy Business Practice Manual, BPM-011-r14, page 27.

44 See Module E-1, Section 69A and 69A.7.1 “All LSEs will be required to meet their PRMR through the PRA process, uncles 

they have opted out of the PRA pursuant to Section 69A.9 [FRAP] and/or have decided to pay the Capacity Deficiency Charge.” 

The deficiency charge is equal to 2.748 multiplied by the Cost of New Entry and the total quantity of deficient resource credits. 

(Module E-1, Section 69A.10). 
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 27

PRA.45 As summarized by MISO’s Independent Market Monitor, “[t]he PRA allows 

participants to buy and sell capacity to satisfy residual capacity requirements and better 

identifies locational capacity needs throughout the MISO.”46 

MISO introduced this current capacity market construct in 2013, and the PRA is now used to 

provide additional flexibility for market participants to voluntarily and efficiently meet their 

residual resource adequacy obligations from resources other than self-supplies or FRAP. The 

transition to the PRA represented an important improvement over the previous Voluntary 

Capacity Auction (“VCA”) in part because it better defines locational capacity needs.47 

The PRA and the 2015/16 auction results, in particular, have recently come under increased 

scrutiny, with the Illinois Attorney General raising concerns about the causes of price 

separation across zones. These price separations appear to be due to a number of factors, 

including local capacity requirements, transfer constraints, market design,48 the opportunity 

cost of supply capacity into neighboring regions.49,50 For example, many resources in Illinois 

can also deliver into PJM which may allow them to choose to participate in either capacity 

auction.51 

 45 Any LSE with an excess of supplies must offer those supplies into the market, subject to a 50 MW withholding threshold. 

(Module D, Section 64.1.1).

46 Potomac Economics, “2013 State of the Market Report,” page 1.

47 See, for example, Potomac Economics, “2013 State of the Market Report,” page 1.

48 For example, the current PRA effectively uses a vertical demand curve. The MISO’s Independent Market Monitor has 

recommended that MISO develop a sloped demand curve to better reflect the incremental value of capacity for reliability 

benefits. The vertical demand curve appears to have contributed in part to the jump in capacity prices. See Jeffrey Tomich, 

“Illinois Legislators question MISO executive about capacity auction,” E&E Publishing - Electricity, April 21, 2015. 

49 In MISO, the Market Monitor establishes the initial reference level based on the opportunity cost of exporting to a neighboring 

region (Module D, Section 64.1.4). The IMM reviews all offers above the reference level plus 10 percent of CONE for 

withholding. (Module D, Section 64.1.2).

50 We are aware that there are differences of opinion with regard to the causes of price divergence in the recent MISO auction. 

We have not conducted an analysis of the particular matters in dispute and therefore are not taking a position on the disputed 

issues. For example, MISO has reportedly said that the Independent Market Monitor for the MISO market “reviewed the offers 

and determined that the final results were not impacted by physical or economic withholding and other conduct prohibited by 

MISO’s Tariff,” Statement of Kari A.E. Bennett, MISO’s senior corporate counsel, as reported by Chris O’Malley, “MISO: 

Nothing Amiss in High Illinois Capacity Prices,” RTO Insider, April 27, 2015. http://www.rtoinsider.com/miso-illinois-capacityprices-14758/. The Illinois Attorney General has subsequently filed a complaint at FERC, allegedly that the auction results were 

a product of the exercise of market power. See: Paul Ciampoli, “Illinois AG files complaint against MISO related to auction 

results,” Public Power Daily, June 1, 2015 (originally published May 29, 2015). 

http://www.publicpower.org/Media/daily/ArticleDetail.cfm?ItemNumber=43978. 

51 For the latest MISO auction, capacity prices in Zone 4 (Illinois) increased from $16.75/MW-day to $150/MW-day. In contrast, 

Zones 2 through 7 (excluding 4) cleared at $3.48/MW-day. PJM’s most recent auction cleared at $136/MW-day for the 2015/16 

year. See “2015-2016 PRA Detailed Report” and “2014-2015 PRA Detailed Report,” available: 

https://www.misoenergy.org/Library/Pages/ManagedFileSet.aspx?SetId=2054.
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 28

That said, an increase in capacity prices – while difficult in the short term for consumers – is 

expected to provide an appropriate signal to investors that capacity is needed in the market. 

In theory, this is what the PRA is designed to do, especially when there are changing 

conditions in MISO’s market (such as the draw-down of prior/existing capacity surpluses). 

As noted by the global market research firm UBS, “separate and distinct price signals 

between regulated and competitive markets is a crucial element to setting appropriate price 

signals in restructured markets...”52 According to Richard Doying, COO of MISO: “This 

was really a local issue where the local demand had to be cleared with local resources... price 

spreads across the region, I think are consistent with the design of the market, and the 

market is, in fact, designed as you would hope to design a competitive market to achieve 

competitive outcomes.”53 

Using this price information, developers of potential projects can come forward with 

potential capacity resources. A utility or other market participant can use the results of

capacity auctions as it considers the cost-effectiveness of adding new generating assets 

(whether self-build or power procurements), or a new transmission project, or incremental 

demand-side resources. For example, this information can inform the regional MTEP process 

to identify cost-effective transmission solutions, such as the MVP, that can be used to 

increase capacity imports into affected zones within MISO. (See more on the MTEP/MVP 

processes below.) This could allow any excess capacity in neighboring zones – that may 

currently be limited by these import limits and therefore “stranded” from a zonal resource 

adequacy perspective – to help meet resource adequacy standards.

Additionally, MISO, the region’s market participants, state regulators, and FERC could 

consider changes to MISO market rules to address local and regional reliability concerns 

associated with the tightening reserve margins anticipated to emerge over the next several 

years.54 For example, analysts at SNL Energy recently offered the following insight:

 52 Julien Dumoulin-Smith, Michael Weinstein, and Paul Zimbardo, “Learning what’s in the MISO soup (includes conference call 

transcript)”. April 22, 2015.

53 Cited in the transcript of a conference call, in Julien Dumoulin-Smith, Michael Weinstein, and Paul Zimbardo, “Learning 

what’s in the MISO soup,” April 22, 2015.

54 For example, the absence of a long-term forward capacity market and of a minimum-offer price rule (“MOPR”), which exist in 

some other RTOs (but not in MISO) and have proven to be controversial in several regions (e.g., PJM), have some effect on 

potentially dampening capacity price signals in MISO: “As a largely regulated, cost-of-service market, new merchant projects 

will have to compete against utility self-supply through the RFP process, which often proves difficult given the less expensive 

financing structures typically available to utilities. Furthermore, without a forward capacity market, market participants can 

only see forward pricing signals through the bi-lateral contracting process which makes it more difficult to push through 

projects without a contract in hand. Unlike other Eastern ISO markets, the MISO capacity market currently does not have in 

place a MOPR, which would require new projects to bid into the market at minimum levels. This means that prices out of the 
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 29

SNL Energy’s projected rise in capacity values in MISO is highly dependent 

on tight supply-demand balance... MISO currently models the ability of 

generators in the market to export capacity to the larger transmission system, 

and transmission limitations resulting from this are part of what drives the 

tightness in the market. Currently, greater than 3,000 MW of conventional 

generation is not counted toward capacity totals due to transmission 

limitations, with this number even higher when considering trapped wind 

generation. Some of this capacity may be able to be freed up by modest 

transmission investments with costs far below the cost of new build. 

Additionally, it is also likely that some of the shortfall in MISO’s North and 

Central regions could be offset by additional imports from the MISO South 

region, which is estimated to have a surplus in excess of 2,000 MW. MISO 

has issued a number of estimates on potential transfer capability between the 

South region and the rest of MISO quoting numbers as high as 4 GW. The 

issue of contribution from the South may be clouded by how the 

transmission battle between MISO and SPP [Southwest Power Pool] over the 

use of SPP’s system to transfer energy between the south region and the rest 

of MISO plays out. Currently MISO has voluntarily limited transmission 

from its southern region to 1 GW following a March 28, 2014, FERC decision 

which forced MISO to pay for using SPP’s unreserved transmission capacity 

when routing power between MISO’s northern and southern regions. If this 

assumed transfer capability is expanded, it could increase the effective 

reserve margin in MISO and pressure capacity values.55

Resource Adequacy: The Role of the States, Utilities’ Integrated 

Resource Planning, and Competitive Markets 

The MISO States have a long and successful history of using IRP processes to ensure resource 

adequacy for their utilities and their customers, and continue to successfully implement IRP 

processes within the broader MISO planning process.

56 

 

formal market could be depressed even when new build is needed, if utility-contracted or self-supplied capacity bids in as a 

price taker... In August 2014, a trio of MISO IPPs including Dynegy and Exelon filed with FERC petitioning for expedited action 

on capacity market reforms in MISO which included changes such as a MOPR, a forward capacity auction with downward 

sloping demand curve and mandatory participation by both load and resources. The comment deadline has since past but FERC 

has not acted as of this writing. This will be something to watch closely as capacity market reform could improve the relative 

attractiveness of the MISO market for merchant investment.” SNL RTO Generation Investment Report, May 2015, page 17.

55 SNL RTO Generation Investment Report, May 2015, page 19.

56 See for example, Comments of Nancy Lange, Commissioner Minnesota Public Utilities Commission, FERC Central Region 

Technical Conference, March 31, 2015: “But we recognize that we don’t just live in an IRP world, we live in an RTO world. 

Minnesota has derived economic and reliability benefits from participation in MISO. For example, regional transmission 

planning and projects have enabled cost effective reductions in carbon emissions in our state through integration of substantial 

Midwestern wind resources. Our ratepayers benefit from power markets that are governed by economic dispatch. Our agency 

engages actively with OMS and MISO to ensure that MISO’s planning, procedures, and tariffs represent the best interest of 
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 30

These processes focus attention on ensuring enough capacity resources, but they also have 

the ability to place value on the attributes of capacity resources that can facilitate compliance 

with Clean Power Plan requirements. This capability has led many states to develop IRP 

processes that assure fair consideration of demand-side, supply-side and transmission 

alternatives. and that rely on market-based mechanisms (e.g., competitive procurements) to 

determine whether it is cost-effective to allow the utility to build its own assets or to buy 

power from third party suppliers. Use of such state authorities can provide signals to the 

market aligned with transitions underway in the industry. 

Within MISO, some states have already begun to consider prices on carbon and other 

pollutants when making long-term resource planning and siting decisions. Since 1997, for 

example, Minnesota has required that utilities account for environmental damages (including 

relating to emissions of CO2) when preparing cost analyses as part of their resource 

acquisition plans.57 The Minnesota PUC reopened its “environmental externalities docket” 

in February 2014, and under this proceeding is considering, among other things, a 

recommendation from the state’s Department of Commerce and the Pollution Control 

Agency to adopt the Federal Social Cost of Carbon for CO2 values going forward.58 

The state’s regulators also consider the environmental damages of CO2 emissions in two 

separate but related dockets. First, in its Value-of-Solar docket, the Minnesota PUC 

established that the Social Cost of Carbon should be used when assessing the marginal cost 

of CO2 emissions when setting solar tariffs. Under Docket CI-07-1199, the Minnesota PUC 

also established a range of CO2 values that reflect future regulatory compliance costs. 

Starting in 2019, utilities will be required to include this cost range in their long-term plans. 

The Minnesota PUC explicitly stated that utilities will not be required to include both a 

regulatory cost and the environmental externalities cost.59.60

 

Minnesota. We understand that living in an RTO world, actions taken by Minnesota to ensure resource adequacy can be 

enhanced or compromised by actions of other states or even the RTO itself. We are joined at the reliability hip.”

57 The Minnesota PUC established a range of environmental cost values for Sulfur Dioxide (“SO2”), particulates (“PM10”), 

carbon monoxide, nitrogen oxides (“NOx”), lead, and CO2 in an Order issued January 3, 1997 in Docket CI-93-583. The 

Minnesota PUC reopened its “environmental externalities docket” in February 2014, and under this docket is considering, 

among other things, a recommendation from the state’s Department of Commerce and the Pollution Control Agency to adopt 

the Federal Social Cost of Carbon for CO2 values going forward. See Minnesota PUC Docket No. 14-643. For a comprehensive 

summary, see Minnesota Public Utilities Commission Staff Briefing Papers, September 4, 2014, Docket No. CI-14-643.

58 See Minnesota PUC Docket No. 14-643.

59 For a comprehensive summary, see Minnesota PUC Staff Briefing Papers, September 4, 2014, Docket No. CI-14-643.

60 We note too another recent example of state/utility action in this area (although occurring in the neighboring RTO, the 

Southwest Power Pool). In its most recent Integrated Resource Plan, Kansas City Power and Light explicitly addressed the 

proposed Clean Power Plan when it filed plans to phase out coal plants by 2020 and to increase its renewable resources. Lauren 

Bellero, “Environmental rules prompt less coal, more renewables in Great Plains IRPs,” SNL Financial, April 14, 2015.
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 31

These implicit or explicit economic values for CO2 emissions are reflected in the utility’s 

plans and regulators’ siting and resource-adequacy decisions, and do not directly affect the 

dispatch decisions of MISO and the energy markets (except to the extent that the siting 

process leads to the entry of new generating assets with favorable efficiency profiles (e.g., 

low heat rates)). However, these examples point out the role that individual state IRP 

processes can – and do – play in affecting resource adequacy while also lowering CO2

emissions from power plants. 

States will have many other options for integrating the value of CO2 emissions into their 

planning processes in ways that support resource adequacy and system reliability. And 

states can design their State Plans to comply with EPA’s Clean Power Plan in a number of 

ways. These options are broad, and have been compiled in numerous studies and reports in 

the past year.61 

States will have significant discretion in how they shape their plans. There are many strong 

reliability (and economic) reasons why states in the MISO region would seek voluntarily to 

align the elements of their State Plans with the competitive-market character of the electric 

industry structure affecting power plants in the MISO portion of their states.62 Even if the 

states do not end up filing a single joint multi-state plan, the states in an RTO can – and we 

think should – design their plans to be compatible with one another. This will help support 

reliability outcomes and lower the cost of compliance.

Regional Collaboration

Finally, given its history of collaboration across the many states of the MISO region, this 

group of states seems well prepared to capture the benefits of regional coordination. As we 

noted in our overview of the region, there is a culture of voluntary cooperation and 

coordination. For more than a half century, utility regulators have convened as the Mid-

 61 See, for example: Susan Tierney and Paul Hibbard, “Carbon Control and Competitive Wholesale Electricity Markets: 

Compliance Paths for Efficient Market Outcomes,” May 2015; Natural Association of Regulatory Utility Commissioners 

(“NARUC”) guide to “Multistate Coordination Resources for Clean Power Plan Compliance,” May 12, 2015; Franz Litz and 

Jennifer Macedonia, “Choosing a Policy Pathway for State 111(d) Plans to Meet State Objectives, Great Plains Institute and 

Bipartisan Policy Center,” April 24, 2015; Rachel Wilson, et al., “Best Practices in Planning for Clean Power Compliance: A 

Guide for Consumer Advocates,” Synapse Energy Economics, Prepared for the National Association of State Utility Consumer 

Advocates, April 29, 2015; Comments of Exelon Corporation, submitted to the EPA in Docket ID No. EPA-HQ-OAR-2013-0602, 

submitted on December 1, 2014; Paul Hibbard, Andrea Okie and Susan Tierney, EPA’s Clean Power Plan: States’ Tools for 

Reducing Costs and Increasing Benefits to Consumers,” July 2014; and Susan Tierney, “Greenhouse Gas Emission Reductions 

From Existing Power Plants Under Section 111(d) of the Clean Air Act: Options to Ensure Electric System Reliability,” May 8,

2014.

62 We recently identified the importance of states in multi-state RTOs adopting mass-based, multi-state emission-trading 

approaches that cover both existing and new generating units. Susan Tierney and Paul Hibbard, “Carbon Control and 

Competitive Wholesale Electricity Markets: Compliance Paths for Efficient Market Outcomes,” May 2015. 
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 32

America Regulatory Conference (“MARC”) group to discuss and work through issues of 

common interest. Other examples include: the MISO-sponsored voluntary survey of 

generation statistics; the states working together through the Organization of MISO States;

the long-standing work of NERC’s regional partner, the Midwest Reliability Organization 

(“MRO”) and its predecessor organizations); and the Midwestern Power Sector 

Collaborative, a group of energy and environmental regulators, power companies and 

environmental groups that have been discussing (among other things) ways to provide 

options for parties in the region to enter voluntarily into a cap-and-trade system in the 

region.63

The recent efforts of Mid-Continent utility and environmental regulators (in MSEER) to 

discuss issues relating to the EPA’s proposed Clean Power Plan is yet another recent, active 

and constructive example of regional collaboration. At present and going forward, the 

MSEER discussions are a critical venue for multi-state cooperation and analysis, with the 

potential to significantly support both regional planning and preparedness for the wide 

range of potential actions (including multi-state approaches, and other demand-side options) 

that may be adopted voluntarily by the states in designing and implementing their State 

Plans.64 

The MISO’s MTEP process with its process for evaluating MVP projects is another clear 

instance of this regional coordination, and offers pathways for helping the region work 

through reliability issues relating to Clean Power Plan compliance going forward. 

MISO conducts transmission planning and assessments under its current MTEP framework, 

which is used more broadly to collaborate on all transmission planning issues in the MISO 

footprint. This framework is based on five key principles:65

• Make the benefits of a competitive energy market available to customers by providing 

access to the lowest possible energy costs.

• Provide a transmission infrastructure that safeguards local and regional reliability.

 63 In April, the group asked EPA to create a framework for establishing such a system. “Midwestern states ask EPA to set up 

regional carbon trading rules to meet Clean Power Plan,” Climate Wire, May 11, 2015.

64The MSEER discussions have been supported by the Great Plains Institute, with analytic support from the Bipartisan Policy 

Center. The latter organizations recently hosted an all-day meeting on June 5, 2015 (“Midcontinent States Regional Workshop: 

Implementation Options for EPA’s Proposed Clean Power Plan”) to discuss: Policy Pathways for States to Achieve State 

Emissions Goals; Opportunities and Challenges for Multistate Collaboration; and Achieving State Goals in the Midcontinent 

Region. http://bipartisanpolicy.org/events/midcontinent-states-regional-workshop-implementation-options-for-epas-proposedclean-power-plan/?_cldee=c3RpZXJuZXlAYW5hbHlzaXNncm91cC5jb20%3d.

65 These five bullets are quoted directly from: MISO Business Practices Manual, Transmission Planning, Manual No. 020, BPM020-r11, page 14. 
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 33

• Support State and Federal renewable energy objectives by planning for access to all 

such resources (e.g. wind, biomass, demand-side management).

• Create a mechanism to ensure that investment implementation occurs in a timely 

manner.

• Develop a Transmission System scenario model and make it available to State and 

Federal energy policy makers to provide context and information regarding potential 

policy choices.

This framework (depicted in Figure 7) and the previous success of the MTEP process, 

including its MVP process, create a strong platform that will be used to help states in the 

Mid-Continent area to meet the goals of the Clean Power Plan while also ensuring system 

reliability. The MTEP process provides both the tools and solutions to respond to potential 

challenges from individual state implementation plans, and at the same time, provides an 

important framework for how to implement a broader regional coordination approach.

Figure 7

The MISO Transmission Expansion Plan (MTEP) Process Framework

Source: MISO MTEP14, Book 1, Chapter 2.3. 

As a first step in its MTEP planning process, MISO classifies transmission projects into two

buckets, called Appendices A and B.66 Projects that are matched as a potential solution to a 

 66 See the MTEP14 Report. Originally, there was a third category, Appendix C, in which all projects started. These were 

expansions proposed by any stakeholder (e.g., a utility, an independent transmission company), under the belief that they offer 

some positive system-wide benefits. Appendix C projects were not specific to a known reliability need or issue. 
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 34

known reliability need, policy or other need, or an identified cost savings or other benefit are 

moved to Appendix B. Within Appendix B, there could be multiple projects that satisfy a 

given need. The preferred solution of projects that serve multiple needs is then moved into 

Appendix A. 

The MTEP has an 18-month planning cycle that includes reliability analyses, economic 

analyses, and resource assessments. To support this process, MISO is responsible for 

collaborating and coordinating with stakeholders (including state PUCs and local utilities) 

for necessary forecasts of system load and generator availability. MISO then models the 

impact of various types of projects (e.g., baseline reliability projects, new transmission access 

projects such as generation interconnection and transmission delivery service projects, and 

market efficiency projects) over both the short-term (1 to 10 years) and the long-term (20 

year) time horizons, and compares these model results against a business as usual scenario. 

These studies provide necessary planning recommendations, such as system-wide and local 

planning reserve margins, and also provide timely review of pressing policy issues and the 

impacts on stakeholders.

Unique to the MTEP process is a special class of transmission projects known as Multi-Value 

Projects.67 Broadly, MVP projects are used to help meet state and/or federal policy objectives 

or solve an identified reliability violation under NERC standards. MVP projects are unique 

in that they provide multiple different streams of quantifiable benefits, in excess of project 

costs, to multiple regions in the MISO footprint. Because of their regional nature, MVP 

project costs are allocated to all load in the MISO region and shared proportionately. 

The benefits of these projects can include production-cost savings that arise from serving 

load more efficiently (e.g., through lower operating reserves or reduced operating costs), or 

savings resulting from avoided capacity costs and payments (e.g., through reduced system 

losses during peak demand and/or from reduced planning reserve margins as identified 

 67 Specifically, MVP projects those projects whose “primary purpose... is to enable cost sharing of projects that are regional in 

nature and developed to enable compliance with public policy requirements, which include state and federal laws and 

regulations, and/or to provide economic value, defined as the difference between financially quantifiable benefits related to the 

provision of transmission service and the project costs.” MVP projects must meet one of three criterion:

 Enable the transmission system to “reliably and economically deliver energy in support of documented energy policy 

mandates or laws that have been enacted or adopted through state or federal legislation or regulatory requirements that 

directly or indirectly govern the minimum or maximum amount of energy that can be generated by specific types of 

generation. The MVP must be shown to enable the Transmission System to deliver such energy in a manner that is more 

reliable and/or more economic than it otherwise would be without the transmission upgrade.”

 [P]rovide multiple types of economic value across multiple pricing zones with a total MVP benefit-to-cost ratio of 1.0 or 

higher....

 [A]ddress at least one Transmission Issue associated with a projected violation of a NERC or Regional Entity reliability 

standard and must provide economic value across multiple pricing zones.”

MISO Business Practices Manual, Transmission Planning, Manual No. 020, BPM-020-r11, pages 148-149.
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 35

through LOLE studies), or by accelerating, deferring, or replacing alternative infrastructure

plans needed in either the short-term or long-term. 

The roots of the MTEP process are changes that have been taking place in the region’s electric 

system for more than a decade. As we have noted in our previous reports on electric system 

reliability and the Clean Power Plan, many of the changes it envisions are already underway

and the industry is already in the midst of crafting solutions to these challenges. The MISO 

MVP projects are a perfect example of this trend. 

As early as 2003, MISO members met to discuss a regional planning approach. By 2008, they 

had identified a need for a more “regional and robust” transmission system to help meet the 

Renewable Portfolio Standards (“RPS”) of member states by enabling additional windpowered generation, particularly in the western edge of the MISO footprint.68 (See Figure 8.) 

 68 Kentucky is the only state in MISO without an RPS mandate or goal. Most states have a mandate or goal to generate between 

10-to-15 percent of energy from renewables, with timeframes varying from 2015 to 2025. Minnesota and Illinois have the most 

aggressive goals, with 25 percent of energy (or more) from renewables by 2025. Each state has slightly different definitions of 

qualifying renewables, but the majority of most standards will be met through increased wind generation, enabled in part by 

the MVP projects. See MISO, “Multi-Value Project Portfolio, Results and Analyses,” January 10, 2012, page 3.
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

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Figure 8

States’ Renewable Portfolio Standards

Source: Database of State Incentives for Renewables and Efficiency (“DSIRE” http://www.dsireusa.org/) 

In 2011, the MISO Board of Directors approved the first suite of 17 different MVP projects in 

nine different states, noting that these “no regrets” projects provided multiple reliability and 

economic benefits, under a wide range of scenarios.69 

In its 2014 MTEP Review, MISO re-evaluated the multiple benefits of these projects, and 

found that they significantly improved reliability while enabling greater use of renewables, 

at a lower cost and lower total system-wide emissions.70 Specifically, the portfolio was found 

to mitigate the need for $300 million baseline upgrades for approximately 650 reliability 

constraints (under 6,700 different transmission outage conditions), where some of these 

constraints would have been large enough to potentially cause a cascading system outage if 

left unaddressed. And MISO found that absent the MVP projects, more than 32 million 

MWh of wind generation would have had to be curtailed for reliability reasons; with the 

 69 See MISO, “Multi Value Project Portfolio, Results and Analyses,” January 10, 2012, page 84.

70 All numbers cited in the following two paragraphs can be found in MISO, MTEP14 MVP Triennial Review: A 2014 review of 

the public policy, economic, and qualitative benefits of the Multi-Value Project Portfolio, September 2014.
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 37

MVP projects, an additional 11 million MWh of wind could be accommodated and serve 

future RPS mandates, for a total of 43 million MWh of renewable energy attributed to the 

MVP projects. All told, the projects reduce carbon emissions from a business-as-usual 

scenario by up to 9 million tons annually in 2023 growing to 15.1 million tons by 2028.

The MTEP review found that the transmission upgrades also defer the need for additional 

capacity, both in localities and system wide. From a local clearing-requirement (and 

resource-adequacy) perspective, the projects allowed for the deferral of 852 MW of capacity 

expansion in LRZ 3 due to greater capacity-import limits and lower planning-reserve 

margins. 

From a system-wide perspective, the MVP projects provide two capacity benefits. First, the 

projects reduced system losses during peak periods by 122 MW, thereby avoiding necessary 

capacity expansions; the projects caused a large shift in the proportion of NGCCs cycle and 

combustion turbines in the base capital expansion plan. Second, the projects would be online 

a year earlier than expected (by 2020). Combined with the tighter reserve margins (and the 

need for new capacity as early as 2016), the deferment value fell within a range of $291 

million to $1,079 million (based on different scenarios and assumptions). Accounting for 

these benefits, MISO found that the MVP projects will provide $17 to $60 billion in net 

present value benefits on a 20-to-40-year time horizon. From a reliability point of view, there 

are additional benefits: increased system robustness, ability to share reserves, and enhanced 

generation flexibility. 

The MTEP/MVP process helps to position the MISO states and region to examine the benefits 

of a regional, coordinated approach to the EPA Clean Power Plan. For example, MISO’s 

own analysis of the Clean Power Plan found that a regional approach could save regulated 

entities in aggregate $3 billion per year.71 The MTEP/MVP project process offers a 

framework through which individual states, with their own individual state mandates (e.g., 

state RPS requirements) can successfully collaborate to form cost-effective solutions for 

themselves and for the region. 

Together the MTEP and MVP processes are strong tools to further position the parties in the 

MISO states to collaborate to develop workable and reliable Clean Power Plan compliance 

strategies.72

 71 “MISO Clean Power Plan Analysis,” page 12. These savings are relative to a sub-regional approach.

72 Additionally, some states in the MISO footprint are already working cooperatively to improve their permitting processes and 

decrease the total time to completion. For example, Minnesota is piloting a pre-application process with the Department of 

Energy (“DOE”). As part of this pilot, the final Environmental Impact Statement for Great Northern Transmission (a 220-mile, 
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 38

Conclusion

Based on our analysis, we make the following conclusions:

 The parties responsible for electric system reliability in the MISO region are well 

positioned to address collaboratively and constructively the reliability issues that might 

arise from the electric industry’s compliance with the Clean Power Plan.

 With or without the Clean Power Plan, the MISO region has to address relatively nearterm resource-adequacy issues. As a region historically – and still – highly dependent on

coal for power generation, the MISO states’ electric systems have been undergoing 

significant changes in recent years. Until recently, it has had significant surplus capacity. 

It has seen (and will likely see more) retirements of coal-fired generating units, increased 

reliance on natural gas to produce power, integration of significant quantities of 

electricity generated by wind, and significant expansion of the transmission system.

 Like all RTOs, MISO starts with a strong tool kit for managing the “Essential Reliability 

Services” needed to assure high-quality electric service. Performing various resourceadequacy and system-security functions is MISO’s normal job, which it carries out in 

conjunction with the states, electric utilities, other market participants, and other 

reliability organizations, to ensure continuous operational security of the electric system. 

 Given the electric industry structure in the MISO region – with an organized power 

market administered by an RTO and with most electricity consumers in the region served 

by traditional utilities – there is a strong culture and practice of planning involving the 

local utilities and their regulators/boards along with MISO. Each plays different roles in 

assuring electric system reliability. MISO establishes recommended resource-adequacy 

targets to the states and the industry, while the utilities assemble packages of resources 

after the states establish planning requirements for them.

 MISO supports this process through various assessments, including the MTEP process 

and its unique approach – the “Multi-Value Projects” process – for identifying 

transmission projects that support reliability, economic efficiency and policy goals of the 

states and which provide broad benefits to the region.

 The region has a long history in which states rely upon IRP processes to provide 

electricity supply. These IRP processes are a key tool through which utilities assemble 

 

500-kV line) is expected to be complete within 16 months of DOE’s notice of intent. Comments of Lauren Azar, Attorney and 

Advisor, FERC Central Regional Technical Conference, March 31, 2015, page 4. 
MISO: Electric System Reliability and the EPA’s Clean Power Plan 

Analysis Group 39

their supply portfolios. Many states in the region use IRP processes in conjunction with 

the MISO markets, competitive-power procurements, and energy-efficiency programs for 

consumers. This set of tools will help the states and the industry with Clean Power Plan 

compliance. 

 The MISO region and the states also have a history of constructive collaboration that is 

serving them well as they attempt to overcome the complicated issues they face in 

preparing to comply with the Clean Power Plan. MISO’s and others’ analyses suggest 

that the more the states in the MISO footprint collaborate on a regional, market-based 

approach, the more this approach will enable the region to comply at a lower cost while 

also ensuring reliability.

 Finally, the flexibility that EPA has granted states in designing Clean Power Plan 

implementation plans leaves the door very wide open for states to propose in their plans 

the specific mechanisms needed to ensure that Clean Power Plan compliance does not 

compromise system reliability.