Demand Response Reference Levels at MISO: More Details Needed Before FERC Filing.

MISO's upcoming FERC filing will shape the future of Demand Response participation, but a key question remains unanswered—how will reference levels for DR resources be determined?

As MISO prepares to file a proposal at FERC to update how demand response participates as a supply-side resource, one noticeable gap is how MISO and the Independent Market Monitor (IMM) calculate reference levels for DR resources.

Reference Levels (RLs) are price benchmarks that enable the IMM to check if a market participant is charging more than they should during normal grid conditions.

MISO Tariff defines them as “Reference Levels are intended to reflect a Generation Resource’s, Planning Resource’s, Distributed Energy Aggregated Resource’s or Electric Storage Resource’s marginal costs, including Legitimate Risks and opportunity costs or justifiable technical characteristics for physical Offer parameters.”.

RLs are calculated for most resources participating in the MISO market. Exceptions are behind-the-meter-generation (BTMG) resources less than 10 MW, non-dispatchable demand response resources Type I and load modifying resources (LMRs).

MISO Business Practices Manual for Market Power and Mitigation (BPM 09) Section 6.9 contains specific instructions on how MISO IMM calculates reference levels for generation resources. But, there is no explicit guidance on DR resources. As MISO relies more on DR resources in upcoming capacity auctions, having the rules clear on how reference levels are calculated would provide certainty for DR market participants.

Source: MISO RASC (Reference Levels is part of the Demand Response Participation Rules Enhancements topic)

This is relevant now because MISO is preparing to file at FERC by March 20^th an extensive proposal on how MISO is planning to change DRs and Emergency Resources are accredited at MISO. Additionally, MISO is planning to file at FERC another proposal that eliminates the dual registration of Emergency DRs (EDRs) and LMRs by April 1^st this year. The reference levels topic will likely be filed as part of the DR Participation Rules proposal at the end of March¹.

Source: Slide 11, MISO MSC

MISO BPM 09 Section 6.9 and FERC Tariff provide sufficient guidance for generation resources, not DR.

The discussion of reference levels in both BPM and Tariff is similar for generation resources. For example, the Tariff includes the hierarchy of reference levels just like the BPM, but it includes additional details, such as a $1,000 per MWh soft cap on energy offer. Both BPM and Tariff list the exemptions for RLs. The Tariff is intended to be the final document for FERC purposes, but the BPM typically explains the Tariff in plain terms for market participants' benefit. To that extent, the BPM 09 includes sufficient details on RLs but for generation resources.

This is understandable because most demand response resources are exempt from market mitigation except for DRR Type II. But with MISO taking steps to file multiple proposals at FERC related to how DR participates in the market, now would be the time to add clarity on how DR resources RLs will be calculated.

For example, the BPM mentions that “Reference Levels for Energy are calculated and posted to the market portal for as many as 10 segments and up to the maximum capability for most Resources” but for “DRR Type I resources, Reference Levels for Energy are calculated for 1 segment”. There is no other mention of either demand response or DRR in MISO BPM 09 Section 6.9. The Tariff includes one additional mention of DRR Type I, “Additionally, resource types not subject to mitigation, such as Demand Response Resources – Type I, may request reference levels for incremental energy cost verification above the Energy Offer Soft Price Cap”.

There are four major differences in how BPM and Tariff contain extensive details regarding generation resources but not DR.

First, the RL Calculation methods are defined for Generation resources but not for DRRs. The BPM and Tariff both outline explicit RL calculation methods for generation, including:

• Startup costs

• No-load costs

• Dispatch costs (fuel, O&M, emissions)

• Ramp rates and minimum runtime

For DRRs, the BPM and Tariff simply state that RLs apply to DRR energy and capacity offers but do not provide a specific formula or methodology unique to DRRs.

Second, there is a lack of a specific cost breakdown for DRRs. The Tariff explicitly defines cost categories for generation RLs (e.g., fuel, emissions, ramping constraints). DRRs do not have a similarly detailed breakdown—only references to opportunity costs and curtailment costs.

Third, capacity market RLs for DRRs are based on Going Forward Costs GFCs, but without detailed cost components. For generation resources, the Tariff defines specific GFC components (labor, maintenance, insurance, etc.). For DRRs, it simply states that net revenues are subtracted from GFCs without detailing what counts as an avoidable cost.

Finally, there is no mention of dedicated RL adjustment mechanisms for DRRs. Generation RLs are adjusted for seasonal factors, operational changes, and market conditions. No equivalent process exists for DRR-specific conditions (e.g., variable demand patterns, participation fatigue).

Conclusion

MISO and the IMM should immediately engage DR stakeholders through the Market Subcommittee and present a detailed proposal on how RLs for DRRs will be calculated. This proposal must outline a transparent methodology—similar to that used for generation resources—to ensure that DRRs are benchmarked fairly. Without these clarifications, DR participants risk uncertainty in capacity auctions and potential conflicts with IMM market mitigation rules. As MISO prepares its upcoming FERC filings on DR participation, now is the critical moment to close this gap and ensure that DR resources are treated with the same rigor as generation in reference level calculations.

On vacation for rest of the month. See you in April!

1. When I look at the posted Tariff redlines, I see addition of “opportunity costs associated with demand resource reductions” added at the end. That’s it! Nothing more.

Source: MISO posted Tariff redlines