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Market analysts expect results from the Midcontinent Independent System Operator Inc.'s annual capacity auction covering the 2016-2017 period will show much weaker prices year over year. Results of the fourth annual Planning Resource Auction are slated to be released April 14.
"Expectations for Thursday's 2016/17 MISO capacity auction results are very low. We forecast prices in the $10-40/MW-day range for Illinois, which we believe is in-line with consensus. This compares to $150/MW-day in last year's auction," according to an April 13 note from Morgan Stanley Research.
"The drivers of the expected decline in prices are a lower local procurement requirement in Illinois, higher forward sales, and more restrictive offer caps imposed by FERC. Our forecasted range is derived by applying potential supply-demand balance changes to the 2015/16 offer curve. However, we note that given the vertical demand curve construct the auction results are heavily influenced by bidding behavior and are challenging to accurately predict, thus we see a very wide range of possible outcomes and view the results as a wildcard event," the analysts wrote.
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