NIPSCO is asking MISO ratepayers across 15 states to absorb $38 million in losses from two Indiana coal units that the U.S. Department of Energy ordered to stay online under emergency authority, a test case for who pays when federal reliability mandates override market signals. The units lost $83.2 million in the first quarter of 2025 alone – $116.7 million in operating costs against just $33.5 million in market revenue – and DOE has signaled the orders could extend through 2028. The filing marks the first major cost-recovery request tied to the current wave of Section 202(c) directives, which have already imposed over $400 million in nationwide costs on ratepayers.
Emergency Authority Collides With Competitive Markets
Section 202(c) of the Federal Power Act grants the Energy Secretary authority to order generation facilities to operate during wartime or other emergencies threatening grid reliability. Since December 23, 2024, Secretary Chris Wright has invoked this authority to block the retirement of NIPSCO’s Michigan City Generating Station Units 4 and 5, renewing the directive every 90 days with the current order set to expire September 19, 2025. NIPSCO’s filing indicates the utility is preparing for potential extensions through late 2028, suggesting the federal government views these units as critical to resource adequacy in the MISO North/Central region for years to come.
The economics are stark. In the January-through-March quarter, the two units – totaling roughly 900 megawatts of nameplate capacity – incurred $116.7 million in fuel, operations, maintenance, and capital carrying costs while earning only $33.5 million in energy and capacity market revenue. That $83.2 million quarterly deficit annualizes to over $330 million. NIPSCO’s $38 million recovery request represents a subset of those losses, likely reflecting the portion attributable to MISO-wide reliability benefits rather than local Indiana ratepayers alone. The utility argues the units provide voltage support and inertia that MISO’s seasonal assessments flag as necessary to meet planning reserve margins.
MISO’s tariff includes a mechanism for recovering costs of units designated as System Support Resources (SSRs), but those designations typically follow a stakeholder process and cost-allocation methodology. NIPSCO’s request effectively asks FERC to bless a cost-socialization framework for federally mandated operation that bypasses the normal SSR process. If approved, it would establish precedent for how the roughly $400 million in nationwide 202(c) costs tracked by DOE get allocated across regional ratepayer bases.
The Reliability-Market Tension Is Structural, Not Cyclical
This dispute illuminates a structural fracture in U.S. electricity markets: capacity accreditation and energy pricing increasingly undervalue the reliability attributes – inertia, voltage control, ramping capability – that thermal plants provide, while federal and regional reliability standards still depend on those attributes. MISO’s seasonal capacity auctions have cleared at prices well below the going-forward costs of many coal and gas plants, yet the grid operator’s reliability assessments continue to identify resource adequacy risks that trigger emergency interventions.
By comparison, the PJM Interconnection’s recent capacity auction reforms and the Southwest Power Pool’s reliability must-run (RMR) agreements represent alternative approaches to the same problem. PJM’s capacity performance construct attempts to price reliability attributes directly; SPP’s RMR process uses a transparent cost-of-service review before socializing costs. NIPSCO’s 202(c) pathway circumvents both market pricing and regional stakeholder processes, substituting federal fiat for negotiated outcomes. That points to a growing risk: as more coal and gas retirements collide with load growth from data centers and electrification, Section 202(c) could become a standing administrative tool rather than a genuine emergency measure, effectively creating a shadow capacity market administered by DOE rather than FERC-jurisdictional RTOs.
If this trend holds, the $400 million in documented 202(c) costs to date represents only the leading edge. MISO’s 2024 Long-Range Transmission Plan identifies over 30 gigawatts of potential retirements through 2032 against a backdrop of 1.5-2% annual load growth. Each gigawatt of thermal capacity kept online via 202(c) at a $30-40 million annual above-market cost – a rough industry benchmark for aging coal units – implies potential annual costs in the hundreds of millions per region. The NIPSCO filing will test whether FERC accepts DOE’s reliability judgment as sufficient justification for bypassing established cost-allocation procedures.
Who This Affects
- Utility planners: Must now model Section 202(c) as a recurring, multi-year risk factor in integrated resource plans, not a one-off emergency; the NIPSCO precedent could extend mandated operation timelines by 3-5 years beyond announced retirement dates.
- Storage and renewable developers: Face a new competitive dynamic where federally mandated thermal units suppress energy and capacity prices in MISO North/Central, delaying revenue sufficiency for replacement resources by an estimated 2-4 years.
- State utility commissions: Lose leverage over retirement decisions and cost allocation when federal emergency orders preempt state resource planning authority; Indiana’s IURC now has limited say over Michigan City’s economics through 2028.
- MISO market participants: Should prepare for potential tariff changes at FERC to formalize 202(c) cost recovery, which would socialize above-market thermal costs across the entire MISO footprint rather than assigning them to local load-serving entities.
What to Watch Next
- FERC docket EL25-XX (to be assigned): The commission’s ruling on NIPSCO’s cost-recovery petition will determine whether 202(c) costs flow through MISO’s existing SSR tariff provisions or require a new allocation methodology – expect initial briefs within 60 days of filing.
- DOE’s September 19 renewal decision: Whether Secretary Wright extends the order for another 90 days, modifies unit commitments, or allows expiration will signal the administration’s expected duration for federal intervention in MISO reliability.
- MISO’s 2025 Seasonal Assessment (October release): Updated capacity accreditation and loss-of-load expectation metrics will reveal whether the grid operator’s own reliability models still show Michigan City as necessary for planning reserve margins.
- Congressional oversight of 202(c) use: House Energy and Commerce and Senate Energy and Natural Resources committees have signaled hearings on emergency authority scope; any legislative clarification could constrain or codify current practice before FERC acts.
Bottom line: NIPSCO’s $38 million ask is the price tag for a new federal reliability backstop that bypasses markets, states, and RTO stakeholder processes – and the precedent it sets will determine whether the $400 million already spent nationwide becomes a recurring line item on transmission bills across every organized market.
Read the full report at Energy Central
Note: facts and figures attributed above to reflect that outlet's original reporting. Broader context, cross-sector connections, and forward-looking scenarios reflect independent analysis by our editorial team.
About this article: Drafted by Energy Ai with AI-assisted research and writing based on public reporting, then reviewed under our editorial process before publication.
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