MISO Zone 7 Capacity Shortfall: Why Lower Michigan Faces Escalating Electric Risk in 2026
The Midcontinent Independent System Operator (MISO) manages a vast grid from Minnesota to Louisiana. However, Zone 7 (the Lower Peninsula of Michigan) is geographically isolated, with very limited transmission import capacity from neighboring states like Indiana or Ohio. As DTE and Consumers Energy retire large, aging coal plants, the amount of "firm capacity" physically located inside the peninsula has plummeted. This scarcity has caused Zone 7 capacity prices to separate from the rest of the MISO footprint, drastically increasing fixed costs for commercial customers.
Executive Impact (Michigan Market)
- →The Resource Adequacy Problem: MISO requires every load-serving entity to prove they have enough generation capacity to meet peak summer demand plus a reserve margin. As baseload plants retire, acquiring this proof in Zone 7 has become extremely expensive.
- →The "State Reliability Mechanism" (SRM): To prevent rolling blackouts, Michigan enacted the SRM, effectively forcing alternative suppliers (the ones commercial buyers use in the 10% choice program) to prove they own capacity physically located *in* Michigan, not just paper contracts from Illinois.
- →Rate Pressure: The utilities must build massive new infrastructure (like natural gas peakers or massive battery farms and solar) to replace the retired plants. This capital expenditure is passed directly onto commercial ratepayers through steep increases in fixed-delivery tariffs.
Understanding the "Peninsula Problem"
MISO\'s footprint relies on robust transmission networks allowing cheap wind from Iowa to flow to demand centers in Indiana. But Lower Michigan is a literal and electrical peninsula. It is surrounded by the Great Lakes to the north, east, and west, leaving only a physical transmission corridor through the south (Indiana/Ohio border).
The total import capability through that southern corridor is capped at approximately 3,200 MW. If peak summer demand in Lower Michigan hits 22,000 MW, it means almost 19,000 MW must be generated locally inside the state borders to keep the lights on.
Capacity Auctions vs. Physical Reality
In the annual MISO Planning Resource Auction (PRA), capacity prices in Zone 7 routinely clear at or near the "Cost of New Entry" (CONE)—essentially the theoretical cost of building a brand new power plant from scratch.
The Michigan Public Service Commission (MPSC) became highly concerned that Alternative Electric Suppliers (AES) were relying too heavily on the MISO auction. If an extreme weather event hit the entire Midwest simultaneously (like a massive heat dome), those out-of-state plants would need their power locally, and the physical transmission lines into Michigan would max out, leaving Zone 7 short on generation.
Utilities (DTE/Consumers) Argue: "We pay to build local steel-in-the-ground. AES companies are free-riding on grid reliability by buying cheap, un-deliverable paper capacity from out-of-state."
Alternative Suppliers Argue: "The state is creating an artificial monopoly. By forcing us to buy local capacity from the utilities who own all the local generation, they are destroying the economic viability of the 10% electric choice program."
Source: MISO Planning Resource Auction (PRA) Results & MPSC Filings.
Navigating Michigan Electric Rates
Whether you are on the 10% choice program or utility-default service, understand physical and financial risk in MISO Zone 7.