MISO LMP Merchant Curve: Midwest & South Power Price Forecasts

MISO divides its footprint into 10 Local Resource Zones (LRZs), each representing a distinct area of the transmission system with its own capacity and energy price characteristics. LRZs were designed primarily for the capacity market, but they correspond closely to areas of persistent transmission congestion that create basis between zones in the energy market as well. LRZ 1 covers the upper Midwest including Minnesota and the Dakotas, where high wind penetration suppresses overnight prices relative to load centers. LRZ 4 covers Illinois, where the MISO-PJM interface congestion creates persistent basis. LRZ 10 corresponds to MISO South, which operates under a different capacity market structure than the rest of MISO. For developers and investors, the LRZ determines which capacity market the project participates in, what basis risk exists relative to the reference hub, and what congestion patterns the project needs to underwrite. Hub-level price curves that ignore LRZ basis will systematically over- or underestimate zone-specific project revenue. See MISO capacity market details.

Coal retirements affect MISO power prices through two primary channels: dispatch stack changes and capacity adequacy tightening. On the dispatch side, retiring coal removes low-variable-cost baseload that currently sets the margin in many off-peak hours, particularly in zones like LRZ 4 and LRZ 6. As coal exits, gas-fired combined cycle plants move up the merit order and set the clearing price in more hours, raising the average energy price level. The price impact depends heavily on the pace of entry of replacement resources and whether new gas peakers, storage, or renewables fill the gap. On the capacity side, coal retirements tighten the planning reserve margin, which raises capacity auction clearing prices and creates scarcity pricing episodes during high-demand periods. The combined effect is higher on-peak energy prices and tighter capacity margins in affected zones. Noreva tracks MISO’s Generator Retirement and Derate filings and models the dispatch and adequacy impacts by zone. For a broader view on why keeping coal online is expensive, see our coal economics analysis.

The MISO-PJM interface refers to the set of transmission paths connecting the two adjacent markets along their shared border, which runs roughly from Michigan through Indiana, Illinois, and down to Kentucky. The two markets clear their day-ahead energy prices independently, and when the clearing price in one market diverges from the other, economic flows attempt to cross the interface to capture the spread. However, the interface has limited transfer capacity, and when it binds, congestion rent accrues and prices on either side can diverge significantly. For MISO market participants, this creates basis risk in eastern LRZs (LRZ 4 in Illinois, LRZ 6 in Indiana) relative to PJM Western Hub. Projects sited in these zones may face lower prices than their PJM neighbors when MISO-to-PJM flows are constrained, or benefit from higher prices when the reverse is true. PPA buyers and sellers with exposure to both markets need to model this basis explicitly. Noreva tracks historical interface congestion and projects forward binding frequency based on load growth, generation retirements, and transmission expansion on both sides of the seam.

MISO South, which covers Louisiana, Arkansas, Mississippi, and parts of Texas and Missouri, operates under a distinct market structure with its own capacity market mechanism separate from the main MISO Planning Resource Auction. Price dynamics in MISO South differ from MISO North across several dimensions. First, the generation stack in MISO South is heavily gas-dependent, with limited coal and nuclear, meaning energy prices track Henry Hub more closely and with less dampening from baseload coal dispatch. Second, MISO South experiences distinct seasonal demand peaks driven by summer cooling loads in the Gulf Coast and lower Mississippi Valley. Third, the MISO South interconnection queue is backlogged with solar projects, which are beginning to reshape the midday price profile in LRZ 7, 8, and 9 similarly to what solar has done in CAISO and SPP. Fourth, the transmission interface between MISO South and MISO Central can bind during high-load events, creating price divergence between the two sub-regions. For developers and buyers in MISO South, the key modeling inputs are gas price correlation, solar shape effects, and the adequacy construct that governs capacity prices in the sub-region. See MISO dispatchable dominance analysis for broader context.