LawFlash

FERC Adopts Reforms to Address Inefficiencies in Interconnection Process

April 27, 2018

The revisions by the Federal Energy Regulatory Commission relate to the Large Generator Interconnection Procedures and Large Generator Interconnection Agreement, and are intended to provide increased certainty and additional interconnection service options to generation interconnection customers, while also enhancing the information available for interconnection decisionmaking. 

The Federal Energy Regulatory Commission (FERC) issued a Final Rule[1] on April 19 to adopt reforms to improve the efficiency of processing interconnection requests, maintain reliability, balance the needs of interconnection customers and transmission owners, and remove barriers to resource development. Transmission providers are required to submit compliance filings revising their tariffs to adopt these changes to the generator interconnection requirements within 90 days after the publication of the Final Rule in the Federal Register.

In the notice of proposed rulemaking issued in December 2016,[2] FERC identified a number of potential reforms to address issues with the generator interconnection process, including delays that interconnection customers experience, backlogs and long timelines of some interconnection queues, the impacts of late-stage interconnection request withdrawals, and the impacts of the lack of cost and timing certainty. Of the 14 reforms that FERC proposed in the December 2016 Notice of Proposed Rulemaking (NOPR), FERC’s Final Rule adopts 10 reforms to the pro forma Large Generator Interconnection Procedures (LGIP) and pro forma Large Generator Interconnection Agreement (LGIA). FERC determined that the reforms were necessary because the current process may hinder the timely development of new generation, stifle competition in the wholesale markets, result in uncertainty and inaccurate information, or potentially unduly discriminate against new technologies.

The Final Rule is effective 75 days after publication in the Federal Register. All transmission providers must submit compliance filings to adopt the requirements of the Final Rule as revisions to the LGIP and LGIA in their open access transmission tariffs (OATTs) no later than 90 days after the Final Rule is published in the Federal Register.

Reforms to Improve Certainty for Interconnection Customers

Not Adopted: Scheduled Periodic Restudies. FERC declined to adopt the proposal that would have required transmission providers that conduct cluster studies to establish a schedule for conducting periodic restudies. FERC concluded that cascading restudies were not a significant problem and that scheduled periodic restudies would constrain the restudy process for transmission providers that are not experiencing cascading restudies.

Adopted: Interconnection Customer’s Option to Build. FERC adopted the proposal to modify articles 5.1, 5.1.3, and 5.1.4 of the pro forma LGIA to allow interconnection customers to exercise the option to build with respect to the transmission provider’s interconnection facilities and standalone network upgrades, regardless of whether the transmission provider can meet the interconnection customer’s proposed dates. FERC concluded that this reform gives interconnection customers more control and certainty during the design and construction phases of the interconnection process.

Not Adopted: Customer Agreement to Self-Funding by Transmission Owner. FERC withdrew its proposal to revise the pro forma LGIA to require mutual agreement between the interconnection customer and the transmission owner or provider before the transmission owner or provider could choose to initially fund the cost of the network upgrades.

Adopted: New Non-Binding Dispute Resolution. FERC revised the pro forma LGIP to add a new section 13.5.5 to give parties the option to engage in non-binding dispute resolution before a neutral decisionmaker, regardless of whether the party has obtained mutual agreement to pursue the arbitration process under section 13.5 of the LGIP. This non-binding dispute resolution procedure is an alternative but not a replacement for the arbitration process.

Not Adopted: Capping Costs for Network Upgrades. FERC declined to propose revisions to the pro forma LGIP and pro forma LGIA to institute a cap on the cost of network upgrades required for interconnection. However, FERC stated that it will not bar a transmission provider from proposing to establish cost caps for network upgrades in its footprint by submitting a filing under Section 205 of the Federal Power Act.

Reforms to Promote More Informed Interconnection Decisions

Adopted: Identification and Definition of Contingent Facilities. FERC adopted the proposal to add a new section 3.8 to the pro forma LGIP that requires transmission providers to publish a method for identifying contingent facilities[3] in their LGIPs. The method must be provided to the interconnection customer at the conclusion of the system impact study and included in the generator interconnection agreement and must be sufficiently transparent to determine why a specific contingent facility was identified and how it relates to the interconnection request. In addition, at the interconnection customer’s request, the transmission provider must provide the estimated interconnection facility and/or network upgrade costs and estimated in-service completion time of each identified contingent facility when the information is readily available and is not commercially sensitive.

Adopted: Additional Transparency Regarding Study Models and Assumptions. The Final Rule modifies section 2.3 of the pro forma LGIP to require transmission providers to maintain not only base case data but also network models and underlying assumptions on its OASIS site or a password protected website. FERC withdrew the proposal to require transmission providers to post shift factors, dispatch assumptions, load power factors, and power flows, finding that this information may not be informative to interconnection customers and could delay or burden the interconnection study process.

Not Adopted: Posting Congestion and Curtailment Information. FERC declined to adopt the proposal to add a new subsection to 18 CFR § 37.6 that would require transmission providers to post certain specified congestion and curtailment information to inform the decisionmaking of interconnection customers. FERC stated that the requirement could be technically infeasible or would require significant additional effort.

Adopted: Revised Definition of Generating Facility to Include Storage Resources. FERC adopted the proposal to modify the definition of Generating Facility to include “storage for later injection.” FERC found that this will reduce a potential barrier to large electric storage resources with a generating facility capacity above 20 MW that wish to interconnect under the pro forma LGIP and pro forma LGIA.

Adopted: Posting Interconnection Study Metrics, but Not Deadlines. FERC adopted the proposal to modify the pro forma LGIP section on OASIS Posting to require transmission providers to post interconnection study metrics on a quarterly basis to increase the transparency of interconnection study completion timeframes. It also adopted new provisions that require transmission providers to submit study delay information to FERC. The Final Rule, however, does not adopt firm deadlines for completing interconnection studies or eliminate the existing “reasonable efforts” standard to meet study deadlines.

Not Adopted: Reforms to Improve Coordination with Affected Systems. In the NOPR, FERC sought comment on prescribing guidelines for affected systems coordination, imposing study requirements and associated timelines on affected systems that are also public utility transmission providers, standardizing the process for coordinating with an affected system during the interconnection, and developing a standard affected system study agreement. FERC declined to take further action on this issue at this time, but will be considering next steps in light of the technical conference to be held in Docket No. AD18-8.

Reforms to Enhance the Generator Interconnection Process

Adopted: Option to Request Interconnection Service Below Generating Facility Capacity. FERC adopted the proposal to modify the pro forma LGIP to allow interconnection customers to request interconnection service in an amount that is less than a resource’s full generating facility capacity. The interconnection customer may do so through its initial interconnection request or may request to reduce the level of interconnection service after the interconnection process has begun as a revision of its interconnection request (1) before the interconnection customer returns an executed system impact study agreement to the transmission provider; and (2) before the interconnection customer returns an executed facility study agreement to the transmission provider.

A transmission provider will be required to study requests for interconnection service at the level of interconnection service requested by the interconnection customer for purposes of interconnection facilities, network upgrades, and associated costs, but it has the discretion to also perform other studies at the full generating facility capacity to ensure safety and reliability of the transmission system. The transmission provider would need to provide the interconnection customer with a detailed explanation of why a study at the full generating facility capacity is necessary, and the interconnection customer would bear the costs of the study. In addition, if the transmission provider determines, based on the studies, that additional upgrades are needed, it must specify which additional network upgrade costs are based on what studies and provide a detailed explanation on why the additional network upgrades are needed.

FERC withdrew the proposal to revise the definitions of Large Generating Facility and Small Generating Facility in the pro forma LGIA so that they are based on the level of interconnection service for the generating facility, rather than the generating facility capacity.

Adopted: Provisional Interconnection Service. FERC directed transmission providers to make changes to their LGIPs and LGIAs to enable all interconnection customers to request “provisional interconnection service,” which is a temporary form of interconnection service using available capacity on the transmission system prior to the completion of the requisite upgrades for the interconnection customer’s full service. Transmission providers are given discretion to determine the frequency for updating provisional interconnection studies and clarify the cost responsibilities of the interconnection customer. Interconnection customers will be allowed to enter into provisional agreements for limited interconnection service before the full interconnection process is completed, i.e., while it is waiting for the final results of the interconnection studies, the execution of the LGIA, and the construction of any additional interconnection facilities and/or network upgrades. FERC adopted the proposal to define Provisional Interconnection Service and Provisional Large Generator Interconnection Agreement in the pro forma LGIP and pro forma LGIA.

Adopted: Surplus Interconnection Service. FERC adopted the proposals to add a new Section 3.3 to the pro forma LGIP that requires transmission providers to establish a process for the use of surplus interconnection and a new Section 3.3.1 that describes the process for using surplus interconnection service. The surplus interconnection service reforms will permit an interconnection customer to use excess interconnection service capacity associated with an existing resource. FERC found that establishing an expedited process that is separate from the interconnection queue for surplus interconnection service could reduce costs for interconnection customers by increasing the use of existing interconnection facilities and network upgrades rather than requiring new ones.

Surplus interconnection service cannot exceed the total interconnection service already provided by the original interconnection customer’s LGIA. In addition, if the original LGIA is for Energy Resource Interconnection Service (ERIS), any surplus interconnection customer associated with the original LGIA at the same interconnection point would need to be an ERIS customer to avoid the potential need for new network upgrades. However, if the original LGIA is for Network Resource Interconnection Service (NRIS), either ERIS or NRIS could be offered to the surplus interconnection customer.

A transmission provider must demonstrate that its tariff (1) includes a definition of surplus interconnection service consistent with the Final Rule; (2) provides an expedited interconnection process outside of the interconnection queue for surplus interconnection service, consistent with the Final Rule; (3) allows affiliates of the original interconnection customers to use surplus interconnection service for another interconnecting generating facility consistent with the Final Rule; (4) allows for the transfer of surplus interconnection service that the original interconnection customer or one of its affiliates does not intend to use; and (5) specifies what reliability-related studies and approvals are necessary to provide surplus interconnection service and to ensure the reliable use of surplus interconnection service.

FERC withdrew the proposal to require an open and transparent solicitation process if an original interconnection customer that has surplus interconnection service wishes to transfer this service to a non-affiliated third party. FERC determined that it is not necessary to achieve its overall open access goals.

Adopted: Material Modification and Incorporation of Advanced Technologies. The Final Rule adopts reforms requiring transmission providers to develop a definition of permissible technological advancement that the interconnection process can accommodate without triggering the material modification provision of the pro forma LGIP. A transmission provider must also incorporate a technological change procedure in its pro forma LGIP that specifies what technological advancements can be incorporated at various stages of the interconnection process, that identifies which requirements apply to the interconnection customer and which apply to the transmission provider, and that identifies the information an interconnection customer must include in a technological advancement request (to incorporate technological advancements into its generating facility). The procedure must identify the types of information the interconnection customer must provide and how the transmission provider will evaluate whether a technological advancement request is a material modification. If additional studies are required, the interconnection customer must provide a deposit to the transmission provider. A transmission provider must complete its studies within 30 days of the date the interconnection customer submits a formal technological advancement request and must explain why the technological advancement is a material modification.

Not Adopted: Modeling of Electric Storage Resources for Interconnection Studies. FERC declined to move forward with any requirements for modeling electric storage resources. Transmission providers can continue to model electric storage resources in ways that are most appropriate in their respective regions.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Washington, DC
Joseph W. Lowell
Pamela Tsang Wu


 

[1] Reform of Generator Interconnection Procedures and Agreements, Order No. 845, 163 FERC ¶ 61,043 (2018) (“Final Rule”).

[2] Reform of Generator Interconnection Procedures and Agreements 82 Fed. Reg. 4,464 (Jan. 13, 2017) (NOPR).

[3] Contingent facilities are “unbuilt interconnection facilities and network upgrades upon which the interconnection request’s costs, timing, and study findings are dependent, and if delayed or not built, could cause a need for restudies of the interconnection request or a reassessment of the interconnection facilities and/or network upgrades and/or costs and timing.”