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FERC Proposes Major Changes to Interconnection Rules

January 18, 2017 posted by Eric Christensen

            For the first time since the rules were originally adopted in 2003, the Federal Energy Regulatory Commission (“FERC”) is proposing major changes to its Large Generation Interconnection standards.  FERC intends the proposed changes to improve the efficiency and transparency of the interconnection process and also to accommodate energy storage and other new and emerging technologies.  If adopted, the rules should substantially improve the process of obtaining interconnection with the electric transmission system, which remains one of the highest hurdles for independent generators seeking to access the nation’s electricity markets.     

            For several years after FERC adopted its landmark Order No. 888 in 1996, it left the specifics of generation interconnection to each individual transmission system.  But in the early 2000s, FERC concluded that the problems experienced by independent generators in obtaining interconnection to the electric grid remained a major barrier to effective competition in the market for electric generation.  Accordingly, FERC in Order No. 2003 required transmission providers to adopt standardized tariff provisions for generation interconnection and to offer a standardized pro forma Large Generator Interconnection Agreement (“LGIA”) for generators with more than 20 MW of capacity, as well as simplified procedures for smaller generators with capacity less than 20 MW. 

            In light of the rapid expansion of renewable generation since 2003, the emergence of energy storage technologies, and difficulties experienced with the interconnection study process, it has become increasingly clear that the 2003 rules are in need of significant reform.  Accordingly, following a petition for rulemaking filed by wind producers and a May 2016 technical conference, FERC issued a Notice of Proposed Rulemaking (“NOPR”) at its December meeting, subsequently published in the January 13 Federal Register, seeking comments on a number of proposed reforms to both the LGIA and the provisions of the pro forma Open Access Transmission Tariff governing interconnection.  Although FERC is not currently proposing reforms to the small generation interconnection procedures, the NOPR seeks comment on whether parallel changes should be made to those procedures, as well.

            FERC proposes several changes to the interconnection process that would accommodate new energy storage technologies and allow existing transmission capacity to be used more efficiently.  These include:

            (1)        Allowing generators to request capacity that is less than the total capacity of their resource.  This reform is especially important for energy storage because it will allow storage resources to avoid paying for expensive transmission upgrades that can be avoided by targeting the injection of power onto the grid to periods when excess transmission capacity is available even in the absence of the upgrade;

            (2)        Allowing new generators provisional access to existing transmission capacity during the often lengthy period when transmission studies and upgrades are being completed;

            (3)        A new process to allow use of “surplus” interconnection capacity, that is, capacity constructed by existing generators that is currently underutilized;

            (4)        Requiring transmission providers to account for technological advancements in grid equipment in interconnection studies; and,

            (5)        Requiring transmission providers to determine whether their existing processes adequately account for the unique characteristics of electric storage resources and to modify their processes if necessary. 

            In addition, FERC proposes several changes that will provide greater flexibility in how transmission upgrades are financed and constructed.  These proposals include:

            (1)        Providing the interconnection customer with the option to build transmission upgrades.  That is, the interconnecting generator could at its option assume control of constructing upgrades on the transmission provider’s system necessary to accommodate the new generation or energy storage resource.

            (2)        Requiring mutual agreement of the transmission provider and the interconnecting generator for the transmission provider to fund transmission upgrades.  Under Order No. 2003, the transmission provider could unilaterally elect to fund transmission upgrades, with the upfront costs paid by the interconnecting generator and refunded to the generator in the form of billing credits for transmission service.  Reflecting concerns that this mechanism allows transmission providers to unilaterally and unnecessarily increase the cost of interconnection and thereby to distort competition in the generation market, FERC proposes to require mutual agreement of the transmission provider and interconnecting generator for use of this funding mechanism; and,

            (3)        A new dispute resolution process aimed at quickly resolving disputes related to the interconnection process.

            Recognizing that the interconnection study process, especially “cluster studies” where several proposed projects are studied for cumulative effects, has proved unpredictable and expensive,  the NOPR proposes several reforms.  These include:

            (1)        imposing a specific timetable for restudies, with the aim of improving the predictability of the study requirement when, for example, a project high in the interconnection queue withdraws its interconnection request;

            (2)        increasing the transparency of the interconnection study process by requiring transmission providers to publicly post information about the assumptions and models underlying their interconnection study processes on their OASIS sites;

            (3)        requiring OASIS posting of information regarding curtailments and congestion on the transmission provider’s system; and,

            (4)        requiring interconnection studies to be completed within specific deadlines.

            In addition, the NOPR seeks comment on a number of issues where FERC is not yet ready to make specific proposals.  For example, FERC seeks comments on whether a workable mechanism exists for capping interconnection costs and whether information from different transmission systems that are potentially affected by an interconnection can be more effectively coordinated. 

            Comments on the NOPR are due on March 14, 2017.