Federal Energy Regulatory Commission Issues Landmark Order to Improve Generator Interconnection Processes Across the US

On July 28, 2023, building off its June 16, 2022 Notice of Proposed Rulemaking (“NOPR”), the Federal Energy Regulatory Commission (“Commission”) issued Order No. 2023 (the “Order”), a landmark order in which the Commission concluded definitively that the existing pro forma generator interconnection procedures and agreements are insufficient to ensure that interconnection customers are able to interconnect to the transmission system in a reliable, efficient, transparent, and timely manner.

Absent reform, the Commissions stated, the current interconnection process will “continue to cause interconnection queue backlogs, longer development timelines, and increased uncertainty regarding the cost and timing of interconnecting to the transmission system” and “hinder the timely development of new generation.”

As such, the Commission’s latest reforms address five key problematic areas in the existing pro forma generator interconnection procedures and agreements: (1) the information (or lack thereof) available to prospective interconnection customers and the commitments required of them to enter and progress through the interconnection queue; (2) the reliance on a serial first-come, first-serve study process in some regions, as well as the “reasonable efforts” standard that transmission providers are held to for meeting interconnection study deadlines; (3) the protocols (or lack thereof) for affected system studies; (4) the provisions for studying new generating facility technologies and evaluating the list of alternative transmission technologies enumerated in this final rule; and (5) the modeling or performance requirements (or lack thereof) for non-synchronous generating facilities, including wind, solar, and electric storage facilities.

Order No. 2023 is likely to improve interconnection queue backlogs across the country—an issue that has particularly plagued and delayed the development of clean energy resources. However, the ultimate effectiveness of Order No. 2023 will depend in large part on upcoming compliance filings that will be made by Regional Transmission Organizations and Independent System Operators (“RTOs/ISOs”) as well as other transmission providers. Additionally, true transformational change to the country’s generator interconnection and transmission planning processes – which is necessary if the US is to achieve its full clean energy potential – will likely not occur until FERC issues a final rule on transmission planning and cost allocation, which is still pending.

SUMMARY OF ORDER NO. 2023’S KEY PROVISIONS

Reforms to Implement a First-Ready, First-Served Cluster Study Process

Interconnection Information Access

The Order implements reforms governing interconnection customers’ access to information, including requiring transmission providers to provide the following information as outputs at each proposed point of interconnection: (1) the distribution factor; (2) the MW impact (based on the proposed project size and the distribution factor); (3) the percentage impact on each impacted transmission facility (based on the MW values of the proposed project and the facility rating); (4) the percentage of power flow on each impacted transmission facility before the proposed project; and (5) the percentage power flow on each impacted transmission facility after the injection of the proposed project.

The Commission declined to adopt the NOPR proposal to require transmission providers to offer an informational interconnection study for prospective interconnection customers.

Cluster Study Process

The Order adopted the NOPR proposal to revise the pro forma generator interconnection procedures and agreements to make cluster studies the required interconnection study method.

Among other pertinent aspects related to cluster studies, the Order adopted:

• The proposal to require an interconnection customer to select a definitive point of interconnection to be studied when executing the cluster study agreement
• The proposal to require interconnection customers to submit an interconnection request during a specified cluster request window of 45 calendar days
• One commenter’s recommendation to prevent transmission providers from posting detailed information about interconnection requests proceeding through the interconnection process or withdrawing from the queue until all interconnection requests within the cluster request window successfully meet their milestone requirements to proceed, due to anti-competitive and confidentiality concerns
• The NOPR proposal for transmission providers to hold a scoping meeting with all interconnection customers whose interconnection requests were received in that cluster request window, but declined to adopt the NOPR proposal to require transmission providers to hold individual customer-specific scoping meetings at the interconnection customer’s request.

Elimination of Feasibility Study Requirement

The Order adopted the proposed elimination of the feasibility study, to be replaced with new “heatmap” requirements, stating that “[t]he move from a serial interconnection process to the new cluster study process, coupled with the Commission’s heatmap requirements, render the feasibility study redundant at best and an unnecessary burden on transmission provider resources.”

Allocation of Cluster Study Costs

The Order adopted the NOPR proposal to allow each transmission provider to propose its own study cost allocation ratio for allocating the shared costs of cluster studies between a per capita basis (ie, on a per generating facility basis) and pro rata by MW basis, provided that: between 10% and 50% of study costs must be allocated on a per capita basis, with the remainder (between 90% and 50%) allocated pro rata by MW.

Allocation of Cluster Network Upgrade Costs

The Order adopted the NOPR proposal to require transmission providers to allocate network upgrade costs based on a proportional impact method.

The Commission modified the requirement proposed in the NOPR for transmission providers to directly assign the cost of shared transmission provider interconnection facilities to interconnection customers on a per capita basis: (1) to make the new provisions applicable to the interconnection customer’s interconnection facilities as well as to the transmission provider’s interconnection facilities, (2) to provide that interconnection customers may agree to share interconnection facilities, and that the per capita allocation will apply only where interconnection customers agree to share interconnection facilities, and (3) to allow interconnection customers that share interconnection facilities to choose a different cost sharing arrangement upon mutual agreement.

Shared Network Upgrades

The Order did not adopt the NOPR proposal to implement shared network upgrades between interconnection customers in an earlier cluster and interconnection customers in a subsequent cluster.

Increased Financial Commitments and Readiness Requirements

The Order adopted the NOPR proposal to require interconnection customers to pay, and transmission providers to collect, study deposits as part of the cluster study process in accordance with the following table:

The Order requires transmission providers to collect a single study deposit only once upon entry into the cluster, rather than requiring transmission providers to collect a study deposit at each phase of the cluster study process, as had been proposed in the NOPR.

Reforms to Increase the Speed of the Interconnection Process

Elimination of the Reasonable Efforts Standard

In perhaps its most impactful reform, the Order adopted the NOPR proposal to eliminate the reasonable efforts standard, where transmission providers were only required to use “reasonable efforts” to complete interconnection studies on time.

In place of the “reasonable efforts” standard, the Order adopted the NOPR proposal to impose study delay penalties on transmission providers that do not meet tariff-specified deadlines. Importantly, in a modification of the NOPR proposal, in RTO/ISO regions in which transmission-owning members perform certain interconnection studies, the Order requires study delay penalties to be imposed directly on the transmission-owning member(s) that conducted the late study.

Per the Order, delays of cluster studies beyond the tariff-specified deadline will incur a penalty of $1,000 per business day; delays of cluster restudies beyond the tariff specified deadline will incur a penalty of $2,000 per business day; delays of affected system studies beyond the tariff-specified deadline will incur a penalty of $2,000 per business day; and delays of facilities studies beyond the tariff-specified deadline will incur a penalty of $2,500 per business day. The Order adopted certain caps on total penalty amounts and allows transmission providers to appeal penalty amounts before they are finalized.

Affected Systems

The Order adopted the NOPR proposal to establish an affected system study process in the pro forma interconnection procedures.

Optional Resource Solicitation Study

The Order did not adopt the NOPR proposal to modify the pro forma interconnection procedures to require transmission providers to allow resource planning entities to initiate an optional resource solicitation study.

Reforms to Incorporate Technological Advancements into the Interconnection Process

Increasing Flexibility in the Generator Interconnection Process

The Order further adopted revisions to the pro forma interconnection procedures and agreements aimed at increasing flexibility in the generator interconnection process including: (1) allowing generating facilities behind one-point of interconnection to co-locate, (2) revising the modification process to allow interconnection customers to request the addition of a generating facility to an existing interconnection request, (3) increasing the availability of surplus interconnection service, and (4) allowing interconnection customers to propose operating assumptions for their generating facilities.

Co-Locating Generating Facilities

In its determination allowing generating facilities to co-locate, the Commission declined to adopt the NOPR proposal to revise the pro forma interconnection procedures to require that co-located generating facilities have technology to address differences in terminal voltage between such facilities and ensure that voltage levels are aligned.

Modifying an Existing Interconnection Request

The Order adopted the NOPR proposal to require transmission providers to evaluate the proposed addition of a generating facility at the same point of interconnection prior to deeming such an addition a material modification, if the addition does not change the originally requested interconnection service level.

However, the Order declined to adopt the NOPR proposal to impose a 60-calendar day requirement for assessment of a material modification to an existing interconnection request.

The Order also modified the NOPR proposal that would have enabled requests to add an additional generating facility at any point in the interconnection process. As the Order requires, transmission providers will only be required to analyze whether a request to add a generating facility to an existing interconnection request is material if the request is received prior to the interconnection customer’s return of the executed facilities study agreement to the transmission provider (with the exception that transmission providers that employ fuel-based dispatch assumptions are not required to comply with this requirement).

Access to Surplus Interconnection Service

The Order requires transmission providers to allow interconnection customers to access the surplus interconnection service process earlier than previously permitted—specifically, when the interconnection customer has an executed interconnection agreement or requests the filing of an unexecuted interconnection agreement.

Integrating Newer Technologies

The Order adopted reforms to: (1) require transmission providers, at the request of an interconnection customer, to use operating assumptions in interconnection studies that reflect the proposed charging behavior of electric storage resources, and (2) allow for transmission providers to require that interconnection customers install additional control technologies where necessary.

Consideration of Alternative Transmission Technologies

The Order requires transmission providers to evaluate alternative transmission technologies including: static synchronous compensators, static VAR compensators, advanced power flow control devices, transmission switching, synchronous condensers, voltage source converters, advanced conductors, and tower lifting.

In departure from the NOPR, consideration of alternative transmission technologies is required without need for a request from the interconnection customer.

However, the decision of whether to actually implement any of these technologies is left to the transmission provider’s sole discretion. For transparency, the transmission provider must include a comparative explanation of the cost, feasibility, and time savings of alternative versus traditional technologies for all cluster study reports.

Annual Informational Report

Departing from the NOPR, the Commission declined to adopt the proposal to require transmission providers to submit an annual informational report to the Commission detailing whether, and if so how, the list of alternative transmission technologies were considered in interconnection studies over the last year, finding such requirement to be too onerous.

Modifying Modeling and Ride-Through Requirements for Non-Synchronous Generating Facilities.

Modifying modeling requirements for non-synchronous generating facilities

The Order requires each interconnection customer requesting to interconnect a non-synchronous generating facility to submit to the transmission provider certain modeling criteria to address study delays and to ensure that transmission providers identify the necessary interconnection facilities and network upgrades to accommodate the interconnection request and appropriate assignment of interconnection costs.

Modifying Ride-Through Requirements for Non-Synchronous Generating Facilities

The Order adopted reforms to the existing “ride-through” provisions to address concerns that differing ride-through requirements can result in undue discrimination and preferential treatment.

Effective Date and Transition Process

Compliance filings to implement the new requirements are due 90 days after publication of the final rule in the Federal Register.

To smooth the transition to the new interconnection paradigm, the Commission adopted three options that can be exercised by interconnection customers depending on the progress of a particular interconnection request: (1) those interconnection customers that have been tendered facilities study agreements by the transmission provider may proceed to a transitional serial study (a facilities study) or may opt to move to the transitional cluster study; (2) those interconnection customers in the interconnection queue that have not been tendered a facilities study agreement (have not completed the system impact study) will be eligible for the transitional cluster study, and (3) all other interconnection customers will be subject to the new interconnection procedures.

Conclusion

The Order directly addresses many of the concerns voiced by clean energy developers and the industry over the last several years in various Commission proceedings. In particular, the elimination of the “reasonable efforts” standard and imposition of a penalty regime on transmission providers that do not meet tariff-specified deadlines is a significant shift intended to ensure more-timely processing of interconnection requests. Other more prescriptive requirements being adopted by the Commission also represent a shift in the Commission’s prior approach which arguably deferred too much to transmission providers’ own individualized processes and case-by-case judgment. The upcoming compliance filings that will be made in response to the Order are expected to be closely watched and scrutinized, as they are likely to significantly impact the overall and ultimate efficacy of the Order.

If you have any questions about the upcoming compliance filings and/or how your entity is affected by the final rule please do not hesitate to contact Steven Shparber, Omar Bustami, and Xandy Walsh.

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