[Federal Register: April 3, 2008 (Volume 73, Number 65)]
[Notices]
[Page 18267-18270]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03ap08-49]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
[Docket No. AD08-2-000]
Order on Technical Conference
Issued March 20, 2008.
AGENCY: Federal Energy Regulatory Commission.
ACTION: Order on Technical Conference.
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SUMMARY: On December 11, 2008, the Federal Energy Regulatory Commission
convened a technical conference on interconnection queuing practices.
This order follows up that technical conference and directs Regional
Transmission Organizations and Independent System Operators to file
reports on the status of their efforts to improve the processing of
their interconnection queues.
DATES: Reports are due April 21, 2008.
FOR FURTHER INFORMATION CONTACT:
Mary C. Morton, Federal Energy Regulatory Commission, 888 First Street,
NE., Washington, DC 20426, (202) 502-8040.
Michael G. Henry (Legal Information), Federal Energy Regulatory
Commission, 888 First Street, NE., Washington, DC 20426, (202) 502-
8532.
SUPPLEMENTARY INFORMATION:
Before Commissioners: Joseph T. Kelliher, Chairman; Suedeen G.
Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff.
[[Page 18268]]
Order on Technical Conference
1. This order follows up on our December 11, 2007, technical
conference (Technical Conference) on interconnection queuing practices.
In this order, we direct the Regional Transmission Organizations (RTOs)
and Independent System Operators (ISOs) to file reports on the status
of their efforts to improve the processing of their interconnection
queues. We also provide guidance to assist the RTOs and ISOs and their
stakeholders in those efforts.
Background
2. The Commission issued Order No. 2003 to standardize the
agreements and procedures related to the interconnection of large
generating facilities.\1\ We found that ``[a] standard set of
procedures as part of the [Open Access Transmission Tariff] for all
jurisdictional transmission facilities will minimize opportunities for
undue discrimination and expedite the development of new generation,
while protecting reliability and ensuring that rates are just and
reasonable.'' \2\ Key to balancing these goals was queue management
procedures, including timelines that Transmission Providers \3\ must
use reasonable efforts to meet.
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\1\ Standardization of Generator Interconnection Agreements and
Procedures, Order No. 2003, FERC Stats. & Regs. ] 31,146 (2003),
order on reh'g, Order No. 2003-A, FERC Stats. & Regs. ] 31,160,
order on reh'g, Order No. 2003-B, FERC Stats. & Regs. ] 31,171
(2004), order on reh'g, Order No. 2003-C, FERC Stats. & Regs. ]
31,190 (2005), aff'd sub nom. Nat'l Ass'n of Regulatory Util.
Comm'rs v. FERC, 475 F.3d 1277 (D.C. Cir. 2007), cert. denied, 76
U.S.L.W. 3454 (Feb. 25, 2008). See also Standardization of Small
Generator Interconnection Agreements and Procedures, Order No. 2006,
FERC Stats. & Regs. ] 31,180, order on reh'g, Order No. 2006-A, FERC
Stats. & Regs. ] 31,196 (2005), order granting clarification, Order
No. 2006-B, FERC Stats. & Regs. ] 31,221 (2006), appeal pending sub
nom. Consol. Edison Co. of N.Y., Inc. v. FERC, Nos. 06-1275 (DC Cir.
filed July 14, 2006 and later); Interconnection for Wind Energy,
Order No. 661, FERC Stats. & Regs. ] 31,186 (2005), order on reh'g,
Order No. 661-A, FERC Stats. & Regs. ] 31,198 (2005).
\2\ Order No. 2003, FERC Stats. & Regs. ] 31,146 at P 11.
\3\ ``Transmission Provider'' is a defined term under Order No.
2003. See Standard Large Generator Interconnection Procedures (``pro
forma LGIP'') Sec. 1.
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3. In response to concerns about the effectiveness of queue
management, the Commission held the Technical Conference. The
Commission also issued a notice afterward inviting comments.\4\ The
speakers at the Technical Conference and the written comments confirm
that some Transmission Providers are not processing their
interconnection queues with the timeliness envisioned in Order No.
2003, in certain cases greatly exceeding the timelines in their
tariffs. Surges in the volume of new generation development are taxing
the current queue management approach in some regions. Additionally,
the unprecedented demand in some regions for new types of generation,
principally renewable generation, places further stress on queue
management because such generation technologies can, for example, be
brought online more quickly than traditional generation. Finally, some
regions have capacity markets that did not exist when the current queue
management approach was developed and are struggling with how to manage
their queues to accommodate those new markets.
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\4\ Notice Inviting Comments, Interconnection Queuing Practices,
Docket Nos. AD08-2-000, et al. (Dec. 17, 2007).
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Discussion
4. The Commission is concerned about delays in processing
interconnection queues. Although we are concerned about delays in all
regions, the Technical Conference revealed that the delays are
particularly significant in RTOs and ISOs that are attracting
significant new entry. Many of the factors identified at the Technical
Conference as contributing to delays are present for all Transmission
Providers, independent and non-independent alike. For example, the need
for restudy when multiple projects withdraw from a queue and the
complexity of designing interconnections within a system with limited
excess transmission capacity are not confined to RTOs and ISOs. All
Transmission Providers should be evaluating whether changes are needed
to their queue management practices to ensure the expediency called for
by Order No. 2003. However, given the greater interest of new
generation entrants in gaining access to RTO and ISO markets compared
to other markets, the magnitude of the backlogs in RTO- and ISO-managed
queues is particularly significant.
5. These backlogs not only deprive generation developers of needed
business certainty, they also undermine other important public goals.
As detailed by speakers at the Technical Conference, delays in
interconnecting renewable generation in the footprints of the Midwest
Independent Transmission System Operator, Inc. and the California
Independent System Operator Corporation are creating additional
challenges in meeting state renewable portfolio standards. In the ISO
New England Inc. and PJM Interconnection, LLC regions, queue delays
could prevent least cost resources from being available in new capacity
markets auctions.
6. The Commission believes that over the long term, the improved
transmission planning required under Order No. 890 \5\ will address
some of the causes of the current interconnection queue problems. In
particular, the planning reforms adopted by Order No. 890 should
increase the transparency of planning information to all customers,
increase coordination among transmission owners in each region, and
otherwise result in a more robust transmission system. These
improvements, in turn, should enable developers to make fewer, more
tailored interconnection requests and make it easier to interconnect
with the transmission system. However, while the efforts currently
under way to comply with Order No. 890 hold promise for the long-term
processing of interconnection queues, we cannot afford to wait until
those efforts are completed to address the queue management problem.
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\5\ Preventing Undue Discrimination and Preference in
Transmission Service, Order No. 890, 72 FR 12,266 (Mar. 15, 2007),
FERC Stats. & Regs. ] 31,241 (2007), order on reh'g, Order No. 890-
A, 73 FR 2984 (Jan. 16, 2008), FERC Stats. & Regs. ] 31, 261 (2007).
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7. We note in particular the comments of the ISO/RTO Council on the
scope and nature of the interconnection queue problems facing ISOs and
RTOs. According to the ISO/RTO Council, the queue backlog has increased
in many of the ISOs and RTOs because of the significant new entry that
is occurring. The ISO/RTO Council states that prompt action is
necessary to address these problems; however, the Council urges that
the Commission allow each region to develop solutions that are tailored
to its specific circumstances and contends that stakeholder processes
to discuss reforms are already underway in several regions.
8. While the Commission could take action to impose solutions, and
may need to do so if the RTOs and ISOs do not act themselves, we agree
that we should allow each region the opportunity to propose its own
solution. Although there are some common issues affecting all the
regions, there are also significant differences in the nature and scope
of the problem from region to region; there may, therefore, be no one
right answer for how to improve queue management. Further, any solution
involves a balancing of interests. Therefore, we urge the RTOs and ISOs
to work with their stakeholders to develop consensus proposals.
9. While each of the RTOs and ISOs represented at the conference
indicated
[[Page 18269]]
that it was evaluating its queue management, the RTOs and ISOs and
their stakeholders must proceed more quickly, and the Commission
intends to monitor their efforts. Thus, we direct each RTO and ISO to
file a status report with the Commission within 30 days of the date of
this order.\6\ The report must describe the current size of the RTO's
or ISO's interconnection queue (i.e., number of pending interconnection
requests and total megawatts represented by those requests), the
current projected timeframes for processing pending interconnection
requests, and the nature and extent of any problems that have led to
any such queue backlogs, including a discussion of how clustering has
or has not alleviated those problems. The report must also explain the
status of stakeholder discussions on queue reform and provide a
schedule for selecting and implementing any necessary reforms,
including a target date for filing any necessary tariff amendments or
waivers. To assist stakeholders in their deliberations, we offer the
guidance set forth below.
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\6\ The reports will be noticed and subject to public comment.
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10. The reforms that can be implemented most quickly from a
regulatory standpoint are those that do not require any revisions to an
RTO's or ISO's current tariff. For example, no Commission filings are
needed to increase the staff available to work on interconnection
studies or adopt more efficient modeling for feasibility studies or
system impact studies. Similarly, each of the RTO and ISO tariffs
already provide an option for performing a single system impact study
for a cluster of interconnection requests, so no further Commission
filings would be necessary to take full advantage of the existing
flexibility to cluster. Therefore, we urge the RTOs and ISOs when
evaluating ways to improve their queue processing first to consider
whether they have taken all effective steps under their current
tariffs.
11. While there likely are reforms that can be implemented without
the need for Commission filings, more may need to be done. Reforms
necessitating tariff changes come in two forms: (1) Reforms that apply
to future interconnection requests as well as existing interconnection
requests that are still at an early stage in the interconnection
process; and (2) reforms that affect existing interconnection requests
that are in later stages of the process. The issues raised by these two
classes of reforms may well differ.
12. With regard to reforms applicable to future and early-stage
existing interconnection requests, we note that Order No. 2003
authorizes a number of options to streamline the interconnection
process. For example, Order No. 2003 already allows for the feasibility
study to be combined with the system impact study at the request of the
customer.\7\ Order No. 2003 permits Transmission Providers who perform
system impact studies on a clustered basis to allocate the cost of
common upgrades to members of a cluster without regard to queue
position.\8\ Further, Order No. 2003 authorizes the use of third party
consultants to conduct interconnection studies.\9\ When considering
tariff changes applicable to future and early-stage existing
interconnection requests, the RTOs and ISOs should first consider
whether their current tariffs use all of the streamlining options
already explicitly sanctioned under Order No. 2003.
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\7\ Pro forma LGIP Sec. 6.1.
\8\ Id. Sec. 4.2.
\9\ Id. Sec. 13.4.
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13. If an RTO or ISO concludes that the options already identified
in Order No. 2003 are inadequate to address its queue problems, it may
consider proposing variations from Order No. 2003. Because RTOs and
ISOs do not own generation and thus do not have an incentive to unduly
discriminate, variations sought by an RTO or ISO are reviewed under the
``independent entity variation standard.'' This standard allows
independent Transmission Providers flexibility in designing their
interconnection procedures to accommodate regional needs.\10\
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\10\ Order No. 2003 at P 822-27; Order No. 2003-A at P 759. An
RTO or ISO proposing a variation must demonstrate that the variation
is just and reasonable and not unduly discriminatory, and would
accomplish the purposes of Order No. 2003. See, e.g., PJM
Interconnection, LLC., 108 FERC ] 61,025, at P 7 (2004) (``[W]hen an
RTO is the filing entity, the Commission will review the proposed
variations to ensure that they do not provide an unwarranted
opportunity for undue discrimination or produce an interconnection
process that is unjust and unreasonable.''), order denying reh'g,
110 FERC ] 61,099 (2005); and Midwest Indep. Transmission Sys.
Operator, Inc., 117 FERC ] 61,128 (2006), order on reh'g, 119 FERC ]
61,097, at P 7 (2007) (rejecting a proposed pricing variation
because the RTO ``had not shown that the proposal would accomplish
the purposes Order No. 2003 set forth as possible justifications for
this type of pricing'').
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14. The Commission recognizes that the business of developing
generation is very dynamic and requires the coordination of a whole
host of factors beyond interconnection, many of which are outside the
full control of the developer. In the absence of alternative sources of
information about available transmission capacity, the interconnection-
related study process may be the only reliable vehicle a customer has
to evaluate the merits of different interconnection points and
configurations. Thus, it is critical that reforms applicable to future
and early-stage existing interconnection requests provide customers
with enough flexibility and information to respond to business
uncertainties. At the same time, the Commission realizes that the
actions of one party in the queue can affect the interests of other
parties in the queue. Thus, there needs to be a way to prioritize the
processing of requests on a fair basis and to ensure that the
flexibility for individual generators does not undermine the certainty
and speed needed for the queue as a whole.
15. Order No. 2003 struck a balance by establishing that material
modifications to an interconnection request will result in loss of
queue position, while allowing a customer to make multiple
interconnection requests for the same basic project, if it makes a
relatively modest demonstration that it is serious about the project.
These requests are then processed and allocated costs on a first-come,
first-served basis.\11\ While this approach made good sense at the time
Order No. 2003 was issued and still works well in many situations, it
has led to some unexpected consequences, particularly in transmission
systems with numerous interconnection customers and limited excess
transmission capacity. In markets with numerous interconnection
customers, many of those customers may be competing for the same load,
and not all will be needed. Further, in systems with limited excess
transmission capacity, the first-come, first-served approach to cost
allocation can result in great disparities between the costs faced by
the customer whose request happens to trigger the need for a network
upgrade as opposed to those in lower queue positions. Moreover, the
relatively small deposit amounts, coupled with the incentives produced
by a first-come, first-served approach to allocating capacity, provides
an incentive for developers to secure a place in the queue even for
projects that may not be commercially viable. These and other factors
can result in large numbers of interconnection requests being
ultimately withdrawn, which in turn slows down the process by
necessitating more study and restudy. While the Commission is open to
[[Page 18270]]
considering a range of possible variations from Order No. 2003 with
regard to future and early-stage existing interconnection requests, we
believe that there are three types of variations that, individually or
in combination, hold particular promise for speeding up queue
processing while remaining faithful to the goals of Order No. 2003.
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\11\ As noted above, Order No. 2003 did allow for some
flexibility in the first-come, first-served approach where a
Transmission Provider performs a single system impact study for a
cluster of interconnection requests.
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16. First, it may be appropriate to increase the requirements for
getting and keeping a queue position. For example, it may be
appropriate to increase the amount of the deposits required at the
different stages of the process to more accurately reflect the cost of
the necessary studies. Such a change would not only be consistent with
traditional ratemaking principles, but would also increase the
likelihood that only projects that are likely to be commercially viable
(and hence willing to commit to the cost of such studies in advance)
are in the queue. Such a change also would likely reduce the number of
multiple interconnection requests made by the same customer for the
purpose of speculating on the cost impacts of different locations.
However, as discussed above, multiple requests for a single project can
result from a legitimate desire to evaluate the merits of different
interconnection points and configurations without having to go to the
back of the queue. Therefore, the more stringent the requirements, the
more important it is to ensure that customers have access to
alternative sources of reliable information about available
transmission capacity to help them tailor their interconnection
requests more narrowly toward a single acceptable interconnection
configuration. Further, the RTOs and ISOs should address the impact of
any increases in the requirements on smaller customers or any other
class of interconnection customers.
17. Second, elimination of the feasibility study as a separate step
could reduce processing time without harming interconnection customers.
Under Order No. 2003, the feasibility study is intended, in part, to
provide preliminary information to assist developers in deciding
whether it is even worth their while to pursue more detailed
interconnection studies. Elimination of a separate feasibility study
could streamline the study process and could reduce interconnection
requests by screening out those customers who are not willing to pay
the higher deposit required for a system impact study. However,
elimination of a feasibility study phase, like increased requirements
to obtain and retain a queue position, creates a greater need to
develop alternative mechanisms through which customers can gather the
information necessary to more narrowly tailor their interconnection
requests toward a final acceptable configuration.
18. Third, there may be approaches to prioritizing queue processing
that provide protection against discrimination comparable to the first-
come, first-served approach, but that are more efficient. For example,
there may be merit in a first-ready, first-served approach, whereby
customers who demonstrate the greatest ability to move forward with
project development are processed first. Further, the Commission is
open to considering methods of clustering other than that provided in
Order No. 2003. Order No. 2003's approach to clustering is
fundamentally based on a first-come, first-served paradigm, as clusters
are limited to requests filed within the same time frame, not to exceed
180 days.\12\ Clustering that takes into account factors other than
proximity of filing date may allow for more efficient studies and we
are open to reviewing such proposals.
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\12\ See pro forma LGIP Sec. 4.2. But see id. Sec. 4.1
(allowing allocation of cost of common upgrades for clustered
interconnection requests without regard to queue position).
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19. We note that reforms that would affect existing interconnection
requests that are in later stages of the process create special
circumstances that require careful consideration. Unlike reforms
applicable to future and early-stage existing interconnection requests,
any such reforms could significantly disrupt the activities of
customers who may have taken action in reliance upon the existing
process. Reforms of this sort could take the form of a filing to make
generic revisions to the tariff, filings to modify individual
interconnection-related agreements, or a request for a one-time waiver
of the tariff.\13\ These reforms could change both the timing and the
cost allocation for a customer. Some customers may experience an
overall benefit from a particular reform, while others may be
disadvantaged by a reform. In still other cases, perhaps the majority,
the difference between continued processing under the existing tariff
provisions and processing under a reformed process may be speculative,
including as to ultimate timing and cost allocation. In those cases, we
would expect proponents of reform to have an easier time justifying
such reform.\14\ Whether and how a particular reform should apply to a
late-stage request will depend on the specific facts. The Commission is
open to considering such reforms. Further, while such reforms do pose
more difficult issues than reforms applicable to future and early-stage
existing requests, the Commission recognizes that they may be necessary
in order to resolve current backlogs.
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\13\ See, e.g., Midwest Indep. Transmission Sys. Operator, Inc.,
117 FERC ] 61,128 (2006), order on reh'g, 119 FERC ] 61,097 (2007)
(rejecting as unsupported proposed tariff amendments applicable to
existing interconnection agreements but without prejudice to future
filings to revise individual interconnection agreements); and Cal.
Indep. Sys. Operator Corp., 118 FERC ] 61,226, order on
clarification, 120 FERC ] 61,180 (2007) (granting one-time waiver of
procedures for conducting clustered system impact studies despite
application to protestor who had already undergone a system impact
study).
\14\ See, e.g., New York Indep. Sys. Operator, Inc., 114 FERC ]
61,207 (2006) (granting one-time waiver of interconnection procedure
noting that protestor's claim that it would incur higher costs due
to potential loss of its queue position was speculative).
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The Commission orders:
The RTOs and ISOs are hereby directed to file reports as discussed
in the body of this order within 30 days of the date of this order.
By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. E8-6606 Filed 4-2-08; 8:45 am]
BILLING CODE 6717-01-P