Docket Nos. AD12-14-000, AD11-11-000

The Federal Energy Regulatory Commission (“FERC”) issued a Notice of Inquiry (“NOI”) seeking comments on whether, and if so how, FERC should revise its current policy concerning open access and priority rights to transmission service capacity on certain generator interconnection facilities known as generator lead lines. FERC’s current policy has allowed, on a case-by-case basis, an owner of generator interconnection facilities to have priority to capacity over its facilities for its existing use at the time a third party requests transmission service on the facilities, when the owner of the facilities can demonstrate that it or its affiliates have specific, pre-existing generator expansion plans with milestones for construction of generation facilities and that it has made material progress toward meeting those milestones. Additionally, however, FERC has required a generator who receives a third-party request for transmission service on its generator lead line to file an Open Access Transmission Tariff (“OATT”) with FERC within 60 days of the request for service.

FERC’s NOI seeks comments on two alternative approaches to govern third-party use and priority rights, as follows: (1) continue use of an OATT framework with potential modification and clarification, including the potential introduction of a safe harbor period, and a case-by-case determination on the generation developer’s priority rights; or (2) use of a Large Generator Interconnection Procedure/Large Generator Interconnection Agreement (“LGIP/LGIA”) framework in which the existing LGIA provisions that govern third-party use of transmission providers’ interconnection facilities would be extended to a generator interconnection customer’s interconnection facilities. FERC also seeks comments on the relative ability of each approach to meet customer needs while ensuring that rates, terms and conditions of services remain just and reasonable and not unduly discriminatory.

FERC specified in the NOI numerous questions upon which it seeks comments, including but not limited to the following primary issues:

  1. Has FERC’s existing policy blurred the line between interconnection service and transmission service with respect to third-party access in a way that creates unintended consequences?
  2. To what type of use and ownership, size, length, and/or voltage of interconnection facilities should these policies apply?
  3. Are there alternative approaches FERC should consider, such as mutual agreements for parties to agree to access to interconnection facilities, or a de minimus exception for small interconnection facilities?
  4. Should generation developers be required to meet a defined set of uniform criteria to secure priority rights to their interconnection facilities?
  5. What criteria should apply to determine what constitutes a third-party request for service on interconnection facilities?
  6. Should there be a “tailored” pro forma OATT for service on interconnection facilities?
  7. Should there be a safe harbor period for the generation developer to phase in development of generation facilities without having to allow access to third parties to the generator’s interconnection facilities? and,
  8. Should the LGIP/LGIA construct be expanded to include third-party transmission requests on generator interconnection facilities?

Notably, FERC’s NOI does not expressly request comment on the threshold question whether it has jurisdiction under Section 205 of the Federal Power Act to order a generator to offer to provide open access transmission service over its generator tie line, thereby requiring the involuntary bundling of generation and transmission businesses.

Congress gave FERC the authority to order generation owners to provide interconnection and third-party wheeling services over their transmission assets on a case-by-case basis through Sections 210-212 of the FPA, which FERC used to require the owners of the Sagebrush transmission line to provide interconnection and transmission service for the developer of a proposed new wind generation project.

In a later case, however, FERC used Section 205 to order the owner of the Dixie Valley transmission line to provide service under an OATT. Although FERC confirmed priority use rights for the existing generator, FERC required priority service to be provided under the OATT but did not explain how the rate and non-rate terms and conditions of the OATT would apply to the “priority” service. For example, one concern raised in the Dixie Valley proceeding was whether FERC’s policy on averaging line losses would serve to dilute the delivery rights of the existing project, thereby impairing service obligations under its power sales contract. FERC also did not explain how the generation owner can recover its OATT compliance costs if the third party ultimately does not take the service that it requested as occurred in the Sagebrush case.

Comments on the NOI must be filed within 45 days following publication of the NOI in the Federal Register, which we expect will occur within the next week or two. Thus, we expect comments will be due in early to mid-June.