On 19 April 2012, FERC issued a notice of inquiry (NOI) seeking comments on whether, and how, FERC should revise its current policy concerning priority rights and open access with regard to certain generator interconnection facilities. The NOI responds to concerns expressed in conjunction with a March 2011 technical conference on priority rights to customer-funded interconnection facilities. Comments on the NOI will be due 60 days from the date of publication in the Federal Register (sometime in late June 2012).
FERC’s current approach
In recent years, acting on a case-by-case basis, FERC has waived its open access transmission policy for interconnection facilities owned by generators, subject to the requirement that the interconnection facility owner must file an open access transmission tariff (OATT) within 60 days of receiving a written request for service from a third party. FERC also has granted an owner of interconnection facilities priority to capacity over its facilities for its existing use at the time of a third-party request for service. Moreover, in instances where an owner of interconnection facilities has specific, pre-existing expansion plans with milestones for construction of generation facilities, and can demonstrate that it has made material progress toward meeting those milestones, FERC has granted priority rights for capacity on the interconnection facilities to those future generation projects or expansions. An affiliate of the interconnection facilities owner that is developing its own generator projects may also obtain priority rights to capacity on the interconnection facilities if it can demonstrate the existence of specific plans and construction milestones, and material progress toward meeting the milestones, and if the plans include a future transfer of ownership of the interconnection facilities to the affiliate.
Although FERC has granted these waivers and priority rights in order to preserve the ability of a generation developer to deliver its output to the point of interconnection with the transmission system, many developers of generation projects have argued that being subject to FERC’s open access policy involves significant costs, which are triggered by a mere written request for service from a third party. The interconnection facilities owner may incur significant costs in developing the facilities, only to have another generator request service and reap the benefit of the original investment, thereby adversely affecting the ability of generators to develop and finance interconnection lines. The issue has taken on greater significance as renewable resources are developed in areas remote from existing transmission facilities, requiring the construction of interconnection facilities spanning greater distances and providing more transmission capacity.
Notice of inquiry
The NOI seeks comments on a number of issues. As a threshold matter, FERC asks whether there is a need to reconsider existing policies, or whether FERC rulings issued subsequent to the March 2011 technical conference have resolved industry concerns. FERC poses the following questions, among others:
- Is requiring third-party access to generator-owned interconnection facilities under an OATT framework necessary to ensure just and reasonable rates and to protect against undue discrimination, particularly given the size and scope of facilities being developed by remote generators?
- Does current FERC policy blur the pre-existing line between interconnection service and transmission service with respect to providing for third-party access in such a way as to create unintended consequences for generator development of interconnection facilities?
- Should FERC consider providing different treatment for larger interconnection facilities and small interconnection facilities? If so, what should be the appropriate threshold for distinguishing between the two classes, and how should they be treated?
- Is there a meaningful distinction between the interconnection/operation of facilities for the provision of independent transmission service and generator interconnection facilities of long length and high voltage?
- Should FERC draw a distinction between affiliates and non-affiliates for purposes of access to facilities, even when parties have otherwise agreed to the terms and conditions of access?
FERC also requests comments on issues related to the requirement to file an OATT within 60 days of a third-party request for service, including whether the requirement should be retained or altered, and what standard should apply to the third-party request for service.
Some developers have suggested creation of a tailored OATT for interconnection facilities that are unable to provide ancillary services or network integration transmission service as required under the pro forma OATT. FERC requests comment on what provisions should be excluded from a tailored pro forma OATT.
The NOI also seeks comments on two potential alternative approaches:
- continued use of the OATT framework with certain modifications, including the creation of a “safe harbor” period during which a generation developer would be presumed to have priority rights to capacity on its interconnection facilities; and
- use of a framework that would modify existing rules and procedures applicable to third-party use of a transmission provider’s interconnection facilities to apply to interconnection facilities developed by a generator.