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On March 21, 2024, FERC issued a follow up rehearing order to its landmark Order No. 2023 generator interconnection reform rule, providing several clarifications and tweaks in response to industry comments. 

Improvements to Generator Interconnection Procedures and Agreements, 186 FERC ¶ 61,199 (2024) (Order No. 2023-A). In Order No. 2023, issued on July 28, 2023, FERC adopted a comprehensive package of reforms in three general categories: (1) implementation of a first-ready, first-served cluster study process, (2) reforms to increase the speed of interconnection queue processing by eliminating the reasonable efforts standard and adopting study delay penalties for failing to complete studies on time, and (3) requirements to incorporate technological advancements into the interconnection process. Improvements to Generator Interconnection Procs. & Agreements, 184 FERC ¶ 61,054 (2023) (Order No. 2023). 

Overall, in Order No. 2023-A, FERC upheld all the major reforms provided in Order No. 2023, including the requirement to assess penalties on transmission providers for late completion of interconnection studies, which received significant opposition. Some of the key clarifications and modifications are discussed below. 

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

Order No. 2023’s cluster study requirement for processing interconnection requests has largely already been adopted by most RTOs/ISOs. Indeed, some RTOs/ISOs already meet or even surpass the rule’s requirements in some regards. Thus, it is no surprise that on rehearing FERC continues on the path to requiring cluster studies as a basic measure to improve on the interconnection process. In the rehearing order, FERC discussed many aspects of the cluster study requirements, providing clarifications and in some cases revisions to the proforma interconnection rules to clarify and improve on the language initially proposed. 

Some of the more notable changes include:

  • Readiness requirements. FERC clarified that where a transmission provider proposes to adopt new readiness requirements for its annual cluster study, an interconnection customer who is already in the queue must comply with the transmission provider’s new readiness requirements within 60 days of the Commission-approved effective date of the transmission provider’s compliance filing.
  • Shared Network Upgrades. A network upgrade that is required for multiple interconnection customers in a cluster may be considered a shared stand alone network upgrade if all interconnection customers mutually agree to exercise the option to build. If there is no mutual agreement, no interconnection customer will be able to exercise the option to build a shared stand alone network upgrade.
  • Curing deficiencies. Transmission providers must complete their determination that an interconnection request is valid by the close of the cluster request window and therefore, interconnection customers must also cure deficient interconnection requests by the close of the cluster request window. Only interconnection customers with interconnection requests that are valid and non-deficient can proceed to the customer engagement window. Additionally, interconnection customers must receive as many cure periods as needed to remedy a deficient interconnection request, as long as the end of such cure periods fall prior to the last day of the 45-day cluster request window.  Thus, transmission providers must issue a second or third deficiency notice to an interconnection customer during the cluster request window, if time allows.
  • Security Requirements. Acceptable forms of security for the Commercial Readiness Deposit and deposits prior to the Transitional Serial Study, Transitional Cluster Study, Cluster Restudy and the Interconnection Facilities Study should include not only cash or an irrevocable letter of credit, but also surety bonds or other forms of financial security that are reasonably acceptable to the transmission provider.

Reforms to Increase the Speed of Interconnection Queue Processing

In Order No. 2023, FERC eliminated the reasonable efforts standard for transmission providers to complete cluster studies, cluster restudies, facilities studies, and affected system studies by the tariff-specified deadlines. FERC instead required transmission providers to implement a study delay penalty structure, whereby delays of studies beyond the tariff-specified deadline would incur penalties, per business day of delay, of $1,000 for cluster studies; $2,000 for cluster restudies and affected system studies, and $2,500 for facilities studies. According to FERC, the penalty amounts are intended to incentivize transmission providers to meet study deadlines and the increasing penalty amounts reflects the progressively greater harm caused by delayed studies at later interconnection stages.  In addition, FERC justified the need for a penalty structure based on its prior determination that the reforms in Order No. 845 have not eliminated the problems of interconnection queue backlogs and delayed interconnection studies.  

A significant portion of the rehearing order contains FERC’s further discussion in support of adopting a penalty structure. According to FERC, a penalty structure aimed at transmission providers recognizes the key role transmission providers play in timely interconnection study completion. According to FERC, the transmission provider conducting the study is the entity with the most control over whether the study deadline is met, including the resources allocated to the study process; the actual conduct of the study, coordination with interconnection customers and consultants, and providing the study conclusions. In rejecting the numerous legal and procedural arguments from protestors, FERC reiterated that the study deadlines in Order No. 2023 should be achievable and where there may be factors outside of a transmission provider’s control that influence whether these deadlines can be met, FERC has adopted appropriate safeguards in the penalty structure to account for this possibility.

To entities that argued FERC should not penalize transmission providers without a finding of intentional delay, bad faith, misconduct or lack of effort, FERC responded that such findings are not necessary as predicates to concluding that the interconnection study process must occur more expeditiously in order to help remedy the problem of unjust and unreasonable rates caused by interconnection queue backlogs. According to FERC, the available data indicate that cluster studies alone are not sufficient to remedy interconnection queue backlogs.

To entities that argued the study time frames adopted in Order No. 2023 are not long enough (and thus it was unfair to impose penalties for failure to meet those deadlines), FERC responded that the deadlines were selected based on timeframes that, as a general matter, should be reasonably achievable for transmission providers under the pro forma LGIP process. FERC concluded that a transmission provider’s failure to meet these deadlines presumptively reflects that the transmission provider has failed to respond appropriately to the need for timely interconnection study processing such that a penalty is warranted.

FERC also denied that the penalty structure adopted in Order No. 2023 was an improper “strict liability” measure because the pro forma LGIP provides a framework for transmission providers to appeal any study delay penalties. According to FERC, unlike a “strict liability” regime, transmission providers can raise case-specific facts and circumstances for consideration in determining whether there is good cause to grant relief from a penalty.  FERC stated that it would consider affording relief based on the transmission provider’s conduct in any particular study and also the transmission provider’s efforts to prevent future delays.

Reforms to Incorporate Technological Advancements into the Interconnection Process

In Order No. 2023, FERC initiated a number of reforms to incorporate technological advancements into the interconnection process, including, among other things, requiring transmission providers to evaluate an enumerated list of alternative transmission technologies during the study process. 

In the rehearing order, FERC rejected arguments that the requirement to evaluate the enumerated list of alternative transmission technologies will burden transmission providers and lengthen the interconnection process. According to FERC, the record supported a finding that these alternative transmission technologies can provide benefits to optimize the transmission system in specific scenarios.

Compliance Requirements

Prior to the rehearing order, the Order No. 2023 compliance deadline was April 3, 2024. To allow transmission providers additional time to incorporate the revisions required in the rehearing order, FERC extended the current deadline for transmission providers to submit compliance filings to 30 days after the order is published in the Federal Register. Interested entities have 30 days from the date of issuance to seek rehearing of any new requirements in the rehearing order.