On September 29, 2023, FERC accepted part of Arizona Public Service Company’s (“APS”) proposed interconnection queue reforms to transition from a first come, first served cluster study process to a first ready, first served cluster study process. Generally, FERC accepted APS’s proposals that would prevent speculative projects from moving through the queue, while rejecting proposals that were not consistent with or superior to the pro forma Large Generator Interconnection Procedures (“LGIP”). APS’s interconnection queue reform proposal was submitted before FERC issued Order No. 2023; the approved reforms do not constitute APS’ Order No. 2023 compliance filing and are based on FERC’s currently effective pro forma LGIP.

APS submitted revisions to its interconnection queue on July 13, 2023 and proposed a number of reforms, including but not limited to:

1. requiring projects to demonstrate 100% site control when submitting an application and to maintain control throughout the interconnection process;
2. allowing projects to demonstrate commercial readiness—i.e., that the project is ready to move forward with the interconnection—either by meeting non-financial “commercial readiness milestones,” coupled with submission of a $900,000 irrevocable letter of a credit to cover the maximum withdrawal penalty, or by submitting a $7.5 million deposit;
3. adding withdrawal penalties that increase as projects progress through the interconnection process;
4. eliminating suspension as a right;
5. adding small generators, except those on the fast track, in the same cluster studies as large generators and limiting the eligibility of small generators for the “fast track” process to less than 69 kV interconnections; and
6. preventing transmission providers from granting a request to alter the commercial operation date (“COD”) during interconnection agreement negotiations.

FERC accepted and rejected various parts of the proposal. First, FERC rejected APS’s site control proposal. FERC explained that there is a large amount of government-managed land in Arizona and that prospective interconnection customers proposing to build on such land might be hindered from entering the queue because they would have a greater difficulty demonstrating 100% site control at the time of their request. FERC also took issue with the proposal’s silence on the types of documents APS will accept for establishing site control for projects located on government-managed land. 

Second, FERC accepted APS’s proposed commercial readiness demonstration requirements, finding that the proposal will decrease the number of withdrawals that result in delays and restudies and improve the efficiency of APS’s interconnection process. Third, FERC rejected the withdrawal penalties on the basis that APS’s proposal for distributing the revenues from such penalties did not comport with the cost causation principle.

FERC also rejected APS’s proposal to eliminate suspension as a right, finding that it failed to give interconnection customers flexibility to accommodate delays that could affect large projects. In addition, FERC accepted APS’s proposal to include small generators in the same cluster study process as large generators, stating that it “will afford small generator customers greater certainty.” However, FERC rejected APS’s proposal to exclude 69 kV interconnections from eligibility for the “fast track” process.

Finally, FERC rejected APS’s limitation on altering the COD during interconnection agreement negotiations, instead requiring APS to allow for COD extensions of less than three cumulative years to account for unforeseen changes that affect the planning process.

Chairman Phillips and Commissioner Clements concurred with the opinion, stating that the combination of non-financial and financial commercial readiness options “offer a reasonable pathway for interconnection customers . . . to progress through the queue with non-speculative projects.” Commissioner Danly dissented as to FERC’s decision to reject aspects of APS’s proposal. Commissioner Danly argued that the rejected reforms were consistent with or superior to the pro forma LGIP and noted that although the Commission “does not in practice allow public utilities much flexibility from our thousands of pages of interconnection rules,” he hoped that FERC “will not be so heavy handed in rejecting reasonable variations from Order No. 2023.”

A copy of the order, in Docket No. ER23-2398, can be found here.