Background

The California Independent System Operator’s (CAISO) recently issued Interconnection Process Enhancements (IPE) final proposal^[1] provides heightened requirements to complete an interconnection request and relies on scoring criteria to determine which projects advance to the interconnection study process. Due to the proposed 150% cap on specific interconnection zones, not all interconnection requests in each queue will be able to advance to the interconnection study phase. The scoring criteria are intended to prioritize the most viable projects and meet the 150% cap. The scoring criteria categories are commercial interest, project viability, and system need, with each category providing a maximum of 100 potential awardable points. However, some industry stakeholders have expressed concern that the commercial interest criteria provide too much discretion to load-serving entities (LSEs), lack transparency, and may have detrimental effects on competition.

Commercial Interest

Commercial interest evaluations will incorporate preliminary, non-binding feedback on specific projects from LSEs. Each LSE (both California Public Utilities Commission (CPUC) jurisdictional and non-jurisdictional) will receive an individual megawatt capacity allocation calculated by available and planned transmission capacity and load share. Each LSE may allocate its capacity to specific interconnection requests submitted in the cluster window during each interconnection cycle. The maximum point allocation an interconnection request may be awarded for LSE selection is 100 points.  Commercial entities and other non-LSEs will also have an opportunity to express interest in specific projects. An interconnection request may receive 25 points for demonstrated commercial interest from a non-LSE or commercial offtaker. CAISO states that it will evaluate these commercial arrangements to ensure the company is legitimate, procuring capacity in a “meaningful way,” and not affiliated with the interconnection customer or its holding company. A project will receive a maximum of 25 points even if more than one demonstration of commercial interest from a non-LSE offtaker is provided. A non-LSE or commercial offtaker can only express interest in one project per cluster.

There is concern that the final proposal improperly weights LSE selection over non-LSE commercial interest expression, given the difference in point allocation and the one project limitation on non-LSEs. In the final proposal CAISO justifies the differential treatment by stating that commercial offtakers do not carry an obligation to serve load or provide resource adequacy, and as such it does not propose to allow them to participate in the same allocation process as LSEs. Additionally, some stakeholders have asked CAISO to add further restrictions on LSEs’ ability to award points to LSE-owned projects. The IPE final proposal limits LSE self-allocation to three projects per cluster or 25% of the LSE’s total megawatt capacity allocation, whichever is greater. CAISO states that it will review data around utility self-build projects after the initial scoring process to determine if the limitations should be reevaluated. Stakeholders have also advocated for greater transparency in the LSE selection process. CAISO recommends, but does not mandate, clear and transparent Requests For Information processes leading up to the LSE allocation process. CAISO also encourages Federal Energy Regulatory Commission (FERC) jurisdictional LSEs to consider updating their tariffs to establish clear and fair processes for allocating points.

Project Viability

The project viability category consists of 35% of the total score for each interconnection request and may be demonstrated through four indicators. Specifically, an interconnection customer can receive points for project viability based on how complete the engineering design plan is (50 point maximum), or through expansion of a generation facility currently under construction (10 points), expansion of an operating facility (20 points), or expansion of an existing facility where the existing gen-tie has sufficient surplus capability to accommodate the additional resource (50 points). For this category, if the engineering design plan is 15% complete, 15 points would be awarded. For the three expansion indicators, only one may be selected, and the full points are awarded.

System Need

System need is 35% of the total score and may be demonstrated through two indicators. First, projects that are able to provide local resource adequacy consistent with a CAISO demonstrated need for additional capacity in that area may receive 50 points. Alternatively, long-lead time resources that meet the requirements of the CPUC resource portfolio and where CAISO has approved the necessary transmission may receive 100 points. CAISO assumes that these two categories are mutually exclusive and that projects would not be able to select both indicators.

Some stakeholders believe that the system need and project viability categories may not offer much differentiation between projects, and that many projects will be awarded the same number of points under both categories. If this is the case, the commercial interest category may be the primary tool for scoring projects and advancing to the interconnection study phase.  

Comments on the final proposal were submitted on April 18, 2024. The final proposal will be presented at the CAISO Board of Governors Meeting in May 2024 and then filed for approval at the FERC.

^[1] A summary of CAISO’s IPE final proposal is available here: CAISO Releases Interconnection Process Enhancements Final Proposal | Renewable + Law (lawofrenewableenergy.com).