On November 29, 2022, the Federal Energy Regulatory Commission ("FERC") issued an order1 accepting a proposal from PJM Interconnection, L.L.C. ("PJM") effectuating comprehensive reforms to its existing generator interconnection queue processes. As explained in our previous client alert from June of 2022, there has been a significant backlog in these queues across regional grid operators, posing a bottleneck to bringing new generation assets online. According to PJM, in May of 2022, over 2,700 active projects were mired in certain stages of its study process as part of the generator interconnection queue—with new renewable generation comprising the vast majority—demonstrating a clear need for procedural improvements and Tariff revisions.
FERC initiated a rulemaking proceeding to explore reforms on June 16, 20222; however, PJM also filed its own respective proposal two days earlier3 with many of the substantive revisions dovetailing with the agency. Notably, PJM detailed several key components in expediting the planning study phase, including:
- Establishing a 'fast-lane' process for approximately 450 existing projects to clear the existing backlog stemming from a serial first-come, first-served approach
- Adding requirements such as commercial readiness deposits and improving site control procedures
- Analyzing cost responsibility of individual projects in the cluster
- Expediting the process to memorialize interconnection agreements for projects that do not require network upgrades or further studies
In ensuing months of the PJM proceeding, over 30 stakeholders filed comments by the deadline, most of which were favorable toward the proposed revisions. Some comments, however, criticized the potential new timeframes and processing deadlines as not being expedient enough in light of many PJM jurisdictions operating under active renewable portfolio standards (i.e., state-level policies incentivizing utilities to adopt renewable resources). Additionally, some intervenors raised issue with the proposed $5 million network upgrade threshold, arguing that it would impose an arbitrary monetary amount not necessarily indicative of the commercial readiness of a project and, therefore, should be grouped in the to-be-established "fast lane" of the generator interconnection queue process. Lastly, a few commenters—environmental advocacy groups—alleged that the proposed Tariff revisions may constitute an unjust and unreasonable departure from FERC regulations due to the lack of precise deadlines for its new rules and implementation transition cycles.
During the proceeding, FERC issued a deficiency letter to PJM seeking clarification on how the reforms would generally comport with prior FERC orders and directives. Specifically, FERC asked if the initial grouping of key projects—all projects from October 1, 2021 through the processing of the first new cycle—would create an "unmanageably large" first wave of projects to evaluate, especially while incorporating new procedural mechanisms and stages. FERC also asked PJM to explain why, if PJM fails to complete a set percentage of transmission service request studies within a certain timeframe, two Tariff sections relating to reporting and penalties were removed. Lastly, FERC sought an explanation of how PJM will determine whether a request for long-term firm service can be studied as part of the planning process for bulk transmission supply in PJM or whether special impact studies must be completed.
On September 29, 2022, PJM submitted its response to the deficiency letter, capturing all of the issues raised by FERC. For instance, PJM explains that, due to the "holistic" nature of the NOPR, the reporting and penalty regimes contemplated by Order No. 890, in addition to Order No. 845, are no longer in harmony with "one narrow set of requests (Firm Transmission Service Requests), which provisions will prove unworkable when applied in the context of the new clustered study approach." PJM also clarified that the proposed $5 million threshold represents the initial stage of determining the eligibility of projects, not the actual network upgrade process itself. Following the deficiency letter response, PJM responded to other substantive protests and comments raised by stakeholders in order to address those concerns.
Ultimately, FERC issued the approval order pursuant to its authority under section 205 of the Federal Power Act, subject to the condition that PJM submit two compliance filings within 30 and 60 days, respectively,4 as well as ongoing informational reports regarding the implementation of the queue reforms. FERC largely adopted PJM’s proposal and rejected revisions or new language raised by intervenors. The regulatory outlook for improving and streamlining the generator interconnection queue process is ostensibly improving due to these revisions in PJM as well as the forthcoming resolution of the broader FERC proceeding, and if adopted correctly, will create more certainty toward building new renewable generation resources across the US grid.
1 181 FERC ¶ 61,162, "Order Accepting Tariff Revisions Subject to Condition," Federal Energy Regulatory Commission (issued on November 29, 2022 in Docket Nos. ER22-2110-000, ER22-2110-001).
2 179 FERC ¶ 61,194, "Improvements to Generator Interconnection Procedures and Agreements," Federal Energy Regulatory Commission (issued on June 16, 2022 in Docket No. RM22-14-000).
3 See, e.g., PJM Interconnection, L.L.C., Filing, FERC Docket No. ER22-2110 (filed June 14, 2022).
4 The first compliance filing due 30 days following issuance of the order requires PJM to include language in the Tariff memorializing its representation that only New Service Requests with no network upgrade cost assignment not requiring further studies will be eligible for acceleration, per the PJM response to FERC’s deficiency letter. The second compliance filing due 60 days following issuance of the order requires PJM to provide the official effective date for Part VIII of its Tariff, which will constitute the language of the proposed reforms described herein.
