At the July 27, 2023, Open Meeting, the Federal Energy Regulatory Commission (FERC) issued long-awaited Order No. 2023, the Final Rule on Improvements to Generator Interconnection Procedures and Agreements in Docket No. RM22-14-000. The rulemaking arose from the Advanced Notice of Proposed Rulemaking: Building for the Future Through Electric Regional Transmission Planning and Cost Allocation and Generator Interconnection issued in July 2021 and the Notice of Proposed Rulemaking: Improvements to Generator Interconnection Procedures and Agreements issued in June 2022. Order No. 2023 adopts many of the reforms proposed in the June 2022 NOPR with modifications. Order No. 2023 aims to hasten the interconnection process and ensure ready projects progress in an efficient, reliable, and transparent manner. To do so, Order No. 2023 implements comprehensive reforms to the interconnection study process, including the requirement to use a first-ready, first-served cluster study process. As described below, the Final Rule also imposes new and heightened financial requirements on both interconnecting customers and transmission providers. Additionally, the rule incorporates technological advancements into the interconnection process and implements a transition process.
Order No. 2023 did not adopt several proposals in the NOPR pertaining to informational interconnection studies, the non-financial commercial readiness demonstrations, shared network upgrades, the optional resource solicitation study, and the alternative transmission technologies annual report.
Cluster Study Process
Order No. 2023 requires transmission providers to use a cluster study process rather than the serial first-come, first-served study process that has been in place for decades. The reforms to the pro forma LGIP adopted in Order No. 2023 do not prescribe how transmission providers should form clusters.
Order No. 2023 revises the interconnection requirements for interconnection requests and processing. Among other changes, new section 3.1.2 to the pro forma LGIP, requires an interconnection customer to select a definitive point of interconnection to be studied when executing the cluster study agreement. Additionally, new pro forma LGIP section 3.4.1 requires interconnection customers to submit an interconnection request during a specified a 45-calendar day period, the cluster request window, with the start date to be determined by each transmission provider. Order No. 2023 also adopts a non-refundable $5,000 application fee required to be submitted with the interconnection request. If the request is deficient, the interconnection customer must provide requested information within 10 business days of receiving an interconnection request deficiency notice but no later than the close of the cluster request window, or the request is deemed withdrawn. In that circumstance, the application fee is forfeited, but the study deposit and commercial readiness deposit are returned to the interconnection customer.
Order No. 2023 provides parameters for how study costs are allocated among interconnection customers. Section 13.3 (Obligation for Study Costs) of the pro forma LGIP allows each transmission provider to propose its own study cost allocation ratio for allocating the shared costs of cluster studies between a per capita basis and pro rata by MW, provided that: between 10% and 50% of study costs must be allocated on a per capita basis, with the remainder (between 90% and 50%) allocated pro rata by MW.
Order No. 2023 adds section 4.2.1 to the pro forma LGIP, which details how interconnection facilities and network upgrade costs identified in cluster studies must be allocated amongst interconnection customers. For system network upgrades, costs are allocated based on the proportional impact of each individual generating facility in the cluster study on the need for a specific system network upgrade. However, for substation network upgrades, including all switching stations, costs are allocated per capita to each generating facility interconnecting at the same substation. Section 4.2.1 states that each transmission provider must include a description of how cost for each facility type designated as a network upgrade will be allocated using its proportional impact method. Finally, the costs of any needed transmission provider’s interconnection facilities or interconnection customer’s interconnection facilities will be directly assigned to the interconnection customer(s) using such facilities. In the event that interconnection customers in the cluster agree to share interconnection facilities, the cost of such interconnection facilities will be allocated based on the number of generating facilities sharing use of such interconnection facilities on a per capita basis (i.e., on a per generating facility basis), unless the customers mutually agree to a different cost sharing arrangement.
Order No. 2023 also requires increased commitments for interconnection customers to enter and remain in the interconnection queue. Specifically, the Final Rule requires interconnection customers to pay increased study deposits, meet more stringent site control requirements, and pay commercial readiness deposits. The Final Rule also imposes withdrawal penalties to discourage speculative commercially non-viable interconnection requests.
Regarding the study deposits, transmission providers are required to collect a single study deposit only once upon entry into the cluster, at the time the interconnection customer submits an interconnection request (initial study deposit). The amount of the initial study deposit is calculated using a tiered approach, depicted below. These study costs will be trued up and any excess deposit refunded once the interconnection customer executes the LGIA or requests the filing of an unexecuted LGIA and submits the corresponding payment or withdraws from the queue.
As for site control, under the revised definition, site control may be demonstrated by documentation establishing: “(1) ownership of, a leasehold interest in, or a right to develop a site of sufficient size to construct and operate the Generating Facility; (2) an option to purchase or acquire a leasehold site of sufficient size to construct and operate the Generating Facility; or (3) any other documentation that clearly demonstrates the right of Interconnection Customer to exclusively occupy a site of sufficient size to construct and operate the Generating Facility.” The interconnection customer must demonstrate the “exclusive” land right to develop, construct, operate, and maintain its generating facility or, where facilities are co-located, to demonstrate a shared land use right to develop, construct, operate, and maintain co-located facilities, where exclusive means both that the right belongs solely to the interconnection customer and is solely for purposes of a single interconnection request. Interconnection customers must provide evidence of 90% site control for the generating facility at the time of submission of the interconnection request and 100% site control for the generating facility at the time of execution of the facilities study agreement and when executing, or requesting the unexecuted filing of, the LGIA. If site control is not demonstrated at the milestone, the interconnection request is deemed withdrawn and may be subject to withdrawal penalties.
Site control for a generating facility that is co-located with one or more generating facilities on the same site and behind the same point of interconnection must be demonstrated by a contract or other agreement that allows for shared land use for all generating facilities that are co-located that meet the provisions of the site control definition. Interconnection customers are prohibited from submitting evidence of site control that uses the same land for multiple interconnection requests, unless the site is large enough to host multiple generating facilities. Further, section 3.4.2 of the pro forma LGIP permits shared land use for co-located generating facilities on the same site and behind the same point of interconnection, however transmission providers are required to establish appropriate technology-specific acreage requirements for generating facilities, which the interconnection customer is required to meet at the time it submits its interconnection request.
Importantly, Order No. 2023 eliminates the option to provide a deposit in lieu of site control demonstration, except in limited circumstances where an interconnection customer demonstrates a regulatory limitation to obtaining site control, and also eliminates the option to post non-refundable security in lieu of site control at LGIA execution.
The Final Rule requires interconnection customers to submit a commercial readiness deposit at the beginning of each study in the cluster study process (i.e., the initial cluster study, the cluster restudy, and the facilities study). The amount of the readiness deposit is dependent on the study phase. The initial commercial readiness deposit is two times the study deposit to enter the cluster study. The commercial readiness deposits submitted to enter the cluster restudy and to enter the facilities study are based on a percentage of the interconnection customer’s identified network upgrade costs. Specifically, the commercial readiness deposit for the cluster restudy is the amount required to bring the total amount of the interconnection customer’s commercial readiness deposit to 5% of the interconnection customer’s network upgrade cost assignment identified in the cluster study. The commercial readiness deposit to enter the facilities study is the amount required to bring the total amount of the interconnection customer’s commercial readiness deposit to 10% of the interconnection customer’s network upgrade cost assignment identified in the cluster study or restudy, as applicable.
Additionally, interconnection customers will be required to submit an LGIA deposit when executing the LGIA, or requesting the filing of an unexecuted LGIA. Interconnection customers must submit a deposit that will increase the total commercial readiness deposit paid to be equal to 20% of the estimated network upgrade costs identified in the LGIA. The LGIA deposit will be used as part of the security that must be provided for the construction of network upgrades and the transmission provider’s interconnection facilities. The LGIA deposit could be refunded, subject to the withdrawal penalty, if the interconnection customer withdraws after executing the LGIA or after requesting the filing of an unexecuted LGIA.
Finally, Order No. 2023 imposes withdrawal penalties that increase throughout the interconnection process, on interconnection customers that withdraw an interconnection request from the interconnection queue, absent qualification for one of the limited exemptions. Thus, the withdrawal penalty for an interconnection customer will be calculated as the greater of the study deposit or the amounts provide in the table below:
Transmission Provider Queue Processing Timing Requirements
Order No. 2023 eliminates the reasonable efforts standard to complete interconnection studies and establishes firm study deadlines for transmission providers. Specifically, Section 7.4 of the pro forma LGIP now requires that the transmission provider complete the cluster study within 150 calendar days from the close of the customer engagement window. Similarly, Section 7.5 of the pro forma LGIP now requires that the transmission provider complete the cluster restudy within 150 calendar days of the transmission provider notifying interconnection customers in the cluster that a cluster restudy is required. Order No. 2023 provides for study delay penalties when transmission providers fail to meet their firm interconnection study deadline, although transmission providers may appeal the imposition of any penalty.
Order No. 2023 also require transmission providers to use a standardized and transparent affected systems study process. The Final Rule establishes a detailed affected systems study process which includes firm study deadlines, uniform modeling standards, and pro forma affected system agreements.
Order No. 2023 incorporates technological advancements into the interconnection process through reforms that increase flexibility in the generator interconnection process, incorporate enumerated alternative transmission technologies, and adopt model and ride-through requirements for non-synchronous generating facilities.
The Final Rule requires transmission providers to allow more than one generating facility to co-locate on a shared site behind a single point of interconnection and share a single interconnection request—options that multiple transmission providers have refused to provide. The Commission clarifies that interconnection customers have the choice to structure their interconnection requests according to their preference, and they are not required to submit a single interconnection request for multiple generating facilities located on the same site. For purposes of this reform, co-located generating facilities can be owned by a single interconnection customer with multiple generating facilities sharing a site, or by multiple interconnection customers that have a contract or other agreement that allows for shared land use. All generating facilities that co-locate still must adhere to all other applicable laws and regulations, including PURPA.
The Final Rule revises the material modification standard, and allows interconnection customers to add a generating facility to an existing interconnection request under certain circumstances without such a request being automatically deemed a material modification. Specifically, the Commission revises section 4.4.3 of the pro forma LGIP to require transmission providers to evaluate the proposed addition of a generating facility at the same point of interconnection prior to deeming such an addition a material modification, if the addition does not change the originally requested interconnection service level. This change may allow for the addition of energy storage resources to existing facilities. The material modification reform does not include a deadline for transmission providers to complete their material modification evaluations, and provides timing flexibility depending on the details of their individual interconnection processes. The Final Rule also limits when an interconnection customer may request to add a generating facility to an existing interconnection request to requests before the interconnection customer returns the executed facilities study agreement to the transmission provider. The Final Rule includes an exception for transmission providers that use fuel-based dispatch assumptions in their interconnection studies, because a request to add a generating facility of a different fuel type to an existing interconnection request would always constitute a modification that would require a study.
Additionally, Order No. 2023 expends the availability of surplus interconnection service beyond those entities that have achieved commercial operation by requiring transmission providers to allow interconnection customers to access the surplus interconnection service process once the original interconnection customer has an executed LGIA or requests the filing of an unexecuted LGIA.
Transmission providers are also required to use operating assumptions in interconnection studies that reflect the proposed charging behavior of electric storage resources (whether standalone, co-located generating facilities, or part of a hybrid generating facility), i.e., whether the interconnecting generating facility will or will not charge during peak load conditions—unless good utility practice, including applicable reliability standards, otherwise requires the use of different operating assumptions. In the initial interconnection request, the interconnection customer must provide the transmission provider the requested operating assumptions for the interconnecting electric storage resource, and a description of any applicable control technologies. If an interconnection customer fails to operate its electric storage resource in accordance with the operating assumptions memorialized in the interconnection customer’s LGIA, the transmission provider may pursue termination through the breach and cure provisions in articles 17.1.1 and 17.1.2 of the pro forma LGIA is appropriate.
The Final Rule requires transmission providers to evaluate specific alternative transmission technologies in their cluster studies. The Commission modified the proposal in the NOPR to ultimately require transmission providers to evaluate the list of alternative transmission technologies enumerated in the Final Rule during the cluster study, including any restudies, of the generator interconnection process for all interconnection customers in a cluster without the need for a request from an interconnection customer. The rule expands the list of alternative transmission technologies from those identified in the NOPR to include: static synchronous compensators, static VAR compensators, advanced power flow control devices, transmission switching, synchronous condensers, voltage source converters, advanced conductors, and tower lifting. These technologies must be evaluated during the pro forma SGIP feasibility study and system impact study of the generator interconnection process where network upgrades are identified. The transmission providers must evaluate each alternative transmission technology, but have discretion to determine whether it should be used, consistent with good utility practice, applicable reliability standards, and other applicable regulatory requirements.
Finally, Order No. 2023 adopts modeling and ride-through requirements for non-synchronous generating facilities to ensure non-synchronous generating facilities provide data to transmission providers at a comparable degree of accuracy as is required of a synchronous generator.
FERC required that transmission providers offer existing interconnection customers up to three transition options depending on the progress of the interconnection request as of 30 calendar days after the filing date of the transmission provider’s initial proposal to comply with this final rule:
- Interconnection customers that have been tendered facilities study agreements may either (a) proceed to a transitional serial study (a facilities study) or (b) opt to move to the transitional cluster study.
- Interconnection customers with an assigned queue position that have not been tendered a facilities study agreement will be eligible for the transitional cluster study (clustered system impact study and individual facilities studies).
Interconnection customers can withdraw from the queue without penalty prior to the transitional studies. The final rule also includes deposit and site control requirements and withdrawal penalties for the transitional studies.
Transmission provider compliance filings are due 90 days after publication of the Final Rule in the Federal Register. Order No. 2023 is yet to be published in the Federal Register at the time of publication of this article.