Standardization of Generator Interconnection Agreements and Procedures; Notice of Proposed Rulemaking
Federal RegisterMay 2, 2002
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 35
[Docket No. RM02-1-000]
Standardization of Generator Interconnection Agreements and Procedures; Notice of Proposed Rulemaking
April 24, 2002.
AGENCY:
Federal Energy Regulatory Commission.
ACTION:
Notice of proposed rulemaking.
SUMMARY:
The Federal Energy Regulatory Commission (Commission) is proposing to amend its regulations to require public utilities to file the standardized interconnection agreement and procedures we will adopt in this proceeding and to take and provide interconnection service under them. The agreement and procedures also would apply to any non-public utility that seeks voluntary compliance with jurisdictional transmission tariff reciprocity conditions.
DATES:
Comments are due June 17, 2002. Comments should not exceed 30 double-spaced pages and should include an executive summary.
ADDRESSES:
Send comments to: Office of the Secretary, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426.
FOR FURTHER INFORMATION CONTACT:
Patrick Rooney (Technical Information), Office of Market, Tariffs and Rates, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 501-5546.
Roland Wentworth (Technical Information), Office of Market, Tariffs and Rates, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 208-1288.
Michael G. Henry (Legal Information), Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 208-0532,
SUPPLEMENTARY INFORMATION:
I. Introduction
The electric power industry continues to be an industry in transition. Where the industry was once primarily the domain of large, vertically integrated utilities providing power at cost-based rates, companies selling unbundled power at rates set by competitive markets have become common. But balanced market rules and sufficient infrastructure continue to be essential for achieving a seamless nationwide power market that will provide customers with reasonably priced and reliable service.
The Commission continues to work to encourage fully competitive bulk power markets. The effort took its first big step with Order No. 888,
1
which required public utilities to provide others comparable access to their transmission lines, and continued with Order No. 2000,
2
which began the process that will result in the development of a small number of Regional Transmission Organizations (RTOs). Where necessary, the Commission has taken action to complete the establishment of robust, seamless, competitive, wholesale electric markets. To this end, the Commission currently is preparing a rulemaking on Standard Market Design that will propose a reformed open access transmission tariff (OATT) that will be applicable to RTOs and other public utilities that own, operate, or control interstate transmission facilities.
1
Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities and Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Order No. 888, 61 Fed. Reg. 21,540 (May 10, 1996), FERC Stats. and Regs. ¶ 31,036 (1996),
order on reh'g,
Order No. 888-A, 62 Fed. Reg. 12,274 (March 14, 1997), FERC Stats. & Regs. ¶ 31,048 (1997),
order on reh'g,
Order No. 888-B , 81 FERC ¶ 61,248 (1997),
order on reh'g,
Order No. 888-C , 82 FERC ¶ 61,046 (1998),
aff'd in relevant part sub nom.
Transmission Access Policy Study Group v. FERC, 225 F.3d 667 (D.C. Cir. 2000),
aff'd sub nom.
New York v. FERC, 122 S.Ct. 1212 (2002).
2
Regional Transmission Organizations, Order No. 2000, 65 Fed. Reg. 809 (Jan. 6, 2000), FERC Stats. & Regs. ¶ 31,089 (1999),
order on reh'g,
Order No. 2000-A, 65 Fed. Reg. 12,088 (March 8, 2000), FERC Stats. & Regs. ¶ 31,092 (2000),
aff'd sub nom.
Public Util. Dist. No. 1 v. FERC, 272 F.3d 607 (D.C. Cir. 2001).
While the subject of interconnection arose in the Order No. 888 rulemaking, no explicit reference to interconnection appeared in the
pro forma
tariff. Nevertheless, interconnection is a critical component of open access transmission service, and standard interconnection agreements and procedures are essential for providing the right incentives for both transmission providers and generators. Good interconnection standards and procedures will serve several important functions: they will encourage needed investment in infrastructure, limit opportunities for transmission providers to favor their own generation, and ease entry for competitors while ensuring efficient siting decisions.
To date, the Commission has addressed interconnection issues on a case-by-case basis. However, these issues have arisen with increasing frequency as competitive markets have reacted to supply shortages. Generators seeking to build and interconnect their new energy resources with interstate transmission have been hindered by the lack of standardized interconnection procedures and agreements that would enable an expeditious and economic approval and construction process. As discussed below, it has become apparent that the case-by-case approach is insufficient to address these problems and there is a pressing need for a single, uniformly applicable interconnection agreement and set of procedures. Having a standardized set of procedures applicable to all interstate transmission facilities will expedite the development of new generation.
Our effort to address interconnection issues generically presents numerous challenges. The electric industry is faced with the competing need, on the one hand, for additional generation and transmission infrastructure that will ensure reliability and, on the other hand, for efficient price signals for appropriate siting. Efficiency considerations include the assignment of cost responsibility for system upgrades necessary to interconnect a new generator.
To properly implement an interconnection agreement and set of procedures, numerous issues must be resolved, among them: (1) How to ensure that accurate interconnection studies are produced in a timely fashion; (2) the extent to which any transmission data necessary for interconnection should be made transparent (
i.e.,
available to all); (3) how to create the proper incentives for transmission providers to treat all generation comparably; (4) how to allocate equitably the costs and benefits of siting generation; and (5) who should pay for the costs of system upgrades associated with interconnection, including the issue of whether the generator should be required to initially finance the cost of systems upgrades associated with interconnection.
The effort to generically address cost responsibility for system upgrades necessary to interconnect new generators is further complicated by prior treatment of these costs for existing Transmission Providers' system facilities that are necessary to interconnect their own generators to the transmission system. With the exception of the generator step-up transformers (GSUs), Transmission Providers' interconnection facility costs are usually recovered through the Transmission Providers' OATT rates, even when those facilities are radial or would not otherwise be necessary but for the
Transmission Providers' generator. Treating Transmission Providers' own generation different than generation owned by others may put the other generators at a competitive disadvantage.
The proposed rule proposes a standard interconnection agreement (IA) and standard interconnection procedures (IP) that will be made part of existing and future OATTs. The Commission believes that these documents will ensure that reliability needs will be met while providing a reasonable balance between competing needs for uniformity and flexibility.
II. Discussion
A. The Need for Generic Action
Order No. 888 set forth the Commission's open access principles as they apply to transmission service, but it did not directly address generator interconnections. Later, in
Tennessee Power Company
(
Tennessee
), 90 FERC ¶ 61,238 (2000), the Commission clarified that interconnection is an element of transmission service and must be offered under the terms of the
pro forma
tariff. In
Tennessee
we encouraged, but did not require, transmission providers to revise their open access tariffs to include interconnection procedures, including standard interconnection agreements and specific criteria, procedures, milestones, and time lines for evaluating interconnection requests.
3
3
See, e.g.,
Commonwealth Edison Co., 91 FERC ¶ 61,083 (2000).
Accordingly, a number of transmission providers have filed interconnection procedures as part of their
pro forma
tariffs.
4
Some of these providers have filed
pro forma
interconnection agreements; others have submitted only procedures explaining how interconnection requests will be processed.
4
See, e.g.,
American Electric Power Service Corp., 91 FERC ¶ 61,308 (2000),
order denying reh'g and granting clarification,
94 FERC ¶ 61,166 (2001),
order dismissing request for clarification,
95 FERC ¶ 61,130 (2001),
appeal docketed sub nom. Tenaska, Inc.
v.
FERC,
No. 01-1194 (D.C. Cir. April 23, 2001); Southwest Power Pool, Inc., 92 FERC ¶ 61,109 (2000); Carolina Power & Light Co., 93 FERC ¶ 61,032 (2000),
reh'g denied,
94 FERC ¶ 61,165 (2001),
appeal docketed sub nom. Tenaska, Inc.
v.
FERC,
No. 01-1195 (D.C. Cir. April 23, 2001); Virginia Electric & Power Co., 93 FERC ¶ 61,307 (2000),
order on clarification,
94 FERC ¶ 61,045 (2001),
reh'g denied,
94 FERC ¶ 61,164 (2001),
appeal docketed sub nom. Tenaska, Inc.
v.
FERC,
No. 01-1196 (D.C. Cir. April 23, 2001); Consumers Energy Co., 93 FERC ¶ 61,339 (2000),
order on reh'g and clarification,
94 FERC ¶ 61,230 (2001),
order on clarification and denying reh'g,
95 FERC ¶ 61,131 (2001).
However, many industry participants remain dissatisfied with existing interconnection policy and procedures. In a number of contexts, the Commission has received comments from both generators and transmission providers concerning existing interconnection policy and procedures.
Generators assert, among other things, that: (1) They have experienced difficulty securing interconnection without requesting delivery, (2) the treatment they receive is not comparable to the treatment received by the transmission provider's own generation, (3) system upgrade costs charged initially to generators are sometimes not related to the interconnection, (4) there are delays and uncertainty due to the lack of binding commitments and firm deadlines in the transmission providers'
pro forma
tariffs, and (5) there is a lack of transparency of transmission information needed to make an independent assessment of the impact of an interconnection request.
Transmission providers argue that they need: (1) Minimum commitments from generators seeking to interconnect prior to performing studies to weed out those who will likely never interconnect, resulting in a more manageable and realistic queue, (2) assurance that their control area will benefit from, or at least not be burdened by, adding generators, particularly when the new generator seeks to locate on one system but serve load on another, and (3) improved communication between the generators and the loads they serve.
Interconnection plays a crucial role in bringing much-needed generation to the grid. We expect that a standard interconnection agreement and set of procedures will resolve these disputes and foster increased economic generation development and reliability through appropriate incentives for both transmission providers and generators. Accordingly, the Commission proposes to adopt a standard generator interconnection agreement and standard generator interconnection procedures. These will be required as amendments to the OATTs of all public utilities that own, operate, or control transmission facilities under the Federal Power Act (FPA).
B. Legal Authority
In fulfilling its responsibilities under FPA sections 205 and 206,
5
the Commission is required to address, and has the authority to remedy, undue discrimination. The Commission must ensure that the rates, contracts, and practices affecting jurisdictional transmission do not reflect an undue preference or advantage and are just and reasonable. Additionally, as discussed in Order No. 888, there is a substantial body of case law that holds that the Commission's regulatory authority under the FPA “clearly carries with it the responsibility to consider, in appropriate circumstances, the anticompetitive effects of regulated aspects of interstate utility operations pursuant to [FPA] §§ 202 and 203, and under like directives contained in §§ 205, 206, and 207.”
6
The Supreme Court recently affirmed the Commission's decision to exercise this authority and require non-discriminatory (comparable) open access as a remedy for undue discrimination.
7
5
16 U.S.C. 824d, 824e (1994).
6
Gulf States Utils. Co.
v.
FPC,
411 U.S. 747, 758-59 (1973);
see
City of Huntingburg
v.
FPC,
498 F.2d 778, 783-84 (D.C. Cir. 1974) (noting Commission duty to consider the potential anticompetitive effects of a proposed interconnection agreement).
7
New York
v.
FERC,
122 S.Ct. 1212 (2002) .
In Order No. 888, the record showed that public utilities owning or controlling jurisdictional transmission facilities had the incentive to engage in, and had engaged in, unduly discriminatory transmission practices.
8
The Commission also thoroughly discussed the legislative history and case law involving sections 205 and 206, and concluded that as a matter of law, it had the authority and responsibility to remedy the undue discrimination it had found by requiring mandatory open access, and that it could do so through a rulemaking on a generic, industry-wide basis.
9
8
Order No. 888 at 31,679-84; Order No. 888-A at 30,209-10.
9
Order No. 888 at 31,668-73, 31,676-79; Order No. 888-A at 30,201-12; TAPS v. FERC, 225 F.3d 667, 687-88 (D.C. Cir. 2000).
After issuing Order No. 888, the Commission identified interconnection as an element of transmission service that is required to be provided under the open access
pro forma
tariff.
10
Thus, the Commission may order generic interconnection terms and procedures pursuant to its authority to remedy undue discrimination and preferences under sections 205 and 206 of the FPA and further described in Order No. 888.
10
See
Tennessee Power Co., 90 FERC ¶ 61,238 at 61,761,
reh'g dismissed,
91 FERC ¶ 61,271 (2000).
C. Commission Interconnection Case Law
The Commission's current interconnection policy informs this generic effort. The cases addressing interconnection have been preoccupied with drawing distinctions between interconnection and network facilities, and between interconnection service and transmission service. The Commission has developed a simple test
for distinguishing interconnection from transmission facilities: network facilities include all facilities at or beyond the point where the customer or generator connects to the grid.
11
It follows that interconnection facilities are those found between the generator and the grid connection.
11
Entergy Gulf States, Inc., 98 FERC ¶ 61,014 at 61,023,
reh'g denied,
99 FERC ¶ __ (2002);
see
Public Service Co. of Colorado, 59 FERC ¶ 61,311 (1992),
reh'g denied,
62 FERC ¶ 61,013 at 61,061 (1993).
Regarding the services themselves, the Commission has clarified that a generator need not enter into a transmission service agreement to interconnect with a transmission system.
12
At the same time, interconnection service or an interconnection by itself does not confer any delivery rights from the generating facility to any points of delivery.
13
Thus, the Commission has distinguished the upgrades and services related to interconnection and those related to transmission when a customer secures the interconnection component of transmission service separately from the delivery component.
14
12
Tennessee Power Co., 90 FERC ¶ 61,238 at 61,761 (2000).
13
See
Arizona Public Service Co., 94 FERC ¶ 61,027 at 61,076,
order on reh'g,
94 FERC ¶ 61,267 (2001).
14
Nevada Power Co., 97 FERC ¶ 61,227 at 62,035-36 (2001),
reh'g pending
(
Nevada Power
).
D. Interconnection ANOPR
The Commission issued an Advance Notice of Proposed Rulemaking (ANOPR) on October 25, 2001.
15
As a point of departure, the ANOPR presented the Standard Generator Interconnection Agreement and Generation Interconnection Procedure of the Electric Reliability Council of Texas (ERCOT).
16
The Commission supplemented and modified the ERCOT documents with various “best practices” that were identified in Attachment A to that order. These “best practices” were based, in part, on generator interconnection agreements and procedures that have been approved by the Commission in past cases. The ANOPR also instructed the parties to assume that the Commission's current pricing policy, as described in an ANOPR attachment, would remain effective.
15
Standardizing Generator Interconnection Agreements Procedures, Advance Notice of Proposed Rulemaking, 66 Fed. Reg. 55,140 (Nov. 1, 2001), FERC Stats. & Regs. ¶ 35,540 (2001).
16
The ERCOT agreement and procedures were attached to the ANOPR as Appendix A.
Commenters advocating a standard agreement and procedures other than the ERCOT model as supplemented and modified by the “best practices” in Attachment A were asked to specify in detail how their proposals differed and were superior to or more appropriate than the ERCOT-plus-best-practices model.
The Commission also initiated a consensus-making process for industry participants in which interested members of the electric industry, government and public had an opportunity to provide meaningful input.
Public meetings of the stakeholders were conducted from November 2001 through January 2002 and included plenary sessions, private caucuses and drafting sessions. An interactive web site was established, which permitted any interested participant to view, post, and access documents, and post comments. These procedures made it possible for interested persons anywhere to participate. Public meetings generally were held at the Commission but also in Philadelphia and Denver in response to the National Association of Regulatory Utility Commissioner's (NARUC's) request that we hold some meetings outside of Washington, DC.
Consensus was largely reached by the participants on the scope of interconnection service, responsibility for facilities, and interconnection procedures and agreements. Two drafting groups developed standard IA and IP documents. These drafting groups, generally comprising representatives from each of the electric market segments, met intensively for three weeks in December 2001 and January 2002. Their efforts resulted in two documents that have largely shaped the text of this NOPR. We will refer to these documents as the Consensus IA and IP (while recognizing that a consensus was not reached on all matters).
The drafting groups reached agreements on many issues and successfully narrowed the areas of disagreement. The Consensus IA and IP present alternative positions for certain provisions. For others, there is a reasonable degree of consensus among the industry participants. No party, however, has endorsed all parts of either Consensus IA or IP, or even all parts of all alternative provisions proposed by the sector to which that party belongs. In addition, some of the Consensus IA and IP provisions
17
have not been discussed by the Drafting Groups because of lack of time.
17
Sixteen of 31 articles of the Consensus IA had not been discussed by the IA Drafting Group.
The consensus proposal was also the subject of a public meeting held on January 17-18, 2002.
18
Moreover, by February 1, 2002, more than 120 parties had filed comments on the ERCOT-plus-best-practices model as well as on the Consensus IA and IP. On the whole, the commenters support the Commission's efforts to standardize generator interconnection procedures and interconnection agreements to promote efficiency in energy markets. The commenters, however, also raise questions with respect to specific provisions in the interconnection agreements and procedures. We will not address the comments in detail in this NOPR, since we are requesting further comment, but they have informed our analysis of the issues.
18
Notice of Staff Public Meeting, 67 Fed. Reg. 887 (Jan. 8, 2002).
E. ANOPR Comments on the IA and IP
Although the parties did not reach consensus on all provisions, the documents reflect substantial consensus among diverse interests. The Commission used these documents and the subsequent comments to create the proposed standardized IA and IP documents (“NOPR IA and IP”). Generally, the NOPR uses the Consensus IA and IP provisions where there was consensus. When the participants could not reach consensus on a particular issue and options were presented in the filed agreement and procedures, we sought to minimize barriers to entry of new generation as much as possible without increasing the risk of reliability problems. Where issues remained unresolved and no options were presented, the proposal generally adopts the ERCOT text. Also, the proposal generally adopts the ERCOT text where the parties noted they had changed the text but had not completed their discussions before filing the documents.
With certain exceptions, the majority of Generators and Transmission Providers endorse the inclusion of two products (Energy and Network Resource Interconnection Services
19
) in the Consensus IA and IP. Likewise, most Generators and Transmission Providers agree in concept with the principles governing queuing and restudy
provisions set forth in the Consensus IA and IP.
19
Energy Resource Interconnection Service allows the Generator to connect its Facility to the Transmission System, thereby becoming eligible to deliver output using existing firm or non-firm capacity on an “as available” basis. IA 4.1.1.1. Network Resource Interconnection Service allows the Generator to connect its Facility in a manner comparable to that in which the Transmission Provider integrates its generating facilities to service native load or, in an independent system operator (ISO) or RTO with market-based congestion management, as in the same manner as other Network Resources. IA 4.1.2.1.
While the Generators and Transmission Providers agree that the differences between the parties have narrowed significantly, disagreements remain. The following section discusses several of the disagreements and how we decided what to propose in the NOPR IA and IP.
1. Coordination With Affected Third Party Systems (IP § 3.5)
The interconnection of a generator may affect other systems. This requires the Transmission Provider to coordinate studies and upgrades to accommodate the interconnection request. Transmission Providers suggest language that requires only reasonable efforts to coordinate with affected third-party systems. Generators generally want transmission providers and affected third parties to be responsible for coordinating and performing all necessary studies and upgrades. Generators also do not want to condition interconnection on the completion of third-party upgrades.
The NOPR IP adopts the Generators' position. We believe that their approach reduces unnecessary delay by recognizing that where multiple transmission systems are affected, coordination studies and upgrades must be performed for the successful completion of a new generation project. We agree with the Generators that the alternative would likely delay the completion of the interconnection project through an iterative or sequential study process. Also, as we explicitly stated in
Nevada Power
, third-party interconnection studies and network upgrades do not apply to interconnection but to transmission delivery service.
20
So, while the generator can get interconnected to the Transmission Provider's system, it cannot deliver or may not be able to deliver all of its power for the facility until the third-party upgrades are completed. Finally, by mandating that the affected third party coordinate interconnection study and network upgrades and additional processes with the Transmission Provider, it gives Transmission Providers another incentive to move quickly to become RTOs because RTO structure requires greater regional coordination and a move to single system planning.
20
Nevada Power Co., 97 FERC ¶ 61,227 at 62,035-36 (2001),
reh'g pending.
2. Interconnection Construction Acceleration (IP § 12.3)
Under certain circumstances, Transmission Providers may wish to accelerate construction of network facilities either on their own initiative or to accommodate another generator's request to do so. Transmission Providers want the ability to accelerate the construction of network upgrades without having to consult with the generator who will be charged for the upgrade. Generators agree that acceleration should be permitted and generally agree with paying for accelerated upgrades as long as they either receive credits or are reimbursed by the generator requesting the accelerated construction. But Generators maintain that the Transmission Provider should bear the costs of any accelerated construction it undertakes for its own benefit or for the benefit of another generator without consultation with the Generator.
The NOPR IP adopts the Generators' proposal. The Commission believes that it is important to allow Transmission Providers to accelerate the construction of network upgrades. The approach offered by the Generators offers generators fair compensation (in the form of transmission credits) for costs that will be repaid by the Transmission Provider once the Transmission Provider recovers them from the generator requesting accelerated construction. It does not appear reasonable that, where a generator is expected to pay for construction of facilities, the Transmission Provider could accelerate the timing and therefore the need for financing without prior consultation.
3. Small Generator Interconnection Issues (IP § 14; IP Appendix 6)
Small Generators want the ability to interconnect without having to pay the cost of the interconnection studies and upgrades or having to deal with local and state regulatory requirements that may hinder development. NARUC, state regulatory agencies and certain Transmission Providers request that the Commission state unequivocally that states have jurisdiction over distribution systems and clarify that the Commission's treatment of Small Generators applies only to transmission.
The actions proposed here are well within the authority granted to the Commission in the FPA; it is clear that the FPA grants federal jurisdiction over transmission by a public utility in interstate commerce and when public utilities make sales for resale in interstate commerce.
21
Within this jurisdiction, we propose that the NOPR IA and IP will apply only when a generator interconnects to the Transmission Provider's transmission system or makes wholesale sales in interstate commerce at either the transmission or distribution voltage level.
22
21
See
New York v. FERC, 122 S. Ct. 1212 (2002).
22
For example, the IA and IP would apply if the Generator interconnects to the Transmission Provider's transmission system (regardless of whether the output is being sold at wholesale or retail) or if the Generator interconnects to the Transmission Provider's distribution system and the output is being sold at wholesale. However, the IA and IP would not apply if the Generator connects to a distribution system but hast not yet proposed to sell the output at wholesale.
Regarding the request to exempt Small Generators from paying for study and upgrade costs, we are not inclined to adopt this proposal. Rather, we propose that Small Generators should be responsible for all studies and upgrades needed to accommodate their facilities. The utilities' other transmission customers should not have to subsidize Small Generators. However, we propose an accelerated procedure for Small Generators and system studies limited in scope (i.e., limited only to the immediate vicinity of the Small Generator's interconnection) and that the Transmission Provider use existing studies to the extent possible at no cost to the Small Generator.
4. Regional Differences
The consensus documents require all affected entities to adopt standard interconnection procedures and agreements regardless of the geographical location or configuration of the electric systems. Yet there is significant disagreement about how best to incorporate regional differences. Transmission Providers, state regulators and others contend that the IA and IP documents must acknowledge regional differences (such as system operations, reliability, environmental concerns, etc.). Florida Public Service Commission, for example, says that the IP and IA must take into account the special protective relaying schemes needed by Florida utilities to ensure that the transmission separation unique to Florida due to its peninsular nature is minimized. Generators suggest that these types of regional differences can be addressed when the compliance filings are made after the Final Rule is issued.
While the Transmission Providers, state regulators and others may have raised legitimate concerns regarding regional differences, they have not specifically identified the modifications
that need to be made to the IA and IP to accommodate these differences. In some instances, parties have raised concerns that are outside the standard terms and conditions of the NOPR IA and IP. The Commission proposes to adopt the approach used in Order No. 888: however, if commenters identify legitimate concerns about a need for regional variations in specific provisions in the NOPR IA and IP, the Commission will consider revisions to these provisions that would permit regional variations as appropriate.
23
23
In Order No. 888, the Commission stated that it would allow parties to use regional differences to justify changes to certain tariff provisions when the proposed alternative provision is “reasonable, generally accepted in the region, and consistently adhered to by the transmission provider.” Order No. 888 at 31,770.
5. Tax Indemnification Provisions (IA § 5.16)
IRS Notices 2001-82 and 88-129 suggest that contributions by Generators to Transmission Providers in connection with interconnection and network facility construction are non-taxable. Consistent with these IRS notices, the draft tax provisions in the NOPR treat the funding as a non-taxable event. The IRS is moving to further address these and other tax indemnification issues raised in the ANOPR proceeding.
Transmission Providers are concerned that the IRS Notices do not cover either transactions between a Generator and certain Transmission Providers or transmission credits for network upgrade costs. Accordingly, Transmission Providers want gross-up or secured indemnity from generators until the IRS rules that such items are not taxable. Generators argue that the IA tax provisions were negotiated by tax professionals who are familiar with and represent all sides of the electric power industry, including the Transmission Providers. They ask the Commission to either accept the tax section in its entirety or eliminate it from the IA.
The NOPR IA leaves section 5.14 in place, but adds a clarification that provides Transmission Providers with full reimbursement in the future if the IRS determines that these type of events are taxable.
6. Parties to the Agreement
The participants disagree as to the appropriate party or counter-party to the IA. Transmission Providers generally believe that the Transmission Owner, whether or not it is also the Transmission Provider, should be the sole signatory to the IA. Generators believe in general that, if the Transmission Owner and Transmission Provider are separate entities, both must sign the IA.
The Commission proposes that the Transmission Provider be required to sign the agreement because this service will be provided under the Transmission Provider's OATT. Moreover, no one disputes that the Transmission Owner must sign an agreement with the Generator, and it would be a waste of resources for the Transmission Provider and Generator to have to enter into separate agreements when one agreement would suffice. Accordingly, the Commission proposes that the Transmission Provider, and, to the extent necessary, the Transmission Owner, must become signatories to the IA.
7. Liquidated Damages (IA § 5.1, IP § 13.5)
Liquidated Damages provisions appear in both the IA and the IP. The liquidated damages provision in the Consensus IA is applicable if a Generator chooses the construction option described in IA section 5.1.B. Under this option, if a Transmission Provider fails to complete the interconnection facility by the in-service date or the network upgrades by the commercial operation date, the Transmission Provider shall pay the Generator liquidated damages. Liquidated damages would be limited to 0.5% per day of the actual aggregate costs of the interconnection facilities or network upgrades for which the Transmission Provider remains responsible, and such total shall not exceed 20% of the Transmission Provider's actual costs. The participants reached agreement on this provision in the Consensus IA.
But the participants disagree about the liquidated damages provision in the IP. The Generators propose a provision that would make Transmission Providers pay liquidated damages if the Transmission Provider fails to meet any of its obligations in the IP and does not remedy the failures within 15 business days. Liquidated damages would be 1% of the actual costs of the applicable study cost per day, but would not exceed 50% of the actual cost of the applicable study. Also, upon expiration of the remedy period, the Transmission Provider would refund any deposit amount for the applicable study that the Generator had paid in excess of actual reasonably incurred study costs.
Several transmission owners object to the Generators' proposal, stating that a Transmission Owner derives no profit from performing studies under the IP; it recovers only actual study costs. They reason that it is unfair to force a Transmission Owner to assume the risk of liquidated damages where there is no concomitant financial benefit. The National Rural Electric Cooperative Association and the American Public Power Association argue that the liquidated damages would be especially burdensome on cooperatives and public power providers because of their limited resources. They propose a reciprocal liquidated damages provision for generators applicable to the milestones that a generator must satisfy. The Arizona PSC argues that transmission providers should not be liable for delay because factors beyond their control could affect the schedule. It also argues that the Commission lacks the authority under the FPA to impose damages and argues that the liquidated damages provision is an assessment for nonperformance.
Because the participants reached consensus on the liquidated damages provision in the consensus IA, the Commission has included this provision in the NOPR IA. As for the IP, the Commission will leave the Generators' liquidated damages language in the NOPR IP. The Commission did not allow for liquidated damages in the OATT provisions related to facilities studies.
24
Nevertheless, we invite comments on whether the Commission should make the Generator's proposed provision a part of the IP in the final rule.
24
Section 19.4 of the
pro forma
OATT requires Transmission Providers to use due diligence to complete a required facilities study within a 60-day period. If the Transmission Provider is unable to do so, it must notify the Transmission Customer, provide an estimate of the time needed to complete the study, and explain why the additional time is necessary. When completed, the study must include a description of the Generator's share of the cost of the required upgrade, and the time required to complete such construction and initiate the requested service.
F. Pricing Underlying the Consensus Documents
For purposes of negotiating the IA and IP, participants were directed to assume our current interconnection pricing policy (see Attachment B to the ANOPR). While the Commission indicated that pricing would be addressed in a subsequent rulemaking, the ANOPR participants have argued forcefully that the interconnection products, terms, and conditions cannot be divorced from the underlying pricing that was assumed during negotiations. Nearly all participants have cautioned that the consensus documents will need to be modified if the Commission changes its current pricing policy.
As a result, the interconnection terms and conditions before us go hand-in-
hand with pricing. We have, therefore, concluded that interconnection pricing is best addressed at this time. The NOPR IA and IP reflect our existing pricing policies, and we invite comment on whether those existing policies should be retained. In addition, we provide clarification below on the issue of how interconnection and transmission pricing must be consistent and comparable.
1. Commission's Pricing Policies
a. Network Facilities Cannot Be Directly Assigned
The Commission has long held that the transmission grid is a single piece of equipment whose use can be priced on an average or incremental investment cost basis, but not by way of direct assignment. These standards are best described in
Public Service Company of Colorado (PSCO)
,
25
where the Commission described its then new policy of allowing use of the grid to be priced either on an incremental cost basis or on the traditional average or rolled-in cost basis:
25
59 FERC ¶ 61,311 (1992),
reh'g denied
, 62 FERC ¶ 61,013 at 61,061 (1993) (footnotes omitted)
The Commission has long held that an integrated transmission grid is a cohesive network moving energy in bulk. Because the grid operates as a single piece of equipment, the Commission has consistently priced transmission service based on the cost of the grid as a whole. The Commission has rejected the direct cost assignment of grid facilities even if the grid facilities would not be installed but for a particular customer's service. The Commission as reasoned that, even if a customer can be said to have caused the addition of a grid facility, the addition represents a
system
expansion used by and benefitting all users due to the integrated nature of the grid. Recognizing that the grid is a cohesive network in a dynamic state of development, the Commission has even included remote facilities in the grid on the ground that they were merely the first segment of what would eventually be a network loop. The Commission has reserved direct assignments for only those transmission facilities that fall into what we have referred to as an “exceptional category” consisting of radials which are so isolated from the grid that they are and will remain non-integrated.
Nothing in the Commission's new pricing policy changes or undermines these fundamental premises. There continues to be only one service—service over the entire grid—and both native load and third party customers “use” the entire grid, including any expansion. Similarly, both native load and third party customers benefit from integrated grid upgrades.
The
only
change in our new policy is how to price grid service. The “but for” test continues to identify the additions to the grid which constitute the incremental cost of expanding the grid to serve the transmission customer. While we now permit utilities to price on the basis of this incremental grid cost, we are not directly assigning grid additions. We are not dismembering the grid or directly assigning its newest components.
At that time, service was still predominantly bundled (generation and transmission) and, therefore, the functionalization of costs between generation and transmission was not an issue. As a result, all transmission facilities, including generation interconnection facilities, were treated as part of the network.
b. Facilities Reassigned From Transmission to Generation
In 1996, the Commission issued Order No. 888, which required the unbundling of transmission and wholesale generation services. Prior to Order No. 888, when utilities were providing primarily a bundled generation and transmission service, the precise functionalization of costs as generation or transmission was not critical, as noted above. However, since unbundling, the Commission has determined that the cost of generation step-up transformers (GSUs) are part of the generation function rather than the transmission function.
26
In
KU
, we found that GSUs are used in providing generation services, and that the costs of these facilities should be charged to the customers using the generating facilities. Thus, we excluded the cost of GSUs from the Transmission Provider's transmission rates, reasoning that a more accurate method of cost recovery is to assign the costs of each GSU to the generator to which it is connected.
26
Kentucky Utilities Company, 85 FERC ¶ 61,274 at 62,111 (1998) (
KU
). A GSU is located adjacent to a generating plant and increases the voltage of the plant output before it reaches the transmission network.
c. Interconnection Facilities Considered Direct Assignment Facilities Rather Than Network Facilities
As merchant generation took hold, entities sought interconnection before they had lined up specific load serving entities to purchase the output of the unit. Merchant generators, therefore, had a need to interconnect before they were ready to sign up for the delivery component of transmission service.
In
Tennessee Power Company (Tennessee)
,
27
the Commission clarified that interconnection is a component of transmission service, that the interconnection component must be offered under the terms of the
pro forma
tariff, and that this right is without regard to whether the interconnection component of transmission service is requested along with or before the delivery component of transmission service. In order to interconnect to the grid, merchant generators agreed to finance all necessary construction costs. It was at this time that Transmission Providers began to request that the cost of interconnection facilities (
i.e.,
all facilities needed to connect the generator to the network) be treated as sole use facilities and be directly assigned, rather than included as part of the network. In addition, some network upgrade costs were now being assessed prior to transmission delivery service. A choice between pricing the use of the network at its average or incremental cost could no longer be made because the average cost was a function of the rolled-in rate for a delivery service that had not as yet been requested. Therefore, the Commission allowed the Transmission Provider to assess an incremental cost rate at the time of interconnection (
i.e.,
the customer pays the cost of the network upgrade that would not have been incurred but for its service request) but required that customers receive credits for the cost of the network upgrades once the delivery component of transmission service begins. The Commission instituted this “crediting” policy to ensure that customers are not charged twice for the use of the network. Later, in
American Electric Power Service Corp
.,
28
the Commission required Transmission Providers to include in the Transmission Credits interest on the monies paid. In certain ISOs with comprehensive congestion management, the Commission does not require credits for network upgrades that increase the transfer capability; the customer (generator) instead receives comparable compensation in the form of price protection from the cost effects of congestion.
27
90 FERC ¶ 61,238 at 61,761,
reh'g dismissed
, 91 FERC ¶ 61,271 (2000).
28
97 FERC ¶ 61,098 at 61,530-31 (2001).
d. Summary
In
Consumers Energy Company,
29
and
Entergy Gulf States, Inc
.,
30
the Commission underscored that the grid is a single piece of equipment from which only sole use facilities are excluded; that Commission policy prohibits the permanent direct assignment of network facilities; that the prohibition against the direct assignment of network facilities is without regard as to the purpose of the upgrade (
e.g.,
to relieve overloads, to remedy stability and short circuit problems, to maintain reliability, or to provide protection and service restoration); and that all facilities at or beyond the point where the customer (or generator) connects to the grid are network facilities.
29
95 FERC ¶ 61,233,
order on reh'g,
96 FERC ¶ 61,132 (2001).
30
98 FERC ¶ 61,014,
reh'g denied,
99 FERC ¶ ___ (2002).
2. Interconnection and Transmission Pricing Must Be Comparable and Consistent
In
Southern Company Services, Inc. (Southern)
, the company proposed to continue to treat the cost of interconnection facilities (meaning facilities on the generator's side of the point of interconnection) for its own generators as part of the network while directly assigning the cost of the same type of facilities to its competitors' generators.
31
Southern
raised the issue of how to ensure comparability with interconnection and transmission pricing. Recognizing the need to address this issue on a generic basis, the Commission made
Southern
subject to the outcome of this rulemaking.
31
98 FERC ¶ 61,328 (2002).
The NOPR IA and IP reflect the Commission's current interconnection pricing policy and we have invited comments on whether that policy should be retained. We will require that all transmission rates be designed in a manner that is consistent with whatever interconnection pricing is approved. To the extent our current interconnection pricing is adopted, all generation interconnection facilities, not just generator step-up transformers, must be removed from the transmission charge and directly assigned as sole use facilities. Consistent with our current pricing of generator step-up transformers, this sends a more accurate price signal by assigning the cost of interconnection facilities to the generation customers using them.
If commenters wish to propose generation interconnection pricing that differs from the pricing we propose herein, they must identify and explain to what extent the NOPR IA and IP must be changed accordingly as well as how they will ensure that the transmission rates are designed on a consistent and comparable basis.
3. Pricing for Independent Entities
After the release of the ANOPR the Commission announced its intention to reform public utility transmission tariffs using a standard market design (SMD) in Docket RM01-12. We seek comment on appropriate generator interconnection pricing in this docket consistent with the locational pricing methodology in the SMD proceeding. We note that in regions that use locational pricing, ISOs assess the cost of any new network facilities based on which network facilities would not be in the transmission expansion plan but for the interconnecting generator (this is referred to as the “but for” test). In this case, the generator typically receives transmission rights in return for the capacity that is created, which may take on value if the facility becomes congested in the future. This pricing method has only been allowed in regions where the transmission provider is independent of market participants. This is because of our concern that certain aspects of this method such as the congestion price signals to which the generator responds in asking for an upgrade, the determination of which generators in the queue should be responsible for which facilities, the cost of the facilities, and the assumptions underlying the power flow analysis, can be subjective. As a result, a transmission provider that is not an independent entity would have the ability and the incentive to exploit this subjectivity to its own advantage if it is able to assess the costs of network upgrades to the interconnecting generator. To address this potential problem, we invite comment on whether the Commission should accept an approach that departs from current Commission policy of providing transmission credits, and will consider alternative proposals as long as we can be assured that these cost causation determinations are made on an objective and non-discriminatory basis by an independent entity such as an RTO.
G. Other Issues
1. Force Majeure and Other Liability Issues
The ERCOT Standard Generation Interconnection Agreement contains several provisions addressing liability and a
force majeure
exception to liability. None of these provisions were reviewed and adopted by the IA drafting group, but they were filed as part of the Consensus IA. In the discussion below, we look to similar provisions in the OATT for comparison.
a. Insurance
At the outset, we note that Article 9 in the ERCOT Agreement (Article 13 in the Consensus IA) requires each party to the agreement to maintain certain minimum insurance coverages. The OATT contains no provision requiring insurance coverage.
b. Indemnification
Indemnification is the act of compensating another for a loss suffered due to a third party's act or default.
32
The ERCOT Agreement and the Consensus IA contain different indemnity provisions. The ERCOT provision (section 10.15, which incorporates by reference a Texas Public Utility Commission rule, PUCT Rule 25.202(b)(2)) does not extend indemnity protection to cases of gross negligence or intentional wrongdoing, while the Consensus IA (section 19.1) does not extend indemnity protection to cases of ordinary negligence or willful misconduct. Also, the ERCOT provision makes the legal costs of prosecuting or defending a claim by a third person an eligible liability, but does not allow indemnity protection from such costs when the action is between the parties to the agreement, while the Consensus IA draws no such distinction and makes all reasonable legal costs recoverable. The Consensus IA also includes indemnity procedures that describe how a party may pursue indemnity claims, and the procedure for doing so.
32
Black's Law Dictionary 772 (7th ed. 1999).
The indemnification provision in the OATT (section 10.2) indemnifies the transmission provider for legal costs due to claims by third persons arising from performance of its obligations under the OATT, and does not explicitly allow indemnification for disputes arising over enforcement of this provision. Indemnification does not extend to cases of ordinary negligence and intentional wrongdoing by the Transmission Provider.
c. Consequential Damages
Consequential damages are losses that flow indirectly from an injurious act rather than directly and immediately.
33
The ERCOT Agreement's consequential damages provision (section 10.16, which is found in section 19.6 of the Consensus IA) excuses liability for losses or costs for any special, indirect, incidental, consequential, or punitive
damages. Liability for damages under another agreement will not be considered special, indirect, or consequential damages under this provision.
33
Id.
at 394.
The OATT protects a transmission provider from consequential damages and indirect damage claims by third parties through indemnification except in cases of negligence or intentional wrongdoing by the transmission provider. No other protection against consequential damages appears in the OATT. In Order No. 888-A, the Commission stated that it saw no need to extend this protection, and noted that “liability is a separate issue from indemnification, and that nothing in these provisions precludes transmission providers or customers from relying, when and where such law is applicable, on the protection of statutes or other law protecting parties from consequential or indirect damages.”
34
34
Order No. 888-A at 30,302.
d. Force Majeure
Nonperformance due to a
force majeure
event shall not be considered default. The Consensus IA (Article 17) adopts the ERCOT
force majeure
provision (section 10.5), which uses a standard laundry list of causes that are considered “beyond the reasonable control” of the party claiming
force majeure.
Fault and negligence are still exceptions, but the
force majeure
event must “materially prevent or impair” the performance of the claimant's obligations. Article 17 also explains the procedure for making a claim of
force majeure.
A party affected shall exercise “due diligence” to remove its inability to meet its obligations with “reasonable dispatch,” but this does not include accepting unsatisfactory provisions that would resolve a labor dispute.
The
force majeure
provision in the OATT (section 10.1) also adopts a standard laundry list of causes but excludes acts of negligence or intentional wrongdoing (without specifying whose negligence or intentional wrongdoing). Nonperformance due to a
force majeure
event is not considered default, but parties should make all reasonable efforts to perform their obligations under the tariff.
e. Discussion
The Commission proposes adopting the protections afforded in the OATT, but making them applicable to both the transmission provider and the interconnection customer. Order No. 888 and its progeny clarified that the
pro forma
tariff was not intended to address liability issues beyond indemnification and
force majeure
,
35
and we intend to apply that principle here as well.
36
Accordingly, we have incorporated the OATT provisions into the NOPR IA, and eliminated the insurance requirements. Nevertheless, we invite comment on the Commission's proposed approach and ask commenters to address the relative merits of the alternative ERCOT and Consensus IA provisions.
35
Order No. 888-A at 30,301-02; Order No. 888-B at 62,080-81.
36
See, e.g.,
Delmarva Power & Light Co., 88 FERC ¶ 61,247 at 61,786,
reh'g dismissed,
89 FERC ¶ 61,170 (1999) (rejecting two parties' competing attempts to address liability issues in their interconnection agreement, and instructing the parties to instead use the indemnification and
force majeure
provisions from the OATT);
but see
Commonwealth Edison Co., 92 FERC ¶ 61,175 at 61,620 (2000) (noting that limitation of liability provisions inconsistent with those in the
pro forma
OATT are acceptable when the individual IA demonstrates that a different limitation of liability provision was part of the specific bargain); Cinergy Services, Inc., 99 FERC ¶ 61,025 (2002).
2. Reciprocity
Order No. 888 required that transmission tariffs contain a reciprocity provision
37
applicable to any customer, including a non-public utility, that owns, controls or operates interstate transmission facilities and that takes service under the open access tariff, and any affiliates of the customer that own, control or operate interstate transmission facilities. The purpose of this provision was to ensure that a public utility offering transmission access to others could obtain similar service from its transmission customers, including non-public utilities. This provision further ensures that any non-public utility that wishes to take advantage of the open access transmission provided by public utilities must offer comparable transmission service in return. They may do so either on a utility-specific basis or through a Commission-approved “reciprocity OATT” on file with the Commission. Since we found in
Tennessee
that interconnection service is an element of transmission service that must be offered under the terms of the Transmission Provider's OATT, and the IP and IA will be added to the OATT, we find that interconnection service also will be subject to this reciprocity requirement. Although we do not have direct authority to require non-public utilities to make interconnection service generally available, we have the ability and the obligation to ensure that all aspects of open access transmission are as widely available as possible and that the implementation of this rulemaking does not result in competitive disadvantage to public utilities. Thus, we propose that the reciprocity provision apply to interconnection as well, and that any non-public utility that wishes either to take advantage of, or to continue to take advantage of, open access on a public utility's transmission system, must adopt the IA and IP into its own reciprocity service.
37
Order No. 888 at 31,760-63; Order No. 888-A at 30,281-87.
H. Summary of NOPR IA and IP
1. Standard Generator Interconnection and Operating Agreement
Article 1. Definitions
—This Article contains the definitions of terms used in the Agreement. Capitalized terms in the summary are defined in the Agreement.
Article 2. Effective Date, Term and Termination
—The term of the Agreement will be 10 years, or longer by request, and will be automatically renewed each successive year thereafter. Termination procedures are described. Parties retain the right to seek unilateral modification of this Agreement under FPA sections 205 and 206.
Article 3. Regulatory Filings
—The Transmission Provider will be responsible for filing the document with the appropriate Governmental Authority. Procedures for confidential treatment of Generator information are described.
Article 4. Scope of Service
—This Article describes the two kinds of interconnection products available.
38
Energy Resource (ER) Interconnection Service allows the Generator to connect its Facility to the Transmission System and be eligible to deliver output using existing firm or non-firm capacity on an “as available” basis. Network Resource (NR) Interconnection Service allows the Generator to connect its Facility in a manner comparable to that in which the Transmission Provider integrates its generating facilities to service native load or, in an ISO or RTO with market-based congestion management, in the same manner as other Network Resources. Neither ER nor NR Interconnection conveys any right to transmission delivery service, nor does the Agreement constitute a request for transmission delivery service. The studies for each service are described, as are the implications of the Generator's eligibility for delivery under each service.
38
This proposal was developed in advance of the standard market design proposal that the Commission will issue in RM01-12-000.
Article 5. Interconnection Facilities Engineering, Procurement, and Construction
—This Article describes
the procedures for designing, procuring, and constructing the Transmission Provider Interconnection Facilities/Network Upgrades and the Generator Interconnection Facilities. Construction options, rights, and responsibilities are also presented. Generators will not be responsible for costs of modifications made to the Transmission Provider Interconnection Facilities or the Transmission System to facilitate interconnection of a third party or to provide transmission service under the Transmission's Provider Tariff. The Parties intend that all payments or transfers by the Generator to the Transmission Provider for installation and upgrades shall be nontaxable. If these payments ultimately are found to be taxable, the Generator shall indemnify the Transmission Provider.
Article 6. Testing and Inspection
—Both Parties will conduct facility testing before the Commercial Operation Date and make any necessary modifications. The Generator shall bear the cost of these tests and modifications. After the Commercial Operation Date, each Party shall conduct routine inspection and testing of its facility at its own expense.
Article 7. Metering
—The Transmission Provider will install, own, operate and maintain Metering Equipment at the Point of Interconnection, but the Generator shall bear all reasonable documented costs. The Article also describes Metering Equipment standards and testing requirements.
Article 8. Communication
—The Article describes the necessary operating communications and dedicated data circuits between the Parties and the cost and maintenance responsibility for such equipment.
Article 9. Operations
—The Generator and Transmission Provider should operate their respective facilities and equipment in a safe and reliable manner. This Article also describes Reactive Power requirements. In the event the Parties agree or are required to allow third parties to use any portion of the Transmission Provider Interconnection Facilities, the Generator will be compensated for capital expenses incurred based on the
pro rata
use of the Interconnection Facilities by the Transmission Provider, all third-party users, and the Generator.
Article 10. Maintenance
—The Generator will be responsible for all reasonable expenses associated with owning, operating and maintaining Generator and Transmission Provider Interconnection Facilities (except for operations and maintenance expenses associated with modifications necessary for providing service to a third party that pays for such expenses).
Article 11. Performance Obligation
—The Article describes the security and payment obligations of the Generator and Transmission Provider with respect to facility construction and Transmission Provider requests for service from the Generator. Section 11.4 describes the payment mechanism for Network Upgrades, in which a Generator shall receive a cash refund of the amount paid to the Transmission Provider for Network Upgrades plus interest.
Article 12. Invoice
—This Article describes monthly invoice and billing dispute procedures. The Transmission Provider must provide an invoice of the final cost of construction of the Transmission Provider Interconnection Facilities and Network Upgrades within six months, and in sufficient detail to enable the Generator to compare actual costs with estimates.
Article 13. Emergencies
—This Article explains the Transmission Provider's and the Generator's responsibilities when Emergency Conditions arise.
Article 14. Governing Law and Applicable Tariffs
—The validity, interpretation, and performance of this Agreement shall be governed by the laws of the state where the Point of interconnection is located, without regard to that state's conflicts of law principles.
Article 15. Notices
—This Article contains the addresses at which the Transmission Provider and Generator will receive, among other things, notices, bills and payments.
Article 16. Force Majeure
—
Force Majeure
is defined as any cause beyond a Party's control. Events arising from negligence or intentional wrongdoing are not
Force Majeure.
Nonperformance due to a
Force Majeure
event shall not be considered Default.
Article 17. Default
—Article 18 defines Default as the failure of either Party to perform any obligation in the time or manner provided in this Agreement. No Default exists as a result of
Force Majeure
or an act or omission of the other Party. Notice and cure procedures also are described.
Article 18. Indemnity
—The Article explains that each Party shall indemnify the other from any and all damages, losses, and claims by or to third parties arising from the other Party's performance of its obligations under this Agreement on behalf of the indemnifying Party. No indemnity will be available in cases of negligence or intentional wrongdoing by the indemnifying Party.
Article 19. Assignment
—Written consent ordinarily is required to assign the Agreement, but assignment may be secured without consent if the assignee is an affiliate that meets certain qualifications. No consent is required if a Generator assigns the Agreement for collateral security purposes to aid in Facility financing.
Article 20. Severability
—Explains that if a court or Governmental Authority determines that any provision of this Agreement is invalid, void, or unenforceable, such determination shall not invalidate any other provision in this Agreement.
Article 21. Comparability
—Parties will comply with all applicable comparability requirements and code of conduct laws, rules and regulations.
Article 22. Confidentiality
—This Article describes what constitutes Confidential Information and the protections that will be afforded such information when shared between Parties.
Article 23. Environmental Releases
—Describes procedures for notifying the other Party of the release or remediation of Hazardous Substances related to the Facility or the Interconnection Facilities that may be expected to affect the other Party.
Article 24. Information Requirements
—This Article describes the requirements for submitting information regarding the electric characteristics of the Parties' respective facilities. Among the information, the Transmission Provider shall provide a monthly status report on construction and installation of Transmission Provider Interconnection Facilities and Network Upgrades.
Article 25. Information Access and Audit Rights
—Each Party shall make information available to the other Party necessary to verify costs for which the other Party is responsible under this Agreement and to carry out its obligations and responsibilities under this Agreement.
Article 26. Subcontractors
—The Parties may use subcontractors to perform obligations under this Agreement provided that the contractors comply with the applicable terms and conditions of the Agreement and each Party remains liable to the other for the subcontractor's performance. The hiring Party retains all of its obligations under this Agreement.
Article 27. Disputes
—This Article explains the dispute resolution and arbitration procedures.
Article 28. Representations, Warranties and Covenants
—This Article requires that each Party be organized and qualified to do business in the
relevant jurisdiction. Each Party has the Authority to enter into this Agreement, and performance of its duties does not violate or conflict with organizational or formation documents.
Article 29. Operating Committee
—The Parties shall convene an Operating Committee, comprising one representative and one alternate from each Party who will also be members of the joint Operating Committee, that will meet at least annually to carry out the duties set forth in this Article.
Article 30. Miscellaneous
—This Article contains provisions addressing matters such as rules of interpretation, a prohibition on third-party beneficiaries, and the right to amend the Agreement by mutual agreement.
Appendices
—The Agreement contains separate appendices for Interconnection Facilities and Network Upgrades, Time Schedule, Interconnection Details, Standard Generator Interconnection Agreement, Security Arrangement Details, Commercial Operation Date, and Interconnection Guidelines.
2. Standard Generator Interconnection Procedures
Section 1. Definitions
—Definitions of terms used in the Interconnection Procedures are provided. (In this summary, defined terms are capitalized.)
Section 2. Scope and Application
—The Transmission Provider must follow strict comparability principles. The Interconnection Procedures do not constitute a request for, nor confer a right to receive, transmission service.
Section 3. Interconnection Requests
—This section describes interconnection request procedures, including a refundable deposit of $10,000 payable to the Transmission Provider that will be applied toward the cost of the Interconnection Feasibility Study. The Generator may withdraw its request at any time, and if the Generator fails to adhere to all requirements of the Interconnection Procedures, the Transmission Provider shall deem the request to be withdrawn.
Section 4. Queue Position
—The queue position is based, in general, on the date and time of receipt of the valid (
i.e.,
complete) Interconnection Request, and is used to determine the order of performing studies and cost responsibility. At the Transmission Provider's option, Interconnection System Impact Studies may be performed serially as requests are received or in clusters.
Section 5. Procedures for Interconnection Requests Submitted Prior to Effective Date of Interconnection Procedures
—This section provides for the completion of studies and the finalizing of Interconnection and Operating Agreements that are pending as of the effective date of the Interconnection Procedures.
Section 6. Interconnection Feasibility Study
—The Interconnection Feasibility Study shall preliminarily evaluate the feasibility of the proposed interconnection to the Transmission System and will consist of a power flow and short circuit analysis. The Generator is responsible for the actual cost of the study and any re-studies that may be required.
Section 7. Interconnection System Impact Study
—The Interconnection System Impact Study shall evaluate the impact of the proposed interconnection on the reliability of the Transmission System and will consist of a short circuit analysis, a stability analysis, and a power flow analysis. The Generator is responsible for the actual cost of the study and any re-studies that may be required.
Section 8. Interconnection Facilities Study
—The Interconnection Facilities Study shall specify and estimate the cost of implementing the conclusions of the Interconnection System Impact Study, including the nature and cost of any Transmission Provider Interconnection Facilities and Network Upgrades needed. It shall also provide an estimate of the time required to complete the construction and installation of these facilities. The Generator is responsible for the actual cost of the study and any re-studies that may be required.
Section 9. Agreements
—In order to advance the implementation of its interconnection, the Generator may request the Transmission Provider to offer an Engineering and Procurement Agreement that authorizes the Transmission Provider to begin engineering and procurement of long lead-time items necessary for the establishment of the interconnection.
Section 10. Optional Study
—The Generator may request the Transmission Provider to perform a reasonable number of Optional Studies. An Optional Study will consist of a sensitivity analysis and will identify the costs that may be required to provide transmission service or interconnection service based upon the results of the Optional Study.
Section 11. Interconnection and Operating Agreement
—When the Transmission Provider delivers the draft Interconnection Facilities Study report to the Generator, the Transmission Provider shall tender a draft Interconnection and Operating Agreement with draft appendices completed to the extent practicable. Procedures and requirements for filing and complying with an unexecuted agreement also are described.
Section 12. Construction of Transmission Provider Interconnection Facilities and Network Upgrades
—The Transmission Provider and the Generator shall negotiate a schedule for constructing needed facilities and upgrades. A Generator may request the Transmission Provider to advance the completion of necessary Network Upgrades that are the responsibility of another entity and would not otherwise be completed in time to support the Generator's In-Service Date. However, the Generator must commit to pay any expediting costs and the cost of the upgrades, with such payments to be refunded when the Transmission Provider receives payment from the responsible entity.
Section 13. Miscellaneous
—The Interconnection Procedures include a variety of miscellaneous provisions pertaining to: (1) Confidential treatment of information provided by the Generator, (2) the Transmission Provider's right to delegate responsibility to subcontractors, (3) the Generator's obligation to pay the actual costs of Interconnection Studies, (4) the Generator's right to request the Transmission Provider to contract with a third party to perform an Interconnection Study, (5) the obligation of the Transmission Provider to pay the Generator liquidated damages, and (6) dispute resolution procedures.
Section 14. Small Generator Interconnection Requests
—Small Generators are defined as units of no more than 20 MW or aggregations of interconnecting Facilities at a single Point of Interconnection totaling no more than 20 MW. Although, for Small Generators, the deposit requirement for each of the Interconnection Studies is waived, Small Generators are responsible for the costs of processing the Interconnection Request and the performance of Interconnection Studies, unless waived. Expedited procedures will be used for Small Generators' Interconnection Requests and Interconnection Studies, but Small Generators will be placed in the same queue as Generators.
Appendices
—The Interconnection Procedures include five appendices that provide forms of agreement for the Interconnection Request, the Interconnection Feasibility Study, the Interconnection System Impact Study, the Interconnection Facilities Study, and the Optional Study.
III. Public Reporting Burden and Information Collection Statement
The following collections of information contained in this proposed rule are being submitted to the Office of Management and Budget (OMB) for review under Section 3507(d) of the Paperwork Reduction Act of 1995. FERC identifies the information provided under Part 35 as FERC-516.
Comments are solicited on the Commission's need for this information, whether the information will have practical utility, the accuracy of the provided burden estimates, ways to enhance the quality, utility, and clarity of the information to be collected, and any suggested methods for minimizing respondents' burden, including the use of automated information techniques. The following burden estimate includes the cost of preparing and submitting tariff changes to comply with the Commission's proposed regulation.
Public Reporting Burden:
Estimated Annual Burden:
Data collection FERC-516
Number of respondents
Number of responses
Hours per response
Total annual hours
Reporting
270
(In place)
145
1
4
580
(Develop)
125
1
31
3,875
Totals
270
1
35
4,455
Total Annual Hours for Collection (reporting + record keeping, (if appropriate) = 4,455 hours (270 respondents (145 × 1 filing × 4 hours for review, clarification or 580 hours) + (125 × 1 × 31 to develop interconnection agreement format or 3,875) = 4,455). Information Collection Costs: The Commission seeks comments on the costs to comply with these requirements. It has projected the average annualized cost for all respondents to be:
Annualized Capital/Startup Costs-Staffing requirements to review and prepare an interconnection agreement = $222,750 ($29,000 (145 respondents × $200 (4 hours @ $50 hourly rate) + $ 193,750 (125 respondents × $1,550 (31 hours @ $50 hourly rate) Annualized Costs (Operations & Maintenance). The cost per respondent is equal to $107 (145 respondents who agreements in place), $718 (125 respondents who have to develop documentation).
The OMB regulations require OMB to approve certain information collection requirements imposed by agency rule. 5 CFR 1320.11. Accordingly, pursuant to OMB regulations, the Commission is providing notice of its proposed information collections to OMB.
Title:
FERC-516, Electric Rate Schedule Filings.
Action:
Proposed Data Collections.
OMB Control No.:
1902-0096.
The applicant shall not be penalized for failure to respond to this collection of information unless the collection of information displays a valid OMB control number.
Respondents:
Business or other for profit.
Frequency of Responses:
One-time implementation.
Necessity of Information:
The proposed rule would revise the requirements contained in 18 CFR part 35. The Commission is seeking to establish standardized interconnection procedures and agreements. In particular, the Commission will propose this proposed rule standardized interconnection agreements and procedures that public utilities must adopt. The proposed rule would require that each public utility that owns, operates or controls transmission facilities participate in one-time filings incorporating the agreement and procedures into their open access transmission tariffs. Internal Review: The Commission has assured itself, by means of internal review, that there is specific, objective support for the burden estimates associated with the information requirements. The Commission's Office of Markets, Tariffs and Rates will use the data included in filings under Section 203 and 205 of the Federal Power Act to evaluate efforts for the interconnection and coordination of the U.S. electric transmission system and to ensure the orderly implementation of the interconnection procedures and agreement as well as for general industry oversight. These information requirements conform to the Commission's plan for efficient information collection, communication, and management within the electric power industry.
Interested persons may obtain information on the reporting requirements by contacting the following: Federal Energy Regulatory Commission, 888 First Street, NE, Washington, DC 20426 [Attention: Michael Miller, Capital Planning and Policy Group, Phone: (202) 208-1415, fax: (202) 208-2425, E-mail:
michael.miller@ferc.gov.
]
For submitting comments concerning the collection of information(s) and the associated burden estimate(s), please send your comments to the contact listed above and to the Office of Management and Budget, Office of Information and Regulatory Affairs, Washington, DC 20503, [Attention: Desk Officer for the Federal Energy Regulatory Commission, phone: (202) 395-7318, fax: (202) 395-7285].
IV. Environmental Statement
The Commission concludes that promulgating the proposed rule would not present a major federal action having a significant adverse impact on the human environment under the Commission's regulations implementing the National Environmental Policy Act.
39
The proposed rule falls within the categorical exemption provided in the Commission's regulations for approval of actions under §§ 203 and 205 of the Federal Power Act relating to provided for the filing of schedules containing all rates and charges for any transmission or sale subject to the Commission's jurisdiction, plus the classification, practices, contracts and regulations that affect rates, charges, classifications and services.
40
Consequently, neither an environmental assessment nor an environmental impact statement is required.
39
18 CFR Part 380.
40
18 CFR Part 380.4(a)(15)(16).
V. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)
41
requires rulemakings to contain either a description and analysis of the effect that the proposed rule will have on small entities or a certification that the rule will not have a significant economic impact on a substantial number of small entities. The regulations proposed here impose requirements only on interstate transmission providers, which are not small businesses, and, these requirements are, in fact, designed to benefit all customers, including small businesses. Accordingly, pursuant to
section 605(b) of the RFA, the Commission hereby certifies that the proposed regulations will not have a significant adverse impact on a substantial number of small entities.
41
5 U.S.C. 601-612 (1994).
VI. Comment Procedures
The Commission invites interested persons to submit comments, data, views and other information concerning matters set out in this notice.
To facilitate the Commission's review of the comments, commenters are requested to provide an executive summary of their positions. Commenters are requested to identify each specific issue posed by the NOPR that their discussion addresses and to use appropriate headings that clearly identify the relevant IA and IP sections. Additional issues the commenters wish to raise should be identified separately. The commenters should double-space their comments.
Comments may be filed on paper or electronically via the Internet and must be received by the Commission by June 17, 2002. Comments should not exceed 30 double-spaced pages and should include an executive summary. Those filing electronically do not need to make a paper filing. For paper filings, the original and 14 copies of such comments should be submitted to the Office of the Secretary, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426 and should refer to Docket No. RM02-1-000.
Comments filed via the Internet must be prepared in WordPerfect, MS Word, Portable Document Format, or ASCII format. To file the document, access the Commission's website at
www.ferc.gov
and click on “e-Filing,” and then follow the instructions for each screen. First time users will have to establish a user name and password. The Commission will send an automatic acknowledgment to the sender's E-Mail address upon receipt of comments.
User assistance for electronic filing is available at 202-208-0258 or by E-Mail to
efiling@ferc.fed.us.
Comments should not be submitted to the E-Mail address. All comments will be placed in the Commission's public files and will be available for inspection in the Commission's Public Reference Room at 888 First Street, NE., Washington, DC 20426, during regular business hours. Additionally, all comments may be viewed, printed, or downloaded remotely via the Internet through FERC's Homepage using the RIMS link. User assistance for RIMS is available at 202-208-2222, or by E-mail to
RimsMaster@ferc.fed.us.
VIII. Document Availability
In addition to publishing the full text of this document in the
Federal Register
, the Commission provides all interested persons an opportunity to view and/or print the contents of this document via the Internet through FERC's Home Page (
http://www.ferc.gov
) and in FERC's Public Reference Room during normal business hours (8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A, Washington, DC 20426.
From FERC's Home Page on the Internet, this information is available in both the Commission Issuance Posting System (CIPS) and the Records and Information Management System (RIMS).
—CIPS provides access to the texts of formal documents issued by the Commission since November 14, 1994.
—CIPS can be accessed using the CIPS link or the Energy Information Online icon. The full text of this document is available on CIPS in ASCII and WordPerfect 8.0 format for viewing, printing, and/or downloading.
—RIMS contains images of documents submitted to and issued by the Commission after November 16, 1981. Documents from November 1995 to the present can be viewed and printed from FERC's Home Page using the RIMS link or the Energy Information Online icon. Descriptions of documents back to November 16, 1981, are also available from RIMS-on-the-Web; requests for copies of these and other older documents should be submitted to the Public Reference Room.
User assistance is available for RIMS, CIPS, and the Website during normal business hours from our Help line at (202) 208-2222 (E-Mail to
WebMaster@ferc.fed.us
) or the Public Reference at (202) 208-1371 (E-Mail to
public.referenceroom@ferc.fed.us
).
During normal business hours, documents can also be viewed and/or printed in FERC's Public Reference Room, where RIMS, CIPS, and the FERC Website are available. User assistance is also available.
List of Subjects in 18 CFR Part 35
Electric power rates, Electric utilities, Reporting and recordkeeping requirements.
By direction of the Commission.
Linwood A. Watson, Jr.,
Deputy Secretary.
In consideration of the foregoing, the Commission proposes to amend Part 35, Chapter I, Title 18 of the Code of Federal Regulations, as follows.
PART 35—FILING OF RATE SCHEDULES
1. The authority citation for part 35 continues to read as follows:
Authority:
16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 U.S.C. 7101-7352.
2. Add § 35.28(f) to read as follows:
§ 35.28
Nondiscriminatory open access transmission tariff.
(f)
Standardized interconnection agreement and procedures.
(1) Every public utility that is required to have on file a non-discriminatory open access transmission tariff under this section must amend such tariff by adding the standardized interconnection agreement and procedures contained in Order No. __, FERC Stats. & Regs. ¶ ___ [Final Rule on Interconnection] or such other interconnection agreement and procedures as may be approved by the Commission consistent with Order No. __, FERC Stats. & Regs. ¶ ___ [Final Rule on Interconnection].
(i) The amendment required by the preceding paragraph must be filed no later than [60 days after the issuance of the final rule].
(ii) Any public utility that seeks a deviation from the standardized interconnection agreement and procedures contained in Order No. __, FERC Stats. & Regs. ¶ ___ [Final Rule on Interconnection], must demonstrate that the deviation is consistent with the principles of Order No. __, FERC Stats. & Regs. ¶ ___ [Final Rule on Interconnection ].
(2) The non-public utility procedures for tariff reciprocity compliance described in paragraph (e) of this section are applicable to the standardized interconnection agreement and procedures.
[
Note:
The following Attachments will not be Published in the Code of Federal Regulations]
Standard Generator Interconnection and Operating Agreement
Table of Contents
Article 1. Definitions
Article 2. Effective Date, Term and Termination
2.1 Effective Date
2.2 Term of Agreement
2.3 Termination Procedures
2.3.1 Written Notice
2.3.2 No Commercial Operation
2.3.3 Default
2.4 Termination Costs
2.4.1
2.4.2
2.4.3
2.5 Disconnection
2.6 Survival
2.7 Reservation of Rights
Article 3. Regulatory Filings
3.1 Filing
Article 4. Scope of Service
4.1 Interconnection Product Options
4.1.1 Energy Resource Interconnection Service
4.1.1.1 The Product
4.1.1.2 The Study
4.1.1.3 Delivery Service Implications
4.1.2 Network Resource Interconnection Service
4.1.2.1 The Product
4.1.2.2 The Study
4.1.3 Delivery Service Implications
4.2 Provision of Service
4.3 Generator Balancing Service Arrangements
4.3.1
4.4 Performance Standards
4.5 No Transmission Delivery Service
4.6 Generator Provided Services
Article 5. Interconnection Facilities Engineering, Procurement, and Construction
5.1 Options
5.2 Power System Stabilizers
5.3 Equipment Procurement
5.3.1
5.3.2
5.3.3
5.4 Construction Commencement
5.4.1
5.4.2
5.4.3
5.4.4
5.5 Work Progress
5.6 Information Exchange
5.7 Limited Operation
5.8 Generator Interconnection Facilities (“GIF”)
5.8.1 Generator Specifications
5.8.2 Transmission Provider's Review
5.8.3 GIF Construction
5.9 Transmission Provider Interconnection Facilities Construction
5.10 Access Rights
5.11 Lands of Other Property Owners
5.12 Early Construction of Base Case Facilities
5.13 Suspension
5.14 Taxes
5.14.1 Generator Payments Not Taxable
5.14.2 Representations And Covenants
5.14.3 Indemnification for Taxes Imposed Upon Transmission Provider
5.14.4 Tax Gross-Up Amount
5.14.5 Private Letter Ruling or Change or Clarification of Law
5.14.6 Contests
5.14.7 Refund
5.14.8 Taxes Other Than Income Taxes
5.14.9 Transmission Owners Who Are Not Transmission Providers
5.15 Tax Status
5.16 Modification
5.16.1 General
5.16.2 Standards
5.16.3 Modification Costs
Article 6. Testing and Inspection
6.1 Pre-Commercial Operation Date Testing and Modifications
6.2 Post-Commercial Operation Date Testing and Modifications
6.3 Right to Observe Testing
6.4 Right to Inspect
Article 7. Metering
7.1 General
7.2 Check Meters
7.3 Standards
7.4 Testing of Metering Equipment
7.5 Metering Data
Article 8. Communications
8.1 Generator Obligations
8.2 Remote Terminal Unit
8.3 No Annexation
Article 9. Operations
9.1 General
9.2 Control Area Notification
9.3 Transmission Provider Obligations
9.4 Generator Obligations
9.5 Start-Up and Synchronization
9.6 Reactive Power
9.6.1 Power Factor Design Criteria
9.6.2 Voltage Schedules
9.6.2.1 Governors and Regulators
9.6.3 Payment for Reactive Power
9.7 Outages, Interruptions, and Disconnection
9.7.1 Outages
9.7.1.1 Outage Authority and Coordination
9.7.1.2 Outage Schedules
9.7.1.3 Outage Restoration
9.7.2 Continuity of Service
9.7.2.1
9.7.2.2
9.7.2.3
9.7.2.4
9.7.2.5
9.7.3 Under-Frequency Load Shed Event
9.7.4 System Protection and Other Controls Requirements
9.7.4.1 Protection and System Quality
9.7.4.2
9.7.4.3
9.7.4.4
9.7.4.5
9.7.4.6
9.7.5 Requirements for Protection
9.7.6 Power Quality
9.8 Switching and Tagging Rules
9.9 Use of Interconnection Facilities by Third Parties
9.9.1 Purpose of Interconnection Facilities
9.9.2 Third Party Users
9.10 Data Exchange
Article 10. Maintenance
10.1 Transmission Provider Obligations
10.2 Generator Obligations
10.3 Coordination
10.4 Secondary Systems
10.5 Operating and Maintenance Expenses
Article 11. Performance Obligation
11.1 Generator Interconnection Facilities
11.2 Transmission Provider Interconnection Facilities
11.3 Network Upgrades
11.4 Transmission Credits
11.4.1 Refund of Amounts Advanced for Network Upgrades
11.4.2
11.5 Financial Security Arrangements
11.5.1 Provision of Security
11.5.1.1
11.5.1.2
11.5.1.3
11.6 Generator Compensation
11.6.1 Generator Compensation for Actions During Emergency Condition
Article 12. Invoice
12.1 General
12.2 Final Invoice
12.3 Payment
12.4 Disputes
Article 13. Emergencies
13.1 Definition
13.2 Obligations
13.3 Notice
13.4 Immediate Action
13.5 Transmission Provider Authority
13.5.1 General
13.5.2 Curtailment, Reduction, and Disconnection
13.6 Generator Authority
13.7 Limited Liability
Article 14. Governing Law and Applicable Tariffs
14.1 Regulatory Requirements
14.2 Governing Law and Applicable Tariffs
14.2.1
14.2.2
14.2.3
Article 15. Notices
15.1 General
15.2 Billings and Payments
15.3 Alternative Forms of Notice
15.4 Operations and Maintenance Notice
Article 16. Force Majeure
16.1 Force Majeure
Article 17. Default
17.1 Default
17.1.1 General
17.1.2 Right to Terminate
Article 18. Indemnity
18.1 Indemnity
Article 19. Assignment
19.1 Assignment
Article 20. Severability
20.1 Severability
Article 21. Comparability
21.1 Comparability
Article 22. Confidentiality
22.1 Confidentiality
22.1.1 Term
22.1.2 Scope
22.1.3 Release of Confidential Information
22.1.4 Rights
22.1.5 No Warranties
22.1.6 Standard of Care
22.1.7 Order of Disclosure
22.1.8 Termination of Agreement
22.1.9 Remedies
22.1.10 Disclosure to FERC or its Staff
22.1.11
2.1.12
Article 23. Environmental Releases
23.1
Article 24. Information Requirements
24.1 Information Acquisition
24.2 Information Submission by Transmission Provider
24.3 Updated Information Submission by Generator
24.4 Information Supplementation
Article 25. Information Access and Audit Rights
25.1 Information Access
25.2 Reporting of Non-Force Majeure Events
25.3 Audit Rights
25.4 Audit Rights Periods
25.4.1 Audit Rights Period for Construction-Related Accounts and Records
25.4.2 Audit Rights Period for All Other Accounts and Records
25.5 Audit Results
Article 26. Subcontractors
26.1 General
26.2 Responsibility of Principal
26.3 No Limitation by Insurance
Article 27. Disputes
27.1 Submission
27.2 External Arbitration Procedures
27.3 Arbitration Decisions
27.4 Costs
Article 28. Representations, Warranties and Covenants
28.1 General
28.1.1 Good Standing
28.1.2 Authority
28.1.3 No Conflict
28.1.4 Consent and Approval
Article 29. Operating Committee
29.1 Operating Committee
29.1.1
29.1.2
29.1.3
29.1.4
29.1.5
29.1.6
29.1.7
Article 30. Miscellaneous
30.1 Binding Effect
30.2 Conflicts
30.3 Rules of Interpretation
30.4 Entire Agreement
30.5 No Third Party Beneficiaries
30.6 Waiver
30.7 Headings
30.8 Multiple Counterparts
30.9 Amendment
30.10 Modification by the Parties
30.11 Reservation of Rights
30.12 No Partnership
Appendix A—Interconnection Facilities and Network Upgrades
Appendix B—Time Schedule
Appendix C—Interconnection Details
Appendix D—Standard Generator Interconnection Agreement
Appendix E—Security Arrangement Details
Appendix F—Commercial Operation Date
Appendix G—Interconnection Guidelines
Standard Generator Interconnection and Operating Agreement
This Standard Generator Interconnection and Operating Agreement (“Agreement”) is made and entered into this____day of ____ 20__, by and between____, a____ organized and existing under the laws of the State/Commonwealth of ____(“Generator”), and ____, a [corporation] organized and existing under the laws of the State/Commonwealth of ____ (“Transmission Provider and/or Transmission Owner”). Generator and Transmission Provider each may be referred to as a “Party” or collectively as the “Parties.”
Recitals
Whereas, Transmission Provider operates the Transmission System; and
Whereas, Generator intends to own, lease and/or control and operate the Facility identified in Appendix C; and,
Whereas, Generator and Transmission Provider have agreed to enter into this Agreement for the purpose of interconnecting the Facility with the Transmission System;
NOW, therefore, in consideration of and subject to the mutual covenants contained herein, it is agreed:
Article 1. Definitions
When used in this Agreement with initial capitalization, the following terms shall have the meanings specified or referred to in this Article 1. Terms used in this Agreement with initial capitalization that are not defined in this Article 1 shall have the meanings specified in the section in which it is used or as specified in the Transmission Provider Tariff, as may be amended from time to time.
1.1 “Affiliate” shall mean, with respect to a corporation, partnership or other entity, each such other corporation, partnership or other entity that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such corporation, partnership or other entity.
1.2 Agreement” shall mean this Standard Generator Interconnection and Operating Agreement.
1.3 Ancillary and Other Services” shall have the same meaning as defined in the Transmission Provider's Tariff, as may be amended from time to time, and shall in addition include such other services as Generator Balancing, Blackstart, Automatic Generation Control, and Capacity.
1.4 Applicable Laws and Regulations” shall mean all duly promulgated applicable federal, state and local laws, regulations, rules, ordinances, codes, decrees, judgments, directives, or judicial or administrative orders, permits and other duly authorized actions of any Governmental Authority.
1.5 Applicable Reliability Council” shall mean the reliability council(s) applicable to the Transmission System to which the Facility is directly interconnected.
1.6 Applicable Standards” shall mean the requirements and guidelines of NERC, the Applicable Reliability Council, the Control Area of the Transmission System to which the Facility is directly interconnected and the Transmission Provider Interconnection Guidelines.
1.7 Breach” shall mean the failure of a Party to perform or observe any material term or condition of this Agreement.
1.8 Breaching Party” shall mean a Party that is in Breach of this Agreement.
1.9 Commercial Operation Date” shall mean the date on which Generator commences commercial operation of a unit at the Facility after Trial Operation of such unit has been completed as confirmed in writing substantially in the form shown in Appendix F.
1.10 “Confidential Information” shall have the meaning set forth in Article 22.1.
1.11 “Control Area” shall mean an electrical system or systems, as certified by NERC or the applicable regional reliability council, as the case may be, and bounded by interconnection metering and telemetry, to which a common automatic generation control scheme is applied in order to (i) match, at all times, power output of the generator(s) within the electrical system and capacity and energy purchased from or sold to entities outside the electrical system to load within the electrical system; (ii) maintain scheduled interchange with other Control Areas within the limits of Good Utility Practice; (iii) maintain the frequency of the electrical system within reasonable limits in accordance with Good Utility Practice; and (iv) provide sufficient generating capacity and operating reserves in accordance with Good Utility Practice.
1.12 “Default” shall mean the failure of a Breaching Party to cure its Breach in accordance with Article 20.
1.13 “Effective Date” shall mean the date on which this Agreement becomes effective in accordance with Article 2.1.
1.14 “Emergency Condition” shall have the meaning set forth in Article 14.1.
1.15 “Energy Resource Interconnection Service” shall have the meaning set forth in Article 4.1.1.
1.16 “Environmental Law” shall mean Applicable Laws or Regulations relating to pollution or protection of the environment or natural resources.
1.17 “Facility” shall mean Generator's or Transmission Provider/Transmission Owner's electric generating facility, but shall not include the Generator Interconnection Facilities.
1.18 “Facilities Study” shall mean the Interconnection Facilities Study conducted by the Transmission Provider under the Interconnection Procedures.
1.19 “Federal Power Act” shall mean the Federal Power Act, as amended, 16 U.S.C. §§ 791a
et seq.
1.20 “FERC” shall mean the Federal Energy Regulatory Commission or its successor.
1.21 “Force Majeure” shall have the meaning set forth in Article 16.1.
1.22 “Generator” as used herein applies to any Facility regardless of ownership.
1.23 “Generator Interconnection Facilities” shall mean all facilities and equipment, as identified in Appendix A, which are located between the Facility and the Point of Change of Ownership, including any modification, addition, or upgrades to such facilities and equipment necessary to physically and electrically connect to Facility to the Transmission System. Generator Interconnection Facilities are sole use facilities and shall not include Network Upgrades or facilities.
1.24 “Good Utility Practice” shall mean any of the practices, methods and acts
engaged in or approved by a significant portion of the electric industry during the relevant time period, or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition. Good Utility Practice is not intended to be limited to the optimum practice, method, or act to the exclusion of all others, but rather to be acceptable practices, methods, or acts generally accepted in the region. Good Utility Practice shall include, but not be limited to, compliance with Applicable Laws and Regulations, Applicable Standards, the National Electric Safety Code, and the National Electrical Code, as they may be amended from time to time, including the criteria, rules and standards of any successor organizations.
1.25 “Governmental Authority” shall mean any federal, state, local or other governmental regulatory or administrative agency, court, commission, department, board, or other governmental subdivision, legislature, rulemaking board, tribunal, or other governmental authority having jurisdiction over the Parties, their respective facilities, or the respective services they provide, and exercising or entitled to exercise any administrative, executive, police, or taxing authority or power; provided, however, that such term does not include Generator, Transmission Provider, or any Afflliate thereof.
1.26 “Hazardous Substances” shall mean any chemicals, materials or substances defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “hazardous constituents,” “restricted hazardous materials,” “extremely hazardous substances,” “toxic substances,” “radioactive substances,” “contaminants,” “pollutants,” “toxic pollutants” or words of similar meaning and regulatory effect under any applicable Environmental Law, or any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any applicable Environmental Law.
1.27 “In-Service Date” shall mean the date upon which the Generator reasonably expects it will be ready to begin use of the Transmission Provider Interconnection Facilities to obtain back feed power and upon which it reasonably expects to begin doing so.
1.28 “Independent System Operator” (“ISO”) shall mean any Independent System Operator to which a transmission provider has transferred operational control of its transmission facilities, or any portion thereof, within the meaning of Order No. 888.
1.29 “Interconnection Facilities” shall mean the Transmission Provider's Interconnection Facilities and the Generator Interconnection Facilities. Collectively, all facilities and equipment between the Facility and the Point of Interconnection, including any modification, additions or upgrades that are necessary to physically and electrically interconnect the Facility to the Transmission System. Interconnection Facilities are sole use facilities and shall not include Network upgrades or facilities.
1.30 “Interconnection Guidelines” shall mean the technical requirements set forth in Appendix G.
1.31 “Interconnection Request” shall mean a request, the form of Appendix 1 to the Standard Generator Interconnection Procedures, in accordance with the OATT, to interconnect a new Facility, or to increase the capacity or make a Material Modification to the operations characteristics of an existing Facility that is interconnected with the Transmission System.
1.32 “Interconnection Service” shall mean those services associated with interconnecting a Facility to the Transmission System as such services are set forth in Article 4 of this Agreement.
1.33 “Initial Synchronization Date” shall mean the date upon which the Facility is initially synchronized and upon which Trial Operation begins.
1.34 “IRS” shall mean the Internal Revenue Service.
1.35 “Joint Operating Committee” shall be comprised of the members of the individual Operating Committees. The role of this Committee is to address on a generic level any issues arising out of the duties, roles and responsibilities of the individual Operating Committees as described in Article 29. The Joint Operating Committee shall meet as necessary, but not less than once each calendar year to carry out those duties. Unless otherwise agreed to, the annual meeting will be held on the first Monday in June of each year.
1.36 “Loss” shall have the meaning set forth in Article 18.1.
1.37 “Metering Equipment” shall mean all metering equipment described in, and installed at the metering points designated in, Appendix C.
1.38 “NERC” shall mean the North American Electric Reliability Council or its successor agency assuming or charged with similar responsibilities related to the operation and reliability of the North American interconnected electric transmission grid.
1.39 “Network Resource Interconnection Service” shall have the meaning set forth in Article 4.1.2.
1.40 “Network Upgrades” shall mean the additions, modifications, and upgrades to the Transmission System required beyond the point at which the generator interconnects to the Transmission System to accommodate the interconnection of the Facility to the Transmission System as identified in Appendix A, including any modifications, additions or upgrades made to such facilities. The facilities and equipment are used by and benefit all users of the transmission grid, without distinction or regard as to the purpose of the upgrade (
e.g.
, to relieve overloads, to remedy stability and short circuit problems, to maintain reliability, or to provide protection and service restoration) including the fact that these facilities and equipment are being replaced or upgraded to accommodate the interconnection request.
1.41 “Non-Breaching Party” shall mean a Party that is not in Breach of this Agreement with regard to a specific event of Breach by another Party.
1.42 “Notice of Dispute” shall have the meaning set forth in Article 27.1.
1.43 Operating Committee” shall mean the Operating Committee as described in Article 29.
1.44 “Party” or “Parties” shall have the meaning set forth in the introductory paragraph of this Agreement.
1.45 “Point of Change of Ownership” shall mean the point, set forth in Appendix A, at which the Generator Interconnection Facilities connect to the Transmission Provider's Transmission Interconnection Facilities.
1.46 “Point of Interconnection”shall mean the point, set forth in Appendix A, where the Interconnection Facilities connect to the Transmission Provider's Transmission Interconnection System.
1.47 “Reasonable Efforts” shall mean, with respect to an action required to be attempted or taken by a Party under this Agreement, efforts that are timely and consistent with Good Utility Practice and are otherwise substantially equivalent to those a Party would use to protect its own interests.
1.48 “RTO/ISO” shall mean any Regional Transmission Organization or Independent System Operator to which a Transmission Provider has transferred operational control of its transmission facilities, or any portion thereof, within the meaning of Order No. 2000.
1.49 “Switching and Tagging Rules” shall mean the switching and tagging procedures of Transmission Provider, and Generator, as they may be amended from time to time.
1.50 “System Protection Facilities” shall be described in Appendix A, and shall mean the equipment required to protect (i) the Transmission System from faults or other electrical disturbances occurring at the Facility, and (ii) the Facility from faults or other electrical system disturbances occurring on the Transmission System or on other delivery systems and/or other generating systems to which the Transmission System is directly connected.
1.51 “Tariff” shall mean the Transmission Provider tariff for which open access transmission service over, and transmission interconnection to the Transmission System is offered, as filed with FERC, and as amended or supplemented from time to time, or any successor tariff.
1.52 “Transmission Owner” shall mean an entity that owns, leases or otherwise possesses interest in the portion of the Transmission System at the Point of Interconnection may be a party to this Agreement to the extent necessary.
1.53 “Transmission Provider” shall mean the entity that provides Transmission Service under its Open Access Transmission Tariff.
1.54 “Transmission Provider Interconnection Facilities” shall mean all facilities owned and/or controlled or operated by the Transmission Provider from the Point of Change of Ownership to the Point of Interconnection as identified in Appendix A, including any modifications, additions or upgrades to such facilities and equipment. Transmission Provider Interconnection Facilities are sole use facilities and shall not include Network Upgrades or facilities as defined in Article 1.39 above.
1.55 “Transmission System” shall mean the facilities owned, controlled or operated
by the Transmission Provider that are used to provide transmission service under the Tariff, including any additions, modifications or upgrades made to such facilities.
1.56 “Trial Operation” shall mean the period during which Generator is engaged in on-site test operations and commissioning of the Facility prior to commercial operation.
Article 2. Effective Date, Term and Termination
2.1 Effective Date. This Agreement shall become effective upon execution by the Parties subject to acceptance by FERC (if applicable), or if filed unexecuted, upon the date specified by FERC. Transmission Provider shall promptly file this Agreement with FERC upon execution in accordance with Article 3.1.
2.2 Term of Agreement. Subject to the provisions of Article 2.3, this Agreement shall remain in effect for a period of ten (10) years from the Effective Date or such other longer period as the Generator may request (Term to be Specified in Individual Agreements) and shall be automatically renewed for each successive one-year period thereafter.
2.3 Termination Procedures. This Agreement may be terminated as follows:
2.3.1 Written Notice. The Generator may terminate this Agreement after giving the Transmission Provider thirty (30) Calendar Days advance written notice; or
2.3.2 No Commercial Operation. The Transmission Provider may terminate this Agreement on written notice to the Generator if (i) the Generator's Facility has not achieved commercial operation within five (5) years after the scheduled Commercial Operation Date reflected in Appendix B, Time Schedule, or (ii) fails to be available for operation for a consecutive period of five (5) years unless major Facility upgrades are in progress.
2.3.3 Default. Either Party may terminate this Agreement in accordance with Article 17.
Notwithstanding the foregoing, no termination shall become effective until the Parties have complied with all Applicable Laws and Regulations applicable to such termination, including the filing with FERC of a notice of termination of this Agreement, which notice has been accepted for filing by FERC.
2.4 Termination Costs. If a Party elects to terminate the Agreement pursuant to Article 2.3 above, each Party shall pay all costs incurred (including any cancellation costs relating to orders or contracts for interconnection facilities and equipment) or charges assessed by the other Party, as of the date of the other Party's receipt of such notice of termination, that are the responsibility of the Terminating Party under this Agreement. In the event of termination by either Party, both Parties shall use commercially Reasonable Efforts to mitigate the costs, damages and charges arising as a consequence of termination. Upon termination of this Agreement, unless otherwise ordered or approved by FERC:
2.4.1 With respect to any portion of the Transmission Provider Interconnection Facilities that have not yet been constructed or installed, the Transmission Provider shall to the extent possible and with Generator's authorization cancel any pending orders of, or return, any materials or equipment for, or contracts for construction of, such facilities; provided that in the event Generator elects not to authorize such cancellation, Generator shall assume all payment obligations with respect to such materials, equipment, and contracts, and the Transmission Provider shall deliver such material and equipment, and, if necessary, assign such contracts, to Generator as soon as practicable, at Generator's expense. To the extent that Generator has already paid Transmission Provider for any or all such costs of materials or equipment not taken by Generator, Transmission Provider shall promptly refund such amounts to Generator, less any costs, including penalties incurred by the Transmission Provider to cancel any pending orders of or return such materials, equipment, or contracts.
2.4.2 Transmission Provider may, at its option, retain any portion of such materials, equipment, or facilities that Generator chooses not to accept delivery of, in which case Transmission Provider shall be responsible for all costs associated with procuring such materials, equipment, or facilities.
2.4.3 With respect to any portion of the Interconnection Facilities, and any other facilities already installed or constructed pursuant to the terms of this Agreement, Generator shall be responsible for all costs associated with the removal, relocation or other disposition or retirement of such materials, equipment, or facilities.
2.5 Disconnection. Upon termination of this Agreement, the Parties will take all appropriate steps to disconnect the Facility from the Transmission System. All costs required to effectuate such disconnection shall be borne by the terminating Party, unless such termination resulted from the non-terminating Party's Default of this Agreement or such non-terminating Party otherwise is responsible for these costs under this Agreement.
2.6 Survival. This Agreement shall continue in effect after termination to the extent necessary to provide for final billings and payments and for costs incurred hereunder, including billings and payments pursuant to this Agreement; to permit the determination and enforcement of liability and indemnification obligations arising from acts or events that occurred while this Agreement was in effect; and to permit each Party to have access to the lands of the other Party pursuant to this Agreement or other applicable agreements, to disconnect, remove or salvage its own facilities and equipment.
2.7 Reservation of Rights. Notwithstanding any other provision in this Agreement, each Party retains its rights to unilaterally seek modification of this Agreement pursuant to Sections 205 and 206 of the Federal Power Act and pursuant to FERC's rules and regulations promulgated thereunder.
Article 3. Regulatory Filings
3.1 Filing. The Transmission Provider shall file this Agreement (and any amendment hereto) with the appropriate Governmental Authority, if required. Any information related to studies for interconnection asserted by Generator to contain competitively sensitive commercial or financial information shall be maintained by the Transmission Provider and identified as “confidential” under seal stating that Generator asserts such information is Confidential Information and has requested such information be kept under seal. If requested by the Transmission Provider, Generator shall provide the Transmission Provider, in writing, with the Generator's basis for asserting that the information referred to in this Article 3.1 is competitively sensitive information, and the Transmission Provider may disclose such writing to the appropriate Governmental Authority. Generator shall be responsible for the costs associated with affording confidential treatment of such information. If the Generator has executed this Agreement, or any amendment thereto, the Generator shall reasonably cooperate with Transmission Provider with respect to such filing and to provide any information reasonably requested by Transmission Provider needed to comply with applicable regulatory requirements. If the Generator has executed this Agreement or any amendment thereto, unless the Parties agree otherwise, Generator shall not protest the filing of this Agreement or any amendment which Generator executed.
Article 4. Scope of Service
4.1 Interconnection Product Options. Generator has selected the following (checked) type of Interconnection Service:
4.1.1 Energy Resource Interconnection Service.
4.1.1.1 The Product. Energy Resource (“ER”) Interconnection Service allows Generator to connect the Facility to the Transmission System and be eligible to deliver the Facility's output using the existing firm or non-firm capacity of the Transmission System on an “as available” basis. To the extent Generator wants to receive ER Interconnection Service, the Transmission Provider shall construct facilities consistent with the studies identified in Attachment A. ER Interconnection Service does not in and of itself convey any transmission delivery service.
4.1.1.2 The Study. The study consists of short circuit/fault duty, steady state (thermal and voltage) and stability analyses. The short circuit/fault duty analysis would identify direct interconnection facilities required and the Network Upgrades necessary to address short circuit issues associated with the interconnection facilities. The stability and steady state studies would identify necessary upgrades to allow full output of the proposed Facility and would also identify the maximum allowed output, at the time the study is performed, of the interconnecting Facility without requiring additional Network Upgrades.
4.1.1.3 Delivery Service Implications. Under ER Interconnection Service, the interconnected Generator will be able to inject power from the Facility into and
deliver power across the interconnecting Transmission Provider's Transmission System on an “as available” basis up to the amount of MW's identified in the applicable stability and steady state studies to the extent the upgrades initially required to qualify for ER Interconnection Service have been constructed. Where eligible to do so (e.g., PJM, ISO-NE, NYISO), the interconnected Generator may place a bid to sell into the market up to the maximum identified Facility output, subject to any conditions specified in the interconnection service approval, and the Facility will be dispatched to the extent the Generator's bid clears. In all other instances, no transmission delivery service from the Facility is assured, but the Generator may obtain point-to-point transmission delivery service or be used for secondary network transmission service, pursuant to the Transmission Provider's Open Access Transmission Tariff (“OATT”), up to the maximum output identified in the stability and steady state studies. In those instances, in order for the Generator to obtain the right to deliver or inject energy beyond the Facility Point of Interconnection or to improve its ability to do so, transmission delivery service must be obtained pursuant to the provisions of the Transmission Provider's OATT. The Generator's ability to inject its Facility output beyond the Point of Interconnection, therefore, will depend on the existing capacity of the Transmission Provider's Transmission System at such time as a transmission service request is made that would accommodate such delivery.
4.1.2 Network Resource Interconnection Service.
4.1.2.1 The Product. The Transmission Provider must conduct the necessary studies and construct the Network Upgrades needed to integrate the Facility (1) in a manner comparable to that in which the Transmission Provider integrates its generating facilities to serve native load customers; or (2) in an ISO or RTO with market based congestion management, in the same manner as all other Network Resources. Network Resource (“NR”) Interconnection Service in and of itself does not convey any transmission delivery service.
4.1.2.2 The Study. The interconnection study for NR Interconnection Service shall assure that the Generator's Facility meets the requirements for ER Interconnection Service and as a general matter, that such Facility interconnection is also studied with the Transmission Provider's Transmission System at peak load, under a variety of severely stressed conditions, to determine whether, with the Generator Facility at full output, the aggregate of generation in the local area can be delivered to the aggregate of load on the Transmission Provider's Transmission System, consistent with the Transmission Provider's reliability criteria and procedures. This approach assumes that some portion of existing Network Resources are displaced by the output of the Generator's Facility. The Generator may request the studies associated with NR Interconnection Service at the time of its interconnection application, together with its request(s) for study of other levels of interconnection service, and, following the completion of the requested facilities studies and subject to the construction of all necessary upgrades, may elect to proceed with NR Interconnection Service or to proceed under a lower level of interconnection service to the extent that only certain upgrades will be completed.
There is no requirement either at the time of study or interconnection, or at any point in the future, that the Generator's Facility be designated as a Network Resource by a network transmission customer or that the Generator identify a specific buyer (or sink). To the extent a Network Generator does designate the Facility as a Network Resource, it must do so pursuant to the Transmission Provider's OATT.
4.1.2.3 Delivery Service Implications. NR Interconnection Service allows the Generator's Facility to be designated by any Network Generator on the Transmission Provider's Transmission System as a Network Resource, up to the Facility's full output, on the same basis as all other existing Network Resources interconnected to the Transmission Provider's Transmission System, and to be studied as a Network Resource on the assumption that such a designation will occur. Any Network Generator can utilize its network service to obtain delivery of energy from the interconnected Generator's Facility in the same manner as it accesses other Network Resources. A Facility receiving NR Interconnection Service may also be used to provide ancillary services after technical studies and/or periodic analyses are performed with respect to the Facility's ability to provide any applicable ancillary service, provided that such studies and analyses have been or would be required in connection with the provision of such ancillary services by any existing Network Resource. In addition, in the event of transmission constraints on the Transmission Provider's Transmission System, the Generator's Facility shall be subject to the applicable congestion management procedures in the Transmission Provider's Transmission System in the same manner as all other Network Resources.
Once a Generator satisfies the requirements for obtaining NR Interconnection Service, any future transmission service request for delivery from the Facility within the Transmission Provider's Transmission System of any amount of capacity and/or energy, up to the amount initially studied, will not require that any additional studies be performed or that any further upgrades associated with such Facility be undertaken, regardless of whether or not such Facility is ever designated by a Network Generator as a Network Resource and regardless of changes in ownership of the Facility. To the extent the Generator enters into an arrangement for long term transmission service for deliveries from the Facility outside the Transmission Provider's Transmission System, such request may require additional studies and upgrades in order for the Transmission Provider to grant such request.
Depending on how the cost allocation issue is resolved, the Generator may be allocated congestion rights based on the construction of upgrades.
4.2 Provision of Service. Transmission Provider shall provide Interconnection Service for the Facility at the Point of Interconnection.
4.3 Generator Balancing Service Arrangements. Generator must demonstrate, to the Transmission Provider's reasonable satisfaction, that it has satisfied the requirements of this Article 4.3 prior to the submission of any schedules for delivery service to such Transmission Provider identifying the Facility as the Point of Receipt for such scheduled delivery.
4.3.1 Generator is responsible for ensuring that its actual Facility output matches the scheduled delivery from the Facility, on an integrated clock hour basis, to the Transmission Provider's Transmission System, including ramping into and out of such scheduled delivery, as measured at the Point of Interconnection. Generator shall arrange for the supply of energy when there is a difference between the actual Facility output and the scheduled delivery from the Facility (the “Generator Balancing Service”). Generator may satisfy its obligation for making such Generator Balancing Service arrangements by: (a) obtaining such service from another entity that (i) has generating resources deliverable within the applicable Control Area, (ii) agrees to assume responsibility for providing such Generator Balancing Service to the Generator, and (iii) has appropriate coordination service arrangements or agreements with the applicable Control Area that addresses Generator Balancing Service for all generating resources for which the entity is responsible within the applicable Control Area; (b) committing sufficient additional unscheduled generating resources to the control of and dispatch by the applicable Control Area operator that are capable of supplying energy not supplied by the Generator's scheduled Facility, and entering into an appropriate coordination services agreement with the applicable Control Area that addresses Generator Balancing Service obligations for the Facility; (c) entering into an arrangement with another Control Area to dynamically schedule the Generator's Facility out of the applicable Control Area and into such other Control Area; (d) entering into a Generator Balancing Service arrangement with the applicable Control Area; or (e) in the event the load/generation balancing function of the applicable Control Area is accomplished through the function of its market structures approved by FERC, by entering into an arrangement consistent with such FERC-approved market structure. In the event Generator fails to demonstrate to the Transmission Provider that it has otherwise complied with this Article, the Generator shall be deemed to have elected to enter into a Generator Balancing Service arrangement with the applicable Control Area. Nothing in this provision shall prejudice either Party from obtaining a FERC-approved tariff addressing its obligations and rights with respect to Generator Balancing Service.
4.4 Performance Standards. Each Party shall perform all of its obligations under this Agreement in accordance with Applicable Laws and Regulations, Applicable Standards, and Good Utility Practice, and to the extent a Party is required or prevented or limited in taking any action by such regulations and
standards, such Party shall not be deemed to be in breach of this Agreement for its compliance therewith.
4.5 No Transmission Delivery Service. The execution of this Agreement does not constitute a request for nor the provision of any transmission delivery service under the Transmission Provider's Tariff or any local distribution service.
4.6 Generator Provided Services. The services provided by Generator under this Agreement are set forth in Article 9.6 and Article 14.5.1. Generator shall be paid for such services in accordance with Article 11.6.
Article 5. Interconnection Facilities Engineering, Procurement, and Construction
5.1 Options. Unless otherwise mutually agreed to between the Parties, Generator shall select the In-Service Date, Initial Synchronization Date, and Commercial Operation Date; and one of the options set forth below (subparagraph A or subparagraph B) for completion of the Transmission Provider Interconnection Facilities/Network Upgrades and such dates and selected option shall be set forth in Appendix B, Time Schedule. The dates selected by Generator shall be dates upon which Generator reasonably expects it will be ready to begin use of the Transmission Provider Interconnection Facilities/Network Upgrades.
A. The Transmission Provider shall design, procure, and construct the Transmission Provider Interconnection Facilities/Network Upgrades, using Reasonable Efforts to complete the Transmission Provider Interconnection Facilities/Network Upgrades by the dates set forth in Appendix B, Time Schedule. The Transmission Provider shall not be required to undertake any action which is inconsistent with its standard safety practices, its material and equipment specifications, its design criteria and construction procedures, its labor agreements, and Applicable Laws and Regulations. In the event the Transmission Provider reasonably expects that it will not be able to complete the Transmission Provider Interconnection Facilities/Network Upgrades by the specified dates, the Transmission Provider will promptly provide written notice to the Generator and will undertake Reasonable Efforts to meet the earliest dates thereafter.
B. (i) The Transmission Provider shall design, procure, and construct the Transmission Provider Interconnection Facilities/Network Upgrades by the dates reflected in Appendix B, Time Schedule, pursuant to subparagraph 5.1.B(i)(a) or subparagraph 5.1.B(i)(b) as applicable.
(a) If the dates designated by Generator are acceptable to Transmission Provider, the Transmission Provider shall so notify Generator within thirty (30) Calendar Days, and shall assume responsibility for the design, procurement and construction of the Transmission Provider Interconnection Facilities/Network Upgrades by the designated dates. If Transmission Provider subsequently fails to complete Transmission Provider Interconnection Facilities by the In-Service Date, to the extent necessary to provide backfeed service, or fails to complete Network Upgrades by the Initial Synchronization Date to the extent necessary to allow for Trial Operation at full power output, unless other arrangements are made by the Parties for such Trial Operation, or fails to complete the Network Upgrades by the Commercial Operation Date, as such dates are reflected in Appendix B, Time Schedule, Transmission Provider shall pay the Generator liquidated damages in accordance with this subparagraph 5.1.B; provided, however, the dates designated by Generator shall be extended day for day for each day that the applicable ISO refuses to grant clearances to install equipment.
(b) If the dates designated by Generator are not acceptable to Transmission Provider, the Transmission Provider shall notify the Generator within thirty (30) Calendar Days, and, unless the Parties agree otherwise, Generator shall have the option to assume responsibility for the design, procurement and construction of: (1) The Transmission Provider Interconnection Facilities, if Transmission Provider has notified Generator that the dates designated by Generator associated therewith are not acceptable, or (2) stand-alone Network Upgrade projects specified in Appendix A, Interconnection Facilities and Network Upgrades, if Transmission Provider has notified Generator that the dates designated by Generator associated therewith are not acceptable. If the Generator elects not to exercise its option to assume such responsibility, Generator shall so notify Transmission Provider within thirty (30) Calendar Days, and the Parties shall in good faith attempt to negotiate terms and conditions (including revision of the specified dates and/or liquidated damages, the provision of incentives or the procurement and construction of a portion of the Transmission Provider Interconnection Facilities/Network Upgrades by Generator) pursuant to which Transmission Provider is willing to assume responsibility for the design, procurement and construction of the Transmission Provider Interconnection Facilities/Network Upgrades pursuant to subparagraph 5.1.B(i)(a), above. If the Parties are unable to reach agreement on such terms and conditions, Transmission Provider shall assume responsibility for the design, procurement and construction of the Transmission Provider Interconnection Facilities/Network Upgrades pursuant to the terms of subparagraph 5.1 A.
(ii) The Parties agree that actual damages to the Generator, in the event the TIF/NU are not completed by the dates designated by the Generator and accepted by the Transmission Provider pursuant to subparagraph 5.1.B(i)(a), above, may include Generator's fixed operation and maintenance costs and lost opportunity costs. Such actual damages are uncertain and impossible to determine at this time. The Parties agree that, because of such uncertainty, any liquidated damages paid by the Transmission Provider to the Generator shall be an amount equal to
1/2
of 1% per day of the actual cost of the Transmission Provider Interconnection Facilities/Network Upgrades, in the aggregate, for which the Transmission Provider has design, procurement, and construction responsibility, in the event that Transmission Provider does not complete any portion of the Transmission Provider Interconnection Facilities/Network Upgrades by the applicable dates, per day. However, in no event shall the total liquidated damages exceed 20% of the actual cost of the Transmission Provider Interconnection Facilities/Network Upgrades for which Transmission Provider has assumed responsibility to design, procure and construct. The Parties agree that the foregoing payments will be made by the Transmission Provider to the Generator as just compensation for the damages caused to the Generator, which actual damages are uncertain and impossible to determine at this time, and as reasonable liquidated damages, but not as a penalty or a method to secure performance of this Agreement.
(iii) No liquidated damages shall be paid to Generator if: (1) The Generator is not ready to commence use of the Transmission Provider Interconnection Facilities/Network Upgrades for the delivery of power to the Facility for Trial Operation or export of power from the Facility on the specified dates, unless the Generator would have been able to commence use of the Transmission Provider Interconnection Facilities/Network Upgrades for the delivery of power to the Facility for Trial Operation or export of power from the Facility but for Transmission Provider's delay; (2) the Transmission Provider's failure to meet the specified dates is the result of the action or inaction of the Generator; (3) the Generator has assumed responsibility for the design, procurement and construction of the Transmission Provider Interconnection Facilities/Network Upgrades or has elected not to assume such responsibility pursuant to subparagraph 5.1 B.(i)(b), above, unless the Parties agree otherwise pursuant to Subparagraph 5.1 B.(i)(b); or (4) the Parties have otherwise agreed.
(iv) If Generator has assumed responsibility for the design, procurement and construction of the Transmission Provider Interconnection Facilities/Network Upgrades pursuant to Subparagraph 5.1.B(i)(b): (1) The Generator shall engineer, procure equipment, and construct the Transmission Provider Interconnection Facilities/Network Upgrades (or portions thereof) using Good Utility Practice and using standards and specifications provided in advance by the Transmission Provider; (2) Generator's engineering, procurement and construction of the Transmission Provider Interconnection Facilities/Network Upgrades shall comply with all requirements of law to which Transmission Provider would be subject in the engineering, procurement or construction of the Transmission Provider Interconnection Facilities/Network Upgrades; (3) Transmission Provider shall review and approve the engineering design, acceptance tests of equipment, and the construction of the Transmission Provider Interconnection Facilities/Network Upgrades; (4) Transmission Provider shall approve and accept for operation the Transmission Provider Interconnection Facilities/Network Upgrades to the extent engineered, procured, and constructed in accordance with this Subparagraph 5.1.B.v; (5) Should any phase
of the engineering, equipment procurement, or construction of the Transmission Provider Interconnection Facilities/Network Upgrades, including selection of subcontractors, not meet the standards and specifications provided by Transmission Provider, and therefore not be approved and accepted for operation, then Generator shall be obligated to remedy deficiencies in that portion of the Transmission Provider Interconnection Facilities/Network Upgrades.
5.2 Power System Stabilizers. The Generator shall procure, install, maintain and operate power system stabilizers, if and as required the System Impact Study. Transmission Provider reserves the right to reasonably establish minimal acceptable settings for any installed power system stabilizers, subject to the design and operating limitations of the Facility.
5.3 Equipment Procurement. If responsibility for construction of the Transmission Provider Interconnection Facilities/Network Upgrades is to be borne by the Transmission Provider, then the Transmission Provider shall commence design of the Transmission Provider Interconnection Facilities/Network Upgrades and procure necessary equipment as soon as practicable after all of the following conditions are satisfied, unless the Parties otherwise agree in writing:
5.3.1 The Transmission Provider has completed the Facilities Study pursuant to the Facilities Study Agreement;
5.3.2 The Transmission Provider has received written authorization to proceed with design and procurement from the Generator by the date specified in Appendix B, Time Schedule; and
5.3.3 The Generator has provided security to the Transmission Provider in accordance with Article 11.5 by the dates specified in Appendix B, Time Schedule.
5.4 Construction Commencement. The Transmission Provider shall commence construction of the Transmission Provider Interconnection Facilities/Network Upgrades for which it is responsible as soon as practicable after the following additional conditions are satisfied:
5.4.1 Approval of the appropriate Governmental Authority has been obtained for any facilities requiring regulatory approval;
5.4.2 Necessary real property rights and rights-of-way have been obtained, to the extent required for the construction of a discrete aspect of the Transmission Provider Interconnection Facilities/Network Upgrades;
5.4.3 The Transmission Provider has received written authorization to proceed with construction from the Generator by the date specified in Appendix B, Time Schedule; and
5.4.4 The Generator has provided security to the Transmission Provider in accordance with Article 11.5 by the dates specified in Appendix B, Time Schedule.
5.5 Work Progress. The Parties will keep each other advised periodically as to the progress of their respective design, procurement and construction efforts. Either Party may, at any time, request a progress report from the other Party. If, at any time, the Generator determines that the completion of the Transmission Provider Interconnection Facilities will not be required until after the specified In-Service Date, the Generator will provide written notice to the Transmission Provider of such later date upon which the completion of the Transmission Provider Interconnection Facilities will be required.
5.6 Information Exchange. As soon as reasonably practicable after the Effective Date, the Parties shall exchange information regarding the design and compatibility of the Parties' Interconnection Facilities and compatibility of the Interconnection Facilities with the Transmission Provider's Transmission System, and shall work diligently and in good faith to make any necessary design changes.
5.7 Limited Operation. If any of the Transmission Provider Interconnection Facilities/Network Upgrades are not reasonably expected to be completed prior to the Commercial Operation Date of the Facility, Transmission Provider shall, upon the request and at the expense of Generator, perform operating studies on a timely basis to determine the extent to which the Facility and the Generator Interconnection Facilities may operate prior to the completion of the Transmission Provider Interconnection Facilities/Network Upgrades consistent with Applicable Laws and Regulations, Applicable Standards, Good Utility Practice, and this Agreement. Transmission Provider shall permit Generator to operate the Facility and the Generator Interconnection Facilities in accordance with the results of such studies.
5.8 Generator Interconnection Facilities (“GIF”). Generator shall, at its expense, design, procure, construct, own and install the GIF, as set forth in Appendix A, Interconnection Facilities and Network Upgrades.
5.8.1 Generator Specifications. Generator shall submit final specifications for the GIF, including System Protection Facilities, to Transmission Provider for review and comment at least ninety (90) Calendar Days prior to the Initial Synchronization Date. Transmission Provider shall review such specifications to ensure that the GIF are compatible with the technical specifications, operational control, and safety requirements of the Transmission Provider and comment on such specifications within thirty (30) Calendar Days of Generator's submission. All specifications provided hereunder shall be deemed confidential.
5.8.2 Transmission Provider's Review. Transmission Provider's review of Generator's final specifications shall not be construed as confirming, endorsing, or providing a warranty as to the design, fitness, safety, durability or reliability of the Facility, or the GIF. Generator shall make such changes to the GIF as may reasonably be required [by Transmission Provider] to ensure that the GIF are compatible with the telemetry, communications, and safety requirements of the Transmission Provider.
5.8.3 GIF Construction. The GIF shall be designed and constructed in accordance with Good Utility Practice. Within one hundred twenty (120) Calendar Days after the Commercial Operation Date, unless the Parties agree on another mutually acceptable deadline, the Generator shall deliver to the Transmission Provider the following “as-built” drawings, information and documents for the GIF: a one-line diagram, a site plan showing the Facility and the GIF, plan and elevation drawings showing the layout of the GIF, a relay functional diagram, relaying AC and DC schematic wiring diagrams and relay settings for all facilities associated with the Generator's step-up transformers, the facilities connecting the Generator to the step-up transformers and the GIF, and the impedances (determined by factory tests) for the associated step-up transformers and the generators.
5.9 Transmission Provider Interconnection Facilities Construction. The Transmission Provider Interconnection Facilities shall be designed and constructed in accordance with Good Utility Practice. Upon request, within one hundred twenty (120) Calendar Days after the Commercial Operation Date, unless the Parties agree on another mutually acceptable deadline, the Transmission Provider shall deliver to the Generator the following “as-built” drawings, information and documents for the Transmission Provider Interconnection Facilities: [include appropriate drawings and relay diagrams]
5.10 Access Rights. Upon reasonable notice and supervision by a Party, and subject to any required or necessary regulatory approvals, a Party (“Granting Party”) shall furnish [at no cost] to the other Party (“Access Party”) any rights of use, licenses, rights of way and easements with respect to lands owned or controlled by the Granting Party and its agents that are necessary to enable the Access Party to obtain ingress and egress to construct, operate, maintain, repair, test (or witness testing), inspect, replace or remove facilities and equipment to: (i) interconnect the Facility with the Transmission System; (ii) operate and maintain the Facility, the Interconnection Facilities and the Transmission System; and (iii) disconnect or remove the Access Party's facilities and equipment upon termination of this Agreement. In exercising such licenses, rights of way and easements, the Access Party shall not unreasonably disrupt or interfere with normal operation of the Granting Party's business and shall adhere to the safety rules and procedures established in advance, as may be changed from time to time, by the Granting Party and provided to the Access Party.
5.11 Lands of Other Property Owners. If any part of the Transmission Provider/ Transmission Owner Interconnection Facilities and/or Network Upgrades is to be installed on property owned by persons other than Generator or Transmission Provider/Transmission Owner, the Transmission Provider/Transmission Owner shall at Generator's expense use reasonable efforts to procure from such persons any rights of use, licenses, rights of way and easements that are necessary to construct, operate, maintain, test, inspect, replace or remove the Transmission Provider/Transmission Owner Interconnection Facilities and/or Network Upgrades upon such property. Provided, however, where such property is owned by an affiliate of Transmission Provider/
Transmission Owner, Generator's expense for such procured property right shall be limited to the fair market value of the procured property right or such other price as required by applicable inter-affiliate transaction requirements. The Transmission Provider/ Transmission Owner shall use its eminent domain authority to facilitate the exercise of the Parties' rights and obligations under this Agreement, where and to the extent that it is permitted to do so.
5.12 Early Construction of Base Case Facilities. Generator may request Transmission Provider to construct, and Transmission Provider shall construct, on a schedule that will accommodate Generator's In-Service Date, all or any portion of any Network Upgrades required for Generator to be interconnected to the Transmission System which are included in the base case of the Facilities Study for the Generator, and which also are required to be constructed for another interconnecting generator, but where such construction is not scheduled to be completed in time to achieve Generator's In-Service Date.
5.13 Suspension. Generator reserves the right, upon written notice to Transmission Provider, to suspend at any time all work by Transmission Provider associated with the construction and installation of Transmission Provider Interconnection Facilities and/or Network Upgrades required under this Agreement. In such event, Generator shall be responsible for all reasonable and necessary costs which Transmission Provider (i) has incurred pursuant to this Agreement prior to the suspension and (ii) incurs in suspending such work, including any costs incurred to perform such work as may be necessary to ensure the safety of persons and property and the integrity of the Transmission System during such suspension and, if applicable, any costs incurred in connection with the cancellation or suspension of material, equipment and labor contracts which Transmission Provider cannot reasonably avoid; provided, however, that prior to canceling or suspending any such material, equipment or labor contract, Transmission Provider shall obtain Generator's authorization to do so. Transmission Provider shall invoice Generator for such costs pursuant to Article 12 and shall use due diligence to minimize its costs. In the event Generator suspends work by Transmission Provider required under this Agreement pursuant to this Article 5.13, and has not requested Transmission Provider to recommence the work required under this Agreement on or before the expiration of three (3) years following commencement of such suspension, this Agreement shall be deemed terminated.
5.14 Taxes.
5.14.1 Generator Payments Not Taxable. The Parties intend that all payments or property transfers made by Generator to Transmission Provider for the installation of the Transmission Provider Interconnection Facilities and the Network Upgrades shall be non-taxable, either as contributions to capital, or as an advance, in accordance with the Internal Revenue Code and any applicable state income tax laws and shall not be taxable as contributions in aid of construction or otherwise under the Internal Revenue Code and any applicable state income tax laws.
5.14.2 Representations And Covenants. In accordance with IRS Notice 2001-82 and IRS Notice 88-129, Generator represents and covenants that (i) ownership of the electricity generated at the Facility will pass to another party prior to the transmission of the electricity on the Transmission System, (ii) for income tax purposes, the amount of any payments and the cost of any property transferred to the Transmission Provider for the Transmission Provider Interconnection Facilities will be capitalized by Generator as an intangible asset and recovered using the straight-line method over a useful life of twenty (20) years, and (iii) any portion of the Transmission Provider Interconnection Facilities that is a “dual-use intertie,” within the meaning of IRS Notice 88-129, is reasonably expected to carry only a de minimis amount of electricity in the direction of the Facility. For this purpose, “de minimis amount” means no more than 5% of the total power flows in both directions, calculated in accordance with the “5% test” set forth in IRS Notice 88-129. At Transmission Provider's request, Generator shall provide Transmission Provider with a report from an independent engineer confirming its representation in clause (iii), above. Transmission Provider represents and covenants that the cost of the Transmission Provider Interconnection Facilities paid for by Generator will have no net effect on the base upon which rates are determined.
5.14.3 Indemnification for Taxes Imposed Upon Transmission Provider. Notwithstanding Article 5.14.1, Generator shall protect, indemnify and hold harmless Transmission Provider from income taxes imposed against Transmission Provider as the result of payments or property transfers made by Generator to Transmission Provider under this Agreement, as well as any interest and penalties, other than interest and penalties attributable to any delay caused by Transmission Provider. Transmission Provider shall not include a gross-up for income taxes in the amounts it charges Generator under this Agreement unless (i) Transmission Provider has determined, in good faith, that the payments or property transfers made by Generator to Transmission Provider should be reported as income subject to taxation or (ii) any Governmental Authority directs Transmission Provider to report payments or property as income subject to taxation;
provided, however,
that Transmission Provider may require Generator to provide security, in a form reasonably acceptable to Transmission Provider (such as a parental guarantee or a letter of credit), in an amount equal to Generator's estimated tax liability under this Article 5.14. Generator shall reimburse Transmission Provider for such taxes on a fully grossed-up basis, in accordance with Article 5.14.4, within thirty (30) Calendar Days of receiving written notification from Transmission Provider of the amount due, including detail about how the amount was calculated.
5.14.4 Tax Gross-Up Amount. Generator's liability for taxes under this Article 5.14 shall be calculated on a fully grossed-up basis. Except as may otherwise be agreed to by the parties, this means that Generator will pay Transmission Provider, in addition to the amount paid for the Interconnection Facilities and Network Upgrades, an amount equal to (1) the current taxes imposed on Transmission Provider (“Current Taxes”) on the excess of (a) the gross income realized by Transmission Provider as a result of payments or property transfers made by Generator to Transmission Provider under this Agreement (without regard to any payments under this Article 5.14) (the “Gross Income Amount”) over (b) the present value of future tax deductions for depreciation that will be available as a result of such payments or property transfers (the “Present Value Depreciation Amount”), plus (2) an additional amount sufficient to permit the Transmission Provider to receive and retain, after the payment of all Current Taxes, an amount equal to the net amount described in clause (1). For this purpose, (i) Current Taxes shall be computed based on Transmission Provider's composite federal and state tax rates at the time the payments or property transfers are received and Transmission Provider will be treated as being subject to tax at the highest marginal rates in effect at that time (the “Current Tax Rate”), and (ii) the Present Value Depreciation Amount shall be computed by discounting Transmission Provider's anticipated tax depreciation deductions as a result of such payments or property transfers by Transmission Provider's current weighted average cost of capital. Thus, the formula for calculating Generator's liability to Transmission Owner pursuant to this Article 5.14.4 can be expressed as follows: (Current Tax Rate × (Gross Income Amount−Present Value of Tax Depreciation))/(1-Current Tax Rate). Generator's estimated tax liability in the event taxes are imposed shall be stated in Appendix A, Interconnection Facilities and Network Upgrades.
5.14.5 Private Letter Ruling or Change or Clarification of Law. At Generator's request and expense, Transmission Provider shall file with the IRS a request for a private letter ruling as to whether any property transferred or sums paid, or to be paid, by Generator to Transmission Provider under this Agreement are subject to federal income taxation. Generator will prepare the initial draft of the request for a private letter ruling, and will certify under penalties of perjury that all facts represented in such request are true and accurate to the best of Generator's knowledge. Transmission Provider and Generator shall cooperate in good faith with respect to the submission of such request. Transmission Provider shall keep Generator fully informed of the status of such request for a private letter ruling and shall execute either a privacy act waiver or a limited power of attorney, in a form acceptable to the IRS, that authorizes Generator to participate in all discussions with the IRS regarding such request for a private letter ruling. Transmission Provider shall allow Generator to attend all meetings with IRS officials about the request and shall permit Generator to prepare the initial drafts of any follow-up letters in connection with the request. If the private letter ruling concludes that such
transfers or sums are not subject to federal income taxation, or a clarification of or change in law results in Transmission Provider determining in good faith that such transfers or sums are not subject to federal income taxation, Generator's obligations under this Article 5.14 shall be reduced accordingly.
5.14.6 Contests. In the event any Governmental Authority determines that Transmission Provider's receipt of payments or property constitutes income that is subject to taxation, Transmission Provider shall notify Generator, in writing, within thirty (30) Calendar Days of receiving notification of such determination by a Governmental Authority. Upon the timely written request by Generator and at Generator's sole expense, Transmission Provider shall appeal, protest, seek abatement of, or otherwise oppose such determination. Upon Generator's written request and sole expense, Transmission Provider shall file a claim for refund with respect to any taxes paid under this Article 5.14, whether or not it has received such a determination. Transmission Provider reserves the right to make all decisions with regard to the prosecution of such appeal, protest, abatement or other contest, including the selection of counsel and compromise or settlement of the claim, but Transmission Provider shall keep Generator informed, shall consider in good faith suggestions from Generator about the conduct of the contest, and shall reasonably permit Generator or a Generator representative to attend contest proceedings. Generator shall pay to Transmission Provider on a periodic basis, as invoiced by Transmission Provider, Transmission Provider's documented reasonable costs of prosecuting such appeal, protest, abatement or other contest. Transmission Provider will not be required to appeal or seek further review beyond one level of judicial review. At any time during the contest, Transmission Provider may agree to a settlement either with Generator's consent or after obtaining written advice from nationally-recognized tax counsel, selected by Transmission Provider, but reasonably acceptable to Generator, that the proposed settlement represents a reasonable settlement given the hazards of litigation. Generator's obligation shall be based on the amount of the settlement agreed to by Generator, or if a higher amount, so much of the settlement that is supported by the written advice from nationally-recognized tax counsel selected under the terms of the preceding sentence. Any settlement without Generator's consent or such written advice will relieve Generator from any obligation to indemnify Transmission Provider for the tax at issue in the contest.
5.14.7 Refund. In the event that (a) a private letter ruling is issued to Transmission Provider which holds that any amount paid or the value of any property transferred by Generator to Transmission Provider under the terms of this Agreement is not subject to federal income taxation, (b) any legislative change or administrative announcement, notice, ruling or other determination makes it reasonably clear to Transmission Provider in good faith that any amount paid or the value of any property transferred by Generator to Transmission Provider under the terms of this Agreement is not taxable to Transmission Provider, (c) any abatement, appeal, protest, or other contest results in a determination that any payments or transfers made by Generator to Transmission Provider are not subject to federal income tax, or (d) if Transmission Provider receives a refund from any taxing authority for any overpayment of tax attributable to any payment or property transfer made by Generator to Transmission Provider pursuant to this Agreement, Transmission Provider shall promptly refund to Generator the following: (i) any payment made by Generator under this Article 5.14 for taxes that is attributable to the amount determined to be non-taxable, together with interest thereon (ii) on any amounts paid by Generator to Transmission Provider for such taxes which Transmission Provider did not submit to the taxing authority, calculated in accordance with the methodology set forth in FERC's regulations at 18 CFR § 35.19a(a)(2)(ii) from the date payment was made by Generator to the date Transmission Provider refunds such payment to Generator, and (iii) with respect to any such taxes paid by Transmission Provider, any refund or credit Transmission Provider receives or to which it may be en
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