Standardization of Generator Interconnection Agreements and Procedures

Federal RegisterAug 19, 2003

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 35

[Docket No. RM02-1-000; Order No. 2003]

Standardization of Generator Interconnection Agreements and Procedures

July 24, 2003.

AGENCY:

Federal Energy Regulatory Commission, DOE.

ACTION:

Final rule.

SUMMARY:

The Federal Energy Regulatory Commission (Commission) is amending its regulations under the Federal Power Act to require public utilities that own, control, or operate facilities for transmitting electric energy in interstate commerce to file revised open access transmission tariffs containing standard generator interconnection procedures and a standard agreement that the Commission is adopting in this order and to provide interconnection service to devices used for the production of electricity having a capacity of more than 20 megawatts, under them. Any non-public utility that seeks voluntary compliance with the reciprocity condition of an open access transmission tariff may satisfy this condition by adopting these procedures and this agreement.

EFFECTIVE DATE:

This final rule will become effective October 20, 2003.

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) 502-6205.

Roland Wentworth (Technical Information), Office of Market, Tariffs and Rates, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 502-8262.

Bruce Poole (Technical Information), Office of Market, Tariffs and Rates, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 502-8468.

Michael G. Henry (Legal Information), Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 502-8532.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction

A. Background

1. Need for Standard Generator Interconnection Procedures and Agreement

2. Interconnection ANOPR

3. Interconnection NOPR

a. Overview of the NOPR

b. Severing of Small Generator Issues from the NOPR

B. Legal Authority

1. The Federal Power Act and Order No. 888

2. Commission Interconnection Case Law

C. Differences Between the Proposed and Final Rules

II. Discussion

A. Issues Related to the Standard Large Generator Interconnection Procedures (LGIP)

1. Overview

2. Section-by-Section Discussion of the Proposed LGIP

Section 1—Definitions

Section 2—Scope and Application

Section 3—Interconnection Request

Section 4—Queue Position

Section 5—Procedures for Interconnection Requests Submitted Prior to Effective Date of Interconnection Procedures

Section 6—Interconnection Feasibility Study

Section 7—Interconnection System Impact Study

Section 8—Interconnection Facilities Study

Section 10—Optional Interconnection Study

Section 9—Engineering & Procurement (“E&P”) Agreement

Section 11—Standard Large Generator Interconnection Agreement

Section 12—Construction of Transmission Provider's Interconnection Facilities and Network Upgrades

Section 13—Miscellaneous

Appendices

B. Issues Related to the Standard Large Generator Interconnection Agreement (LGIA)

1. Overview

2. Article-by-Article Discussion of the Proposed LGIA

Article 1—Definitions

Article 2—Effective Date, Term and Termination

Article 3—Regulatory Filings

Article 4—Scope of Service

Article 5—Interconnection Facilities Engineering, Procurement, and Construction

Article 6—Testing and Inspection

Article 7—Metering

Article 8—Communication

Article 9—Operations

Article 10—Maintenance

Article 11—Performance Obligation

Article 12—Invoice

Article 13—Emergencies

Article 14—Regulatory Requirements and Governing Law

Article 15—Notices

Article 16—Force Majeure

Article 17—Default

Article 18—Indemnity

Article 19—Assignment

Article 20—Severability

Article 21—Comparability

Article 22—Confidentiality

Article 23—Environmental Releases

Article 24—Information Requirements

Article 25—Information Access and Audit Rights

Article 26—Subcontractors

Article 27—Disputes

Article 28—Representations, Warranties and Covenants

Article 29—Joint Operating Committee

Article 30—Miscellaneous

Appendices

C. Other Significant Policy Issues

1. Interconnection Pricing Policy

Concerns about the Fairness and Efficiency of the Commission's Crediting Policy

Interconnection Pricing and the Transition to Standard Market Design

The Inability of a Transmission Owner To Recover the Costs of Network Upgrades

Responsibility for Line Outage Costs Resulting from Interconnection

Issues Concerning the Five Year Refund Period and the Payment of Interest

Rules Governing the Payment of Credits

Responsibility for the Costs Incurred by Affected Systems

Policies Regarding Previously Approved Cost Allocations and Pricing Arrangements

Miscellaneous Pricing Issues

2. Interconnection Products and Scope of Service

Definition of Interconnection Products

Pricing of Network Resource Interconnection Service

Study Requirements for Network Resource Interconnection Service

Identification of Types of Interconnection Services to be Studied

Revisions to the Final Rule LGIP and Final Rule LGIA

3. “Distribution” Interconnections

4. Issues Relating to Qualifying Facilities

5. Variations from the Final Rule

6. Waiver Availability for Small Entities

7. OATT Reciprocity Requirements Applied to the Final Rule LGIP and Final Rule LGIA

8. General Comments/Clarifications

a. Insurance

b. Liquidated Damages

c. Consequential Damages

d. Two vs. Three Party Agreements

D. Compliance Issues

1. Amendments to Transmission Providers' OATTs

2. Grandfathering of Existing Interconnection Agreements (ISOs and non-ISOs)

3. Order No. 2001 and the Filing of Interconnection Agreements

III. Information Collection Statement

IV. Environmental Impact Statement

V. Regulatory Flexibility Act

VI. Document Availability

VII. Effective Date and Congressional Notification

Regulatory Text

Appendix A—Flow Chart of the Large Generating Facility Interconnection Process

Appendix B—Commenter Acronyms

Appendix C—Standard Large Generator Interconnection Procedures (LGIP), including Standard Large Generator Interconnection Agreement (LGIA)

Before Commissioners:

Pat Wood, III, Chairman; William L. Massey, and Nora Mead Brownell.

I. Introduction

1. This Final Rule requires all public utilities that own, control or operate facilities used for transmitting electric energy in interstate commerce to have on file standard procedures and a standard agreement for interconnecting generators larger than 20 MW. The Commission expects that this Final Rule will prevent undue discrimination, preserve reliability, increase energy supply, and lower wholesale prices for customers by increasing the number and variety of new generation that will compete in the wholesale electricity market.

2. This Final Rule requires public utilities that own, control, or operate facilities for transmitting electric energy in interstate commerce to file revised open access transmission tariffs (OATTs) to add Standard Large Generator Interconnection Procedures (Final Rule LGIP)

and a Standard Large Generator Interconnection Agreement (Final Rule LGIA).

Any non-public utility that seeks voluntary compliance with the reciprocity condition of an open access transmission tariff may satisfy this condition by adopting this Agreement and these procedures.

Readers may note that provisions of the Final Rule LGIP are referred to as “Sections” whereas provisions of the Final Rule LGIA are referred to as “Articles.”

Such filings must be made within 60 days of publication of this Final Rule in the

Federal Register

3. The Final Rule LGIP sets forth the procedures that Interconnection Customers and Transmission Providers are required to follow during the interconnection process.

The Final Rule LGIA sets forth the legal rights and obligations of each Party, addresses cost responsibility issues, and establishes a process for resolving disputes.

Unless otherwise defined in this Preamble, capitalized terms used in this Final Rule have the meanings specified in Section 1 of the Final Rule LGIP and Article 1 of the Final Rule LGIA. The term Generating Facility means the specific device for which the Interconnection Customer has requested interconnection. The owner of the Generating Facility is referred to as the Interconnection Customer. The entity (or entities) with which the Generating Facility is interconnecting is referred to as the Transmission Provider. The term Large Generator is intended to refer to any energy resource having a capacity of more than 20 megawatts, or the owner of such a resource.

4. The Federal Energy Regulatory Commission's (Commission's) authority to require the addition of the Final Rule LGIA and Final Rule LGIP to the OATT derives from its findings of undue discrimination in the interstate electric transmission market that formed the basis for Order No. 888.

The Commission here adopts standard procedures and a standard agreement to be used by Transmission Providers with Interconnection Customers proposing to interconnect a generator of more than 20 MW to sell energy at wholesale in interstate commerce. The Final Rule LGIP and Final Rule LGIA apply to any new Interconnection Request to a Transmission Provider's Transmission System.

The Commission is not requiring any retroactive changes to individual (versus generic) interconnection agreements filed with the Commission prior to the effective date of this Final Rule.

Promoting Wholesale Competition Through Open Access Non-Discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Order No. 888, 61 FR 21540 (May 10, 1996), FERC Stats. & Regs. ¶ 31,036 (1996),

order on reh'g,

Order No. 888-A, 62 FR 12274 (Mar. 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

FERC,

225 F.3d 667 (DC Cir. 2000),

aff'd sub nom. New York

FERC,

535 U.S. 1 (2002).

New Interconnection Requests include those submitted after the effective date of this Final Rule and include requests to increase the capacity of, or modify the operating characteristics of, an existing Generating Facility that is interconnected with the Transmission Provider's Transmission System.

A. Background

5. The electric power industry continues to be in transition. Where the industry once comprised mainly large, vertically integrated utilities providing bundled power at cost-based rates, companies selling unbundled wholesale power at rates set by competitive markets have now become common. Balanced market rules and sufficient infrastructure are essential for achieving power markets that will provide customers with reasonably priced and reliable service.

6. The Commission continues to work to encourage fully competitive bulk power markets. The effort took its first major step with Order No. 888, which required public utilities to provide other entities comparable access to their facilities for transmitting electricity in interstate commerce, and continued with Order No. 2000,

which encouraged the development of Regional Transmission Organizations (RTOs).

Regional Transmission Organizations, Order No. 2000, 65 FR 810 (Jan. 6, 2000), FERC Stats. & Regs. ¶ 31,089 (1999),

order on reh'g,

Order No. 2000-A, 65 FR 12,088 (Mar. 8, 2000), FERC Stats. & Regs. ¶ 31,092 (2000),

aff'd sub nom. Public Util. Dist. No. 1

FERC,

272 F.3d 607 (DC Cir. 2001).

7. In this proceeding the Commission, pursuant to its responsibility under Sections 205 and 206 of the Federal Power Act (FPA) to remedy undue discrimination, requires all public utilities that own, control, or operate facilities for transmitting electric energy in interstate commerce to append to their OATTs a Final Rule LGIP and Final Rule LGIA. The Commission believes that these documents will provide just and reasonable terms and conditions of transmission service while ensuring that reliability is protected and that they will provide a reasonable balance between the competing goals of uniformity and flexibility.

1. Need for Standard Generator Interconnection Procedures and Agreement

8. In April 1996, in Order No. 888, the Commission established the foundation necessary to develop competitive bulk power markets in the United States: non-discriminatory open access transmission services by public utilities and stranded cost recovery rules to provide a fair transition to competitive markets. Order No. 888 did not directly address generator interconnection issues.

9. In

Tennessee Power Company

(

Tennessee

) the Commission clarified that interconnection is a critical component of open access transmission service and thus is subject to the requirement that utilities offer comparable service under the OATT. In

Tennessee

the Commission encouraged, but did not require, each Transmission Provider to revise its OATT to include interconnection procedures, including a

standard interconnection agreement and specific criteria, procedures, milestones, and time lines for evaluating Interconnection Requests.

Tennessee Power Company, 90 FERC ¶ 61,238 (2002).

See, e.g.,

Commonwealth Edison Co., 91 FERC ¶ 61,083 (2000).

10. The Commission to date has addressed interconnection issues on a case-by-case basis. Although a number of Transmission Providers have filed interconnection procedures as part of their OATTs,

many industry participants remain dissatisfied with existing interconnection policy and procedures. With the increasing number of interconnection-related disputes, it has become apparent that the case-by-case approach is an inadequate and inefficient means to address interconnection issues.

See, e.g.,

American Electric Power Service Corp., 91 FERC ¶ 61,308 (2000),

order denying reh'g and granting clarification,

94 FERC ¶ 61,166,

order dismissing request for clarification,

95 FERC ¶ 61,130 (2001),

appeal docketed sub nom. Tenaska, Inc.

FERC,

No. 01-1194 (DC Cir. Apr. 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.

FERC,

No. 01-1195 (DC Cir. Apr. 23, 2001); Virginia Electric & Power Co., 93 FERC ¶ 61,307 (2000),

order on clarification,

94 FERC ¶ 61,045,

reh'g denied,

94 FERC ¶ 61,164 (2001),

appeal docketed sub nom. Tenaska, Inc.

FERC,

No. 01-1196 (DC Cir. Apr. 23, 2001); Consumers Energy Co., 93 FERC ¶ 61,339 (2000),

order on reh'g and clarification,

94 FERC ¶ 61,230,

order on clarification and denying reh'g,

95 FERC ¶ 61,131 (2001).

11. Interconnection plays a crucial role in bringing much-needed generation into the market to meet the growing needs of electricity customers. Further, relatively unencumbered entry into the market is necessary for competitive markets. However, requests for interconnection frequently result in complex, time consuming technical disputes about interconnection feasibility, cost, and cost responsibility. This delay undermines the ability of generators to compete in the market and provides an unfair advantage to utilities that own both transmission and generation facilities. The Commission concludes that there is a pressing need for a single set of procedures for jurisdictional Transmission Providers and a single, uniformly applicable interconnection agreement for Large Generators.

A standard set of procedures as part of the OATT for all jurisdictional transmission facilities will minimize opportunities for undue discrimination and expedite the development of new generation, while protecting reliability and ensuring that rates are just and reasonable.

In another rulemaking, the Commission proposes a separate set of procedures and an agreement applicable to Small Generators (any energy resource having a capacity of no larger than 20 MW, or the owner of such a resource) that seek to interconnect to jurisdictional Transmission Providers.

See

Standardization of Small Generator Interconnection Agreements and Procedures, Notice of Proposed Rulemaking, Docket No. RM02-12-000 (issued concurrently with this Final Rule). 104 FERC ¶ 61,104.

12. Interconnection is a critical component of open access transmission service, and standard interconnection procedures and a standard agreement applicable to Large Generators will serve several important functions: They will (1) Limit opportunities for Transmission Providers to favor their own generation, (2) facilitate market entry for generation competitors by reducing interconnection costs and time, and (3) encourage needed investment in generator and transmission infrastructure. The Commission expects that the Final Rule LGIP and Final Rule LGIA (as well as the documents that will be developed in the Small Generator Interconnection proceeding—

see

footnote 10,

supra

) will resolve most disputes, minimize opportunities for undue discrimination, foster increased development of economic generation, and protect system reliability. Therefore, the Commission adopts the Final Rule LGIP and Final Rule LGIA, which will be required as an amendment to the OATT of each public utility that owns, controls, or operates facilities for transmitting electric energy in interstate commerce. As discussed below, more flexibility is available to independent transmission entities in the procedures and agreement they must adopt as compared with the standard provisions adopted herein.

2. Interconnection ANOPR

13. The Commission issued an Advance Notice of Proposed Rulemaking (ANOPR) regarding generator interconnection on October 25, 2001.

As a point of departure, the ANOPR presented the Standard Generator Interconnection Procedures and Standard Generation Interconnection Agreement of the Electric Reliability Council of Texas (ERCOT).

The Commission supplemented and modified the ERCOT documents with various “best practices” that were identified in Attachment A to the ANOPR. These “best practices” were based, in part, on generator interconnection procedures and agreements that had been approved by the Commission in past cases. The ANOPR instructed the commenters and parties to assume that the Commission's current pricing policy, as described in ANOPR Attachment B, would remain in effect.

Standardizing Generator Interconnection Agreements and Procedures, Advance Notice of Proposed Rulemaking, 66 FR 55140 (Nov. 1, 2001), FERC Stats. & Regs. ¶ 35,540 (2001).

The ERCOT agreement and procedure were appended to the ANOPR as Appendix A.

14. The ANOPR initiated a consensus-making process in which members of various segments of the electric power industry, government, and the public had an opportunity to provide input. This effort resulted in two documents that largely shaped the Notice of Proposed Rulemaking (Large Generator Interconnection NOPR) that followed.

These two documents are referred to as the Consensus LGIP and Consensus LGIA (although a consensus was not reached on all issues). The Commission received numerous comments, primarily from Transmission Providers, Transmission Owners, generators (herein called Interconnection Customers), and state regulators, on the ANOPR and the Consensus LGIP and Consensus LGIA.

Standardization of Generator Interconnection Agreements and Procedures, Notice of Proposed Rulemaking, 67 FR 22250 (May 2, 2002), FERC Stats. & Regs. ¶ 32,560 (2002).

3. Interconnection NOPR

a. Overview of the NOPR

15. Although the negotiators did not reach consensus on every issue, the Consensus LGIP and LGIA reflect substantial agreement among diverse interests. The Commission used these documents and the comments on them to create the proposed standard LGIP and LGIA documents (NOPR LGIP and NOPR LGIA). Generally, the NOPR used the Consensus LGIP and LGIA provisions where there was agreement. Where the participants could not reach consensus on a particular issue and options were presented in the Consensus LGIP and LGIA, the Commission chose between those options guided by the principle of minimizing barriers to entry of new generation without increasing the risk of reliability problems. Where an issue remained unresolved and no option was presented, the Commission generally proposed the ERCOT provision.

b. Severing of Small Generator Issues From the NOPR

16. In their comments on the interconnection NOPR, supporters of Small Generators (which are defined herein as devices for the production of electricity having a capacity no more than 20 MW) requested that the Commission adopt separate rules and procedures for interconnecting Small Generators. They argued that use of a Final Rule LGIP and Final Rule LGIA

designed for Large Generators would unduly hinder the development of Small Generators. They sought streamlined procedures and requirements that would allow an Interconnection Customer with a Small Generator to avoid delays caused by studying sequentially the effects of interconnecting its generator with the Transmission Provider's electric system.

17. Persuaded by this request, the Commission decided to propose separate Small Generator interconnection procedures and an agreement (SGIP and SGIA) to provide the right incentives for both Transmission Providers and Interconnection Customers with Small Generators.

To that end, the Commission severed the issues related to interconnecting generators no larger than 20 MW from this proceeding and initiated another rulemaking docket, RM02-12-000, for the former.

The Small Generator Interconnection ANOPR proposed adopting two Small Generator Interconnection Procedures documents and two Small Generator Interconnection Agreements, with the distinction between the two sets of documents being the size of the Small Generator.

See

Standardization of Small Generator Interconnection Agreements and Procedures, Advance Notice of Proposed Rulemaking, 67 FR 54749 (Aug. 26, 2002), FERC Stats. & Regs. ¶ 35,544 (2002).

B. Legal Authority

1. The Federal Power Act and Order No. 888

18. In fulfilling its responsibilities under Sections 205 and 206 of the Federal Power Act,

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 for non-independent Transmission Providers and are just and reasonable. Additionally, as discussed in Order No. 888, the Commission's regulatory authority under the Federal Power Act “clearly carries with it the responsibility to consider, in appropriate circumstances, the anticompetitive effects of regulated aspects of interstate utility operations pursuant to [FPA] Sections 202 and 203, and under like directives contained in Sections 205, 206, and 207.”

16 U.S.C. 824d, 824e (2000).

Gulf States Utils. Co.

FPC,

411 U.S. 747, 758-59 (1973);

see City of Huntingburg

FPC,

498 F.2d 778, 783-84 (D.C. Cir. 1974) (noting the Commission's duty to consider the potential anticompetitive effects of a proposed interconnection agreement).

19. The record underlying Order No. 888 showed that public utilities owning or controlling jurisdictional transmission facilities had the incentive to engage in, and had engaged in, unduly discriminatory transmission practices.

The Commission in Order No. 888 also thoroughly discussed the legislative history and case law involving Sections 205 and 206, concluded that it had the authority and responsibility to remedy the undue discrimination it had found by requiring open access, and decided to do so through a rulemaking on a generic, industrywide basis.

The Supreme Court affirmed the Commission's decision to exercise this authority by requiring non-discriminatory (comparable) open access as a remedy for undue discrimination.

Order No. 888, FERC Stats. Regs ¶ 31,036 at 31,679-84; Order No. 888-A, FERC Stats. & Regs ¶ 31,048 at 30,209-10.

Order No. 888, FERC Stats. & Regs ¶ 31,036 at 31,668-73, 31,676-79; Order No. 888-A, FERC Stats. & Regs ¶ 31,048 at 30,201-12;

TAPS

FERC,

225 F.3d 667, 687-88 (DC Cir. 2000).

New York v. FERC, 535 U.S. 1 (2002).

20. The Commission has identified interconnection as an element of transmission service that is required to be provided under the OATT.

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 Federal Power Act.

See

Tennessee Power Co., 90 FERC ¶ 61,238 at 61,761,

reh'g dismissed,

91 FERC ¶ 61,271 (2000).

2. Commission Interconnection Case Law

21. Unless expressly changed in this Final Rule, the holdings in the Commission's existing interconnection precedents will remain a useful guide during the implementation of this Final Rule. The Commission's interconnection cases have drawn the distinction between Interconnection Facilities and Network Upgrades. Interconnection Facilities are found between the Interconnection Customer's Generating Facility and the Transmission Provider's Transmission System. The Commission has developed a simple test for distinguishing Interconnection Facilities from Network Upgrades: Network Upgrades include only facilities at or beyond the point where the Interconnection Customer's Generating Facility interconnects to the Transmission Provider's Transmission System.

The Commission has made clear that Interconnection Agreements are evaluated by the Commission according to the just and reasonable standard.

Most improvements to the Transmission System, including Network Upgrades, benefit all transmission customers, but the determination of who benefits from such Network Upgrades is often made by a non-independent transmission provider, who is an interested party. In such cases, the Commission has found that it is just and reasonable for the Interconnection Customer to pay for Interconnection Facilities but not for Network Upgrades. Agreements between the Parties to classify Interconnection Facilities as Network Upgrades, or to otherwise directly assign the costs of Network Upgrades to the Interconnection Customer, have not been found to be just and reasonable and have been rejected by the Commission.

Entergy Gulf States, Inc., 98 FERC ¶ 61,014 at 61,023,

reh'g denied,

99 FERC ¶ 61,095 (2002);

see

Public Service Co. of Colorado, 59 FERC ¶ 61,311 (1992),

reh'g denied,

62 FERC ¶ 61,013 at 61,061 (1993).

Pacific Gas & Electric Company,

et al.,

102 FERC ¶ 61,070 (2003).

See, e.g.

Illinois Power Co., 103 FERC ¶ 61,032 (2003); American Electric Power Service Corp., 101 FERC ¶ 61,194 (2002).

22. Regarding pricing for a non-independent Transmission Provider, the distinction between Interconnection Facilities and Network Upgrades is important because Interconnection Facilities will be paid for solely by the Interconnection Customer, and while Network Upgrades will be funded initially by the Interconnection Customer (unless the Transmission Provider elects to fund them), the Interconnection Customer would then be entitled to a cash equivalent refund (

i.e.,

credit) equal to the total amount paid for the Network Upgrades, including any tax gross-up or other tax-related payments. The refund would be paid to the Interconnection Customer on a dollar-for-dollar basis, as credits against the Interconnection Customer's payments for transmission services, with the full amount to be refunded, with interest within five years of the Commercial Operation Date. The Commission has clarified that transmission credits may be used whether or not a Generating Facility is being dispatched and that credits must be accepted for all network transmissions by the Interconnection Customer, regardless of whether the plant from which the credits originated is dispatched.

Credits are not tied to any particular Generating Facility.

The Commission has stated that peaking facilities, for instance, must be allowed to use credits even when the Generating

Facility is not dispatched.

The Commission has also allowed Transmission Providers to require several Interconnection Customers to share the costs of Network Upgrades, under certain circumstances.

Entergy Services, Inc., 101 FERC ¶ 61,289 (2002).

Id.

Colton Power, LP, 101 FERC ¶ 61,150 (2002).

Id.

23. The Commission has also clarified that an Interconnection Customer need not enter into an agreement for the delivery component of transmission service to interconnect with a Transmission Providers' Transmission System.

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.

Entergy Services, Inc., 101 FERC ¶ 61,016 (2002); Southern Company Services, Inc., 95 FERC ¶ 61,307 at 62,049,

order dismissing reh'g,

96 FERC ¶ 61,168 (2001); Tennessee Power Co., 90 FERC ¶ 61,238 at 61,761 (2000).

See

Arizona Public Service Co., 94 FERC ¶ 61,027 at 61,076,

order on reh'g,

94 FERC ¶ 61,267 (2001).

24. The Commission has clarified that ownership of the Interconnection Facilities does not have a direct effect on reliability of the system. Therefore, as long as the Transmission Provider operates the Interconnection Facilities, the Commission will allow an Interconnection Customer to own part, or all, of those facilities.

Arizona Public Service Company, 102 FERC ¶ 61,303 (2003).

C. Differences Between the Proposed and Final Rules

25. The Final Rule LGIP and Final Rule LGIA largely track the proposed documents. Changes made in the Final Rule tend to be specific to an individual LGIP section or LGIA article, and do not require fundamental changes to the documents. That being said, there are a few significant issues, some substantive and others organizational, that the Commission summarizes here.

26. Most importantly, we note that the Final Rule applies to independent and non-independent Transmission Providers alike, but non-independent Transmission Providers are required to adopt the Final Rule LGIP and Final Rule LGIA into their OATTs, with deviations from the Final Rule justified using either the “regional differences” or “consistent with or superior to” standard. We also allow Regional Transmission Organizations (RTOs) and ISOs more flexibility to customize an LGIP and LGIA to meet their regional needs. This applies to terms and conditions as well as pricing. While RTOs and ISOs are required to submit compliance filings, they may submit LGIP and LGIA terms and conditions that meet an “independent entity variation” standard that is more flexible than the “consistent with or superior to” standard and the regional differences standard.

27. We are also including in the Final Rule LGIA an article addressing insurance requirements and limiting liability for consequential damages, both of which were absent from the NOPR. Provision for liquidated damages had been removed from the Final Rule LGIP but remains an option in the Final Rule LGIA. Also, in the Final Rule LGIP, when a Transmission Provider elects to study Interconnection Requests in Clusters, it would simultaneously study all Interconnections Requests received within a 180 day window, rather than a 90 day window as proposed.

28. On pricing, we clarify the approach set forth in the NOPR. We continue our current policy of requiring a Transmission Provider that is not an independent entity to provide transmission credits for the cost of Network Upgrades needed for a Generating Facility interconnection. For a Transmission Provider that is an independent entity, such as an RTO or ISO, we allow flexibility as to the specifics of the interconnection pricing policy. Also, an RTO or ISO may propose participant funding for Network Upgrades for a generator interconnection, and, for a transitional period not to exceed a year, a region may use participant funding as soon as an independent administrator has been approved by the Commission and the affected states.

29. Where the policy of transmission credits for upgrades required as a result of the interconnection applies, the Commission provides several clarifications in this Final Rule. For example, the Interconnection Customer should receive transmission credits only if its Generating Facility has achieved commercial operation. Transmission credits are to be paid to the Interconnection Customer when upgrades to an Affected System

are constructed and the Interconnection Customer has paid for them. Finally, the Transmission Provider may decline to award credits for only those transmission charges that are designed to recover out-of-pocket costs, such as the cost of line losses, associated with the delivery of the output of the Generating Facility.

An Affected System is an electric system other than the Transmission Provider's Transmission System that may be affected by the proposed interconnection.

II. Discussion

30. In part A of this discussion we address the Standard Large Generator Interconnection Procedures (Final Rule LGIP) that specify the details of the uniform process a prospective Interconnection Customer and its Transmission Provider shall use to initiate, evaluate, and implement an Interconnection Request pursuant to the Final Rule.

31. In part B we discuss the details of the Standard Large Generator Interconnection Agreement (Final Rule LGIA) to be executed by the prospective Interconnection Customer, the Transmission Provider and, where appropriate, the Transmission Owner. This document is incorporated as Appendix 6 to the Standard Large Generator Interconnection Procedures and covers the related rights and obligations of the Parties.

The Final Rule LGIP and Final Rule LGIA define Party or Parties as “Transmission Provider, Transmission Owner, Interconnection Customer, or any combination of the above.”

32. In part C, we discuss a number of other significant policy issues in connection with this rulemaking, including pricing policies; the required Interconnection Services; the treatment of “Distribution” level interconnections; Qualifying Facility matters; variations from the Final Rule and accommodation of regional differences; the availability of waivers for small entities; OATT reciprocity implications for interconnection requests; assorted clarifications to the NOPR's proposals; insurance and liquidated damages matters; two- versus three-party interconnection agreements; and consequential damage issues.

33. In part D, we address Compliance Issues pertaining to the requirement for a Transmission Provider to file conforming amendments to its existing OATT; the treatment to be accorded existing interconnection agreements (grandfathering); and the method a Transmission Provider is to use to file executed and unexecuted interconnection agreements in accord with this Final Rule.

A. Issues Related to the Standard Large Generator Interconnection Procedures (LGIP)

1. Overview

For the convenience of the reader, a flow chart depicting the interconnection process is appended to this preamble as Appendix A.

34. The Final Rule Standard Large Generator Interconnection Procedures (LGIP) document specifies the steps that must be followed and deadlines that must be met when an Interconnection

Customer requests interconnection of either a new Generating Facility or the expansion of an existing Generating Facility with the Transmission Provider's Transmission System.

The Commission directs each public utility to amend its OATT with a single compliance filing to incorporate the Final Rule LGIP and the Standard Large Generator Interconnection Agreement (LGIA) documents. RTOs and ISOs must also make compliance filings, but as discussed above, will have more flexibility to propose different procedures and a different agreement.

Any Transmission Provider with an Interconnection Request outstanding at the time this Final Rule becomes effective shall transition to the Final Rule LGIP within a reasonable period of time. This is further described in Final Rule LGIP Section 5.1.

35. The Final Rule LGIP sets forth the following steps to secure an interconnection. First, the prospective Interconnection Customer will submit an Interconnection Request to the Transmission Provider along with a $10,000 deposit, preliminary site documentation, and the expected In-Service Date.

The Transmission Provider will acknowledge receipt of the request and promptly notify the Interconnection Customer if its request is deficient. When the Interconnection Request is complete, the Transmission Provider will place it in its interconnection queue with other pending requests. The Transmission Provider will assign a Queue Position to each completed Interconnection Request based on the date and time of its receipt.

Queue Position is used to determine the order of performing the various Interconnection Studies and the assignment of cost responsibility for the construction of facilities necessary to accommodate the Interconnection Request.

The Transmission Provider will also maintain a list of all Interconnection Requests

on its OASIS.

The standard form of Interconnection Request is Appendix 1 of the LGIP document.

For example, the first complete Interconnection Request, assigned an earlier Queue Position, is “higher-queued” relative to the second complete Interconnection Request that is assigned a later Queue Position and is “lower queued.” The withdrawal of a complete Interconnection Request causes it to lose its Queue Position and all succeeding complete Interconnection Requests to advance, accordingly.

Any Interconnection Customer assigned a Queue Position before the effective date of this Final Rule would retain that Queue Position.

We emphasize that the Final Rule LGIP requires the Transmission Provider, the Transmission Owner, and such entities' officers, employees, and contractors to maintain proper procedures for Confidential Information provided by an Interconnection Customer related to the Interconnection Request, the disclosure of which could harm or prejudice the Interconnection Customer or its business.

Open Access Same-Time Information System and Standards of Conduct, Order No. 889, 61 FR 21737 (May 10, 1996), FERC Stats. & Regs. ¶ 31,035 at 31,590 (1996),

order on reh'g,

Order No. 889-A, 62 FR 12484 (Mar. 14, 1997), FERC Stats. & Regs. ¶ 31,049 (1997),

reh'g denied,

Order No. 889-B, 81 FERC ¶ 61,253 (1997),

aff'd in relevant part sub nom. Transmission Access Policy Study Group

FERC,

225 F.3d 667 (DC Cir. 2000),

aff'd sub nom.

New York

FERC,

535 U.S. 1 (2002).

36. The Parties will then schedule a Scoping Meeting to discuss possible Points of Interconnection and exchange technical information, including data that would reasonably be expected to affect such interconnection options.

The Scoping Meeting is followed by a series of Interconnection Studies to be performed by, or at the direction of, the Transmission Provider to evaluate the proposed interconnection in detail, identify any Adverse System Impacts on the Transmission Provider's Transmission System or Affected Systems, and specify the facility modifications that are needed to safely and reliably complete the interconnection.

These studies include:

The Scoping Meeting will address technical matters such as facility loadings, general instability issues, general short-circuit issues, general voltage issues, and general reliability issues that would affect the Interconnection Customer's designation of its Point of Interconnection.

The standard forms of agreement for the Interconnection Feasibility Study, the Interconnection System Impact Study, the Interconnection Facilities Study, and the Optional Interconnection Study, are included at Appendices 2-4 to the Final Rule LGIP, respectively.

(1)

Interconnection Feasibility Study

to evaluate on a preliminary basis the feasibility of the proposed interconnection, using power flow and short-circuit analyses (to be completed within 45 Calendar Days from the date of signing of an Interconnection Feasibility Study Agreement) (study requires a $10,000 deposit);

(2)

Interconnection System Impact Study

to evaluate on a comprehensive basis the impact of the proposed interconnection on the reliability of Transmission Provider's Transmission System and Affected Systems, using a stability analysis, power flow, and short-circuit analyses (to be completed within 60 Calendar Days from the date of signing of an Interconnection System Impact Study Agreement) (study requires a $50,000 deposit);

At the Transmission Provider's option, Interconnection System Impact Studies for multiple Generating Facilities may be conducted serially or in clusters.

(3)

Interconnection Facilities Study

to determine a list of facilities (including Transmission Provider's Interconnection Facilities and Network Upgrades as identified in the Interconnection System Impact Study), the cost of those facilities, and the time required to interconnect the Generating Facility with the Transmission Provider's Transmission System (to be completed within 90-180 Calendar Days from the date of signing of an Interconnection Facilities Study Agreement) (study requires a $100,000 deposit or an estimated monthly cost developed by the Transmission Provider for conducting the Interconnection Facilities Study); and

(4)

Optional Interconnection Study

or sensitivity analysis of various assumptions specified by the Interconnection Customer to identify any Network Upgrades that may be required to provide transmission delivery service over alternative transmission paths for the electricity produced by the Generating Facility and (study requires a $10,000 deposit).

37. The Interconnection Feasibility Study, the Interconnection System Impact Study, and the Interconnection Facilities Study must be performed in the above order, with completion of each study before the next begins.

An Interconnection Customer may also request a restudy of any of the above if a higher-queued project either drops out of the queue, is subjected to Material Modifications, or changes its Point of Interconnection.

The Interconnection Customer will pay the actual costs for performing each of the Interconnection Studies and restudies.

These Interconnection Studies are typical of the kinds of studies undertaken by Transmission Providers to evaluate Interconnection Requests. The Interconnection Facilities Studies and Interconnection System Impact Studies also correspond to transmission service studies described in the

pro forma

open access tariff.

See

Order No. 888-A (Tariff Part II, 19 Additional Study Procedures for Firm Point-To-Point Transmission Service Requests; and Tariff Part III, 32 Additional Study Procedures for Network Integration Transmission Service Requests), FERC Stats. & Regs., Regulations Preambles (July 1996-December 2000), ¶ 31,048 at 30,524-26 and 30,535-36.

An Interconnection Feasibility Restudy must be completed within 45 Calendar Days of such request. Similarly, the Transmission Provider has 60 Calendar Days to complete either an Interconnection System Impact Restudy or an Interconnection Facilities Restudy.

38. The Transmission Provider's Interconnection Facilities Study report

will include a best estimate of the costs to effect the requested interconnection which are to be funded up-front by the Interconnection Customer. At the same time as the report is issued, the Transmission Provider shall also give the Interconnection Customer a draft interconnection agreement completed to

the extent practicable.

The Transmission Provider and the Interconnection Customer will then negotiate the schedule for constructing and completing any necessary Transmission Provider Interconnection Facilities and Network Upgrades, and incorporate this schedule into the interconnection agreement that is signed by the Parties.

Upon the completion of each of the Interconnection Studies, a report is prepared which presents the results of the analyses.

The draft interconnection agreement shall include: Appendix A, Interconnection Facilities, Network Upgrades and Distribution Upgrades; Appendix B, Milestones; Appendix C, Interconnection Details; Appendix D, Security Arrangements Details; Appendix E, Commercial Operation Date; and Appendix F, Addresses for Delivery of Notices and Billings.

In general, the In-Service Date of an Interconnection Customer's Generating Facility or Generating Facility expansion will determine the sequence of construction of Network Upgrades. An Interconnection Customer, in order to achieve its expected In-Service Date, may request that the Transmission Provider advance the completion of Network Upgrades necessary to support such In-Service Date that would otherwise not be completed pursuant to a contractual obligation of an entity other than the Interconnection Customer. The Transmission Provider will use Reasonable Efforts to advance the construction if the Interconnection Customer reimburses it for any associated expediting costs and the cost of such Network Upgrades. The Interconnection Customer is entitled to transmission credits for the expediting costs that it pays.

2. Section-by-Section Discussion of the Proposed LGIP

39. What follows is a discussion of the standard interconnection procedures the Commission proposed, the comments received, and the Commission's conclusion. The order of discussion follows the organization of the proposed LGIP, covering Sections 1-13. Only subsections for which issues are raised are presented. For example, we discuss Section 2.3, but not Sections 2.1 or 2.2 because no significant issues were raised regarding Sections 2.1 or 2.2. Readers should note that section numbers referred to in the following discussion are the numbers contained in the proposed LGIP. Some proposed sections are renumbered in the Final Rule; mention of that fact will be made in the Commission Conclusions discussion, where appropriate. Also, note that Proposed LGIP Section 14 is eliminated from the Final Rule in its entirety because provisions for interconnection procedures and an interconnection agreement for Small Generators have been severed from this proceeding, as discussed,

supra.

40.

Section 1—Definitions

—Section 1 of the NOPR LGIP and Article 1 of the NOPR LGIA contained defined terms that appeared in the respective documents. For the sake of consistency, the Final Rule LGIP and Final Rule LGIA contain one common set of terms. Included in the list of defined terms are a number of new terms which were not included in the NOPR LGIP and NOPR LGIA. Comments relating to the definition of terms in both documents are discussed below.

41.

Ancillary Services

(In the NOPR: Ancillary and Other Services)—The NOPR proposed that Ancillary and Other Services would have the same meaning as defined in the Transmission Provider's OATT and include some other services such as generator balancing, black start, and automatic generation control.

Comments

42. Cinergy and Entergy claim that this term is not used in the LGIA and that its definition should be deleted.

Commission Conclusion

43. The Commission disagrees that the definition should be deleted. The term is used in Article 9 of the NOPR LGIA and elsewhere. However, to be consistent with the OATT, the Commission here adopts the definition of Ancillary Services in Order No. 888: “Those services that are necessary to support the transmission of capacity and energy from resources to loads while maintaining reliable operation of the Transmission Provider's Transmission System in accordance with Good Utility Practice.”

44.

Commercial Operation Date

—The NOPR proposed to define Commercial Operation Date as the date on which the Generating Facility commences commercial operation of a unit at the Generating Facility after Trial Operation of the unit is completed, as confirmed in writing, in accordance with proposed Appendix F to the NOPR LGIA.

Comments

45. Central Maine points out that when a Generating Facility consists of more than one generating unit, under the NOPR, the Commercial Operation Date depends on the operability of a generating unit after its testing. Central Maine requests that the Commission define the term Commercial Operation Date as the date on which the Generating Facility as a whole commences commercial operation, not the individual generating units.

Commission Conclusion

46. The Commission is not adopting Central Maine's proposal. The Generating Facility (referred to as the Facility in the NOPR LGIP and NOPR LGIA) could consist of multiple generating units with substantially different Commercial Operation Dates. Under Central Maine's proposal, all of the Generating Facilities at the complex would be required to undergo a pre-commercial Trial Operation each time a new generating unit at the Generating Facility is ready to commence commercial operation. Central Maine gives no reason why this should be required. Furthermore, revising the NOPR LGIP is unnecessary because Article 6.1 of the NOPR LGIA (Pre-Commercial Operation Date, Testing and Modifications) addresses testing of the Generating Facility and the Interconnection Customer's Interconnection Facilities to ensure their safe and reliable operation.

47.

Generating Facility

(In the NOPR: Facility)—The NOPR proposed to define the term Facility as the Interconnection Customer's generator, as identified in the Interconnection Request, but excluding the Interconnection Customer's Interconnection Facilities. In this Final Rule, the Commission has renamed Facility to Generating Facility to avoid confusion between other facilities and equipment.

Comments

48. Central Maine states that a full description of the Generating Facility should be attached to the interconnection agreement as an appendix.

Commission Conclusion

49. The Commission concludes that it is unnecessary to append a description of the Generating Facility to the interconnection agreement because Appendix 1 of the Final Rule LGIP (Interconnection Request) already provides detailed information about the Generating Facility. Accordingly, the Commission adopts the proposed definition but changes the defined term from Facility to Generating Facility.

50.

Generator

—In the NOPR, the Commission proposed to define the term Generator to mean any Generating Facility, regardless of ownership.

Comments

51. Dairyland Power points out that the term Generator is used in the NOPR LGIP to refer to the entity that owns the Generating Facility, as well as the facility itself. It asks for clarification.

Commission Conclusion

52. To clarify, we use the term Interconnection Customer in this preamble and the Final Rule to refer to the owner of the Generating Facility. The terms Small Generator and Large Generator refer to the class of energy producing devices no larger than 20 MW and larger than 20 MW, respectively.

53.

Good Utility Practice

—In the NOPR, the Commission defined Good Utility Practice to mean any of the practices, methods and acts generally accepted in the region, including Applicable Reliability Standards and the National Electrical Code.

Comments

54. NERC states that although the terms Good Utility Practice and Applicable Reliability Standards have separate definitions, they have often been used interchangeably. It notes that the Commission has defined Applicable Reliability Standards to include NERC and regional reliability council requirements while Good Utility Practice is a broader term that includes Applicable Reliability Standards. NERC comments that it is important that these terms be used consistently.

55. Cinergy notes that Good Utility Practice is defined to include compliance with the National Electrical Code. It states that because it is not subject to the National Electrical Code, it would be improper to attempt to bind it to such compliance.

Commission Conclusion

56. The Commission agrees with NERC that there is some overlap in the proposed definitions of Good Utility Practice and Applicable Reliability Standards. To remove any misunderstanding in the definition of Good Utility Practice, the Commission is adopting in the Final Rule the Order No. 888 definition, which contains no references to Applicable Reliability Standards and National Electrical Code. This also addresses Cinergy's concern.

57.

Interconnection Guidelines

—The NOPR stated that the technical requirements to be followed by the Parties are set forth in the proposed Appendix G (Interconnection Guidelines).

Comments

58. Southern observes that proposed Appendix G is blank, inferring that the Interconnection Customer and Transmission Provider negotiate the technical and operational requirements. Southern believes that this is inappropriate because interconnection guidelines should be established by the Transmission Provider, not by negotiation. Southern contends that requiring a Transmission Provider to negotiate the technical and operational requirements with each Interconnection Customer is inconsistent with the goal of uniform interconnection procedures.

Commission Conclusion

59. Proposed Appendix G was intended to set forth uniform technical and operational requirements applicable to all Interconnection Customers established by the Transmission Provider, not to be a vehicle for the Parties to negotiate technical and operational requirements on a case-by-case basis. The Commission concludes, however, that most, if not all, of the generic technical and operational requirements are already set forth in the Final Rule LGIA. We are therefore not defining the term Interconnection Guidelines as well as not including proposed Appendix G in the Final Rule LGIA.

See, e.g.,

Article 7 (Metering), Article 8 (Communications) and Article 9 (Operations).

60.

Joint Operating Committee

—The NOPR proposed to define Joint Operating Committee to mean a committee comprised of members of individual operating committees that addresses issues arising out of the duties, roles, and responsibilities of individual operating committees described in Article 29 of the NOPR LGIA.

Comments

61. FirstEnergy and PSNM state that the Joint Operating Committee would impose additional administrative costs on the Transmission Provider and is also unnecessary.

Commission Conclusion

62. The Commission is not deleting the term. As discussed later, the Final Rule does not require the Parties to form individual operating committees. Instead, the Final Rule requires a Joint Operating Committee comprising the Transmission Provider and all of its Interconnection Customers. Among other things, the committee will address issues arising out of the duties, roles, and responsibilities of the Parties under their interconnection agreements.

63.

Network Upgrades

—In the NOPR, Network Upgrades were defined as additions, modifications, and upgrades to the Transmission System required beyond the Point of Interconnection in order to accommodate the interconnection of the Generating Facility. Network Upgrades are identified by the Parties in Appendix A to the interconnection agreement (including any modifications, additions or upgrades made to such facilities). The NOPR also stated that Network Upgrades benefit all users of the Transmission System, without distinction or regard as to the purpose of the upgrade.

Comments

64. Several commenters, including Calpine and SoCal Water District, request that the definition of Network Upgrades be clarified and made as specific as possible. Calpine and Nevada Power propose that Network Upgrades should include only facilities shown to be “integrated” to the Transmission System, that is, likely to be used by entities other than the Interconnection Customer. Some commenters

contend that circuit breakers are not Network Upgrades, since they benefit only the new Interconnection Customer.

E.g.,

Edison Mission, Georgia Transmission, MidAmerican, and SoCal Water District.

Commission Conclusion

65. The Final Rule revises the definition of Network Upgrade to include the phrase “at or beyond the Point of Interconnection,” instead of “beyond the Point of Interconnection,” to make it consistent with established Commission precedent. The network begins at the point where the Interconnection Customer connects to the Transmission System, not somewhere beyond that point.

Facilities beyond the Point of Interconnection are part of the Transmission Provider's Transmission System and benefit all users. We are also removing the concept of beneficiary from the definition so as to avoid implying a pricing policy in the definition.

See

Entergy Gulf States, Inc., 99 FERC ¶ 61,095 (2002).

66. We disagree with the comments stating that the term is not well defined. The Commission has defined Network Upgrades as those facilities “at or beyond the Point of Interconnection” partially in order to clarify to all entities exactly what is a Network Upgrade. We are removing references to beneficiaries from the definition, because our well-established precedent regarding what constitutes Network Upgrades does not require a case-specific determination that all users benefit from Network Upgrade; instead we look only as whether the upgrade is at or beyond the Point of Interconnection.

E.g., Entergy Services, Inc.

FERC,

319 F.3d 536 (DC Cir. 2003); Southern Company Services, Inc., 101 FERC ¶ 61,309 (2002); American Electric Power Service Corp., 101 FERC ¶ 61,194 (2002); Tampa Electric Company, 99 FERC ¶ 61,192 (2002).

67.

Reasonable Efforts

—The NOPR proposed to define Reasonable Efforts as actions that are timely and consistent with Good Utility Practice and are substantially equivalent to those a Party would use to protect its own interests.

Comments

68. Some commenters including Central Maine found this definition to be vague. They also contend that only Good Utility Practice should be required.

Commission Conclusion

69. The Commission adopts the proposed definition. The standard in the NOPR is necessary to ensure comparable treatment. If a Party normally exceeds Good Utility Practice when it protects its own interests, it must do so for others as well.

70.

System Protection Facilities

—The NOPR proposed to define System Protection Facilities as the equipment required to protect the Transmission System from faults and other electrical disturbances occurring at the Interconnection Customer's Generating Facility, and vice versa.

Comments

71. NERC proposes that the definition of System Protection Facilities should include “necessary protection signal communications equipment” in addition to the other equipment mentioned in the definition. It argues that such communications equipment is needed to coordinate and monitor the operation of protective devices.

Commission Conclusion

72. The Commission agrees with NERC and adopts the recommended language.

73.

Transmission Owner and Transmission Provider

—In the NOPR, the Commission proposed to define Transmission Owner to mean any entity that owns, leases or otherwise possesses an interest in the Transmission System at the Point of Interconnection. It proposed to define Transmission Provider to mean the entity that provides transmission service under its OATT.

Comments

74. EEI proposes that the definition of Transmission Provider be revised to include Transmission Owner. National Grid states that the proposed LGIA should clearly delineate the rights and responsibilities of Transmission Owners that are not Transmission Providers.

Commission Conclusion

75. We agree with EEI. Accordingly, the definition of Transmission Provider in the Final Rule includes the Transmission Owner as well. While we recognize that the Transmission Provider and the Transmission Owner may be distinct entities in some cases, throughout the Final Rule we will refer to both the Transmission Provider and the Transmission Owner generically as the Transmission Provider. There are a few instances in which the distinction between Transmission Owner and Transmission Provider becomes relevant and there we use the appropriate terms.

76.

Section 2—Scope and Application

—Section 2 of the NOPR LGIP provided that the Transmission Provider receive, process, and analyze all Interconnection Requests in the same manner as it does for itself, its subsidiaries or Affiliates.

77.

Section 2.3—Base Case Data

—Section 2.3 of the NOPR LGIP required the Transmission Provider to provide base case power flow, short-circuit and stability databases to the Interconnection Customer upon request so that the Interconnection Customer may independently study its Interconnection Request.

Comments

78. Mirant notes that certain of the language from the Consensus LGIP Section 2.3 concerning confidentiality provisions and the makeup of the Base Case data appears to have been unintentionally left out of the NOPR LGIP Section 2.3.

Mirant states that the following language was left out of Section 2.3 of the NOPR LGIP: “and contingency lists upon request subject to confidentiality provisions. Such databases and lists, herein referred to as Base Cases, shall include all (I) generation projects and (ii) transmission projects, including merchant transmission projects that are proposed for a Transmission System for which a transmission expansion plan has been submitted and approved by the applicable authority.”

79. Dominion Resources asks that the Commission revise LGIP Section 2.3 to state that Base Case data is subject to a confidentiality provision between the Parties. Sempra comments that the Transmission Provider should protect the confidentiality of other Interconnection Customers' information that is part of those databases. Entergy states that this Section should apply only to information that is not commercially sensitive, so as to avoid providing a competitive advantage to other Interconnection Customers.

80. Calpine argues that the Transmission Provider should provide, in addition to the stated databases, all underlying assumptions, data files and documents used to create the Base Case, because otherwise the provision could be interpreted as a narrow set of data files that are meaningless.

81. The Ohio PUC contends that the Commission should ensure that rules for handling critical energy infrastructure information (CEII) are not abused by utilities that seek to withhold from public disclosure commercial information that is not really CEII and that has historically been central to public regulatory proceedings. It believes that there must be procedures to ensure protection of critical public interests. The Ohio PUC recommends that the procedures be carried out by an entity, such as the newly formed Department of Homeland Security, that has specific experience in CEII and is qualified to review the Commission's CEII decisions.

Commission Conclusion

82. As Mirant correctly notes, segments of the Consensus LGIP Section 2.3 relating to confidentiality and the makeup of the Base Case data were inadvertently omitted from the NOPR; this text is included in the Final Rule. Both confidentiality and the Base Case data format were significant topics in the Commission Staff Queuing Technical Conference held on January 21, 2003. Most conference participants agreed that providing this Base Case data was reasonable in that it would help the Interconnection Customer and its subcontractor conduct Interconnection Studies independently, expedite the evaluation process, and free up the Transmission Provider's resources, and reduce the time that would otherwise be devoted to performing Interconnection Studies or acting as the Interconnection Customer's consultant. The Commission believes that adding the missing text addresses other commenters' concerns regarding the need for confidential treatment of the Base Case data and other commercially sensitive information that may be provided to the Interconnection Customer.

83. In response to Calpine, we clarify that Transmission Providers must provide all underlying assumptions and data files so that the Interconnection Customer or its subcontractor can independently conduct Interconnection Studies.

84. As to the concerns of the Ohio PUC and others regarding the security of critical energy infrastructure information, the security of the energy infrastructure is essential. The Commission expects that all Transmission Providers, market participants, and Interconnection Customers will comply with the recommendations of the President's Critical Infrastructure Protection Board, as well as any best practice recommendations or requirements that may be issued by NERC or any other electric reliability authorities. In particular, all public utilities are expected to meet basic standards for system infrastructure and operational

security, including physical, operational, and cyber-security practices. However, they are not to abuse security requirements in an effort to withhold from public disclosure commercial information that lacks legitimate CEII status.

85.

Section 3—Interconnection Request

—In NOPR LGIP Section 3, the Commission proposed that each Interconnection Request include, among other things, a refundable deposit of $10,000 that would be applied toward the cost of the Interconnection Feasibility Study.

86.

Section 3.1—General

—NOPR LGIP Section 3.1 would have required that the Interconnection Customer submit to the Transmission Provider an Interconnection Request and a refundable deposit of $10,000 to be applied toward the cost of an Interconnection Feasibility Study. The Interconnection Customer would submit a separate Interconnection Request for each site to be studied and may submit multiple Interconnection Requests for a single site. At the Interconnection Customer's option, the Parties could identify alternative Points of Interconnection and configurations at the Scoping Meeting and attempt to eliminate alternatives from further consideration. The Interconnection Customer would be required to select the Point of Interconnection no later than the execution of the Interconnection Feasibility Study Agreement.

Comments

87. Some commenters, including Entergy and PJM, state that an initial evaluation of several alternative interconnection sites is inconsistent with regional planning and can be accomplished only at the expense of Transmission Providers and lower queued Interconnection Customers seeking swift interconnection.

88. Cal ISO raises several questions related to the possibility of multiple Interconnection Requests for a single site: (1) Do multiple Interconnection Requests refer only to routing and interconnection arrangements? (2) If so, how many alternatives are acceptable under one submittal? (3) Is an Interconnection Request for one site that is to be evaluated at two different voltage levels, one or two Interconnection Requests? and (4) Is the $10,000 deposit required for each Interconnection Request, resulting in multiple deposits for multiple requests at a single site?

89. ISO New England recommends revising this section to give an RTO or ISO authority to set reasonable interconnection deposit amounts, taking into account the requested study's complexity. It also states that concerns about discriminatory treatment of Interconnection Customers should be alleviated because the RTO or ISO is independent.

Commission Conclusion

90. Except as noted below, we are adopting Section 3.1 in the Final Rule as proposed. Allowing the Interconnection Customer the option to have the Parties evaluate alternative interconnection sites and configurations at the Scoping Meeting will greatly reduce the need to conduct detailed analyses of interconnection options that are found to have little merit. Providing the Interconnection Customer with more information prior to authorizing an Interconnection Feasibility Study should lead to more efficient use of the Transmission Provider's planning resources and higher quality Interconnection Studies.

91. With regard to Cal ISO's first question, multiple Interconnection Requests at a single site could involve more than just alternative routing and interconnection arrangements. For example, they could also involve substantially different Generating Facility designs. Regarding Cal ISO's second question, we do not set a generic limit on the number of Interconnection Requests that may be included in a single submittal, but leave it to the Parties to reach agreement at the Scoping Meeting, or, if they fail to agree, pursue dispute resolution. As to the third question, a request to evaluate one site at two different voltage levels would be two Interconnection Requests. With respect to Cal ISO's fourth question, the Interconnection Customer must submit a deposit with each Interconnection Request when more than one request is submitted for a single site. However, if an Interconnection Request is withdrawn before the execution of an Interconnection Feasibility Study Agreement, perhaps as a result of discussions at the Scoping Meeting, the Transmission Provider must promptly return the deposit to the Interconnection Customer. Finally, the Commission is clarifying Section 3.1 to eliminate the uncertainty underlying Cal ISO's questions 3 and 4.

92. The Commission is not revising proposed LGIP Section 3.1 to provide the flexibility that the New England ISO seeks. The proposed study deposit requirements appropriately balance the interests of the Transmission Provider and the Interconnection Customer. However, as explained elsewhere in this preamble, we will entertain proposals by an RTO or ISO to adopt alternative interconnection procedures that reflect regional differences.

93.

Section 3.2

—

Identification of Types of Interconnection Services

—Section 3.2 of the NOPR LGIP stated that, when the Interconnection Customer submits its Interconnection Request, it must identify the type of Interconnection Service it desires. The Final Rule provides for two service products: (1) Energy Resource Interconnection Service, which is a basic or minimal interconnection service, and (2) Network Resource Interconnection Service, which is a more flexible and comprehensive service. However, any Interconnection Customer requesting Network Resource Interconnection Service may request that it also be studied for the less comprehensive Energy Resource Interconnection Service up to the point when an Interconnection Facility Study Agreement is executed. Comments and conclusions relating to Section 3.2 of the NOPR LGIP are discussed in part II.C.2 (Interconnection Products and Scope of Service).

94.

Section 3.3.1

—

Initiating an Interconnection Request

—According to NOPR LGIP Section 3.3.1, in order to initiate an Interconnection Request, the Interconnection Customer would be required to submit a $10,000 deposit, a completed Interconnection Request, and either a demonstration of Site Control (

e.g.,

securing land rights, air permit,

etc.

) or an additional deposit of $10,000, with the deposits applied toward any required Interconnection Studies. The latter deposit would be refundable only if the Interconnection Customer demonstrates Site Control within the time period specified in the proposed LGIP Section 3.3.3.

95. Proposed LGIP Section 3.3.1 would allow the expected In-Service Date of the Generating Facility to be no later than the completion date of the relevant region's expansion planning period, not to exceed seven years from the date of the Interconnection Request, unless the Interconnection Customer can demonstrate that engineering, permitting and construction of the Generating Facility will take longer. Under the proposal, the In-Service Date may not exceed ten years from the date the Interconnection Request is received by the Transmission Provider.

Comments

96. Some commenters contend that an Interconnection Customer should be required to demonstrate Site Control when it submits an Interconnection

Request.

They disagree with the proposed LGIP Section 3.3.1 provision that allows for the posting of an additional $10,000 deposit in lieu of the demonstration of Site Control. For example, PJM states that Site Control is a strong indication of a serious project and is essential for establishing a queue that will consist of projects that are likely to be completed. PJM claims that this is not a burdensome requirement, and that every one of the 285 requests for generator interconnection that it has received since 1999 has included evidence of Site Control at the Interconnection Feasibility Study stage. Edison Mission believes that the Interconnection Customer must have uninterrupted Site Control throughout the interconnection process. It states that a $10,000 deposit is not sufficient to discourage Interconnection Customers from filing premature Interconnection Requests (in order to secure a favorable Queue Position) and only later find themselves to be unable to secure Site Control. Edison Mission further contends that such a minimal deposit requirement may encourage Interconnection Customers, not acting in good faith, to speculate in interconnection rights by placing deposits for Interconnection Requests at promising locations. It believes that such speculation will frustrate other Interconnection Customers that obtain a site but are locked out of interconnection due to the superior Queue Position of a Party that merely posted a deposit. Edison Mission predicts that this will become an even greater issue as market designs based on locational marginal pricing become the norm.

E.g.,

BPA, Central Maine, Cleco, Edison Mission, Georgia Transmission, NYTO, PJM, PJMTO, and Salt River Project.

97. Cleco believes that the only deposit that should be refundable is the $10,000 deposit paid in lieu of demonstrating Site Control, not the original deposit initiating an Interconnection Request. Moreover, Cleco states that the Commission should make clear that the $10,000 deposited in lieu of Site Control should be refundable if the Interconnection Customer demonstrates Site Control within the time period specified in Section 3.3.3.

98. Central Maine takes exception to allowing an Interconnection Customer to remain in the queue for a period not to exceed ten years from the date of receipt of the Interconnection Request; it says this period is too long. FirstEnergy recommends replacing “Regional Expansion Planning Period” with “Transmission Provider Expansion Planning Period.” Salt River Project seeks clarification as to how to reconcile a situation where the original In-Service Date is ten years out and there is then a three year extension.

99. Some commenters, including American Wind Energy, Edison Mission, NMA, Peabody, and WEPCO, contend that the development time for certain large scale coal, wind power, and other types of projects raise special issues. For example, they want the ten year restriction eliminated because their equipment is not “off-the-shelf,” and siting and permitting can exceed ten years. Some commenters also want the Commission to revise Section 3.3.1 to allow them up to nine months after the Interconnection Request is made to submit final design specifications. They contend that because large non-gas-fired generators are unique and not “off-the-shelf,” completion of the final design specifications requires nine or more months after the Interconnection Request is submitted.

Commission Conclusion

100. We retain the proposed text that requires a demonstration of Site Control or a posting of an additional deposit of $10,000. There may be instances when requiring Site Control could unduly delay the interconnection process.

101. We also share Edison Mission's concern that some participants may attempt to game the system by filing Interconnection Requests at multiple sites knowing that Site Control is unlikely to be obtainable at every site. However, under NOPR LGIP Section 11.3, the Interconnection Customer must provide reasonable evidence of Site Control within 15 Business Days after the receipt of the Final Interconnection Agreement or post additional security of $250,000, which will be applied toward future construction costs when the demonstration of Site Control is made. This is sufficient incentive for an Interconnection Customer to refrain from engaging in the speculative behavior suggested by Edison Mission.

102. With respect to the ten-year period for allowing an Interconnection Customer to remain in the queue, we believe that ten years should be adequate time to complete the siting, permitting and construction requirements for all plants unless major permitting delays are encountered. Large non-gas-fired projects (

e.g.,

coal or oil projects) generally take eight years or less to complete. Thus, a ten-year period gives large projects at least a two year buffer. Moreover, we note that numerous Interconnection Customers and Transmission Providers negotiated this time limit during the Consensus process. Finally, if an Interconnection Customer believes it needs additional time to complete its project, it should seek the approval of the Transmission Provider to extend the In-Service Date. Accordingly, the Commission clarifies that the term of the Final Rule LGIP Section 3.3.1 is ten years, or longer if the Parties agree, with such agreement not to be unreasonably withheld.

103. Regarding the need for additional time for some Interconnection Customers to complete design specifications, the Commission is not convinced that an exception should be made in the Final Rule LGIP to allow an Interconnection Customer proposing to construct a large non-gas-fired Generating Facility to submit final design specifications nine months after the Interconnection Request is made. The Interconnection Customer should have its design substantially completed prior to submitting its Interconnection Request so that it does not block or disrupt the queuing process. The Transmission Provider is not able to act on an Interconnection Request unless it includes all necessary information, and to give one class of Interconnection Customers extra time to submit design specifications would be unfair to other Interconnection Customers in the queue.

104. As to FirstEnergy's recommendation, the Commission clarifies that, in the absence of a regional expansion planning period, the appropriate expansion planning period would be that of the Transmission Provider.

105.

Section 3.3.4—Scoping Meeting

(In the NOPR: Initial Scoping Meeting)—Proposed LGIP Section 3.3.4 would have required the Transmission Provider to hold a Scoping Meeting with the Interconnection Customer no later than 30 Calendar Days from receipt of the Interconnection Request. The purpose of the Scoping Meeting would be to discuss alternative interconnection options, including potential feasible Points of Interconnection. The Interconnection Customer would designate its Point of Interconnection and one or more alternative Points of Interconnection on the basis of information gathered at the Scoping Meeting. Section 3.3.4 would also provide that the Interconnection Customer may forgo the Interconnection Feasibility Study and proceed directly to an Interconnection System Impact Study.

Comments

106. Several commenters, including El Paso, Entergy, FirstEnergy, and

Georgia Transmission, state that the Parties should be able to agree to schedule a Scoping Meeting outside the 30-day window.

107. El Paso believes that the Interconnection Customer should not make the final decision on designation of the Point of Interconnection; instead, the Transmission Provider should designate the Point of Interconnection with the Interconnection Customer's consent. At a minimum, El Paso recommends that Section 3.3.4 be modified to state that the Transmission Provider must consent to the designation of Point of Interconnection and that such consent will not be unreasonably withheld. El Paso explains this is because the designation of Point of Interconnection has serious cost consequences for the Transmission Provider and its customers.

108. PJM states that the Interconnection Feasibility Study is an important first step in evaluating an Interconnection Request and that about one-third of the Interconnection Requests are withdrawn after the Interconnection Feasibility Study. PJM adds that the Interconnection Customer should not be allowed to skip the Interconnection Feasibility Study and go directly to the Interconnection System Impact Study because this omission would have serious implications for the Clustering of Interconnection of Studies and would create the need for a large number of restudies. PJM proposes that this provision be deleted from the Final Rule LGIP.

Commission Conclusion

109. In the Final Rule LGIP, the Commission is revising Section 3.3.4 to allow the Parties to hold the Scoping Meeting outside the 30 Calendar Day window upon agreement of the Parties, since either Party can object to the postponement. With respect to El Paso's concern regarding the designation of the Point of Interconnection, the purpose of the Scoping Meeting is to discuss alternative interconnection options, including potential Points of Interconnection. The Commission notes that the Transmission Provider will have an opportunity to voice its concerns at the Scoping Meeting and assess the likely cost consequences of interconnecting at various points. It is appropriate that the Interconnection Customer decide its Point of Interconnection based on input from the Transmission Provider because the former must consider its investment in the Generating Facility and its site selection criteria, as well as its initial funding of Network Upgrades. For these reasons, we adopt Section 3.3.4 as proposed.

110. Regarding PJM's concern about allowing the Interconnection Customer to skip the Interconnection Feasibility Study and proceed directly to the Interconnection System Impact Study, the Commission agrees with PJM that the Interconnection Feasibility Study is an important first step in evaluating an Interconnection Request and should not be skipped. The Commission is therefore deleting this text from the Final Rule LGIP Section 3.3.4.

111.

Section 3.4—OASIS Posting

—Proposed LGIP Section 3.4 required that the Transmission Provider post on its OASIS a list of all Interconnection Requests. It must post the following information for each Interconnection Request: the location by county and state; the station or transmission line or lines where the interconnection will be made; and the projected In-Service Date. The list will not disclose the identity of the Interconnection Customer until the Interconnection Customer executes an interconnection agreement or requests that the Transmission Provider file an unexecuted Agreement with the Commission. The Transmission Provider also must post deviations from the study time lines set forth in the interconnection procedures. Interconnection Study reports and Optional Interconnection Study reports also must be posted after the Parties meet to discuss the applicable study results.

Comments

112. Avista states that listing the location of a Generating Facility by county and state is not sufficient. The location should be specified in greater detail, because some counties cover hundreds of square miles. Mirant and NYTO state that the identity of the Interconnection Customer should be posted on the OASIS when the Interconnection Request is made because it will help identify Interconnection Customers that are unlikely to see their projects through completion and drop out of the queue. Mirant claims that the identity of the Interconnection Customer is important for conducting meaningful Optional Interconnection Studies.

113. NSTAR seeks clarification about whether entire studies consisting of base case data are to be posted on the OASIS, or just the interpretive analysis contained in the study reports. Salt River Project seeks clarification as to whether the posting of deviations refers to the study time lines in proposed LGIP Section 6.3 (Interconnection Feasibility Study Procedures) or the study time lines that were agreed to by the Parties in advance. MidAmerican recommends that changes in the Generating Facility's In-Service Date should also be posted on the OASIS.

Commission Conclusion

114. The Commission is not requiring that the location of a Generating Facility be specified in any greater detail than proposed because the OASIS posting also includes the substation or transmission line where the interconnection is to be made. We are also not requiring that the identity of the Interconnection Customer be posted when the Interconnection Request is made because disclosing the identity at that early stage may put the Interconnection Customer at a competitive disadvantage and its project at risk. With regard to Mirant's assertion that the identity of the Interconnection Customer is important in conducting meaningful Optional Interconnection Studies because it helps identify who may drop out of the queue, we note that the Optional Interconnection Studies are to be performed after the Interconnection System Impact Study, at which point only serious projects are likely to remain in the queue.

115. The Commission clarifies that the study reports are to be posted, not the actual studies. Regarding deviations from the study time lines, the Commission clarifies that the Transmission Provider is to post deviations from the study time lines as projected by the Transmission Provider for completing future Interconnection Studies. For example, Section 6.3 (Interconnection Feasibility Study Procedures) calls for the Interconnection Feasibility Study to be completed within 45 Calendar Days after the Transmission Provider receives the fully executed Interconnection Feasibility Study Agreement. If the Transmission Provider anticipates that it will not be able to complete the Interconnection Feasibility Study within 45 Calendar Days, it should post its deviation along with an explanation for the delay (

e.g.

, backlog). Finally, we adopt MidAmerican's recommendation, and Final Rule LGIP Section 3.4 requires the posting of any expected deviation from a Generating Facility's In-Service Date.

116.

Section 3.5—Coordination with Affected Systems

—Proposed LGIP Section 3.5 dealt with interconnections that may affect a Transmission System other than that of the Transmission Provider. A third party Transmission System was proposed to be defined in the NOPR LGIA as an Affected System. Section 3.5 also proposed obligations and rights of the Affected System, the

Transmission Provider, and the Interconnection Customer, including a requirement to coordinate Interconnection Studies.

Comments

117. Interconnection Customers including Duke Energy, Independent Producers, Norton Energy, and Peabody support requiring the Transmission Provider (rather than the Interconnection Customer) to coordinate and perform all necessary Interconnection Studies and Network Upgrades with an Affected System. Duke Energy agrees that the Affected System Operator should be required to cooperate with the Transmission Provider in completing necessary studies. Duke Energy also wants the Affected System Operator to enter into an agreement with the Interconnection Customer. Other commenters, predominately Transmission Providers, oppose placing these responsibilities on the Transmission Provider.

They contend that (1) a contract cannot bind a third party that is not a signatory to it, (2) it is unfair to impose liability for liquidated damages for an incomplete study on the Transmission Provider where the Transmission Provider has no control over the Affected System, (3) the Transmission Provider should be required to use only “reasonable efforts” to coordinate with an Affected System, (4) the Interconnection Customer should pay any costs of conducting Interconnection Studies on an Affected System, including all costs of delays caused by the studies, (5) the Interconnection Customer should be required to pay for the necessary upgrades on the Affected System and not be allowed to operate until such upgrades are completed, and (6) the Transmission Provider should not be responsible for actions (or inactions) of third parties either with regard to funding or construction of Network Upgrades.

E.g.,

AEP, Ameren, BPA, Cal ISO, Central Maine, Central Vermont PSC, Cleco, the Construction Issues Coalition, Dairyland Power, Dominion Resources, Entergy, Georgia Transmission, Imperial Irrigation, ISO New England, MidAmerican, the Midwest ISO, National Grid, Nevada Power, NYTO, PGE, PJM, Salt River Project, SoCal Edison, TANC, and TVA.

Commission Conclusion

118. The Commission continues to treat interconnection and delivery as separate aspects of transmission service, and an Interconnection Customer may request Interconnection Service separately from transmission service (delivery of the Generating Facility's power output). In the majority of circumstances, interconnection alone is unlikely to affect the reliability of any neighboring Transmission System. However, in those rare instances in which the interconnection alone may cause a reliability problem on an Affected System, the Commission adopts the approach of Order No. 888 for Network Upgrades required to protect an Affected System from a reliability problem due to delivery service.

Under Order No. 888, the Transmission Provider is required to assist the Transmission Customer in coordinating with the Affected System on any Network Upgrades needed to protect the reliability of that system.

We will also allow the Transmission Provider to coordinate the timing of construction of Network Upgrades to its Transmission System with the construction required on the Affected System.

As provided in the OATT, the Commission's Dispute Resolution Service is available should the Interconnection Customer wish to challenge the Transmission Provider's decision to delay construction pending completion of the Affected System's upgrades.

See

Section 21 of the OATT.

See also

Tampa Electric Co., 103 FERC ¶61,047 (2003), and Nevada Power, 97 FERC ¶61,227 (2001),

reh'g denied,

99 FERC ¶61,347 (2002);

but see

American Electric Power Service Corporation, 102 FERC ¶61,336 (2003).

Section 21.1 of the OATT states that: “The Transmission Provider will undertake reasonable efforts to assist the Transmission Customer in obtaining such arrangements, including without limitation, provided any information or data required by such other Transmission System pursuant to Good Utility Practice.”

Section 21.2 of the OATT states that: “Transmission Provider shall have the right to coordinate construction on its own system with the construction required by others. The Transmission Provider, after consultation with the Transmission Customer and representatives of such other systems, may defer construction of its new transmission facilities, if the new transmission facilities on another system cannot be completed in a timely manner.”

See

Section 21.2 of the OATT.

119. The Commission reiterates that under Order No. 888, economic losses from having to redispatch generation do not justify delaying the provision of the delivery component of transmission service.

The Commission adopts the same standard here for interconnections.

See

Section 13.2 of the OATT.

120. Thus, unless the interconnection alone will endanger the reliability of an Affected System, a Transmission Provider may not require an Interconnection Customer, as a condition of interconnection, to accept responsibility for Network Upgrades on other systems. To hold new Interconnection Customers responsible for upgrades to all interconnected systems, including not only the system to which the Generating Facility interconnects, but other, more distant systems as well would create an unreasonable obstacle to the construction of new generation.

We reiterate that requiring a Transmission Provider to coordinate intermediate studies and upgrades with other systems is just and reasonable.

Nevada Power, 97 FERC ¶61,227 (2001),

reh'g denied,

99 FERC ¶61,347 at 62,294 (2002).

121. Although the owner or operator of an Affected System is not bound by the provisions of the Final Rule LGIP or LGIA, the Transmission Provider must allow any Affected System to participate in the process when conducting the Interconnection Studies, and incorporate the legitimate safety and reliability needs of the Affected System. However, the Affected System is not required to participate in the interconnection of the Generating Facility, as proposed by Duke Energy. If the Affected System declines to work with the Transmission Provider, or fails to provide information in a timely manner, the Transmission Provider may proceed in the interconnection process without taking into account the information that could have been provided by the Affected System. Neither the Final Rule LGIP nor the Final Rule LGIA is intended to expose the Transmission Provider to liability as a result of delays by the Affected System.

122. In addition, we note that NERC Planning Standards require Transmission Providers to work together to minimize effects on each others' systems. When a Transmission Provider adds its own new generation to its system, this may have a reliability effect on other systems, requiring coordination among systems. Such coordination must extend to new generation of any Interconnection Customer because, as stated in this provision, a Transmission Provider must offer all generators service that is comparable to the service that it provides to its own generation or that of its Affiliates.

123.

Section 3.6—Withdrawal

—Proposed LGIP Section 3.6 provided that the Interconnection Customer would have the option to withdraw its Interconnection Request at any time with written notice to the Transmission Provider. If the Interconnection Customer fails to adhere to the requirements of the interconnection procedures, its request would be deemed withdrawn and the Transmission Provider would provide written notice of the deemed

withdrawal along with a written explanation. In either instance, the Interconnection Customer would lose its Queue Position and pay all of the Transmission Provider's prudently incurred costs up to the withdrawal. The Transmission Provider would be required to update its OASIS queue posting and to refund the Interconnection Customer any portion of the Interconnection Customer's deposits or study costs that exceeds the costs that the Transmission Provider has incurred, including interest. In the event of a withdrawal, the Interconnection Customer would be able to request all information the Transmission Provider developed for any completed Interconnection Studies, up to the date of withdrawal of the Interconnection Request, subject to the confidentiality provisions of Section 13.1.

Comments

124. FirstEnergy and WEPCO assert that an Interconnection Customer should be given a reasonable amount of time to address purported deficiencies before a Transmission Provider deems a request withdrawn because the purported deficiency may not have been adequately communicated to the Interconnection Customer.

125. Cinergy requests that this section be modified to require that a Transmission Provider provide written notice to the Transmission Owner of any Interconnection Customer withdrawal notice it receives or, alternatively, that the Interconnection Customer provide notice to both the Transmission Provider and the Transmission Owner.

126. When an Interconnection Customer withdraws its application, NYTO supports having the Interconnection Customer pay the Transmission Provider all monies due to the Transmission Provider before it is allowed to obtain any Interconnection Study data or results. Duke Energy argues that an Interconnection Customer's responsibility for prudently incurred costs terminates either when the Transmission Provider receives the Interconnection Customer's notice of withdrawal or, in the event the Interconnection Customer is deemed to have withdrawn its application for interconnection, when the Transmission Provider provides notice of withdrawal.

127. PJM believes that the proposed language implies that if an Interconnection Customer disputes its loss of Queue Position, it would remain in the queue pending Dispute Resolution. PJM advocates instead the approach the Commission has accepted in the PJM Tariff, that is, when an Interconnection Customer is disqualified from the queue, it is eliminated from the queue unless and until a Dispute Resolution process restores its position.

Commission Conclusion

128. The Commission agrees with FirstEnergy and WEPCO that Interconnection Customers should be given an opportunity to address any deficiencies before their requests are deemed withdrawn by the Transmission Provider. Proposed LGIP Section 3.6 is revised in the Final Rule LGIP accordingly.

129. The Commission agrees with Duke Energy that an Interconnection Customer's responsibility for a Transmission Provider's prudently incurred cost terminates at the earlier of either when the Transmission Provider receives the Interconnection Customer's notice of withdrawal or when the Transmission Provider provides a notice of withdrawal after deeming an Interconnection Request to be withdrawn. The Commission also agrees with NYTO that when the Interconnection Customer withdraws its application, it must pay all monies due to the Transmission Provider before it is allowed to obtain any Interconnection Study data or results.

130. We agree with PJM that it is unreasonable for an Interconnection Customer to maintain its Queue Position pending Dispute Resolution. In most cases, Dispute Resolution and any related litigation would create delays, and it would be unfair to delay the projects of lower queued Interconnection Customers while a higher-queued Interconnection Customer's Queue Position is in dispute. The Commission clarifies this section in the Final Rule LGIP accordingly.

131.

Section 4—Queue Position

—Proposed LGIP Section 4 would establish the Interconnection Customer's Queue Position (

i.e.

, the chronological priority assigned to an Interconnection Request), which would be used to determine both the order in which studies are performed and the cost responsibility for the facilities necessary to accommodate the Interconnection Request. At the Transmission Provider's option, Interconnection System Impact Studies would be performed serially as Interconnection Requests are received or in clusters, as discussed below. Proposed LGIP Section 4 also described when a Queue Position can be transferred to another entity, and when an Interconnection Customer could modify its Interconnection Request without losing its Queue Position.

132.

Section 4.1

—General—Proposed LGIP Section 4.1 required the Transmission Provider to assign a Queue Position to the Generating Facility based on the date and time of receipt of a valid Interconnection Request. However, if the sole reason that an Interconnection Request is deemed invalid is lack of information required in the Interconnection Request, and if the Interconnection Customer provides such information in accordance with Section 3.3.3 of the proposed LGIP, the Transmission Provider would then be required to assign the Interconnection Customer a Queue Position based on the date and time that the Interconnection Request was initially filed. The Queue Position of each Interconnection Request would be used to determine the order of performing the Interconnection Studies, which would determine the cost responsibility for the facilities necessary to accommodate the Interconnection Request. This is because the facilities needed for one Interconnection Customer are affected by the facilities needed for other generators that come before it in the queue.

Comments

133. TVA observes that the level of commitment by Interconnection Customers to complete an interconnection varies. A change in the request of a higher queued Generating Facility will affect lower queued generators because it may require restudies. It states that the “first-come, first-served” method rewards an Interconnection Customer that simply is the first in line, even if it has not done the preparation to make a complete and legitimate Interconnection Request. According to TVA, this is costly and unfair to other Interconnection Customers. It also asserts that if an Interconnection Customer seeks to change its Point of Interconnection, it should be placed in a lower position in the queue. Ameren has similar concerns and states that it has a high withdrawal rate for Interconnection Requests. It claims that fewer restudies would be needed if a Transmission Provider could study only “serious” requests.

134. American Wind Energy believes that projects in the queue when the Final Rule takes effect should receive equal treatment under the new rule. It states that since summer 2000 several developers have accelerated their projects and have executed interconnection agreements. These developers should be able to have their

interconnection agreements revised to be consistent with the Final Rule LGIA.

135. PJM believes that the proposed procedures do not help eliminate projects that are not economically feasible. Accordingly, the Interconnection Customer should be required to meet milestones to show significant commitment to a project. The fixed schedule approach (which fixes a time period for completing an Interconnection Study after the receipt of an Interconnection Request) undermines integrated regional planning, since it forces planners to study each Interconnection Request independently of other Interconnection Requests that are located in close electrical proximity. PJM also notes that such projects could have related effects on the Transmission System and overall expansion alternatives.

136. PacifiCorp believes that there will be problems in the queuing and the Interconnection System Impact Study process if an Interconnection Customer is allowed to request an Interconnection Study when it does not expect to begin construction or operations for a long time. According to PacifiCorp, long lead times substantially increase the uncertainty that the project will be completed. An independent Transmission Provider should be given more flexibility in addressing these issues.

137. TECO Energy states that the Interconnection Request must provide a demonstration of Site Control for the Generating Facility at the time of the initial request before it may enter the queue. It states that it is inefficient to commit a Transmission Provider's resources to the study of a request until the project achieves a level of certainty and specificity that justifies the commitment of resources, even though the Interconnection Customer pays for the Interconnection Studies.

138. EEI, PSEG, and SoCal Edison all state that they generally support establishing a single integrated queue per RTO region.

139. EEI states that Interconnection Service and delivery service are separate and that there is no need to combine them. It believes that any combination of the two services requires a single Interconnection Feasibility Study for several generators, would likely overly complicate the queuing process, and subsequently delay study completions. It contends that the separation of interconnection and delivery services is critical to designing a queue that is appropriate for both non-Standard Market Design and Standard Market Design service.

140. Xcel observes that the “first-come, first-served” queue process does not take into account either the transmission planning requirements of RTOs or state integrated resource planning statutes and rules, which often require the use of a “portfolio approach” whereby state-regulated load-serving entities select between competing generation providers based on the total cost of generation and transmission.

141. Xcel supports a process similar to the periodic “open season” used for gas pipelines, in which the Transmission Provider or RTO would periodically solicit market interest in incremental transmission capacity and then develop a transmission plan that serves the various market needs at the lowest overall cost.

142. TXU wants the Final Rule to allow a Transmission Provider, RTO, or ISO to create queues that are periodically opened and closed, based on a predetermined time period. Proposed projects should be placed into a queue according to the date of the Interconnection Request.

143. American Wind Energy, NYISO, and Tenaska believe that Queue Position should not be used exclusively to determine the cost responsibility for the facilities necessary to accommodate the Interconnection Request. American Wind Energy states that the first wind project in the queue should not be required fund the Network Upgrades for what logically will be a long term large scale build-out of an entire wind resource area. NYISO also contends that the Commission's proposal is not workable in the NYISO system because its interconnection cost allocation rules are not based on Queue Position. Instead, Interconnection Facility costs are determined each year and allocated on the basis of pro-rata electrical impact among the members of a group of projects that have reached a specified point in the New York State project permitting process.

Commission Conclusion

144. The Commission understands Ameren's and PJM's concerns that uncertainty about project withdrawal creates difficulties for a Transmission Provider in planning for necessary Network Upgrades. Having an Interconnection Customer and a Transmission Provider establish agreed upon milestones at the Scoping Meeting should help to ensure that the Transmission Provider's planning process reflects only the interconnection of Generating Facilities that are making satisfactory progress toward completion. Also, a Transmission Provider facing difficulties of this sort may wish to consider conducting Interconnection Studies on a clustered basis (see discussion below). Factors other than Queue Position also must be considered in determining the cost responsibility of an Interconnection Customer, especially when a Transmission Provider conducts Interconnection Studies on a clustered basis. However, we believe that Queue Position must play a critical role in determining cost responsibility, and expect the Transmission Provider to give appropriate recognition to Queue Position when it develops its cost allocation rules.

145. We agree with TVA's comment that moving the proposed Point of Interconnection should lead to a lower Queue Position if it is a Material Modification under Final Rule LGIP Section 4.4.3. Section 4.1 is revised accordingly in the Final Rule.

146. With respect to TECO Energy's comments on the need to demonstrate Site Control in the initial application, the Commission notes that LGIP Section 3.3.1 and the definition of Site Control in the Final Rule already require early demonstration of Site Control or posting a deposit of $10,000. Section 7.2 of the Final Rule LGIP requires a demonstration of Site Control prior to executing the Interconnection System Impact Study Agreement. We conclude that these provisions adequately demonstrate Site Control.

147. There must be a single integrated queue per geographic region. We note that it was the method generally agreed upon during the Commission staff's Technical Conference on Queuing. However, we will afford an RTO or ISO the flexibility to propose queues and queuing rules designed to meet its regional needs.

148. Xcel's and TXU's comments are addressed in the Commission Conclusions discussion for Section 4.2 (Clustering), which follows.

149.

Section 4.2—

Clustering—For the purpose of the Interconnection System Impact Study, Section 4.2 of the NOPR LGIP permitted the Transmission Provider to study Interconnection Requests serially or in clusters. The Transmission Provider would be allowed to simultaneously study all Interconnection Requests received during a period not to exceed 90 Calendar Days (“the queue cluster window”) except requests for Energy Resource Interconnection Service, which would be studied serially. The Transmission Provider would be permitted to study an Interconnection Request separately if warranted by Good Utility Practice based upon the

electrical remoteness of the proposed Generating Facility.

Comments

150. Various Transmission Providers including BPA, NYTO, and PJM recommend that the queue cluster window be extended from 90 to 180 days so that the study process may be fully integrated into the Transmission Provider's planning process, and to ensure that one set of Interconnection Studies can be completed before the next round begins. PJM states that a 180-day window reasonably balances the competing objectives of completing Interconnection Studies as rapidly as possible and ensuring that the study process produces meaningful regional expansion plans that induce economically efficient decisions by generation developers. PSEG sees merit in the clustering approach, but states that it should be tied to the planning process and have specified start and end dates. PJM opposes the requirement to study requests for Energy Resource Interconnection Service serially, arguing that most of the tests applied to Energy Resource Interconnection Service and Network Resource Interconnection Service are the same.

151. The Midwest ISO seeks clarification whether a cluster refers to a group of Interconnection Requests that were submitted during a specified time period, such as 90 Calendar Days, or to a group of Generating Facilities that are located in geographic proximity to one other, or both. The Midwest ISO seeks further clarification whether each Interconnection Request is to be studied serially within the cluster in order to determine the cost of Network Upgrades for each, or all of the Interconnection Requests are to be studied simultaneously, which will determine only the total cost of Network Upgrades. It argues that if the latter is the case, the Commission will need to prescribe a way to allocate the total cost of Network Upgrades to each Interconnection Customer within the cluster.

152. American Wind Energy states that clustering is the best method to interconnect both large and small generators in a balanced regional planning process, and also facilitates the coordinated completion of a useful Interconnection System Impact Study.

Commission Conclusion

153. In the Final Rule, we are setting the queue cluster window for conducting Interconnection System Impact Studies at 180 Calendar Days. As the commenters make clear, the principal benefit of studying Interconnection Requests in clusters is that it allows the Transmission Provider to better coordinate Interconnection Requests with its overall transmission planning process, and, as a result, achieve greater efficiency in both the design of needed Network Upgrades and in the use of its planning resources. We are persuaded by the arguments of PJM and others that the proposed 90-day cluster window is too short to achieve this result, and that a 180-day window is more appropriate.

154. We are also persuaded by PJM that if the Transmission Provider elects to study Interconnection Requests in clusters, requests for both Energy Resource Interconnection Service and Network Resource Interconnection Service should be included in the clustered Interconnection Studies. Requiring the Transmission Provider to perform System Impact Studies for Energy Resource Interconnection Service requests on a serial basis would mean that many of the efficiency benefits of clustering would be lost. When a Transmission Provider conducts Interconnection Studies on a clustered basis, the Interconnection Customer may have to wait longer to obtain study results than it would if its request were studied serially. However, some of the information that an Interconnection Customer needs is provided by the Interconnection Feasibility Study, which is conducted serially and early in the study process.

155. Clustering is strongly encouraged in queue management and the Interconnection Study process for all Transmission Providers. We vigorously support the use of queue windows to manage the Interconnection Study process. In response to the Midwest ISO's comments, Final Rule IP Section 4.2 has been modified to better explain the clustering process. Queue windows with regular, fixed opening and closing dates are essential to an orderly process. Once fixed, any changes to these dates should be announced with a posting on the Transmission Provider's OASIS at least 180 days in advance of the change. Cluster windows enable the Transmission Provider to evaluate all pending Interconnection Requests periodically and systematically in light of the Transmission Systems's capabilities at the time of each clustered Interconnection System Impact Study.

156. Clustering (by queue position and electrical location) ensures that the regional expansion plan considers all uses of the Transmission System and enables expansion of the system to be accomplished in the most efficient manner reasonably achievable. However, projects that are electrically isolated can still be studied independently. Additionally, allocation of cost responsibility for system upgrades and jointly used facilities is more readily managed by studying requests in clusters. Absent the ability to cluster interconnection requests, it is difficult to distinguish the Transmission Provider's cost responsibility for baseline reliability upgrades from the responsibility of Interconnection Customers and other developers for the costs of upgrades required to accommodate their Interconnection Requests since each request would have to be studied serially. Equally important, Interconnection Studies for smaller generators can be more easily expedited. These efficiencies are best obtained using clustered queue windows, not through the sequential processing of Interconnection Requests.

157.

Section 4.3—Transferability of Queue Position

—The Commission proposed in Section 4.3 of the NOPR LGIP that an Interconnection Customer may transfer its Queue Position to another entity if such entity acquires the Generating Facility identified in the Interconnection Request and the Point of Interconnection does not change.

Comments

158. National Grid states that the Commission should resist requests from those that propose to make Queue Position a tradable commodity to gain flexibility over the timing of their proposed projects. National Grid offers several arguments against allowing this: (1) It would create an unnecessary commodity that would encourage gaming in competitive markets, (2) it would render the interconnection queue process unmanageable because the trading of Queue Positions would make it impossible to build sets of assumptions on which to base studies, (3) it would add another layer of administrative burdens for Transmission Providers; and (4) the disputes over Queue Position that are likely to arise would divert the Transmission Provider's attention away from facilitating reasonably prompt interconnections. Instead, the Commission should adopt a subordinate application process like the one implemented in NEPOOL, which allows a project sponsor to accelerate the construction and operation of its facilities application ahead of other projects in the queue in return for the sponsor's assumption of the risks associated with building the facilities in a sequence different from the study order of the queue.

159. The CPUC believes that changes resulting from an Interconnection Customer selling its Queue Position

could harm subsequent Interconnection Customers in the queue, since it could affect the portfolio of technologies in the queue and the diversity of the Transmission System as a whole. According to the CPUC, an Interconnection Customer wishing to sell its position should be required to provide assurances that it will pay not only for any Interconnection Studies needed as a result of the change, but also for the costs to subsequent Interconnection Customers in the queue as a result of the change. The seller of the Queue Position should also be liable for any obligations that the buyer of the position is unable to fulfill in the event of a Default.

Commission Conclusion

160. While the commenters raise legitimate concerns with Queue Position trading in general, we conclude that the restrictions on transferability that are already contained in Section 4.3 address these concerns. Section 4.3 of the Final Rule LGIP permits an Interconnection Customer to transfer its Queue Position to another entity only if such entity acquires the specific Generating Facility identified in the Interconnection Request and the Point of Interconnection does not change. These limitations on transferability greatly reduce the potential impact on lower queued Interconnection Customers. The new Interconnection Customer would also be required to show, under Section 4.4.3 of the Final Rule LGIP, that any proposed change is not a Material Modification.

161.

Section 4.4—Modifications

—Proposed LGIP Section 4.4 would have required that the Interconnection Customer submit to the Transmission Provider, in writing, modifications to any information provided in the Interconnection Request. Either the Interconnection Customer or the Transmission Provider would be permitted to identify changes to the planned interconnection that may reduce the costs and increase the benefits (including reliability) resulting from the interconnection. If the changes are acceptable to the Transmission Provider and Interconnection Customer (such acceptance not to be unreasonably withheld), the Transmission Provider would make the necessary changes and proceed with interconnection restudies in accordance with Sections 6.4, 7.6 and 8.5 of the LGIP, as applicable. Accordingly, the Generating Facility would retain its Queue Position.

162.

Section 4.4.1

—Proposed LGIP Section 4.4.1 LGIP would allow an Interconnection Customer to make the following modifications to its Interconnection Request, provided that it makes them before returning the executed Interconnection System Impact Study Agreement to the Transmission Provider: (1) A reduction of as much as 60 percent in the megawatt output of the proposed project, (2) modification of the technical parameters associated with the Generating Facility technology or the step-up transformer impedance characteristics, (3) modification of the interconnection configuration, or (4) any other type of change except to the proposed Point of Interconnection. Any increase in the Generating Facility's megawatt output would be placed at the end of the queue.

Comments

163. Dynegy argues that item (4) is confusing, makes the other items in the list redundant, and does not belong in this section. Several commenters, including Duke Energy and WEPCO, advocate allowing an Interconnection Customer to increase the output of its Generating Facility by up to ten percent of the voltage level of the line to which it is interconnecting without affecting its Queue Position.

Commission Conclusion

164. We agree with Dynegy that item (4) does not belong in this section. The item more appropriately belongs in Section 4.4.3. Accordingly, Final Rule LGIP Section 4.4.3 includes the following sentence: “Any change to the Point of Interconnection shall constitute a Material Modification.”

165. We reject the other commenters' proposal to allow an Interconnection Customer to increase the output of its Generating Facility by up to ten percent. The percentage by which the capacity of the proposed Generating Facility could be increased without substantially changing the size and configuration of necessary Network Upgrades needed to accommodate the change in output would depend on the size and location of the Generating Facility and the voltage level at the Point of Interconnection, among other things. This could vary significantly from case to case, and may well be less than ten percent.

166.

Section 4.4.3

—Proposed LGIP Section 4.4.3 would have required that, prior to making a modification other than one specifically permitted by Sections 4.4.1, 4.4.2, and 4.4.5, the Interconnection Customer may first ask the Transmission Provider to evaluate whether the modification is actually a Material Modification. A Material Modification would be a modification that has a material effect on the cost or timing of a lower queued Interconnection Customer. The Transmission Provider would be required to evaluate the proposed modification and inform the Interconnection Customer in writing whether the modification would considered be a Material Modification. The Interconnection Customer could then either withdraw the proposed modification or submit a new Interconnection Request for such modification.

Comments

167. SoCal Water District and Dynegy ask the Commission to clarify the definition of Material Modification to avoid disputes between the Parties regarding the Generating Facility's Queue Position. Ameren argues that a modification that is proposed as not being “material” may in fact be a Material Modification. FirstEnergy opposes giving the Transmission Provider the discretion to determine whether a request is a Material Modification. El Paso observes that reading proposed LGIP Sections 4.4.3 and 4.4.5 together implies that the Transmission Provider will be forced to judge whether an extension of three years or more is material and to determine if a cost effect or other project change is material. El Paso supports defining a Material Modification as: (1) A change greater than 12 months in Commercial Operation Date, (2) an increase of greater than $100,000 or 10 percent in the Transmission Provider's cost that a later queued Interconnection Customer would bear; or (3) a change greater than five miles in the location of, or any change in the voltage level at, the Point of Interconnection. Edison Mission believes that the Final Rule LGIP should clarify the effect of material improvements and modifications to existing Generating Facilities on the interconnection status and the rights of such Generating Facilities. The Bureau of Reclamation expresses concern that the NOPR does not define how or when an existing Interconnection Customer would be affected by Material Modifications. The Bureau of Reclamation is concerned because design and approval of its generator refurbishment is a federal responsibility and would be subject to the federal appropriation process.

Commission Conclusion

168. It is not necessary to revise proposed LGIP Section 4.4.3 to define precisely what constitutes a Material Modification. The impact of a modification depends in large part on the size, location, type of project and the

configuration of the Transmission Provider's Transmission System. The various Interconnection Studies will identify the modification's impact on other Interconnection Customers. This impact determines if the change is indeed a Material Modification. We leave it to the Transmission Provider to make that determination; however, it must do so on a reasonable basis.

169.

Section 4.4.4

—Proposed LGIP Section 4.4.4 in the NOPR LGIP provided that, upon receipt of an Interconnection Customer's request for modification permitted under Section 4.4, the Transmission Provider would perform any necessary additional Interconnection Studies as soon as practicable, but in no event later than 30 Calendar Days after receiving notice of the Interconnection Customer's request. Any additional Interconnection Studies resulting from such modification would be done at the Interconnection Customer's expense.

Comments

170. Exelon asserts that this section is not practical and is punitive to all lower queued Interconnection Customers. It contends that each time a modification is requested, a Transmission Provider or Transmission Owner must begin studying the modification within 30 Days and all work on the Interconnection Studies of all lower queued Interconnection Customers must be halted.

Commission Conclusion

171. We adopt Section 4.4.4 as proposed. While any modification that requires additional study can pose a challenge to the Transmission Provider's schedules and resources, the modifications that are permitted under Section 4.4 occur early enough in the study process that their effect on Interconnection Customers lower in the queue should be limited. Furthermore, since all Interconnection Requests are evaluated in the same restudy, this provision appropriately balances the Interconnection Customer's need for flexibility to change the project with the Transmission Provider's need for certainty in resource costs and schedules.

172.

Section 4.4.5

—Section 4.4.5 of the NOPR LGIP provided that an extension of less than three cumulative years in the Commercial Operation Date of the Generating Facility should not be considered a Material Modification and should be treated in the same manner as in Section 12.3 (Construction Sequencing).

Comments

173. Salt River Project seeks clarification on what to do when the original In-Service Date is at the maximum allowable ten years (under Proposed LGIP Section 3.3.1) and there is a request for a three year extension. Duke Energy supports allowing an Interconnection Customer to request an extension of all dates, including the In-Service Date, for periods of less than three cumulative years. Sempra believes that the Transmission Provider needs greater flexibility to manage and evaluate its Transmission System for delays of more than one year.

174. Westconnect RTO finds that two provisions in this Section contradict Western Electricity Coordinating Council (WECC) procedures. They are allowing the Interconnection Customer to decide to extend its Generating Facility's Commercial Operation Date for up to a total of three cumulative years and providing that such extensions are not material and should be handled through construction sequencing. Westconnect RTO asserts that regional practices concerning transmission planning and reliability should be honored.

175. SoCal PPA and El Paso believe that a three year period is an unreasonably long time to permit suspension of interconnection because it interferes with the Transmission Provider's ability to manage the queue and plan its system.

Commission Conclusion

176. With respect to Salt River Project's request, we clarify that the term contained in Final Rule LGIP Section 3.3.1 is ten years, or longer if the Transmission Provider agrees. Furthermore, such agreement shall not be unreasonably withheld. This clarification also addresses Duke Energy's and Sempra's concerns.

177. With respect to Westconnect RTO's assertion that this section contravenes WECC procedures, as stated above, we would permit modifications to the Final Rule LGIA and Final Rule LGIP where the Transmission Provider shows that there are legitimate regional differences, such as the WECC procedures, that would support such modifications. As to other arguments that three years is an unreasonably long time to permit extensions of the Commercial Operation Date, the Commission recognizes that such flexibility places a burden on the Transmission Provider's expansion planning process, but these extensions in most cases are well within the scope of other unforeseen changes that affect the planning process. The Final Rule therefore adopts Section 4.4.5 as proposed.

178.

Section 5—Procedures for Interconnection Requests Submitted Prior to Effective Date of Interconnection Procedures

—Section 5 of the proposed LGIP described the procedures for assigning a Queue Position prior to the effective date of the Final Rule LGIP. It also proposed a transition process for a Transmission Provider with an Interconnection Request that is outstanding when the Final Rule takes effect.

179.

Section 5.1—Queue Position for Pending Requests

—Proposed LGIP Section 5.1 provided that any Interconnection Customer assigned a Queue Position prior to the effective date of the Final Rule LGIP would retain that Queue Position. Also, if an Interconnection Study Agreement has not been executed as of the Final Rule effective date, then that Interconnection Study and subsequent Interconnection Studies would be processed in accordance with the Final Rule. However, an executed Interconnection Study Agreement would be completed in accordance with the terms in place at the time of execution of that agreement. The proposed section also provided that if an interconnection agreement has been tendered as of the Final Rule effective date, the Transmission Provider and Interconnection Customer would finalize its terms. To the extent necessary, outstanding requests would transition to the Final Rule procedures within a reasonable period of time, not to exceed 60 Calendar Days. Reasonable extensions would be granted.

Comments

180. The Midwest ISO recommends adding a subsection to the LGIP that permits Interconnection Requests in existing queues of non-RTO Transmission Providers to be merged into the queue of the RTO or ISO based on the original request dates at the time the Transmission Provider joins the RTO.

181. Central Maine supports the grandfathering of existing interconnection agreements that are filed with and accepted by the Commission as of the effective date of the Final Rule LGIP and Final Rule LGIA.

182. Sempra argues that it is inappropriate to mandate Parties to agree to an interconnection agreement tendered but not fully negotiated prior to the issuance of the Final Rule because, otherwise, the tendering Party could tender them on the eve of the Final Rule going into effect and the

other Party would be compelled to negotiate under the Final Rule's terms and conditions. Therefore, either Party should be permitted to set aside unexecuted but tendered interconnection agreements prior to the effective date of the Final Rule.

183. MidAmerican states that the proposed provision of Section 5.1.2, which established a transition period from the old queue processes to the new Final Rule provisions that should not exceed 60 days, is practical only for projects that are in their early stages. It proposes adding the phrase “provided that any existing interconnection agreement or Interconnection Study Agreement shall remain in full force and effect” for projects that have an executed interconnection agreement. MidAmerican also states that the Commission should clarify that this transition period is only for those outstanding requests for which Interconnection Studies Agreements and interconnection agreements have yet to be executed prior to the Final Rule going into effect. Similarly, Central Maine seeks clarification of the meaning of pending or outstanding requests.

184. BPA states that this provision should be clarified with regard to the circumstances under which an Interconnection Customer with an existing Interconnection Request may request an extension of applicable deadlines.

Commission Conclusion

185. The purpose of Proposed LGIP Section 5.1 was to ensure that a Generating Facility that has an established Queue Position prior to the Final Rule taking effect will continue to hold its position. This is also the case mentioned by the Midwest ISO for merging new members into the RTO's queue when the Transmission Provider joins an RTO. However, on compliance, discretion will be granted to RTOs or ISOs to propose queuing rules customized to their needs, in accordance with the “independent entity standard” (described in part II.C.5).

186. Under proposed LGIP Section 5.1.1, the Interconnection Studies for which the Parties have an executed Interconnection Study Agreement would be completed under the Interconnection Study Agreement's terms, but any remaining studies would be completed under the Final Rule LGIP study procedures. The Commission concludes that this situation may cause confusion and unnecessary complications in the event that the Transmission Provider's existing study procedures conflict with those in the Final Rule LGIP. To provide further clarification, and to prevent situations in which an Interconnection Customer may be forced to comply with conflicting or redundant study requirements, the Commission modifies this section to give the Interconnection Customer a choice. Under the Final Rule LGIP Section 5.1.1.2, if an Interconnection Customer has signed an Interconnection Study Agreement as of the effective date of the Final Rule, the Interconnection Customer will have the option to either continue with the rest of its Interconnection Studies under the Transmission Provider's existing study process or complete those remaining studies for which it does not have a signed Interconnection Study Agreement under the Final Rule LGIP.

187 .In response to Central Maine, we clarify that existing interconnection agreements that are filed with and accepted by the Commission prior to the effective date of this Final Rule will remain in effect. Regarding Sempra's request to allow the Parties to set aside interconnection agreements tendered but not executed before the issuance of the Final Rule, the Commission concludes that this decision is best left to the discretion of the Parties. If the Parties decide to continue their negotiations, they have until the Final Rule's effective date to submit their agreement to the Commission to qualify for grandfathering. Accordingly, Final Rule LGIP Section 5.1.1.3 states that an executed or unexecuted interconnection agreement submitted for approval by the Commission before the effective date of the Final Rule will be grandfathered and will not be rejected simply for failing to conform to the Final Rule LGIA.

188. With respect to Central Maine's and MidAmerican's requests for clarification of the term “outstanding requests” in Section 5.1.2, we clarify that the term refers to any request for interconnection that has been submitted to a Transmission Provider but has not yet been submitted to the Commission for approval prior to the effective date of this Final Rule.

189. There is no need to adopt MidAmerican's proposed language regarding the adequacy of a 60 day transition period in Section 5.1.2 since the Final Rule allows an Interconnection Customer to extend deadlines, and the 60 day period applies only to Interconnection Requests with outstanding studies for which an Interconnection Study Agreement has not been executed. We expect the Parties to work together during the transition period to ensure that no Interconnection Request is unreasonably delayed.

190. Finally, we deny BPA's request to explain the circumstances under which an Interconnection Customer may request an extension because these circumstances are likely to differ in each case. However, we expect that a Transmission Provider will grant an extension if it can be reasonably accommodated in a nondiscriminatory manner in the transition to the Final Rule LGIP.

191.

Section 5.2—New Transmission Provider

—Proposed LGIP Section 5.2 provided that if the Transmission Provider transfers control of its Transmission System to a successor Transmission Provider while an Interconnection Request is pending, the original Transmission Provider would also transfer to the successor any deposit or payment that exceeds the cost that it has incurred. The original Transmission Provider would be required to coordinate with the successor to complete any appropriate Interconnection Study. If an Interconnection Agreement has not been executed or if an unexecuted Interconnection Agreement has been filed with the Commission, the Interconnection Customer would have the option to complete negotiations with either the initial Transmission Provider or the successor.

Comments

192. Dairyland Power observes that the initial Transmission Provider should provide interest to the successor when the balance of deposits or payments is transferred. Also, if the study costs of the new Transmission Provider exceed the amount of the deposit, it is reasonable that the Interconnection Customer make up the difference.

193. Without explanation, NYTO states that the Interconnection Customer should not have the option of negotiating with a successor Transmission Provider.

Commission Conclusion

194. With respect to Dairyland Power's comment, the Commission clarifies that any additional costs incurred by the successor in excess of the deposit amounts must be treated in accordance with the Final Rule and paid upon completion of the Interconnection Studies. The Commission does not adopt NYTO's position and instead permits the Interconnection Customer to negotiate with the successor Transmission Provider.

195. Section 6—Interconnection Feasibility Study; Section 7—Interconnection System Impact Study; Section 8—Interconnection Facilities Study; Section 10—Optional

Interconnection Study—Proposed LGIP Sections 6, 7 and 8 describe (1) the analyses that would be conducted for each of the Feasibility, System Impact, and Facilities Studies, (2) the Interconnection Customer's responsibility regarding the actual cost of each study and of any restudies that may be required; and (3) the right an Interconnection Customer would have to maintain its Queue Position and substitute a Point of Interconnection, identified by either the Transmission Provider or the Interconnection Customer, if any of these Interconnection Studies uncovers a result that the Interconnection Customer and Transmission Provider did not contemplate during the Scoping Meeting. These sections would also allow an Interconnection Customer to direct that one of the alternative Points of Interconnection specified in the related Interconnection Feasibility Study Agreement and Scoping Meeting be used if the Transmission Provider cannot agree on a substitute Point of Interconnection.

196. Section 10 proposed that the Interconnection Customer may ask the Transmission Provider to perform a reasonable number of Optional Interconnection Studies. An Optional Interconnection Study would be a sensitivity analysis based on assumptions provided by the Interconnection Customer. The scope of the Optional Interconnection Study would be to identify the Interconnection Facilities, Network Upgrades and the costs that may be required to provide transmission service or Interconnection Service.

197. The following paragraphs group together discussions of Sections 6, 7, 8, and 10 because of the relationships among the topics and provisions.

General Comments Related to the Feasibility Study, the System Impact Study, the Facilities Study and the Optional Interconnection Study

198. A number of commenters, including El Paso, FirstEnergy, the Midwest ISO, National Grid, and PJM, are concerned that the proposed Interconnection Studies will take longer to complete than the Interconnection Studies that a Transmission Provider typically performs today, and will lead to delays in the development of new generation projects. TVA believes that the study deadlines are unrealistic, particularly for Transmission Providers with medium to large interconnection queues. It opposes having to study the Energy Resource Interconnection Service and Network Resource Interconnection Service during each phase of the Interconnection Study process. Instead, TVA proposes that the Interconnection Customer should be able to designate only one Interconnection Service for study purposes or adjusting the time lines in Sections 6, 7, 8, and 10 to reflect the increased scope of work required by giving the Interconnection Customer such alternatives. Imperial Irrigation opposes the NOPR's proposed Interconnection Studies because it does not have enough resources to conduct them. NYISO urges the Commission to allow for regional differences in the Final Rule.

199. Entergy opposes giving the Interconnection Customer the ability to continually modify its selected Point of Interconnection throughout the study process. TVA opposes an Interconnection Customer maintaining its position in the queue if the Interconnection Customer changes its Point of Interconnection in any of the Interconnection Studies. PJM believes that to allow the Interconnection Customer to require restudies throughout the Interconnection Study process is inconsistent with a workable regional planning process.

200. Sempra opposes setting a dollar figure for good faith estimates of Interconnection Study costs in the standardized study agreements that are attached as appendices to the Final Rule LGIA. It supports leaving the cost estimates blank in the appendices, with the expectation that the Transmission Provider would provide the timely good faith estimate later. Sempra also supports limiting the Transmission Provider's ability to pass on cost overruns to the Interconnection Customer.

201. Central Maine notes that the proposed Interconnection Study agreements would fix the “good faith estimated cost for performance” of each particular study. It argues that this is inappropriate because Interconnection Study costs vary greatly from one Generating Facility to another. It believes that Transmission Providers should be able to tailor each Interconnection Study agreement to the particular Generating Facility, and to include the good faith Interconnection Study cost estimate in each such agreement. If prepayment of Interconnection Study costs is not required, the deposit should be a percentage of the estimated total Interconnection Study cost, as opposed to a fixed dollar amount.

202. Several commenters seek additional requirements in assigning cost responsibility for Interconnection Studies to the Interconnection Customer. Central Maine notes that there are no proposed payment terms governing restudies, and supports clearly stating that the Interconnection Customer should bear full cost responsibility for a restudy. BPA supports requiring the Interconnection Customer to pay the estimated cost of the Interconnection Feasability Study in advance under Sections 6.1 and 7.2. National Grid's position is that the Interconnection Customer should prepay the costs of all Interconnection Studies because the Transmission Provider is exposed to the risk of nonpayment. Central Vermont PSC believes that the Interconnection Customer should bear study costs involving an Affected System.

203. Several entities seek clarification on the proper scope of, and standards for, the Interconnection Studies. Cal ISO believes that a study should encompass conditions that include off-peak scenarios and contingency conditions. Entergy and Westconnect RTO argue that the NOPR LGIP does not mention types of Interconnection Studies other than load flow, short circuit, and stability studies. They suggest that the scope of the Interconnection Studies not be limited to these named analyses, but be expanded to include additional Interconnection Studies conducted in accordance with Good Utility Practice. PSNM supports expanding the scope of Interconnection Studies to encompass any analyses dictated by Good Utility Practice and allow for additional time on specialized Interconnection Studies, if needed. PacifiCorp supports permitting the Transmission Provider to require additional Interconnection Studies recommended or required by a regional reliability council, including remedial action margin studies. Georgia Transmission believes that the Transmission Provider's obligation under Sections 6.2 and 6.3 is inconsistent with the limited scope of the Interconnection Feasibility Study, which is defined to consist only of a power flow study and a short circuit analysis.

204. Southern asks whether, if one Interconnection Request is required to be restudied by a date certain, all other lower queued requests would have to be restudied by that same date. Southern believes that this would be unworkable and unrealistic.

205. NYTO seeks details on specific study procedures for each of the Interconnection Studies.

Comments Related to Interconnection Feasibility Studies

206. SoCal Water District argues that an Interconnection Customer should

lose its position in the queue when the Interconnection Feasability Study uncovers a result that was not contemplated during the Scoping Meeting, instead of being allowed to designate a different site for the Point of Interconnection, as proposed. It says that this will encourage the Interconnection Customer to make the right choice at the beginning. It also comments that the Interconnection Customer should not be assigned a Queue Position until after the completion of the Interconnection Feasability Study.

207. NSTAR believes that Interconnection Feasibility and Interconnection Facilities Studies should be at the option of the Interconnection Customer.

208. The Midwest ISO points out that it is not always possible to determine accurately when an Interconnection Customer in a high Queue Position will actually come on line and that this could affect the accuracy of the Interconnection Feasability Study requested by a lower queued Interconnection Customer.

209. Sempra supports allowing a Transmission Provider or Transmission Owner to consider in its Interconnection Studies the In-Service Dates of all proposed generation projects, even those lower in the queue. This is so that the studies produce sound results for reliability purposes and consider all projects that will come on line at approximately the same time.

Comments Related to Interconnection System Impact Studies

210. FirstEnergy opposes as unreasonably short the proposed three day period of time during which a Transmission Provider must give an Interconnection Customer a non-binding good faith estimate of the cost and time frame for completing an Interconnection System Impact Study.

Comments Related to Optional Interconnection Studies

211. Proposed LGIP Section 10.1 would allow the Interconnection Customer to ask the Transmission Provider to perform a reasonable number of Optional Interconnection Studies on or after the date the Interconnection Customer receives the results of the Interconnection System Impact Study associated with its Interconnection Request. A Transmission Provider would have five days from the date it receives a request for an Optional Interconnection Study to give the Interconnection Customer an Optional Interconnection Study Agreement. Commenters raise concerns with the requirement to perform Optional Interconnection Studies, cost responsibilities for such studies, and the proposed deadlines.

212. Southern opposes allowing an Interconnection Customer to require that a Transmission Provider perform Optional Interconnection Studies. Southern believes that Optional Interconnection Studies will delay the process by tying up Transmission Provider resources that could be dedicated to performing the required studies. BPA contends that allowing the Interconnection Customer to require an unspecified number of Optional Interconnection Studies, while requiring that the standard Interconnection Studies be performed within the standard deadlines, places an unreasonable burden on the Transmission Provider.

213. Nevada Power opposes having to conduct Optional Interconnection Studies on the grounds that allowing changes to the original Interconnection Request violates the queue rights of other Interconnection Customers by giving additional study time and priority to the Optional Interconnection Study request. Dominion Resources makes a similar point.

214. SoCal Edison believes that the Final Rule should provide for Optional Interconnection Studies (1) that are performed outside the NOPR LGIP time line, (2) if it is understood by the Interconnection Customer who elects to implement a study that implements Material Changes, that it could impact the Generating Facility's Queue Position; and (3) may not exceed for each requester a maximum of two Optional Interconnection Studies. NYISO urges the Commission to delete Section 10.1 to reduce the number of studies that the Transmission Provider must perform. The Midwest ISO believes that the Interconnection Feasibility Study may be elected and can serve as the Optional Interconnection Study described in Section 10.

215. On the issue of cost responsibility, Central Vermont PSC supports having the Interconnection Customer compensate the Transmission Provider for the costs of an Optional Interconnection Study, including all charges incurred by an Affected System.

216. With respect to the deadlines associated with Optional Interconnection Studies, FirstEnergy believes that the five day turnaround period for the Transmission Provider to provide an Optional Interconnection Study Agreement, as called for in Section 10.1, is too short and that a ten day period would be better. Cal ISO also supports a ten day turnaround time.

Commission Conclusion—General Comments

217. The proposed time frames for completing Interconnection Studies are reasonable. For each of the studies, the NOPR LGIP allows for the possibility that the Transmission Provider will not be able to complete the study within the allotted time. In these cases, the NOPR LGIP provides that the Interconnection Customer and the Transmission Provider will come to an acceptable accommodation. As to Imperial Irrigation's concern that it lacks sufficient resources to conduct the Interconnection Studies, Section 13.4 gives the Parties the option of using a contractor to complete the required studies at the Interconnection Customer's expense and Section 4.2 allows the Transmission Provider to cluster Interconnection Studies, thereby saving time and money.

218. We believe that the proposed Interconnection Study deposit amounts are high enough to ensure that an Interconnection Customer is serious about its Interconnection Request. In the absence of standardized Interconnection Study cost estimates, a Transmission Provider could set the Interconnection Study costs at such high levels so as to discourage entry by competing generators.

219. Central Maine does not identify the benefits of making Interconnection Study deposits a percentage of the estimated Interconnection Study costs. Because the proposed dollar amounts are reasonable and are the result of the consensus process, the Commission adopts them for the Final Rule LGIP.

220. We find that the proposed provisions regarding the payment of study costs by the Interconnection Customer are adequate. The NOPR LGIP makes clear that the Interconnection Customer is responsible for the actual costs of all Interconnection Studies. We reject the proposal that the Interconnection Customer fully prepay the costs of Interconnection Studies because the advance payment would be based on Transmission Provider estimates rather than actual costs. The Commission recognizes that the costs of performing Interconnection Studies may vary by Interconnection Customer because each interconnection is unique. The unique features of each interconnection should be identified either in the Scoping Meeting or early in the Interconnection Study process so that the Transmission Provider can offer the Interconnection Customer a reasonable estimate of what the actual

study costs will be. However, we will require the Transmission Provider to provide a detailed and itemized accounting of the Interconnection Study costs in the relevant invoices. If the Interconnection Customer disputes the study cost, it may pursue dispute resolution procedures as described in Section 13.5 of the Final Rule LGIP.

221. With regard to commenters' various concerns about the proper scope of, and standards for, the Interconnection Studies, the Commission emphasizes that the Final Rule LGIP should not be interpreted as preventing the Transmission Provider from studying Interconnection Requests in accordance with Good Utility Practice and regional reliability requirements. The Transmission Provider may conduct necessary Interconnection Studies using any standards that are generally accepted within the region and consistently applied to all generation projects, including those of the Transmission Provider. If these standards differ from those specified in the LGIP, the Transmission Provider must include them in its compliance filing and may implement them only upon approval of the Commission. For this reason, we decline to specify detailed study procedures for each Interconnection Study beyond what is specified in the Final Rule LGIP.

Commission Conclusion—Interconnection Feasibility Studies

222. With regard to the concern that allowing changes to original Interconnection Requests would be unworkable and would violate the rights of lower queued Interconnection Customers due to the need to conduct numerous restudies, the Final Rule allows the Transmission Provider to take additional time to complete the necessary work. In addition, although lower queued Interconnection Customers may be harmed when their Interconnection Requests must be restudied due to actions of an Interconnection Customer higher in the queue, they also benefit from the flexibility to request that the Transmission Provider study a substitute Point of Interconnection. In this respect, the Commission finds that the NOPR LGIP strikes an appropriate balance and, accordingly, adopts it in the Final Rule.

223. Regarding Sempra's question about which projects within the queue should be considered when performing Interconnection Studies, the Commission requires the Transmission Provider to consider in its Interconnection Studies all generators with both higher and lower queued Interconnection Requests that could affect the Network Upgrades associated with integrating these generators with the Transmission System, as specified in the Final Rule LGIP.

Commission Conclusion—Interconnection System Impact Studies

224. In response to FirstEnergy's comment that there is insufficient time to provide cost and time estimates for completing an Interconnection System Impact Study, we find that three Business Days is reasonable. We note that prior to the Interconnection System Impact Study, the Transmission Provider will have conducted the Interconnection Feasibility Study and the Parties will have met to discuss the study results. Accordingly, through this ongoing process, the Transmission Provider will have had ample time to anticipate and prepare such estimates.

Commission Conclusion—Optional Interconnection Studies

225. The Commission finds that commenters' concerns about allowing an Interconnection Customer to request Optional Interconnection Studies are misplaced. Such studies are for informational purposes only and are to be completed within an agreed upon time period using Reasonable Efforts. If Optional Interconnection Studies place too great a burden on the resources of the Transmission Provider, the Final Rule permits the use of a contractor at the Interconnection Customer's expense. The Commission is neither eliminating these provisions nor, as SoCal Edison proposes, limiting the number of Optional Interconnection Studies an Interconnection Customer may request. These studies may provide information needed by the Interconnection Customer. Since the Interconnection Customer pays for the Optional Interconnection Study and a contractor may be used for this purposes, the impact on a Transmission Provider is minimal.

226. Section 9—Engineering & Procurement (“E&P”) Agreement (In the NOPR: Agreements)—Proposed LGIP Section 9 provided a mechanism for the Transmission Provider and the Interconnection Customer to enter into an Engineering & Procurement Agreement prior to executing the LGIA. An Interconnection Customer may ask that the Transmission Provider begin engineering and procurement of long lead-time items necessary for the establishment of the interconnection. The Transmission Provider is not obligated to offer an agreement if the Interconnection Customer is in Dispute Resolution as a result of an allegation that the Interconnection Customer has failed to meet any milestones or comply with any other sections of the LGIP. This section also specifies the cost and other obligations of the Interconnection Customer.

Comments

227. Calpine and Duke Energy propose that Section 9.1 be expanded to cover situations where the construction of certain Network Upgrades takes place prior to the execution of the LGIA. Duke Energy states that the Transmission Provider should be prohibited from refusing to enter into an interim Engineering & Procurement Agreement unless the Interconnection Customer's failure to meet milestones directly affects the Transmission Provider's ability to meet its obligation under the Engineering & Procurement Agreement. FirstEnergy states that it is inappropriate to enter into an Engineering & Procurement Agreement prior to the execution of an LGIA, or the filing of an unexecuted LGIA with the Commission.

Commission Conclusion

228. We disagree with Calpine and Duke Energy regarding construction. The Final Rule does not require the construction of Network Upgrades prior to the execution of the LGIA; nor do we see why the Transmission Provider should be placed at risk by committing to the construction of such Network Upgrades prior to the execution of an LGIA. Regarding FirstEnergy's comments, we conclude that it is reasonable to allow the Parties to enter into an Engineering & Procurement Agreement for long lead-time items necessary to accommodate the interconnection as long as the Interconnection Customer bears the cost risk. Likewise, in response to Duke Energy an

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