# Standardization of Small Generator Interconnection Agreements and Procedures

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URL: https://www.frixlaw.com/law-library/documents/fr%3A05-11307

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** June 13, 2005
- **Citation:** 70 FR 34190

## Text

DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 35
[Docket No. RM02-12-000; Order No. 2006; 111 FERC 61,220]
Standardization of Small Generator Interconnection Agreements and Procedures
Issued: May 12, 2005

AGENCY:

Federal Energy Regulatory Commission.

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 amend their open access transmission tariffs to include standard generator interconnection procedures and an 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 no more than 20 megawatts. A 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 agreement.

DATES:

Effective Date:
This Final Rule will become effective August 12, 2005.

FOR FURTHER INFORMATION CONTACT:

Kumar Agarwal (Technical Information), Office of Market, Tariffs and Rates, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426. (202) 502-8923.

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

Kirk Randall (Technical Information), Office of Market, Tariffs and Rates, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426. (202) 502-8092.

Patrick Rooney (Technical Information), Office of Market, Tariffs and Rates, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426. (202) 502-6205.

Abraham Silverman (Legal Information), Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426. (202) 502-6444.

SUPPLEMENTARY INFORMATION:

Before Commissioners: Pat Wood, III, Chairman; Nora Mead Brownell, Joseph T. Kelliher, and Suedeen G. Kelly.

I. Introduction

1. This Final Rule requires all public utilities
1

to adopt standard rules for interconnecting new sources of electricity no larger than 20 megawatts (MW). It continues the process begun in Order No. 2003 of standardizing the terms and conditions of interconnection service for Interconnection Customers of all sizes.
2

It will reduce interconnection time and costs for Interconnection Customers and Transmission Providers,
3

preserve reliability, increase energy supply, lower wholesale prices for customers by increasing the number and types of new generation that will compete in the wholesale electricity market, facilitate development of non-polluting alternative energy sources, and help remedy undue discrimination, as sections 205 and 206 of the FPA require.
4

Public utilities must amend
5

their open access transmission tariffs (OATTs) to include a Small Generator Interconnection Procedures document (SGIP—Appendix E to this Preamble) and a Small Generator Interconnection Agreement (SGIA—Appendix F to this Preamble).

1
For purposes of this Final Rule, a public utility is a utility that owns, controls, or operates facilities used for transmitting electric energy in interstate commerce, as defined by the Federal Power Act (FPA). 16 U.S.C. 824(e) (2000). A non-public utility that seeks voluntary compliance with the reciprocity condition of an open access transmission tariff may satisfy that condition by adopting these procedures and agreement.

2
Standardization of Generator Interconnection Agreements and Procedures, Order No. 2003, 68 FR 49845 (Aug. 19, 2003), FERC Stats. & Regs. ¶ 31,146 (2003) (Order No. 2003),
order on reh'g,
Order No. 2003-A, 69 FR 15932 (Mar. 26, 2004), FERC Stats. & Regs. ¶ 31,160 (2004) (Order No. 2003-A),
order on reh'g,
Order No. 2003-B, 70 FR 265 (Jan. 4, 2005), FERC Stats. & Regs. ¶ 31,171 (2005),
reh'g pending
(Order No. 2003-B).
See also
Notice Clarifying Compliance Procedures, 106 FERC ¶ 61,009 (2004). We refer to the large generator interconnection rulemaking as Order No. 2003 throughout this document. The Order No. 2003 Large Generator Interconnection Agreement and Large Generator Interconnection Procedures, as amended by Order Nos. 2003-A and 2003-B, are referred to in this Final Rule as the LGIA and the LGIP, respectively.

3
Capitalized terms used in this Final Rule have the meanings specified in the Glossaries of Terms or the text of the Small Generator Interconnection Procedures (SGIP) or the Small Generator Interconnection Agreement (SGIA). Small Generating Facility means the device for which the Interconnection Customer has requested interconnection. The owner of the Small Generating Facility is the Interconnection Customer. The utility entity with which the Small Generating Facility is interconnecting is the Transmission Provider. A Small Generating Facility is a device used for the production of electricity having a capacity of no more than 20 MW. The interconnection process formally begins with the Interconnection Customer submitting an application for interconnection, called an Interconnection Request, to the Transmission Provider.

We are omitting from the SGIP and SGIA glossaries terms that are defined through their use in the documents themselves or are in such common use in the industry that a definition is unnecessary. Many terms that were capitalized in the Small Generator Interconnection Notice of Proposed Rulemaking are therefore not capitalized in this Preamble, SGIP, and SGIA.

The documents put forward in the Small Generator Interconnection NOPR are called the “Proposed SGIP” and the “Proposed SGIA” in this Preamble. The documents that are being adopted in this Final Rule for inclusion in a Transmission Provider's OATT are called simply the SGIP and SGIA. Provisions of the SGIP are referred to as “sections” and provisions of the SGIA are referred to as “articles.”

4
16 U.S.C. 824d and 824e (2000).

5
Compliance procedures are discussed in Part II.I, below.

2. The SGIP contains the technical procedures the Interconnection Customer and Transmission Provider (the Parties) must follow once the Interconnection Customer requests interconnection of its Small Generating Facility. It provides three ways to evaluate the Interconnection Request. They are the default Study Process that could be used by any Small Generating Facility, and two procedures that use technical screens to evaluate proposed interconnections: (1) The Fast Track Process for a certified Small Generating Facility no larger than 2 MW
6

and (2) the 10 kW Inverter Process for a certified inverter-based Small Generating Facility no larger than 10 kW.
7

All three are designed to ensure that the proposed interconnection will not endanger the safety and reliability of the Transmission Provider's Transmission System.

6
A Small Generating Facility equipment package is considered certified if it has been submitted, tested, and listed by a nationally recognized testing and certification laboratory. The Small Generator Interconnection NOPR used the term “precertified” to describe such a facility. We adopt in this Final Rule the term “certified” to be consistent with industry usage. To avoid further confusion, we also use “certified” when describing the Small Generator Interconnection NOPR.
See
the SGIP, especially Attachments 3 and 4.

7
An inverter is a device that converts the direct current voltage and current of a DC generator to alternating voltage and current. For example, the output of a solar panel is direct current. The solar panel's output must be converted by an inverter to alternating current before it can be interconnected with a utility's alternating current electric system.

3. The SGIA contains contractual provisions appropriate for the interconnection of a Small Generating Facility, including provisions for the payment for modifications made to the Transmission Provider's Transmission System to accommodate the interconnection. The SGIA is signed by the Parties after they have successfully completed the evaluation of a proposed interconnection under the SGIP Study Process or Fast Track Process. The SGIA

does not apply to requests to interconnect submitted under the 10 kW Inverter Process, however, which uses a simplified all-in-one application form/procedures/terms and conditions document that is included in SGIP Attachment 5.

4. We conclude that general consistency between the Commission's interconnection procedures document and interconnection agreement adopted in this Final Rule and those of the states will be helpful to removing roadblocks to the interconnection of Small Generating Facilities. To a large extent, this Final Rule harmonizes state and federal practices by adopting many of the best practices interconnection rules recommended by the National Association of Regulatory Utility Commissioners (NARUC). By doing so, we hope to minimize the federal-state division and promote consistent, nationwide interconnection rules. We hope that states that do not currently have interconnection rules for small generators will look to the documents presented in this Final Rule and NARUC as guides for their own. In particular, the “Fast Track Process” and the “10 kW Inverter Process” should go a long way towards harmonizing state-federal interconnection practices.

5. Finally, the application of this Final Rule is the same as with Order No. 2003 for Large Generating Facilities. Specifically, this Final Rule applies only to interconnections with facilities that are already subject to the Transmission Provider's OATT at the time the Interconnection Request is made.

6. The SGIP and SGIA include separate definitions for “Transmission System” and “Distribution System” to account for the distinct engineering and cost allocation implications of an interconnection with a Distribution System. The SGIP and SGIA, like Order No. 2003, define “Transmission System” as “[t]he facilities owned, controlled or operated by the Transmission Provider or the Transmission Owner that are used to provide transmission service under the Tariff.” Any interconnection with a Transmission System (under an OATT) by a Small Generating Facility is subject to this Final Rule.

7. The SGIP and the SGIA, like Order No. 2003, also use the term “Distribution System.” “Distribution System” is defined as “[t]he Transmission Provider's facilities and equipment used to transmit electricity to ultimate usage points such as homes and industries directly from nearby generators or from interchanges with higher voltage transmission networks which transport bulk power over longer distances. The voltage levels at which Distribution Systems operate differ among areas.” If a Small Generating Facility proposes to interconnect with a portion of the Distribution System subject to an OATT for the purpose of making wholesale sales, then this Final Rule would apply.
8

However, an interconnection to a portion of a Distribution System that is not already subject to an OATT would not be subject to this Final Rule.

8

See Detroit Edison
v.
FERC
, 334 F.3d 48 (DC Cir. 2003) (
Detroit Edison
). There, the court explained that:

When a local distribution facility is used to delivery [sic] energy to an unbundled retail customer, FERC lacks any statutory authority, and the state has jurisdiction over that transaction. By contrast, when a local distribution facility is used in a wholesale transaction, FERC has jurisdiction over that transaction pursuant to its wholesale jurisdiction under FPA Section 201(b)(1). In sum, FERC has jurisdiction over all interstate transmission service and over all wholesale service, but FERC has no jurisdiction over unbundled retail distribution service—
i.e.
, unbundled retail service over local distribution facilities.

Id.
at 51 (citations omitted).

8. “Distribution” is a vague term, usually used to refer to non-networked, often lower-voltage facilities, that carry power in one direction. Commission-jurisdictional facilities with these characteristics are referred to as “Distribution Systems subject to an OATT” throughout this Final Rule. This Final Rule's use of the term “Distribution System” has nothing to do with whether the facility is under this Commission's jurisdiction; some “distribution” facilities are under our jurisdiction and others are “local distribution facilities” subject to state jurisdiction.
9

This Final Rule does not violate the FPA section 201(b)(1) provision that the Commission does not have jurisdiction over local distribution facilities “except as specifically provided * * *.”
10

This is because the Final Rule applies only to interconnections to facilities that are already subject to a jurisdictional OATT at the time the interconnection request is made and that will be used for purposes of jurisdictional wholesale sales. Because of the limited applicability of this Final Rule, and because the majority of small generators interconnect with facilities that are not subject to an OATT, this Final Rule will not apply to most small generator interconnections. Nonetheless, our hope is that states may find this rule helpful in formulating their own interconnection rules.

9

See Detroit Edison
, 334 F.3d at 51. (“For our purposes, the most important result of these jurisdictional determinations is that customers can take any FERC-jurisdictional service under a utility's open access tariff, which the utility is required to file with FERC. Customers must take non FERC-jurisdictional service, such as unbundled retail distribution, under a state tariff.”)

10
16 U.S.C. 824 (2000).

A. Background

9. This Final Rule responds to business and technology changes in the electric industry. Where the electric industry was once primarily the domain of vertically integrated utilities generating power at large centralized plants, advances in technology have created a burgeoning market for small power plants that may offer economic, reliability, or environmental benefits.

10. With these developments in mind, the Commission continues in this rulemaking to work to encourage fully competitive bulk power markets. The effort took its first significant step with Order No. 888,
11

which required public utilities to provide other entities comparable access to their Transmission Systems. The effort continued with Order No. 2000,
12

which began the process of developing Regional Transmission Organizations (RTOs). Most recently, the Commission established a standard Large Generator Interconnection Procedures document (LGIP) and a standard Large Generator Interconnection Agreement (LGIA) for generating facilities larger than 20 MW.
13

11
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 part sub nom. Transmission Access Policy Study Group
v.
FERC
, 225 F.3d 667 (DC Cir. 2000),
aff'd sub nom. New York
v.
FERC
, 535 U.S. 1 (2002) (
TAPS
v.
FERC
).

12
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 12088 (Mar. 8, 2000), FERC Stats. & Regs. ¶ 31,092 (2000),
aff'd sub nom. Public Util. Dist. No.
1 v.
FERC
, 272 F.3d 607 (DC Cir. 2001).

13

See
Order No. 2003
passim
.

11. The Commission, pursuant to its responsibility under sections 205 and 206 of the FPA to remedy undue discrimination, is requiring all public utilities that own, control, or operate facilities for transmitting electric energy in interstate commerce to append to their OATTs the SGIP and SGIA we are adopting in this Final Rule. These documents provide just and reasonable terms and conditions of interconnection service. They also strike a reasonable balance between the competing goals of uniformity and flexibility while ensuring safety and reliability are protected.

B. Need for a Standard Generator Interconnection Procedures and Agreement

12. In fulfilling its responsibilities under sections 205 and 206 of the FPA, the Commission is required to remedy undue discrimination. The Commission must also ensure that the rates, contracts, and practices affecting jurisdictional transmission service do not reflect an undue preference or advantage for Transmission Providers and their affiliates and are just and reasonable. The Commission's regulatory authority under the FPA “clearly carries with it the responsibility to consider, in appropriate circumstances, the anticompetitive effects of regulated aspects of interstate utility operations* * *.”
14

14

Gulf States Utils. Co.
v.
FPC
, 411 U.S. 747, 758-59 (1973);
see City of Huntingburg
v.
FPC
, 498 F.2d 778, 783-84 (DC Cir. 1974) (noting the Commission's duty to consider the potential anticompetitive effects of a proposed interconnection agreement).

13. 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.
15

The Commission in Order No. 888 thoroughly discussed the legislative history and case law involving sections 205 and 206, concluded that it has the authority and responsibility to remedy the undue discrimination it found by requiring open access, and decided to do so through a rulemaking on a generic, industry-wide basis.
16

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.
17

However, Order No. 888 did not specifically address interconnection service.
18

15
Order No. 888 at 31,679-84; Order No. 888-A at 30,209-10.

16
Order No. 888 at 31,668-73, 31,676-79; Order No. 888-A at 30,201-12;
TAPS
v.
FERC
at 687-88.

17

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

18
Order No. 888-A, FERC Stats. & Regs ¶ 31,048 at 30,230-31.

14. In
Tennessee Power
,
19

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. 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 timelines for evaluating applications for interconnection.
20

19
Tennessee Power Co. (
Tennessee Power
), 90 FERC ¶ 61,238 at 61,761 (2000),
reh'g denied
, 91 FERC ¶ 61,271 (2000).

20

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

15. As discussed in Order No. 2003, interconnection is a critical component of transmission service, and having a standard interconnection procedures and a standard agreement applicable to Small Generating Facilities will (1) limit opportunities for transmitting utilities to favor their own generation, (2) remove unfair impediments to market entry for small generators by reducing interconnection costs and time, and (3) encourage investment in generation and transmission infrastructure, where needed.
21

We expect the SGIP and SGIA adopted here will resolve most disputes, minimize opportunities for undue discrimination, foster increased development of economic Small Generating Facilities, and protect system reliability.

21
Order No. 2003 at P 10.

C. The Large and Small Generator Interconnection Rulemaking Proceedings

16. In the Advance Notice of Proposed Rulemaking (ANOPR) issued in Docket No. RM02-1-000, the Commission initiated a collaborative process where members of the public, electric industry participants, and federal and state agencies (collectively, stakeholders) were invited to draft proposed generator interconnection procedures and a generator interconnection agreement.
22

The stakeholders filed their consensus documents in January 2002. The Commission then issued a Notice of Proposed Rulemaking (Large Generator Interconnection NOPR)
23

proposing standard interconnection procedures and a standard interconnection agreement that generally followed the consensus documents. The Large Generator Interconnection NOPR also proposed solutions to issues left unresolved in the consensus documents.

22
Standardizing Generator Interconnection Agreements and Procedures, Advance Notice of Proposed Rulemaking, 66 FR 55140 (Nov. 1, 2001), FERC Stats. & Regs. ¶ 35,540 (2002).

23
Standardization of Generator Interconnection Agreements and Procedures, Notice of Proposed Rulemaking, 67 FR 22250 (May 2, 2002), FERC Stats. & Regs. ¶ 32,560 (2002).

17. Although the Large Generator Interconnection NOPR provided special treatment for Small Generating Facilities, some commenters urged the Commission to initiate a separate proceeding to develop standard interconnection procedures and agreements that addressed the unique concerns of Small Generating Facilities.
24

They proposed one set of simplified interconnection rules for Small Generating Facilities no larger than 2 MW, and another for facilities larger than 2 MW but no larger than 20 MW. Persuaded that different procedures and agreements were indeed needed, the Commission severed Small Generating Facilities from the Large Generator Interconnection proceeding and issued a Small Generator Interconnection Advance Notice of Proposed Rulemaking (ANOPR) in August 2002.
25

The Small Generator Interconnection ANOPR proposed two SGIPs and two SGIAs (ANOPR SGIPs and SGIAs) using 2 MW as a breakpoint. It encouraged stakeholders to pursue consensus on the ANOPR SGIPs and SGIAs. To that end, the Commission convened a series of public meetings designed to enable them to discuss and reach as much consensus as possible.

24
Those commenters included the Solar Energy Industries Association, the U.S. Fuel Cell Council, the American Solar Energy Society, the U.S. Combined Heat and Power Association, the International District Energy Association, and the American Wind Energy Association.

25
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).

18. The negotiating parties, who we refer to collectively as Joint Commenters, then filed SGIPs and SGIAs (Joint Commenters' SGIPs and SGIAs) with the Commission.
26

While Joint Commenters reached consensus on some issues, many remained unresolved. Joint Commenters' SGIPs included two procedures for evaluating whether a proposed Small Generating Facility could be interconnected safely and without degrading reliability. The first was a standard Study Process that

used a scoping meeting and three technical studies to evaluate a proposed interconnection. The second was a streamlined procedure that used technical screens to identify those proposed interconnections that clearly would not jeopardize the safety and reliability of the Transmission Provider's electric system. Public comments on the Small Generator Interconnection ANOPR were filed shortly thereafter.

26
This group refers to itself as the Coalition. However, in this Final Rule we shall refer to the group as “Joint Commenters” to distinguish it from the similarly named Small Generator Coalition. With the exception of these early references to Joint Commenters' comments submitted in response to the ANOPR, all references in the remainder of this Preamble to Joint Commenters are to its supplemental comments. Joint Commenters did not file initial comments in response to the Small Generator Interconnection NOPR, only supplemental comments. Joint Commenters is a diverse group of stakeholders that includes:

• Over 25 small generator trade groups, promoters, and equipment manufacturers, who refer to themselves collectively as the “Small Generator Coalition,”

• State regulatory agencies represented by the National Association of Regulatory Utility Commissioners,

• American Public Power Association (which did not participate in the filing of Joint Commenters' supplemental comments), and

• Transmission Providers represented by Edison Electric Institute (EEI) and National Rural Electric Cooperative Association (NRECA)

A list of commenter acronyms may be found in Appendix A.

19. In July 2003, the Commission issued Order No. 2003, which established standard procedures and an interconnection agreement for the interconnection of large generators and explained the Commission's jurisdiction over interconnections. The Commission simultaneously issued the Small Generator Interconnection NOPR.
27

Certain provisions in the Large Generator Interconnection Final Rule as well as Joint Commenters' SGIPs/SGIAs influenced the Small Generator Interconnection NOPR.
28

The Commission asked commenters to address whether Small Generating Facilities should be treated differently from Large Generating Facilities under the LGIP and LGIA adopted in Order No. 2003.

27
Standardization of Small Generator Interconnection Agreements and Procedures, Notice of Proposed Rulemaking, 60 FR 49974 (Aug. 19, 2003), FERC Stats. & Regs. ¶ 32,572 (2003) (Small Generator Interconnection NOPR).

28
See,
e.g.
, Proposed SGIA articles 4.1, 5.1.2, 5.1.2.1, 5.2, 6.1-6.9, 6.12-6.20, 7, and 8.

20. Sixty-five entities submitted initial comments in response to the Small Generator Interconnection NOPR. The comments generally support the Commission's effort to remove barriers to the development of Small Generating Facilities. Following the issuance of the Small Generator Interconnection NOPR and the initial comment due date, NARUC in October 2003 updated its own interconnection procedures and agreement, referred to here as the NARUC Model. NARUC stated that the NARUC Model is based on the best practices of the state regulatory agencies that have interconnection procedures for small generators. NARUC encouraged state regulators to use the NARUC Model as a basis for developing their interconnection procedures and suggested that the Commission's documents reflect these “best practices.” On July 7, 2004, the Commission staff added to the record in this proceeding the latest version of the NARUC Model.
29

A few commenters favor terminating this proceeding or, in the alternative, adopting the NARUC Model.

29
NARUC members had participated in the ANOPR discussions fostered by the Commission; there was much similarity between the provisions of the NARUC Model and the Small Generator Interconnection NOPR.

21. The Commission then issued a Notice of Request for Supplemental Comments, observing that the small generator industry had continued to evolve since the Commission first received comments in this proceeding.
30

In the notice, the Commission observed that several states had recently adopted new guidelines for small generator interconnections, and that the stakeholders who participated in the Commission's ANOPR process were continuing to work toward resolving various SGIP and SGIA issues. The Commission invited joint supplemental comments describing new consensus positions but discouraged resubmissions of prior positions.

30

See
Notice of Request for Supplemental Comments, 69 FR 51024 (Aug. 17, 2004). The Commission then granted two extensions of time at the request of Joint Commenters.
See
Notices issued on September 30, 2004 and November 30, 2004 in Docket No. RM02-12-000.

22. Joint Commenters, which as noted above represents a diverse group of small generator interests, Transmission Providers, and state regulators who participated in the ANOPR process, was the only group to file a consensus position. Some Joint Commenters—Small Generator Coalition, NRECA, and NARUC—filed their own supplemental comments as well. Ten other entities (mostly state regulatory commissions
31

) submitted supplemental comments.
32

31
CT DPUC, Minnesota PUC, and Massachusetts DTE submitted copies of their recently enacted small generator interconnection rules.

32
The supplemental commenters are listed in Appendix A.

23. In its supplemental comments, Joint Commenters endorsed a single SGIP and single SGIA for Small Generating Facilities no larger than 20 MW. Joint Commenters recommended several revised provisions in areas where they had not been able to reach consensus during the ANOPR process. These included dispute resolution, confidentiality, insurance, equipment certification, and technical screens, among others. Joint Commenters, which includes NARUC, also endorsed a greatly simplified all-in-one application form/procedures/terms and conditions document for the interconnection of certified inverter-based Small Generating Facilities no larger than 10 kW.

24. In Order No. 2003-A, the Commission determined that the LGIP and LGIA were designed around the needs of traditional synchronous technology generators and that generators relying on non-synchronous technologies, such as wind plants, may find that a specific requirement is inapplicable or that a different approach is needed.
33

Accordingly, the Commission added a blank Appendix G (Requirements of Generators Relying on Non-Synchronous Technologies) to the LGIA as a placeholder for requirements specific to non-synchronous technologies.
34

At a September 24, 2004 technical conference on the interconnection requirements of non-synchronous technologies, panelists were asked whether Appendix G type requirements should apply to Small Generating Facilities. They responded that special capabilities, such as low voltage ride-through, simply were not needed for any Small Generating Facility, whether wind powered or not. As a result, the Wind NOPR issued shortly thereafter applies only to the interconnection of wind powered generators 20 MW or larger.
35

In its supplemental comments, National Grid asks the Commission to implement standards for Small Generating Facilities that are similar to those proposed for Large Generating Facilities in the Wind NOPR. This Final Rule does not include such standards. The wind generating facilities that will interconnect under this Final Rule will be small and will have minimal impact on the Transmission Provider's electric system. The reliability requirements proposed for wind powered Large Generating Facilities are not needed for small wind generating facilities.

33
Order No. 2003-A at P 407, n. 86.

34

Id
.

35
Interconnection for Wind Energy and Other Alternative Technologies, Notice of Proposed Rulemaking, 70 FR 4791 (Jan. 31, 2005) (
Wind NOPR
).

25. In crafting this Final Rule, we considered all of the comments received throughout the course of this proceeding, including the initial documents submitted by Joint Commenters in response to the ANOPR, the Small Generator Interconnection NOPR and the comments filed in response, the NARUC Model, and the supplemental comments. We considered all comments filed in response to the Small Generator Interconnection NOPR before April 29, 2005, and they are part of the record in this proceeding.
36

36
Comments addressing issues filed in other dockets (for instance, the Wind NOPR) are not part of this proceeding even if they were cross-filed in Docket No. RM02-12-000.

II. Discussion

26. Part A of this discussion (Descriptions of the SGIP and SGIA) describes in general terms the interconnection procedures document (SGIP) and interconnection agreement

(SGIA) we are adopting in this Final Rule.

27. Part B (Overview of the Interconnection Process for Small Generating Facilities) describes the processes that the Interconnection Customer and the Transmission Provider must follow to interconnect the Small Generating Facility with the Transmission Provider's Transmission System.

28. Part C (Issues Related to Both the SGIP and the SGIA) addresses issues that are common to the interconnection procedures and agreement documents.

29. Part D (Issues Related to the Interconnection Request) addresses issues related to the Interconnection Request (application form) that the Interconnection Customer submits to the Transmission Provider to request interconnection of its Small Generating Facility.

30. Part E (Issues Related to the SGIP) addresses issues related only to the interconnection procedures document.

31. Part F (Issues Related to the SGIA) addresses issues related only to the interconnection agreement.

32. Part G (The 10kW Inverter Process) describes the simplified all-in-one application form/procedures/terms and conditions document for the interconnection of certified inverter-based Small Generating Facilities no larger than 10 kW.

33. Part H (Other Significant Issues) addresses the pricing of Interconnection Facilities and Upgrades, jurisdictional issues, variations from the Final Rule, the availability of waivers for small entities, the effect of this Final Rule on the OATT reciprocity provisions, and others.

34. Finally, Part I (Compliance Issues) addresses issues pertaining to the requirement that a Transmission Provider file conforming amendments to its existing OATT, the treatment to be accorded to existing interconnection agreements (grandfathering), and how a Transmission Provider is to file executed and unexecuted interconnection agreements.

A. Descriptions of the SGIP and SGIA

35. In Order No. 2003, the Commission adopted two documents that are to be used for the interconnection of Large Generating Facilities—the Large Generator Interconnection Procedures document and the Large Generator Interconnection Agreement. The LGIP describes how the Interconnection Customer's Interconnection Request (
i.e.
, application) is to be evaluated from an engineering perspective using a four-step process. These are the scoping meeting, the feasibility study, the system impact study, and the facilities study. The purpose of the evaluation is to determine the impact the proposed interconnection will have on the Transmission Provider's electric system and identify new equipment and modifications needed to accommodate the interconnection. The LGIA, which is signed after the proposed interconnection has been successfully evaluated using the provisions contained in the LGIP, describes the legal relationships of the Parties, including who pays for equipment modifications to the Transmission Provider's electric system.

36. The SGIP and SGIA we adopt in this Final Rule serve the same purposes as the LGIP and LGIA. The SGIP includes the same four-step process for evaluating an Interconnection Request as does the LGIP, except that it is simplified in several aspects and includes timelines to accelerate the interconnection of Small Generating Facilities. In the SGIP, this procedure is termed the “Study Process.” The SGIP also includes special procedures for evaluating two subgroups of Small Generating Facilities, (1) a “Fast Track Process” that uses technical screens to evaluate a certified Small Generating Facility no larger than 2 MW, and (2) a “10 kW Inverter Process” that uses the same technical screens to evaluate a certified inverter-based Small Generating Facility no larger than 10 kW. The SGIA serves the same purpose for the interconnection of a Small Generating Facility as the LGIA does for a Large Generating Facility. It describes the legal relationships of the Parties, including who will pay for equipment modifications to the Transmission Provider's electric system.

37. The Commission received many comments proposing modifications to the Proposed SGIP and Proposed SGIA, which helped greatly to shape this Final Rule. NARUC argued that the Commission should adopt portions of its Model to harmonize federal interconnection rules with those found in states with interconnection rules. Small Generator Coalition recommended that the Commission in this proceeding adopt the NARUC Model instead of the Proposed SGIP and Proposed SGIA. Some of the provisions proposed by Joint Commenters (which includes NARUC representation) in its supplemental comments also followed the NARUC Model. We are adopting in this Final Rule many of these consensus provisions as well as those proposed by NARUC because they are just and reasonable and serve the twin goals of removing barriers to the development of small generation while preserving the safety and reliability of the nation's electric system.

38. The SGIP, while relying heavily on NARUC's and Joint Commenters' proposals, is not a significant departure from the Proposed SGIP. Both use nearly identical interconnection study processes (“Study Process”) to evaluate Interconnection Requests that do not qualify for special handling. Regarding special handling, both use technical screens to identify Small Generating Facilities no larger than 2 MW that can be interconnected with no adverse impact on safety or reliability. The SGIP we adopt in this Final Rule, however, includes two such special procedures, the Fast Track Process and the 10 kW Process. The choice of which one the Interconnection Customer may use depends on the size and technology of the Small Generating Facility. The SGIP also includes the Interconnection Request (application form) that is to be used by all Interconnection Customers except those eligible to use the 10 kW Process, and feasibility study, system impact study, and facilities study agreements that are to be used in the Study Process.
37

37
Note that the scope and payment provisions of the feasibility, system impact, and facilities studies are contained in the actual study agreements which are included as Attachments 6, 7, and 8 to the SGIP, not section 3 of the SGIP.

39. The SGIA is to be used for the interconnection of all Small Generating Facilities subject to this Final Rule, with the exception of certain very small inverter-based generators that use an all-in-one application form/procedures/terms and conditions document (the 10 kW Inverter Process document). The Proposed SGIA included several provisions that were similar to those contained in the LGIA that was issued concurrent with the Small Generator Interconnection NOPR. Some commenters complained that the Proposed SGIA was too long and complex for owners of Small Generating Facilities, who may be small businesses or operators of small farms, for example. We are streamlining and simplifying the SGIA in many ways to address these concerns. We are adopting Joint Commenters' proposals submitted in its supplemental comments where appropriate and have given consideration to the recommendations contained in the NARUC Model and those suggested by other commenters. In particular, the SGIA does away with the requirement that Interconnection Customers maintain multiple kinds of insurance, instead requiring only that they maintain a reasonable amount based on the specific characteristics of

the interconnection. We also adopt a streamlined dispute resolution provision designed to resolve disputes as quickly and inexpensively as possible. We have also shortened the contract termination provisions and the various liability related provisions.

40. We adopt in the SGIA the same pricing policy for Network Upgrades to the Transmission Provider's Transmission System as in Order No. 2003. For a Small Generating Facility interconnecting with a non-independent entity such as a vertically integrated utility, the Interconnection Customer initially funds the cost of any required Network Upgrades (
i.e.
, Upgrades to the Transmission System at or beyond the Point of Interconnection) and it is then subsequently reimbursed for this upfront payment by the Transmission Provider. However, we expect that, for most interconnections of Small Generating Facilities, there will be no Network Upgrades. We also allow more pricing flexibility for a Transmission System that is operated by an independent entity such as an RTO or Independent System Operator (ISO). The costs of Distribution Upgrades are directly assigned to the Interconnection Customer.

41. In conclusion, we encourage the standardization of interconnection practices across the nation, using as a starting point the SGIP and SGIA found in this Final Rule. We hope to foster seamless interconnection procedures for Interconnection Customers and Transmission Providers. Equipment manufacturers will have compatible technical specifications to meet. New generation will be located on the basis of what works best for the Interconnection Customer and the Transmission Provider, not jurisdictional differences in interconnection rules.

B. Overview of the Interconnection Process for Small Generating Facilities

42. Before submitting its Interconnection Request, the Interconnection Customer may informally discuss the proposed interconnection with the Transmission Provider.
38

The Interconnection Customer then submits an Interconnection Request to the Transmission Provider and the Transmission Provider assigns the Interconnection Customer's project a Queue Position based on the date and time the Interconnection Request is received by the Transmission Provider. The Interconnection Request must be accompanied by a deposit that goes toward the cost of the feasibility study, unless it is submitted under the Fast Track Process or the 10 kW Inverter Process, which have small processing fees.

38
Flowcharts depicting interconnection procedures are presented in Appendices B (Study Process), C (Fast Track Process), and D (10 kW Inverter Process).

43. As noted above, an Interconnection Request can be evaluated in one of three ways. The Study Process is the default method; it relies on the scoping meeting and standard feasibility, system impact, and facilities studies to evaluate the safety and reliability of the proposed interconnection. It is identical in concept to the evaluation procedure that is used for the interconnection of Large Generating Facilities. Two optional methods are available to Interconnection Customers whose Small Generating Facilities are certified and no larger than 2 MW. The 10 kW Inverter Process is available for owners of inverter-based Small Generating Facilities no larger than 10 kW and the Fast Track Process is available for owners of any kind of Small Generating Facility no larger than 2 MW.

44. The Study Process normally consists of a scoping meeting, a feasibility study, a system impact study, and a facilities study. At the scoping meeting, the Parties discuss the proposed interconnection and review any existing studies that could aid in the evaluation of the proposed interconnection. The feasibility study is a preliminary technical assessment of the proposed interconnection. The system impact study is a more detailed assessment of the effect the interconnection would have on the Transmission Provider's electric system and Affected Systems. The facilities study determines what modifications to the Transmission Provider's electric system are needed, including the detailed costs and scheduled completion dates for these modifications. These studies identify adverse system impacts
39

that need to be addressed before the Small Generating Facility may be interconnected and any equipment modifications required to accommodate the interconnection. The Interconnection Customer pays the Transmission Provider's actual cost of performing the studies. Once the Interconnection Customer agrees to fund any needed Upgrades, the Parties execute an SGIA that, among other things, formalizes responsibility for construction and payment for Interconnection Facilities and Upgrades.
40

39
An adverse system impact means that technical or operational limits on conductors or equipment are exceeded under the interconnection, which may compromise the safety or reliability of the electric system.

40
The Study Process is similar to the LGIP. However, we expect that the interconnection of a Small Generating Facility will take substantially less time and cost substantially less than a Large Generating Facility.

45. A Fast Track Process is available for certified Small Generating Facilities no larger than 2 MW. Under this process, in place of the scoping meeting and three interconnection studies, technical screens are used to quickly identify reliability or safety issues. If the proposed interconnection passes the screens, the Transmission Provider offers the Interconnection Customer an SGIA. If the proposed interconnection fails the screens, but the Transmission Provider determines that the Small Generating Facility may nevertheless be interconnected without affecting safety and reliability, the Transmission Provider also offers the Interconnection Customer an SGIA. However, if the Transmission Provider is concerned that the interconnection could degrade the safety and reliability of its electric system, the Parties may conduct a customer options meeting to discuss how to proceed. In that meeting, the Transmission Provider must offer to perform a supplemental review of the proposed interconnection, paid for by the Interconnection Customer, to identify Upgrades needed to accommodate the interconnection. Once the Interconnection Customer agrees to pay for any Upgrades called for in the supplemental review, the Parties execute an SGIA. If, after the supplemental review, the Transmission Provider still is unsure whether the proposed interconnection will degrade the safety and reliability of its electric system, the Interconnection Request is evaluated using the Study Process described above;
i.e.
, scoping meeting, feasibility, system impact, and facilities studies, followed by the execution of an SGIA.

46. Finally, the 10 kW Inverter Process is available for the interconnection of certified inverter-based generators no larger than 10 kW. The all-in-one 10 kW Inverter Process document includes a simplified application form, interconnection procedures, and a brief set of terms and conditions (akin to an interconnection agreement). The 10 kW Inverter Process uses the same technical screens to evaluate the safety and reliability of the proposed interconnection as the Fast Track Process. Unless the Transmission Provider demonstrates that the Small Generating Facility cannot be

interconnected safely and reliably based on the results of an analysis using the screens, the Transmission Provider approves the application. Once the Interconnection Customer certifies that equipment installation is complete and upon a satisfactory inspection by the Transmission Provider, the Transmission Provider authorizes the interconnection. To further simplify the interconnection process, what would normally be considered a separate interconnection agreement has been distilled into a terms and conditions document that the Interconnection Customer agrees to at the time the Interconnection Request is submitted to the Transmission Provider. The all-in-one 10 kW Process document is included in Attachment 5 to the SGIP.

C. Issues Related to Both the SGIP and the SGIA

47. This discussion, and those that follow, addresses the evolution of the SGIP and SGIA from the Proposed SGIP and Proposed SGIA. As is the custom in most Commission rulemakings, we use the Small Generator Interconnection NOPR as our point of reference, discussing each issue in turn, describing the comments addressed to the topic, and closing with the Commission conclusion. There are differences between the Proposed SGIP and SGIA and the documents we adopt in this Final Rule that reflect the helpful comments filed in this rulemaking. For example, we have in some instances adopted terminology more compatible with that used in state interconnection documents. This should make for simpler, more easily understood documents for small generators that are compatible across jurisdictions for both Interconnection Customers and Transmission Providers. However, the SGIP and SGIA also need to be interpreted in the broader context of the entire collection of generator interconnection documents that will appear in a Transmission Provider's OATT, including the LGIP and LGIA. Thus, there are some instances where consistency among generator interconnection documents within a single tariff makes it necessary to adopt Large Generator Interconnection terminology or policy. The Commission asked for comments in the Small Generator Interconnection NOPR addressing this topic, and it is the first to be addressed in the discussion that follows.

48. Many of the issues in this rulemaking also arose in the Large Generator Interconnecting rulemaking and we will not address them again here at any great length. Where there is no compelling reason to depart from prior precedent, we affirm the Commission's prior decisions without detailed discussion. Therefore, this order focuses on those issues needing a small-generator-specific resolution.

49. Finally, we note that the 10 kW Inverter Process for certified inverter-based Small Generating Facilities is an all-in-one application form/procedures/terms and conditions document that does not lend itself easily to the separate discussions of the Proposed SGIP/SGIA and the SGIP and SGIA discussions that follow. We will address it in the separate Part G discussion, below. We emphasize, however, that the intent of this Final Rule is that the 10 kW Inverter Process fits within the framework of the SGIP and SGIA, and it is for that reason that we encourage Interconnection Customers and Transmission Providers to use this Preamble, the SGIP, and the SGIA for assistance in interpreting the 10 kW Inverter Process should a dispute arise.

Consistency Between the Large Generator and Small Generator Documents

50. In the Small Generator Interconnection NOPR, the Commission asked commenters to address the need for consistency between the provisions of the LGIP/LGIA and the SGIP/SGIA.

Comments

51. NARUC argued that the Small Generator Interconnection NOPR was too complicated for most small generator interconnections. Instead, the Commission should adopt portions of the NARUC Model or otherwise simplify the interconnection process. NARUC pointed out that many Small Generating Facilities (including most inverter-based generators) will interconnect with low voltage facilities, whether Commission-jurisdictional or state-jurisdictional. Thus, this Final Rule should be as consistent with state interconnection rules as possible to encourage national consistency and discourage forum-shopping. Joint Commenters also supports this outcome.

52. AEP supports consistency between the large and small generator documents. However, it notes that Joint Commenters developed consensus positions on many issues during the ANOPR process. Where such agreement was reached, AEP proposes that the Commission adopt that position.

53. Midwest ISO argues that the Commission should ensure consistency between the large and small generator documents, wherever possible, because all stakeholders will benefit from a consistent approach to the interconnection of generation facilities.

54. PJM, on the other hand, proposes that the Commission simply use the LGIA for all interconnections, arguing that having different rules for large and small generator interconnections would be overly burdensome. PJM also states that its own interconnection rules take this approach and are hailed as being very successful.

55. Baltimore G&E argues that the Commission should require the same terms for all generators, regardless of size, unless there is a specific reason not to do so. Therefore, it requests that the Commission provide a clear explanation wherever these Final Rule provisions differ from those in Order No. 2003. Southern Company agrees, arguing that Large and Small Generating Facilities should be treated similarly “because both can have * * * significant impacts upon the Transmission Provider's electric system.”
41

41
Southern Company at 19.

56. BPA argues that the procedures and technical requirements applicable to large generators “should not apply to the interconnection of small generators that have minimal impacts on a transmission grid.”
42

However, where the Commission does use “substantially similar or consistent procedures, contract terms, and other requirements” for both Large and Small Generating Facilities, “the Commission should strive to provide consistency between its large and small generator rules.”
43

42
BPA at 3.

43

Id.

57. Nevada Power also supports the concept of having the provisions applicable to Small Generating Facilities similar to those in Order No. 2003. According to Nevada Power, “[t]hese commonalities will avoid the confusion of differing terminologies, facilitate consistent and fair implementation, and minimize the need for separate, parallel administrative processes to administer the agreements.”
44

However, Nevada Power also argues that consistency should not compromise the goals of simplifying and expediting the interconnection of Small Generating Facilities. Instead, this Final Rule should be designed to “enable a common language and common administrative procedures to be implemented and still maintain appropriate distinctions between the small generators and the large generators.”
45

Nevada Power argues that the benefits of consistency are illustrated by Proposed SGIA article

5.1.2.1, which specifies the refund process for advances made by the Interconnection Customer for Network Upgrades. By having the same refund process for the amounts advanced for Network Upgrades in the SGIA and the LGIA, the Transmission Provider can set up one system, instead of two separate systems, to track and make any such refunds.

44
Nevada Power at 4.

45
Nevada Power at 4-5.

58. In their supplemental comments, NARUC and the other Joint Commenters proposed SGIP and SGIA provisions that balance the need for simplicity with the need of Transmission Providers to ensure the safety and reliability of the Transmission Provider's electric system. In addition, Joint Commenters also proposed a process for certified inverter-based Small Generating Facilities no larger than 10 kW that can also be used as a model for the states.

Commission Conclusion

59. Unless expressly changed in this Final Rule, the Commission's existing interconnection precedent and Order No. 2003 are relevant to this Final Rule and should be used as guidance for interpretation and implementation. We have tried to be consistent between the rules for Large and Small Generating Facilities, unless there is a specific reason to do otherwise, while considering NARUC's call for federal-state consistency and the recommendations of other commenters.

60. We note Joint Commenters' proposal of much simpler interconnection procedures and agreement for inverter-based generators no larger than 10 kW.
46

Taking these extremely small units out of the mix has allowed us to adopt standard rules for larger Small Generating Facilities. According to NARUC, the process of interconnecting with a state-jurisdictional facility should not be substantially different from the process for interconnecting with a Commission-jurisdictional facility. Standard interconnection procedures are especially important for Interconnection Customers and manufacturers of off-the-shelf generating equipment.

46
The 10 kW Inverter Process is largely based on the work of the Massachusetts DTE and its stakeholders group.

61. In general, we are including standard contractual provisions in the SGIA that are consistent with their counterparts in the LGIA. However, in many cases commenters stressed the need to simplify those provisions to avoid burdening Small Generating Facilities. Many commenters offered ways to shorten and simplify those provisions. Where possible, we accept those proposals. These streamlined provisions adequately protect the Parties while lowering the transaction costs of entering into an interconnection agreement. The SGIP closely tracks the revised NARUC Model but adopts the single screen that NARUC and the other Joint Commenters later proposed in supplemental comments. Last, we have ensured that provisions common to the SGIP and SGIA (such as dispute resolution and confidentiality) are consistent.

62. Definitions of Terms Used in the SGIP and SGIA—NARUC and others propose that the Commission use the defined terms in the NARUC Model instead of those found in the Small Generator Interconnection NOPR. We conclude that several of the terms defined in the Proposed SGIP and SGIA are either unnecessary or add complexity to the interconnection process. We are simplifying the SGIP and SGIA by deleting those definitions. Comments on specific terms are discussed below.

63. Emergency Condition—The Proposed SGIA defined Emergency Condition as a situation that, in the judgment of the Party making the claim, is imminently likely to (1) endanger life or property, (2) have an adverse impact on the safety or reliability of the Transmission Provider's or an affected third party's electric system (Affected System), or (3) have a material adverse effect on the safety or operation of the Interconnection Customer's facilities. If there is an Emergency Condition, the Transmission Provider may take necessary and appropriate actions to protect the safety and reliability of its electric system, including interrupting, suspending, or curtailing interconnection service. While system restoration and black start are considered Emergency Conditions, the Small Generating Facility is not obligated to have black start capability.

Comment

64. Bureau of Reclamation objects to the provision that the Small Generating Facility is not obligated by the SGIA to have black start capability. Black start capability is an issue best handled by the control area rather than the Transmission Provider and that mentioning black start here raises the question of by whom and when black start capability could be required of the Small Generating Facility. In addition, Bureau of Reclamation proposes that the definition of Emergency Condition also include a “threat or danger to the environment.”

Commission Conclusion

65. We see no need to modify the definition of Emergency Condition. The SGIA does not interfere with the control area's ability to establish a voluntary restoration plan, including black start. The SGIA requires the Parties to adhere to all Applicable Laws and Regulations relating to pollution and protection of the environment or natural resources. Therefore, Bureau of Reclamations' proposed revision is not necessary.

66. Network Upgrades—Comments concerning the definition of Network Upgrades are addressed in Part II.H (Pricing/Cost Recovery for Interconnection Facilities and Upgrades).

67. Use of Calendar Days v. Business Days—The Proposed SGIP and Proposed SGIA used both calendar days and Business Days to establish deadlines for particular activities.

Comments

68. Ameren, EEI, and NYTO request that all references to calendar day be changed to “Business Day.” Ameren and EEI state that doing so would make the SGIP and SGIA consistent. They also state that this is particularly important for the three and five day time limits, especially where the Transmission Provider may not have sufficient staff to respond within the required time. Ameren and NYTO argue that using both calendar days and Business Days is confusing. NYTO further notes that using Business Days rather than calendar days gives the Parties more time to meet deadlines. In addition, NYTO states that using calendar days does not account for normal business delays, including those caused by storm emergencies.

Commission Conclusion

69. We agree that references to the passage of time should be consistent. Accordingly, we are changing calendar days to Business Days throughout the SGIP and SGIA, with two exceptions. First, using calendar days is proper in the SGIA's billing and payment provisions because these activities are traditionally tied to calendar days. Second, SGIA article 7.6.1 Default provisions are stated in terms of calendar days to be consistent with the Commission's regulations that require at least 60 calendar days notice of a proposed cancellation or termination of a contract. Where we have replaced calendar days with Business Days, we have adjusted the number of days to reflect about the same passage of time. Arguments relating to the amount of time a Party has to complete an action are discussed below.

70. Maximum Size of a Small Generating Facility—In the Small Generator Interconnection NOPR, the maximum size of a Small Generating Facility is 20 MW. Where there is more than one unit generating power at a particular site, the Commission proposed to aggregate the total capacity of all generation units using the same Point of Interconnection. The Commission sought comments on a circumstance when the Interconnection Customer desires to increase the capacity of an existing generating facility. The Commission proposed that the total size of the facility would be determined by the sum of the existing and the incremental capacity. Thus, a 10 MW addition to an existing 15 MW facility would be treated as a 25 MW facility. The Commission also sought comments on how to evaluate an Interconnection Request that specifies a level of capacity below the maximum rating of the Small Generating Facility. Finally, the Commission invited comments on whether Small Generating Facilities with multiple Points of Interconnection should be treated separately for queuing and interconnection study purposes.

Comments

Revising the Maximum Size of a Small Generating Facility

71. Ameren, EEI, and NRECA ask the Commission to reduce the maximum size of a Small Generating Facility from 20 MW to 10 MW. They argue that the lower size limit would help ensure safety and reliability of the Transmission Provider's electric system. They also note that it would also be consistent with IEEE Standard 1547,
47

and argue that the 20 MW size limit is particularly challenging for Transmission Providers because of the types of analyses required to evaluate their interconnection and the restrictive time limits placed on performing them.

47
IEEE Standard 1547, approved in June 2003, is the Institute of Electrical and Electronics Engineers' standard for interconnecting distributed resources with electric power systems. The standard applies only to generating equipment no larger than 10 MW.

72. EEI similarly argues that many states have adopted 10 MW as the maximum size of a Small Generating Facility and that the Commission should follow suit. It argues that a 10 MW size limit is better suited to the Small Generating Facility configurations most likely to be proposed under the Final Rule. While reducing the size limit to 10 MW creates a gap between the Large and Small Generating Facility interconnection provisions, that gap can be easily remedied by making the LGIP and LGIA applicable to generating facilities larger than 10 MW.

73. NRECA notes in its initial comments that 10 MW is the upper limit for small generators in Texas, California, New York, and Ohio, and that no state currently has rules that apply to the interconnection of generators larger than 10 MW. According to NRECA, the Commission's statement in the Small Generator Interconnection NOPR that the 20 MW maximum size would “encourage the development of a greater number of small generators and promote the development of innovative small generation technologies” is not supported by engineering reality and industry practice. NRECA participated with Joint Commenters in developing consensus provisions for the SGIP and SGIA that were submitted in Joint Commenters' supplemental comments. Based on those provisions, and in particular the technical screens contained in the SGIP, NRECA states that, “while it still believes that 20 MW is too large a generator to be considered ‘small,’ * * * [Joint Commenters'] SGIA and SGIP will work for all generators up to that size.”
48

48
NRECA Supplemental Comments at 5. NRECA also “believes that the screens adopted for review of generators up to 2 MW in capacity reasonably consider the impact that generators of those sizes will have on distribution systems.”
Id.
The technical screens of which NRECA speaks are the same screens adopted in this Final Rule.

74. Cummins argues that the 20 MW size limit would result in more widespread use of on-site Small Generating Facilities.

Commission Conclusion

75. We agree with commenters that generator size does matter when evaluating the effect of the Small Generating Facility on the Transmission Provider's electric system. However, we are keeping the 20 MW size limit for Small Generating Facilities because the interconnection studies and screens will identify any safety and reliability problems. In particular, the screens we adopt in the SGIP are supported by small generators, state regulators, and Transmission Provider representatives such as EEI and NRECA, as being appropriate to evaluate the safety and reliability of interconnections of Small Generating Facilities that are eligible for screening. We believe the higher threshold will remove barriers to the development of a greater number of Small Generating Facilities and promote the development of innovative small generation technologies.

Increasing the Capacity of an Existing Small Generating Facility

76. The Small Generator Interconnection NOPR proposed to evaluate increases in capacity to existing Small Generating Facilities using the total capacity of the modified facility, and the Commission invited comments on whether the proposal was reasonable.

Comments

77. Several Transmission Providers
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support the NOPR's proposal. They add that if, for example, the capacity of an existing 18 MW Small Generating Facility were to be increased by 5 MW, the resulting 23 MW facility should be evaluated under the LGIP. This would keep the Interconnection Customer from gaming the system by incrementally increasing the size of an existing Small Generating Facility so that the capacity addition does not exceed the 20 MW maximum, even though the ultimate capacity of the facility does. BPA and ISO New England state that processing the Interconnection Request for such an expansion on the basis of the total capacity would better protect the safety and reliability of the Transmission Provider's electric system. Tangibl, on the other hand, argues that evaluating the Interconnection Request based on the total increased capacity of the Small Generating Facility would discourage such increases and hinder the increased entry of generators into the energy markets.

49

E.g.,
BPA, ISO-New England, NRECA, NYTO, PG&E, and Western.

Commission Conclusion

78. We are persuaded by BPA and ISO New England that when an existing Small Generating Facility is expanded, the Interconnection Request should be evaluated based on the total capacity of the facility as opposed to the incremental amount of the expansion. Similarly, an existing Large Generator seeking to increase its capacity by less than 20 MW would also have to follow the Large Generator rule, because the total capacity of the expanded facility would be more than 20 MW. Section 4.10.1 of the SGIP reflects this conclusion.

Evaluating the Generating Facility Based on Less Than Its Maximum Rated Capacity

79. In the Small Generator Interconnection NOPR, the Commission sought comments on whether the maximum capacity of the Small Generating Facility should be used to evaluate the Interconnection Request

when the Interconnection Customer specified an output level below the facility's maximum capability. For example, the Commission asked whether an Interconnection Request for a generating facility with a maximum capacity of 22 MW but seeking an interconnection for only 20 MW (and agreeing to restrict delivery to the Transmission Provider's Transmission System to that level) should be evaluated under the SGIP or the LGIP.

Comments

80. Several Transmission Providers
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argue that the Interconnection Request should be evaluated on the basis of the maximum capacity of the Small Generating Facility to ensure that safety and reliability are not jeopardized. They argue that the Commission should not allow a 22 MW generator to be treated as a 20 MW generator based on a promise by the Interconnection Customer that it will never generate more than 20 MW. This would result in an additional administrative burden on the Commission or market monitors. They also argue that evaluating the Small Generating Facility at less than its maximum rated capacity would not ensure that Interconnection Facilities and Upgrades are properly designed and installed.

50

E.g.,
AEP, Ameren, Avista, BPA, CA ISO, Central Maine, MidAmerican, MISO, NYTO, PG&E, SoCal Edison, and Western.

81. BPA argues that evaluating a Small Generating Facility on the basis of maximum rated capacity would prevent gaming by an Interconnection Customer and would prevent it from submitting a request to interconnect its Small Generating Facility at a lower capacity when it really intend to operate the facility at a higher capacity. Further, evaluating a Small Generating Facility based on its maximum operational capacity would avoid the need to perform a reevaluation each time the Interconnection Customer seeks to operate at a higher output level.

82. Likewise, NYTO claims that even if a Small Generating Facility supplies local load and delivers only half of its output, it still contributes its full fault current to the electric system if there is an electrical fault. Also, stability analysis is based on the full physical characteristics of the facility, such as maximum power capability and rotation inertia. It further argues that if the Commission adopts a value other than the maximum capability of the Small Generating Facility, the Interconnection Customer could “forum shop” between the Large and Small Generating Facility interconnection provisions to get the “best deal.”

83. On the other hand, Allegheny states that if the Interconnection Customer is willing to accept the economic risks of its decision to limit the output of its generating facility, the Interconnection Request should be evaluated at the lower capacity.

84. American Forest, Cummins, Nevada Power, NRECA, and Tangibl also state that the Interconnection Request should be evaluated on the basis of requested capacity, not the maximum capability of the generator, if the Interconnection Customer commits to restrict the output. American Forest says that this is important for generators that consume most of their electrical output on-site in various manufacturing processes and export only a small fraction of their output. In its supplemental comments, Small Generator Coalition proposes a special set of tests that could be used to determine whether these kinds of configurations jeopardize safety and reliability.

Commission Conclusion

85. We are persuaded that the Interconnection Request should be evaluated based on the Small Generating Facility's maximum rated capacity. We agree with commenters that evaluating the proposed interconnection at less than the maximum rated capacity of the generating facility does not ensure that proper protective equipment is designed and installed and the safety and reliability of the Transmission Provider's electric system can be maintained.

86. Nevada Power and other commenters propose that the Interconnection Request be evaluated on the basis of requested capacity if the Interconnection Customer agrees to restrict the output of its facility. We agree with NYTO, however, that even if the Small Generating Facility delivers only a portion of its capability, it still contributes its full fault current to the Transmission Provider's electric system if there is an electrical fault. Therefore, the maximum capacity of the Small Generating Facility should be used to evaluate the Interconnection Request (
See
section 4.10.3 of the SGIP).

Evaluating Small Generating Facilities With Multiple Points of Interconnection

87. The Small Generator Interconnection NOPR invited comments on whether Small Generating Facilities with multiple Points of Interconnection (such as for a wind farm or an industrial cogeneration project serving multiple facilities) should be treated as separate projects or as a single project for queuing and interconnection study purposes.

Comments

88. BPA, CA ISO, ISO New England, and Tangibl argue that Small Generating Facilities with multiple Points of Interconnection should be treated as a single project for queuing and interconnection study purposes. BPA states that this promotes greater efficiency and accuracy because the effects of all the generators can be evaluated in one study. According to commenters, evaluating each Point of Interconnection as a discrete facility may not account for the aggregate effects when multiple generation resources are interconnected.

89. Tangibl recommends adopting PJM's approach of one Interconnection Request for each Point of Interconnection. Tangibl states that the Interconnection Customer should aggregate the capacity of the multiple wind or solar projects that lie in close proximity to one another. However, for geographically dispersed wind or solar projects, it recommends that the project developer be able to ask the Transmission Provider to treat each project individually for interconnection study purposes.

90. Central Maine, Idaho Power, and others argue that evaluating Interconnection Requests based upon a single Point of Interconnection may produce flawed results because it may identify Upgrades incorrectly.

91. NYTO recommends that the Transmission Provider have the option, subject to Good Utility Practice, to either treat such projects separately for queuing and interconnection study purposes, or as a single Point of Interconnection. This is because each proposed Point of Interconnection presents numerous technical, operational, and reliability issues.

Commission Conclusion

92. We adopt NYTO's proposal for the reasons cited by NYTO. The Transmission Provider's evaluation of a project with multiple Points of Interconnection should be performed, using Good Utility Practice, based on the project's unique engineering and geographic needs.

93. Dispute Resolution (Proposed SGIA Article 8 and Proposed SGIP Section 2.11)
51

—The Commission

proposed adopting the same dispute resolution procedures contained in the LGIA and LGIP. This was a departure from Joint Commenters' proposal submitted in response to the ANOPR which obliged the Commission to supply technical experts to resolve disputes between the Parties.

51
In the remainder of this Preamble, “Proposed SGIA Article xxx” refers to a numbered article in the Small Generator Interconnection NOPR, not the SGIA adopted in this Final Rule. The same follows

for references to the Proposed SGIP. This is because the numbering of the SGIP and SGIA does not follow the Proposed SGIP and SGIA.

Comments

94. Commenters were split as to which type of dispute resolution procedures should be adopted by the Commission. Small generator proponents generally support allowing either Party to require binding arbitration, while Transmission Providers generally oppose such provisions. However, all commenters stress the need for quick and cost-effective dispute resolution.

95. CT DPUC argues that the procedures in the Small Generator Interconnection NOPR are too cumbersome and that state commissions are best positioned to resolve disputes in a fair manner, especially disputes over dual use facilities.

96. NRECA and BPA support adopting the dispute resolution procedures in the LGIA. However, BPA opposes binding arbitration and asserts that the Parties should keep whatever appeal rights they have.

97. Small Generator Coalition argues that most Interconnection Customers that own Small Generating Facilities do not have the resources to enter into protracted dispute resolution procedures with the larger Transmission Provider. It argues that complex dispute resolution procedures may discourage Small Generating Facilities from seeking to interconnect with Commission-jurisdictional facilities. Small Generator Coalition questions why the Commission would propose retreating from the ANOPR consensus result. It fears that Transmission Providers will simply refuse to submit to arbitration, forcing an Interconnection Customer to engage in expensive and undefined litigation. This is particularly true for owners of Small Generating Facilities no larger than 2 MW.

98. AEP proposes that either Party be able to require binding arbitration. It states that this approach is consistent with the consensus reached during the ANOPR process. Cummins agrees, asserting that otherwise one Party can obstruct the process. It points out that Interconnection Customers often lack the financial resources to pursue their rights before the Commission or in court, and need access to low-cost, binding dispute resolution procedures.

99. American Forest proposes allowing the Parties to agree on other arbitration procedures if they want to further tailor the procedures to the needs of the specific Parties. It claims that this is the approach common in the industry.

100. Midwest ISO recommends that where an RTO has Commission-approved dispute resolution procedures, it be allowed to apply those procedures to interconnection disputes.

101. NARUC requests that the Commission adopt the dispute resolution provisions found in its Model. It argues that “[e]ach State already has in place a variety of avenues for dispute resolution oriented to protect the interests of the retail customer, ranging from a simple phone call to a State commission or consumer advocate ‘consumer hotline’ to a full-blown complaint proceeding conducted by the State Commission.”
52

Specifically, the NARUC Model states that “[i]f a dispute arises at any time during these procedures [the Parties] may seek immediate resolution through complaint procedures available” through the state regulatory commission.
53

The Model (1) states that the Interconnection Customer's Queue Position is not to be affected by its decision to pursue dispute resolution, (2) allows either Party to require binding arbitration, (3) allows the Parties to request that the state regulatory agency appoint a “technical master” to conduct the dispute resolution process, and (4) states that “where possible, dispute resolution will be conducted in an informal, expeditious manner in order to reach resolution with minimal costs and delay. When appropriate and available, the dispute resolution may be conducted by phone or through Internet communications.”
54

52
NARUC at 12-13.

53
NARUC Model at F.

54

Id.

102. Joint Commenters, in its supplemental comments, proposes that the Commission's Dispute Resolution Service (FERC DRS) assist Parties in resolving their disputes. Under Joint Commenters' proposal, one Party would give the other Party written notice that they have reached an impasse. As soon as two days afterwards, either Party may consult with FERC DRS for guidance on how best to resolve the dispute. FERC DRS may provide the Parties with a neutral venue to work out their dispute or may recommend alternative avenues of dispute resolution including, but not limited to, mediation, settlement judge talks, early neutral evaluation, or arbitration. The Parties could agree to make such outcomes binding, but would not be required to so agree, or even to participate in alternative dispute resolution procedures before FERC DRS.

Commission Conclusion

103. We are adopting a dispute resolution provision for both the SGIP and SGIA that closely resembles the consensus recommendation of Joint Commenters. As the widely disparate recommendations show, different types of interconnection disputes require different types of dispute resolution procedures. Small Generator Coalition and others emphasize the need to avoid expensive and time consuming arbitration provisions. According to these commenters, if a project is forced to go to arbitration, it will likely never be built. Instead, Joint Commenters reached consensus on a set of principles designed to encourage the Transmission Provider and the Interconnection Customer to use fast and low cost alternative dispute resolution procedures to work through their differences.

104. Because the nature of the disputes that may arise are so varied, this approach will allow FERC DRS to make specific recommendations to the Parties designed to resolve the dispute quickly and inexpensively. In some cases, FERC DRS may simply provide the Parties a neutral venue to discuss their differences. In other cases, FERC DRS may recommend that the Parties put their case before a settlement judge or technical master for either mediation or arbitration. The Parties are free to specify whether the outcome of this alternative dispute resolution is binding.

105. As recommended by Joint Commenters, we will not mandate that the Parties use the FERC DRS' resources. Alternative dispute resolution is, by its nature, a collaborative and voluntary process. However, both Parties must work in good faith to resolve their disputes. Additionally, the provision specifies that each Party is responsible for paying one-half of the cost of a neutral third-party employed to assist in settling the dispute.

106. We agree with CT DPUC, NARUC, and Joint Commenters (in its supplemental comments) that a state regulatory agency may often be the best place to quickly resolve a dispute. As mentioned above, the FERC DRS is well-equipped to recommend to Parties the best avenue for resolving a dispute. In many cases, that may be a state

regulatory agency, if that body is willing to mediate or arbitrate the dispute.
55

55
The Commission does not require states to serve a dispute resolution function; it lacks the statutory authority to do so. However, because commenters argue that state participation could be beneficial, we encourage states that have the expertise, resources, and interest to help resolve these disputes as they arise.

107. While we are allowing Parties to select a dispute resolution process, we count on FERC DRS to ensure that both Parties are treated fairly. Thus, we disagree with American Forest that the Parties should be able to deviate from the established dispute resolution procedures without Commission guidance or oversight. While flexibility is important, as many commenters have pointed out, the Parties are rarely on an equal footing. Thus, we will scrutinize the process to ensure that Interconnection Customers are treated fairly, especially by non-independent Transmission Providers.

108. In response to Midwest ISO's request to include ISO-specific dispute resolution rules, under the independent entity variation, it and other independent Transmission Providers may propose such a plan in their compliance filings.

109. Confidentiality (Proposed SGIA Article 7 and Proposed SGIP Section 2.11)—These provisions detailed the rights and responsibilities of each Party to keep any Confidential Information shared during the interconnection process.

Comments

110. Avista and Idaho Power assert that the confidentiality provisions should give state regulators conducting an investigation the same access to confidential information as is provided to the Commission when it conducts an investigation. Avista also requests that the Commission address recent rulings by the Internal Revenue Service applicable to confidential transactions. Similarly, NARUC is concerned that the proposed confidentiality provisions might prevent state regulators from getting the information they need in the course of conducting an investigation. The NARUC Model SGIP includes a confidentiality provision that is similar to that proposed in the Small Generator Interconnection NOPR. The NARUC Model SGIA simply leaves a place holder to be filled in by the Parties.

111. Southern Company argues that Proposed SGIA article 7.1 should specify that information supplied “as part of this [interconnection] agreement” be confidential rather than information supplied “prior to execution of this agreement.” It also says that Proposed SGIA article 7.12 allows a broader class of information to qualify for confidential treatment than does article 7.1, and proposes deleting article 7.12. Finally, article 7.4 should be revised to prohibit the Interconnection Customer from sharing Confidential Information with “potential purchasers or assignees of the Interconnection Customer.”

112. In its supplemental comments, Joint Commenters propose the following provision in lieu of the proposal:

Confidential Information is as defined in this Agreement but does not include information previously in the public domain, required to be publicly submitted or divulged by Governmental Authorities (after notice to the other party and after exhausting any opportunity to oppose such publication or release), or necessary to be divulged in an action to enforce this agreement. Each party receiving Confidential Information shall hold such information in confidence and shall not disclose it to any third party nor to the public without the prior written authorization from the party providing that information, except to fulfill obligations under this agreement, or to fulfill legal or regulatory requirements. Each party shall employ at least the same standard of care to protect Confidential Information obtained from the other party as it employs to protect its own Confidential Information. Each party is entitled to equitable relief, by injunction or otherwise, to enforce its rights under this provision to prevent the release of Confidential Information without bond or proof of damages, and may seek other remedies available at law or in equity for breach of this provision.

Commission Conclusion

113. We are adopting confidentiality provisions in both the SGIP and SGIA that closely resemble those proposed by Joint Commenters. While the provisions we adopt here are shorter than those in the LGIP and LGIA, they are similar in content.

114. To clarify the Commission's right to otherwise Confidential Information during an investigation, we include an SGIA provision similar to LGIA article 22.1.10.
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This addition also clarifies that a Party is not prohibited from disclosing Confidential Information to a state regulatory body where the state regulatory body has the authority to request the information.

56

See
Order No. 2003-A at P 486.

115. We deny Southern Company's request to remove proposed language allowing the Interconnection Customer to share Confidential Information with potential assignees and financers. The Interconnection Customer must be able to share such information to secure financing and remain competitive. However, we are modifying the provision to specify that any such person receiving Confidential Information agree to abide by the same confidentiality rules as the Parties.
57

We agree with Southern Company that confidentiality should apply to all information shared between the Parties; however, its proposal is obviated by the new language.

57

Id.
at P 490.

116. Keeping the Small Generator Interconnection Rules Current—The Small Generator Interconnection NOPR did not envision that the SGIP and SGIA would be periodically revised.

Comment

117. In its supplemental comments, Small Generator Coalition asks the Commission to adopt a mechanism to allow periodic revisiting of its interconnection rules as the industry evolves. It proposes that the Commission encourage or charter a stakeholder committee to meet periodically to consider and recommend consensus proposals for changes.

Commission Conclusion

118. We commend the persistence of the Joint Commenters who met on numerous occasions over the duration of this proceeding to aid the Commission in its decision-making. As one can see in the contents of this Final Rule, those negotiations have been very successful. We believe Small Generator Coalition's proposal has merit. We ask the Joint Commenters to take the lead in this process, and encourage interested entities to continue to work together on small generator interconnection issues. We are asking this informal group to meet biennially, beginning two years from the issuance of this order, to consider and recommend consensus proposals for changes in the Commission's rules for small generator interconnection. The Commission will provide appropriate resources to facilitate the process. To the extent that this group identifies needed changes, they may file a petition to amend the Commission's regulations. The Commission will review the petition and, if appropriate, notice that petition for public comment.

D. Issues Related to the Interconnection Request

119. The Interconnection Request is the application form that the Interconnection Customer uses to start the process of interconnecting its Small Generating Facility with the Transmission Provider's Transmission System. The issues discussed below either did not arise in the Large

Generator Interconnection proceeding or we conclude that a different conclusion should apply to Small Generating Facilities.

120. Processing Fees and Study Deposits—The Proposed SGIP set out a fixed processing fee schedule for processing all Interconnection Requests. The amount of the fee was to be tied to the size of the Small Generating Facility. Small Generating Facilities no larger than 2 MW in size would be charged the greater of (1) $0.50/kVA rating, or $100 for single phase generators no larger than 25 kVA or (2) $500 for generators larger than 25 kVA. The fee for a Small Generating Facility larger than 2 MW but no larger than 10 MW would be $1,000, and the fee for one larger than 10 MW would be $2,000. In addition, if the Small Generating Facility was to be evaluated using the interconnection studies, the Interconnection Customer would pay a deposit prior to each study that would be applied to the Transmission Provider's actual costs of performing the study.

Comments

121. NARUC urges that the processing fee be cost-based so that there is no subsidization by either the Transmission Provider or the Interconnection Customer.

122. NRECA generally supports a fixed processing fee approach, but says that the proposed fees are unrelated to the actual cost of conducting the analysis under the screens. It asks the Commission to let each Transmission Provider file fees that are designed to recover the actual cost of conducting the analysis under the screens.

123. NYTO asks the Commission to clarify that the proposed fee covers administrative and engineering costs not covered by other fees. PacifiCorp states that it does not appear that the owner of a Small Generating Facility no larger than 2 MW would pay any fee other than the fee to conduct the analysis under the screens. It asks the Commission to require the owner of such a generator to pay the actual cost of interconnection, if any, beyond the processing fee.

124. Southern Company states that the proposed processing fee schedule conflicts with the deposit provisions of the proposed interconnection study agreements. It argues that a Small Generating Facility interconnecting at the transmission level should submit an interconnection feasibility study deposit rather than the application fee because it appears that the processing fee is a charge for conducting the analysis under the screens. Southern Company also states that evaluating an Interconnection Request for a non-certified Small Generating Facility requires time and effort, and the Interconnection Customer should pay twice the processing fee assessed to the owner of a certified Small Generating Facility.

Commission Conclusion

125. Under this Final Rule, the Interconnection Customer shall submit with its Interconnection Request a processing fee or feasibility study deposit, but not both, depending on how the Interconnection Request is to be evaluated. If it is to be evaluated using the Study Process, which usually includes a scoping meeting and feasibility, system impact, and facilities studies, the Interconnection Customer shall make a deposit towards the cost of the feasibility study at the time the Interconnection Request is submitted to the Transmission Provider. The amount of the deposit is the lesser of 50 percent of the good faith estimated feasibility study costs or $1,000. If the Interconnection Request is to be evaluated using the Fast Track Process, it is to be accompanied by a $500 processing fee. If the Interconnection Request is to be evaluated using the 10 kW Inverter Process, it is to be accompanied by a $100 processing fee.

126. The purpose of the $100 and $500 processing fees is to recover the Transmission Provider's costs of evaluating Interconnection Requests under the 10 kW Inverter Process and Fast Track Process, respectively. This approach to fees is simple, easy to administer, and gives many Interconnection Customers the cost certainty they need to move forward with their projects. However, because administratively fixed fees will sometimes either under- or over-recover a particular Transmission Provider's costs, we will allow the Transmission Provider to charge a cost-based fee for processing Interconnection Requests if it has first made an appropriate rate filing with appropriate detailed cost justification under FPA section 205.
58

If the Transmission Provider decides to revise its processing fee schedule through a rate filing, the revised fees would, of course, apply prospectively to all new Interconnection Requests under the Fast Track Process or the 10 kW Inverter Process. Otherwise, the processing fees in the SGIP will serve as a default.

58
16 U.S.C. 824d (2000);
see also
18 CFR § 35.12 (2004).

127. Given our concerns about the need for many Interconnection Customers to know beforehand the costs they will incur for the evaluation of their Interconnection Request under the screens, we will disallow formula rates or true up provisions in any rate submission. The cost support for the filed fixed processing fee schedule (designed in a manner similar to the processing fees in the SGIP) shall reflect the Transmission Provider's costs for processing Interconnection Requests under the Fast Track and the 10 kW Inverter Processes, as it would for the embedded cost based pricing of any other jurisdictional service.

128. Southern Company's first comment highlights an unintended inconsistency in the NOPR. To clarify, the fixed processing fee schedule delineated above is only for submissions under the10 kW Inverter Process and the Fast Track Process which use the technical screens. A submission under the Study Process instead will include a deposit towards the Transmission Provider's cost of performing the feasibility study, not both a deposit and a processing fee. However, an Interconnection Customer whose proposed interconnection fails the Fast Track Process or the 10 kW Inverter Process and is then evaluated under the Study Process would pay both the fixed processing fee with the initial submission and then a feasibility study deposit before the Study Process begins.

129. Receipt Confirmation and Requests for Additional Data—Proposed SGIP sections 3.2 and 4.2 govern the submission and receipt of the Interconnection Customer's Interconnection Request.

Comments

130. Central Maine argues that the Transmission Provider should be able to use alternative methods to mail, such as fax and overnight delivery services, to tell the Interconnection Customer that it has received the Interconnection Request. It also asks that the Commission increase the Transmission Provider's notification time period from ten to fifteen Business Days. Central Maine and EEI note that the Interconnection Customer does not have a deadline to supply missing information. They recommend that the Commission establish ten Business Days as the deadline and to state that failure to provide such information within that time will result in the Interconnection Request being deemed withdrawn.

Commission Conclusion

131. We agree that the Transmission Provider may use alternate methods of confirming receipt of the Interconnection Request. The notification requirement is needed

because it provides a date certain for affirming that the Transmission Provider has received the Interconnection Request. We also decline to increase the time by which the Interconnection Customer must be told whether the Interconnection Request is complete. Ten Business Days is sufficient time for the Transmission Provider to make an initial assessment as to whether the requisite information has been provided; an in-depth evaluation of the project is not required during this period. However, we agree with Central Maine and EEI that the Proposed SGIP does not address when the Interconnection Customer must furnish the missing information. Accordingly, the SGIP provides that the Interconnection Customer has ten Business Days after receipt of the notice to submit the missing information or to provide an explanation as to why extension of time is needed to provide such information. If the Interconnection Customer does not provide the missing information or a request for an extension of time within the deadline, the Interconnection Request shall be deemed withdrawn.

132. Interconnection Products and Service Options—The Proposed Interconnection Request would have directed the Interconnection Customer to state whether it intends to participate as a “Network Resource,” “Energy-Only Resource,” “Non-Exporting Resource Participating in a Wholesale Market,” or “Other.”

Comments

133. Alabama PSC, EEI, Mississippi PSC, Southern Company, and others are concerned that the Interconnection Request could be construed to mean that a Small Generating Facility is eligible for the same Network Resource Interconnection Service that Order No. 2003 makes available to Large Generating Facilities. They argue that this service should not be provided to a Small Generating Facility. For example, Alabama PSC and Mississippi PSC argue that a Small Generating Facility does not meet the basic prerequisites to receive a “network” type of service. They state that Small Generating Facilities almost universally interconnect with either “distribution” or sub-transmission facilities that are not “networked” but are radial in nature. The costs to make such facilities networked to provide such a service would be prohibitive. Southern Company asks that the references to resource options be deleted. TAPS states that the Small Generator Interconnection NOPR correctly dispenses with Order No. 2003's Network Resource Interconnection Service, which TAPS claims is incompatible with Network Integration Transmission Service under the OATT.

134. Taking the opposite view, National Grid states that the Commission should establish two interconnection products for Small Generating Facilities, arguing that Energy Resource Interconnection Service and Network Resource Interconnection Service are just as important for a Small Generating Facility as they are for a Large Generating Facility. National Grid states that Network Resource Interconnection Service has important market implications for new resources, because only generating facilities that meet this interconnection standard should qualify for installed capacity credits. It argues that Small Generating Facilities should have the option of being studied as deliverable network resources so that they may be eligible for such credits. If the Commission does not mandate two separate interconnection products for Small Generating Facilities, National Grid requests that, at a minimum, the single interconnection product ensure deliverability of generating facility output, consistent with the Commission's ruling in New England with respect to large generator interconnections.
59

59
New England Power Pool (
New England
), 109 FERC ¶ 61,155 at P 43-44 (2004).

135. NARUC asks the Commission to remove the category “non-exporting resource participating in a wholesale market” from the Interconnection Request. It notes that the Interconnection Request instructs the Interconnection Customer to declare its intention to sell electricity at wholesale in interstate commerce. However, the phrase “non-exporting resource participating in a wholesale market,” which is used nowhere else in the Small Generator Interconnection NOPR, raises unnecessary questions and extends its reach far beyond its stated intention.

136. PacifiCorp states that none of these service categories is defined in the Proposed SGIP and that the significance of each designation is unknown. It argues that the different service options must be defined in the SGIP and that the additional information needed to permit a Transmission Provider to conduct studies must be provided. PacifiCorp asks the Commission to explain the significance of “Non-Exporting Resource Participating in a Wholesale Market” and “Other.” It adds that there should be an opportunity for comment on the workability of these proposals and on what information a Transmission Provider may need to provide this kind of interconnection service.

137. SoCal Edison seeks clarification that, to interconnect a Small Generating Facility with a Distribution System, the Transmission Provider must study deliverability
60

on the system, even if no delivery service is sought on either the Transmission or Distribution System. In studying distribution-level interconnections, the Small Generating Facility is assumed to be running at maximum output and the power is flowing onto the directly attached distribution facility. SoCal Edison argues that there is no way to study an interconnection with the Distribution System without assuming power flows on that Distribution System.

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Deliverability refers to the ability of the electric system to accept the Small Generating Facility's output without regard to the ultimate point of delivery.

138. SoCal Edison further argues that, unlike an energy resource on a Transmission System, the generator cannot for safety and reliability reasons opt to generate only when distribution “capacity” is available because the characteristics of a Distribution System (
i.e.
, radial) differ from those of a Transmission System (
i.e.
, network). Given how a Distribution System operates, the provision of distribution interconnection service in the absence of a wholesale distribution service request is a meaningless exercise, and there are considerable efficiencies in requesting and studying the two services at the same time. Also, SoCal Edison is concerned that some Interconnection Customers may not realize that a separate rate may be charged to use the Distribution System in addition to the Transmission System. It states that the Commission should clarify that both interconnection and wholesale delivery service may be required. Although SoCal Edison does not believe that the Commission needs to require that wholesale distribution service and distribution-level interconnection service be provided only on a bundled basis, it asks the Commission to permit “bundled” applications like those under SoCal Edison's Wholesale Distribution Access Tariff.

Commission Conclusion

139. We clarify that the resource options listed in the Small Generator Interconnection NOPR's Interconnection Request are not interconnection service options. Rather, they are merely the possible ways the Interconnection Customer may use its Small Generating

Facility once delivery service begins. The purpose of this information is to give the Transmission Provider an early indication of how the Small Generating Facility is likely to operate. The one interconnection service that the Commission proposed to make available to the Small Generating Facility is similar to the Energy Resource Interconnection Service that is offered under the LGIA. Nevertheless, based on the comments, we are concerned that requesting service-related information in the Interconnection Request could lead to misunderstanding. Because the information is related to the delivery component of transmission service, not interconnection service, it is not needed in the SGIP's Interconnection Request form. Therefore, we are removing this information from the Interconnection Request. This should address the concerns of most commenters.

140. In response to National Grid, we note that the LGIA's more expansive Network Resource Interconnection Service is intended to give the Interconnection Customer broad access to the backbone of the Transmission Provider's Transmission System. In essence, it allows the generating facility to pre-qualify as a Network Resource for any Network Customer on the Transmission System and, as National Grid notes, may make it eligible for installed capacity credits. Because Network Resource Interconnection Service entails high technical standards, we expect that an Interconnection Customer, particularly one interconnecting at a lower voltage, would rarely find this service to be efficient or practical. Nevertheless, we do not want to preclude it from choosing this option. If it wishes to interconnect its Small Generating Facility using Network Resource Interconnection Service, it may do so. However, it must request interconnection under the LGIP and execute the LGIA.

141. In response to SoCal Edison's request for clarification, we note that the SGIP lets the Transmission Provider study the potential impacts of the proposed interconnection on the Distribution System. Also, we clarify that nothing in this Final Rule (which concerns interconnection service only) prevents the Transmission Provider from evaluating the Interconnection Request and requests for wholesale distribution service and transmission delivery service simultaneously. However, the Transmission Provider may not require the Interconnection Customer to request wholesale distribution service or transmission delivery service as a condition for granting a request for interconnection service. We expect the Transmission Provider to explain to the Interconnection Customer what delivery services may be needed to meet its needs.

142. Ministerial Changes to the Interconnection Request—The Proposed Interconnection Request was crafted largely by Joint Commenters in response to the ANOPR. It is similar in many respects to the NARUC Model. Joint Commenters in its supplemental comments submitted ministerial changes to the Proposed Interconnection Request. Other commenters
61

also seek changes to the Interconnection Request, most reflecting misplaced or missing technical information. The Interconnection Request we adopt in this Final Rule largely tracks the NARUC Model version and also reflects many of the changes proposed by the commenters.

61

E.g.
, Bureau of Reclamation, Central Maine, Cummins, EEI, Joint Commenters, Northwestern Energy, NYTO, PacifiCorp, PG&E, and Small Generator Coalition.

E. Issues Related to the SGIP

143. Using Voltage Level to Determine Which Procedures Apply—The Proposed SGIP divided Interconnection Requests into two groups for initial processing based on the voltage level of the interconnection. Interconnections to High-Voltage (at or above 69 kV) would be evaluated using the interconnection studies. Interconnection to Low-Voltage (below 69 kV) would be processed differently depending upon the size and the certification status of the Small Generating Facility as explained below. An Interconnection Request for a certified Small Generating Facility no larger than 2 MW interconnecting at Low-Voltage would be evaluated using super-expedited screening criteria; an Interconnection Request for a Small Generating Facility no larger than 10 MW interconnecting at Low-Voltage would be evaluated using expedited screening criteria; and an Interconnection Request for a Small Generating Facility larger than 10 MW but no larger than 20 MW interconnecting at Low-Voltage would be evaluated using the interconnection studies. If an Interconnection Request did not pass the super-expedited screening criteria or expedited screening criteria, it would be evaluated using interconnection studies.

Comments

144. Several commenters
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object to using voltage level to distinguish which review process initially applies to an Interconnection Request. They argue that the distinction should be based on whether the Small Generating Facility is being interconnected with distribution or transmission facilities. The decision should be consistent with the physical facilities and operational realities of the electric system. They also contend that electric system configurations vary widely in terms of voltage levels and that the effect of an interconnection is not necessarily determined by voltage, but also by location and size of the Small Generating Facility. In addition, they state that this distinction was not a part of the ANOPR proposal and that using voltage to distinguish which set of procedures applies is confusing.

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E.g.
, CA ISO, EEI, Idaho Power, PG&E, PSE&G, SoCal Edison, and Southern Company.

145. In its supplemental comments, Joint Commenters propose using whether the proposed interconnection is with a transmission line (
i.e.
, interconnections with transmission lines may not be evaluated using the technical screens) to determine whether screens may be used to evaluate the proposed interconnection.

Commission Conclusion

146. For the reasons given above, we agree with commenters that interconnection voltage should not be used as a determinative factor for whether the Interconnection Request may be evaluated using the technical screens. Instead, we are adopting the technical screens proposed by Joint Commenters in its supplemental comments. The SGIP specifies that an Interconnection Request for a certified Small Generating Facility no larger than 2 MW shall be evaluated using the technical screens, either under the Fast Track Process or the 10 kW Inverter Process, whichever applies. Under the first provision of the screens, SGIP section 2.2.1.1, the proposed Small Generating Facility's Point of Interconnection must be on a portion of the Transmission Provider's Distribution System that is subject to the Tariff.
63

63
As noted above, “transmission” is both an engineering term of art and a term used in the FPA. As used in the technical screens, “transmission” is used in the engineering sense, not in a jurisdictional sense. Likewise, references in other technical screens to “radial distribution circuits,” “3-phase primary distribution lines,” and other uses of the word distribution are used in an engineering sense, not in a jurisdictional sense. In no case do we intend that this Final Rule applies to non-Commission-jurisdictional facilities.

147. Certification of the Small Generating Facility (Proposed SGIP Section 3.1)—In the Small Generator Interconnection NOPR, the Commission proposed that Interconnection Requests for certified generators no larger than 2

MW would be reviewed using the super-expedited screening criteria that employed technical screens. The Commission also noted that Joint Commenters (in its response to the ANOPR) preferred that the Commission itself implement a single, uniform, nationwide process for the certification of Small Generating Facility equipment packages no larger than 2 MW.
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The Commission proposed, however, that this function instead be performed by an industry-recognized testing organization. In addition, the Commission requested comments as to whether IEEE 1547 (Standard for Interconnecting Distributed Resources with Electric Power Systems), together with other technical industry documents, could be the basis for a national certification standard.

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A “certified” Small Generating Facility is one that has been certified by a nationally recognized laboratory before the Interconnection Request is submitted to the Transmission Provider. Such a facility is said to be “certified” for purposes of the interconnection process.

Comments

148. Commenters generally agree with the value of having a certification process for Small Generating Facilities. They believe that such a process can speed interconnection and eliminate the need to “reinvent the wheel” each time an interconnection is made. In general, commenters agree that IEEE 1547, in conjunction with other standards, could be the basis for a certification standard.

149. NYTO requests that the Commission adopt the process and registry proposal described in the November 12, 2002 Joint Commenters filing. That would have the Commission maintain a list of certified equipment and to centralize the registry function. It claims that this would provide certainty to the industry as to which equipment has been certified and would avoid the development of competing and potentially inconsistent lists of certified equipment, which could lead to disputes and slow down the interconnection process.

150. The NARUC Model certification provision relies on Nationally Recognized Testing Laboratories (NRTL) to test and certify the safety of electrical equipment used for the production of electricity. That provision, which was developed for use by state regulators, requires that the NRTL be used by the state regulatory authority or approved by the U.S. Department of Energy.

151. American Forest and others state that if the Commission chooses not to certify and maintain a registry of equipment, it should establish and oversee a stakeholder process for the development of certification criteria. Without the Commission's involvement, the process of establishing certification standards will languish.

152. Cummins and others, however, argue that a nationally recognized testing laboratory and agencies like the Department of Energy should oversee the certification process. They also note that a national testing laboratory, such as Underwriter Laboratories, typically not only tests and verifies the performance of prototype equipment, but also provides follow-up services to verify that production equipment is designed and manufactured to the same standards as the tested equipment.

153. Ameren and others complain that the NOPR does not explain what industry operational and safety standards are applicable. Likewise, the NOPR does not specify what is needed to qualify as a national testing laboratory. They claim that leaving these issues open could lead to unnecessary or improper testing. They recommend that the Commission (1) adopt a specific set of standards for operation and safety requirements that are continually updated to meet current safety and reliability requirements set forth by NERC or the regional reliability councils, and (2) maintain a list of qualified national testing laboratories.

154. Allegheny Energy argues that certification guarantees the safety and reliability of the equipment in a stand-alone mode only, but not safety and reliability when the equipment becomes part of an integrated system.

155. Joint Commenters, in its supplemental comments, proposes a consensus equipment certification provision that it states was developed under a stakeholder process convened by the U.S. Department of Energy's Office of Electric Transmission and Distribution. The participants in the process included Joint Commenter members representing small generator interests, state regulators, and Transmission Providers, as well as experts from the electrical equipment manufacturing industry and testing laboratories. Joint Commenters' proposed certification provision provides that Small Generating Facility equipment shall be considered certified if (1) it has been tested in accordance with industry standards for continuous utility interactive operation in compliance with the appropriate codes and standards by any NRTL recognized by the United States Occupational Safety and Health Administration to test and certify interconnection equipment pursuant to the relevant codes and standards, (2) it has been labeled and is publicly listed by such NRTL at the time the Interconnection Request is made, and (3) such NRTL makes readily available for verification all test standards and procedures it utilized in performing such equipment certification and, with consumer approval, the test data itself.

Commission Conclusion

156. We agree with Cummins that nationally recognized laboratories should oversee the certification process and maintain registries of certified equipment. A NRTL not only tests and verifies the performance of prototypes, but it provides follow-up services to verify that production equipment is designed and manufactured to the same standards as the tested equipment. In this Final Rule, we are adopting Joint Commenters' proposal. This certification provision was vetted by a diverse group of stakeholders and is fundamentally consistent with the Proposed SGIP as well as the provision contained in the NARUC Model. We are especially encouraged by the report from Joint Commenters that one well-known NRTL intends to begin the certification of equipment as soon as the summer of 2005. This should hasten the development of certified Small Generating Facilities no larger than 2 MW under the Fast Track and 10 kW Inverter Processes. The certification provision we adopt in this Final Rule is contained in Attachments 3 and 4 of the SGIP.

157. Finally, we acknowledge Allegheny Energy's concerns. Electric system safety and reliability issues are to be addressed when the proposed interconnection of the certified equipment is evaluated under the Fast Track Process or the 10 kW Inverter Process.

158. Super-Expedited Procedures (Proposed SGIP Section 3) and Expedited Procedures (Proposed SGIP Section 4.3)
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—In the NOPR, proposed SGIP section 3 stated that if the proposed Small Generating Facility is certified, no larger than 2 MW, and the interconnection is with Low-Voltage facilities, the interconnection would be evaluated using super-expedited screens. Proposed SGIP section 4.3 stated that if the proposed Small Generating Facility is no larger than 10 MW and the interconnection is with Low-Voltage facilities, the

interconnection would be evaluated using expedited screens. Proposed SGIP section 4.3 also provided that the expedited screens would be used to evaluate proposed interconnections that failed the super-expedited screens.

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In the Small Generator Interconnection NOPR, the term Super-Expedited Procedure referred to the process that used the super-expedited screens and Expedited Procedure referred to the process that used the expedited screens. In this Final Rule, we are adopting only one set of screens, which are used in both the Fast Track Process and the 10 kW Inverter Process.

159. The NOPR proposed that if the Transmission Provider determines that the proposed interconnection fails the super-expedited screens and is not satisfied that the Small Generating Facility can be interconnected safely and reliably, the Interconnection Customer can pay for an additional review. The review would not exceed six hours and would determine whether minor modifications to the Transmission Provider's electric system (
e.g.
, changing meters, fuses, relay settings) could enable the interconnection to be made safely and reliably. If the results of the review were positive and the Interconnection Customer agreed to pay for these minor modifications, the Transmission Provider would tender an executable SGIA to the Interconnection Customer.

Comments

160. Joint Commenters, Small Generator

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A05-11307. Public record. Not legal advice.