Reform of Generator Interconnection Procedures and Agreements

Federal RegisterMar 6, 2019

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 37

[Docket No. RM17-8-001; Order No. 845-A]

Reform of Generator Interconnection Procedures and Agreements

AGENCY:

Federal Energy Regulatory Commission, Department of Energy.

ACTION:

Order on rehearing and clarification.

SUMMARY:

The Federal Energy Regulatory Commission is granting in part and denying in part the requests for rehearing and clarification of its determinations in Order No. 845, which amended the Commission's

pro forma

Large Generator Interconnection Procedures and

pro forma

Large Generator Interconnection Agreement to improve certainty, promote more informed interconnection decisions, and enhance interconnection processes.

DATES:

This order on rehearing and clarification is effective May 20, 2019.

FOR FURTHER INFORMATION CONTACT:

Tony Dobbins (Technical Information), Office of Energy Policy and Innovation, Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, (202) 502-6630,

tony.dobbins@ferc.gov

Kathleen Ratcliff (Technical Information), Office of Energy Market Regulation, Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, (202) 502-8018,

kathleen.ratcliff@ferc.gov

Adam Pan (Legal Information), Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, (202) 502-6023,

adam.pan@ferc.gov

SUPPLEMENTARY INFORMATION:

Table of Contents

Paragraph No.

I. Introduction and Background

II. Discussion

A. Interconnection Customer's Option To Build

Ameren

Decision

2. Justification for the Option To Build Requirements

3. FPA Section 203 Blanket Authorization for Transfer of Facilities From Interconnection Customer to Transmission Provider

4. Requirements Related to Reliability, CIP Standards, Liability, Security, and Posting of Standards and Specifications

5. Affected Systems

6. Cluster Studies

7. Stand Alone Network Upgrades

8. Cost Estimates

9. Oversight Costs

B. Identification and Definition of Contingent Facilities

1. Requests for Rehearing and Clarification

2. Determination

C. Transparency Regarding Study Models and Assumptions

1. Protection of Network Model Information

2. Requirement to Post Network Model Information

D. Congestion and Curtailment Information

1. Request for Rehearing

2. Determination

E. Definition of Generating Facility in the

Pro Forma

LGIP and

Pro Forma

LGIA

1. Requests for Rehearing and Clarification

2. Determination

F. Interconnection Study Deadlines

1. Adoption of Order No. 845 Interconnection Study Metric Reporting Requirements

2. Interconnection Study Data Posting Requirements

104

G. Requesting Interconnection Service Below Generating Facility Capacity

108

1. Requests for Rehearing and Clarification

111

2. Determination

114

H. Utilization of Surplus Interconnection Service

119

1. Original Interconnection Customer's Ability To Utilize or Transfer Surplus Interconnection Service

122

2. Effect of Expedited Surplus Interconnection Service Process on the Queue and on Transmission Planning

130

3. Impact of Differences in Electrical Characteristics between the Surplus and Original Interconnection Customers

136

4. Independent Entity Variations

139

5. Additional Requests for Clarification Regarding Surplus Interconnection Service

142

I. Material Modification Definition and Incorporation of Advanced Technology

148

1. Requests for Rehearing and Clarification

149

2. Determination

152

J. Process Concerns

156

1. Compliance and Effective Dates

156

K. Interconnection Request Withdrawals

167

1. Requests for Rehearing and Clarification

168

2. Determination

169

L. Wholesale Distribution Tariffs

170

1. Requests for Rehearing and Clarification

170

2. Determination

172

III. Information Collection Statement

173

IV. Regulatory Flexibility Act Certification

177

V. Document Availability

178

VI. Effective Date

181

Appendix A: List of Short Names of Entities that Filed Requests for Rehearing or Clarification

Appendix B: Compilation of Final Rule Changes to the

Pro Forma

LGIP Made by Order No. 845 and Order No. 845-A

Appendix C: Compilation of Final Rule Changes to the

Pro Forma

LGIA Made by Order No. 845 and Order No. 845-A

I. Introduction and Background

1. On April 19, 2018, the Federal Energy Regulatory Commission (Commission) issued Order No. 845.

Order No. 845 revised the Commission's

pro forma

Large Generator Interconnection Procedures (LGIP) and

pro forma

Large Generator Interconnection Agreement (LGIA) to improve certainty for interconnection customers, promote more informed interconnection decisions, and enhance the interconnection process.

The Commission expected these reforms to provide interconnection customers with better information and more options for obtaining interconnection service and that, as a result, there would likely be fewer interconnection requests overall and fewer interconnection requests that do not reach commercial operation. The Commission also anticipated that, as a result of these reforms, transmission providers would be able to focus on those interconnection requests that are most likely to reach commercial operation.

Reform of Generator Interconnection Procedures and Agreements,

Order No. 845, 83 FR 21,342 (May 9, 2018), 163 FERC ¶ 61,043 (2018).

Id.

P 2. The

pro forma

LGIP and

pro forma

LGIA establish the terms and conditions under which public utilities that own, control, or operate facilities for transmitting energy in interstate commerce must provide interconnection service to large generating facilities.

Id.

P 6. A large generating facility is “a Generating Facility having a Generating Facility Capacity of more than 20 [megawatts (MW)].”

See, e.g.,

pro forma

LGIA Art. 1 (Definitions).

Order No. 845, 163 FERC ¶ 61,043 at P 2.

2. In Order No. 845, the Commission adopted ten different reforms in three general categories. First, in order to improve certainty for interconnection customers, Order No. 845: (1) Removed the limitation that interconnection customers may only exercise the option to build a transmission provider's interconnection facilities

and stand alone network upgrades

in instances when the transmission provider cannot meet the dates proposed by the interconnection customer; and (2) required that transmission providers establish interconnection dispute resolution procedures that allow a disputing party to unilaterally seek non-binding dispute resolution. Second, to promote more informed interconnection decisions, Order No. 845: (1) Required transmission providers to outline and make public a method for determining contingent facilities; (2) required transmission providers to list the specific study processes and assumptions for forming the network models used for interconnection studies; (3) revised the definition of “Generating Facility” to explicitly include electric storage resources; and (4) established reporting requirements for aggregate interconnection study performance. Third, Order No. 845 aimed to enhance the interconnection process by: (1) Allowing an interconnection customer to request a level of interconnection service that is lower than its generating facility capacity; (2) requiring transmission providers to allow for provisional interconnection agreements that provide for limited operation of a generating facility prior to completion of the full interconnection process; (3) requiring transmission providers to create a process for interconnection customers to use surplus interconnection service at existing points of interconnection; and (4) requiring transmission providers to set forth a procedure to allow transmission providers to assess and, if necessary, study an interconnection customer's technology changes without affecting the interconnection customer's queued position. In Order No. 845, the Commission made “no changes to the variations allowed by Order No. 2003” and further explained that “on compliance, transmission providers may argue that they qualify for . . . variations from the requirements of [Order No. 845].”

According to the

pro forma

LGIA:

Transmission Provider's Interconnection Facilities shall mean all facilities and equipment owned, controlled or operated by the Transmission Provider from the Point of Change of Ownership to the Point of Interconnection as identified in Appendix A to the Standard Large Generator Interconnection Agreement, including any modifications, additions or upgrades to such facilities and equipment. Transmission Provider's Interconnection Facilities are sole use facilities and shall not include Distribution Upgrades, Stand Alone Network Upgrades or Network Upgrades.

Pro forma

LGIA Art. 1 (Definitions).

Stand alone network upgrades:

Shall mean Network Upgrades that an Interconnection Customer may construct without affecting day-to-day operations of the Transmission System during their construction. Both the Transmission Provider and the Interconnection Customer must agree as to what constitutes Stand Alone Network Upgrades and identify them in Appendix A to the Standard Large Generator Interconnection Agreement.

Id.

Order No. 845, 163 FERC ¶ 61,043 at P 43 (citing

Standardization of Generator Interconnection Agreements and Procedures,

Order No. 2003, 68 FR 49,845 (Aug. 19, 2003), 104 FERC ¶ 61,103, at P 826 (2003),

order on reh'g,

Order No. 2003-A, 69 FR 15,932 (Mar. 26, 2004), 106 FERC ¶ 61,220 (2004),

order on reh'g,

Order No. 2003-B, 70 FR 265 (Jan. 4, 2005), 109 FERC ¶ 61,287 (2004),

order on reh'g,

Order No. 2003-C, 70 FR 37,661 (Nov. 30, 2005), 111 FERC ¶ 61,401 (2005),

aff'd sub nom. Nat'l Ass'n of Regulatory Util. Comm'rs

FERC,

475 F.3d 1277 (D.C. Cir. 2007),

cert. denied,

552 U.S. 1230 (2008)).

3. The Commission received twelve requests for rehearing and/or clarification of Order No. 845.

The rehearing and clarification requests raise issues related to all but one of the reforms adopted therein.

E.ON Climate & Renewables North America, LLC, EDF Renewables, Inc., EDP Renewables North America LLC, and Enel Green Power North America, Inc. (collectively, Generation Developers) also request rehearing of the Commission's decision not to adopt a reform pertaining to congestion and curtailment information as the Commission proposed in the Notice of Proposed Rulemaking (NOPR).

Some requests for rehearing and clarification also raised general or process concerns.

For the reasons discussed below, we grant in part and deny in part the requests for rehearing and clarification.

Appendix A provides the short names of the entities that filed requests for rehearing or clarification.

No entity requested clarification or rehearing regarding the dispute resolution reform adopted in Order No. 845.

Reform of Generator Interconnection Procedures and Agreements,

82 FR 4,464 (Jan. 13, 2017), 157 FERC ¶ 61,212 (2016).

ISO New England Inc. (ISO-NE) filed an answer to AWEA's request for clarification. Rule 713(d) of the Commission's Rules of Practice and Procedure, 18 CFR 385.713(d) (2018), prohibits answers to requests for rehearing. Although AWEA has styled its pleading as a request for clarification, we consider it to be a request for rehearing and, on that basis, reject ISO-NE's answer. As a result, we also dismiss AWEA's answer to ISO-NE's answer, as well as Ameren and MISO TOs' answer to AWEA's answer.

In Appendices B and C of this order, we provide all the revisions to, and additions of, provisions in the

pro forma

LGIP and the

pro forma

LGIA that the Commission made in Order No. 845 and this order on rehearing and clarification, Order No. 845-A. The underline and strikethrough in these appendices respectively reflect additions to, and deletions from, the

pro forma

LGIP and the

pro forma

LGIA made in Order Nos. 845 and Order No. 845-A. Additionally, these Appendices reflect several non-substantive corrections in these appendices to address stylistic inconsistencies in

some of the new and revised

pro forma

LGIP and

pro forma

LGIA provisions. For example, in

pro forma

section 3.8, we have replaced the term “GIA” with “Large Generator Interconnection Agreement” and have capitalized some terms that are defined in the

pro forma

LGIP and/or the

pro forma

LGIA.

4. In particular, we grant rehearing with regard to the option to build reform to: (1) Require that transmission providers explain why they do not consider a specific network upgrade to be a stand alone network upgrade; and (2) allow transmission providers to recover oversight costs related to the interconnection customer's option to build. We also grant rehearing with regard to the surplus interconnection service reform to explain that the Commission does not intend to limit the ability of RTOs/ISOs to argue that an independent entity variation from the Commission's surplus interconnection service requirements is appropriate. We also grant rehearing in part and find that, with regard to the reform for requesting interconnection service below generating facility capacity, an interconnection customer may propose control technologies at any time in the interconnection process that it is permitted to request interconnection service below generating facility capacity.

5. Additionally, we grant clarification with regard to the option to build by finding that: (1) The Order No. 845 option to build provisions apply to all public utility transmission providers, including those that reimburse the interconnection customer for network upgrades; and (2) the option to build does not apply to stand alone network upgrades on affected systems. We also grant clarification with regard to transparency regarding study models and assumptions to find that: (1) Transmission providers may use the Commission's critical energy/electric infrastructure information (CEII) regulations as a model for evaluating entities that request network model information and assumptions; and (2) the phrase “current system conditions” does not require transmission providers to maintain network models that reflect current real-time operating conditions of the transmission provider's system. With regard to the interconnection study deadlines reform, we grant clarification that the date for measuring study performance metrics and the reporting requirements do not require transmission providers to post 2017 interconnection study metrics. With regard to requesting interconnection service below generating facility capacity, we grant clarification that a transmission provider must provide a detailed explanation of its determination to perform additional studies at the full generating facility capacity for an interconnection customer that has requested service below its full generating facility capacity. Finally, in this order, we deny all other requests for rehearing and clarification.

II. Discussion

A. Interconnection Customer's Option To Build

6. In Order No. 845, the Commission adopted a reform revising articles 5.1, 5.1.3, and 5.1.4 of the

pro forma

LGIA to allow interconnection customers to unilaterally select the option to build for stand alone network upgrades and transmission provider's interconnection facilities regardless of whether the transmission provider can complete construction of such facilities by the interconnection customer's proposed in-service date, initial synchronization date, or commercial operation date.

Prior to Order No. 845, this option to build was available to an interconnection customer only if the transmission provider did not agree to the interconnection customer's preferred construction timeline. The Commission stated that the revisions adopted in Order No. 845 would “benefit the interconnection process by providing interconnection customers more control and certainty during the design and construction phases of the interconnection process.”

Order No. 845, 163 FERC ¶ 61,043 at PP 73-74.

Id.

P 85.

Ameren

Decision

7. On January 26, 2018, less than three months prior to Order No. 845's issuance, the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) decided

Ameren Services Co.

FERC,

a decision that vacated and remanded prior Commission decisions affecting the Midcontinent Independent System Operator, Inc. (MISO).

Several requests for rehearing of Order No. 845 refer to the

Ameren

decision. To explain the context of these arguments, we provide some background regarding the Order No. 2003 interconnection pricing policy

and network upgrade cost responsibility in MISO. We also provide a short summary of

Ameren.

880 F.3d 571 (D.C. Cir. 2018) (

Ameren

Ameren,

the D.C. Circuit referred to the NOPR in this proceeding but only as it pertained to the Commission's original proposal to require agreement between a transmission owner and an interconnection customer before the transmission owner could elect to initially fund network upgrades.

See

Order No. 845, 163 FERC ¶ 61,043 at P 122 (citing

Ameren,

880 F.3d at 585). The Commission opted to not move forward with that particular proposal in “light of the [

Ameren

] decision.”

Id.

We use this term, consistent with its use in Order No. 2003, to refer to Order No. 2003's policy of distinguishing interconnection facilities and network upgrades for the purpose of assigning ultimate cost responsibility.

See, e.g.,

Order No. 2003, 104 FERC ¶ 61,103 at PP 675-76.

8. In Order No. 2003, the Commission drew a distinction between interconnection facilities, which are “found between the Interconnection Customer's Generating Facility and the Transmission Provider's Transmission System,”

and network upgrades, which “include only facilities at or beyond the point where the Interconnection Customer's Generating Facility interconnects to the Transmission Provider's Transmission System.”

Under Order No. 2003, this classification determines which party has ultimate cost responsibility. Interconnection facilities “[are] paid for solely by the Interconnection Customer” and network upgrades “[are] funded

initially

by the Interconnection Customer (unless the Transmission Provider elects to fund them).”

Id.

P 21.

Id.

P 22 (emphasis added).

9. While the Order No. 2003 interconnection pricing policy requires interconnection customers to initially fund network upgrades (unless the transmission provider elects to fund them), Order No. 2003 established a crediting policy to reimburse interconnection customers for these costs.

In particular, if the network upgrades necessary for an interconnection are “funded initially by the Interconnection Customer,” the interconnection customer “would then be entitled to a cash equivalent refund . . . equal to the total amount paid for the Network Upgrades.”

Under this policy, the transmission provider must pay the total amount that the interconnection customer paid for network upgrades as “credits against the Interconnection Customer's payments for transmission services.”

Order No. 2003-B states that “the period for reimbursement may not be longer than the period that would be required if the Interconnection Customer paid for transmission service directly and received credits on a dollar-for-dollar basis, or 20 years [from the generating

facility's commercial operation date], whichever is less.”

In Order No. 2003, the Commission refers to this policy of reimbursing interconnection customers for the cost of network upgrades as its “crediting policy.”

See, e.g., id.

P 683. In this order, we refer to this mechanism as the Order No. 2003 crediting policy.

Id.

P 22.

Id.

Order No. 2003-B, 109 FERC ¶ 61,287 at PP 3 & 36.

10. MISO sought, and the Commission granted, an independent entity variation for MISO to depart from the Order No. 2003 crediting policy.

Instead, MISO directly assigns to interconnection customers 90 percent of the costs for network upgrades rated 345 kV and above (with the remaining 10 percent recovered on a system-wide basis) and 100 percent of the costs for network upgrades rated below 345 kV.

Midwest Indep. Transmission Sys. Operator, Inc.,

129 FERC ¶ 61,060, at P 59 (2009),

order denying reh'g,

154 FERC ¶ 61,073 (2016).

Id.

P 8.

11. In addition, under the interconnection pricing policy that MISO proposed and the Commission accepted, MISO's tariff provides MISO transmission owners two options for recovering network upgrade capital costs from interconnection customers. Under the first option, which we refer to in this order as MISO's interconnection customer initial funding option, the interconnection customer would fund the network upgrades prior to construction, and the MISO transmission owner would not refund the non-reimbursable portion of this capital (the 90 or 100 percent) to the interconnection customer, and would neither include the capital in its rate base nor charge the interconnection customer a return on this capital.

Under the second option, the MISO transmission owner would pay for the construction of the network upgrades and then recover the interconnection customer's portion of the cost burden over time through periodic network upgrade charges

that include a return on the capital investment.

In this order, we refer to this option as MISO's transmission owner initial funding option.

See Midcontinent Indep. Sys. Operator, Inc.,

151 FERC ¶ 61,220, at P 5 (2015).

As noted by the D.C. Circuit, this network upgrade charge “paid from the incoming generator . . . includes

both

a return

capital . . . and a return

capital” and is, according to the D.C. Circuit, “thus economically equivalent to inclusion in the rate base, with the exception that they are charged specifically to the incoming generator rather than to all of the transmission owner's customers.”

Ameren,

880 F.3d at 576 (emphasis in original).

See Midcontinent Indep. Sys. Operator, Inc.,

151 FERC ¶ 61,220 at P 8.

12. On June 18, 2015, in response to a complaint relating to these network upgrade initial funding options, the Commission instituted a proceeding under FPA section 206 to examine MISO's

pro forma

GIA, the

pro forma

Facilities Construction Agreement, and

pro forma

Multi-Party Facilities Construction Agreement.

To support this decision, the Commission stated that allowing MISO transmission owners to unilaterally “select transmission owner [initial] funding may be unjust, unreasonable, unduly discriminatory”

and “may increase costs of interconnection service . . . with no corresponding increase in service.”

Id.

P 2.

Id.

P 53.

Id.

P 48.

13. On December 29, 2015, the Commission denied rehearing on the June 2015 order. In particular, it stated that “because there is the possibility for an increase in costs presented by a transmission owner's unilateral election [of transmission owner initial funding] as compared with [interconnection customer initial funding], and yet there is no increase in interconnection service provided, such unilateral election is unjust and unreasonable.”

For this reason, it directed MISO to revise its tariff “to remove the ability of a transmission owner to unilaterally elect to initially fund network upgrades.”

In response to a request for rehearing on that order, the Commission again denied rehearing, finding that the December 29, 2015 order did not deprive MISO transmission owners of the opportunity to earn a return “to which they are entitled” because pursuant to the interconnection customer initial funding option, “the [MISO] transmission owner makes no investment of which, or on which, it is entitled to a return.”

Otter Tail Power Co.

Midcontinent Indep. Sys. Operator, Inc.,

153 FERC ¶ 61,352, at P 32 (2015).

Id.

P 65.

Otter Tail Power Co.

Midcontinent Indep. Sys. Operator, Inc.,

156 FERC ¶ 61,099, at P 12 (2016). The Commission also stated that its “task is to allow a public utility the opportunity to offer its investors a return commensurate with the risk associated with their investment, as represented by the utility's business and financial risks” and that, under the interconnection owner initial funding option, “the transmission owner does not bear that risk.”

Id.

P 13.

14. The petitioners in

Ameren

challenged these three decisions regarding MISO's options for transmission owners to recover network upgrade capital costs from interconnection customers.

The D.C. Circuit vacated and remanded the orders, finding that the Commission had not adequately responded to MISO transmission owner concerns that MISO's interconnection customer initial funding option “compels [transmission owners] to construct, own, and operate facilities without compensatory network upgrade charges—thus forcing them to accept additional risk without corresponding return as essentially non-profit managers of [network] upgrade facilities.”

Regarding these risks, the D.C. Circuit stated that MISO transmission owners would have to “assume certain costs that are never compensated” such as “liability for insurance deductibles and all sorts of litigation, including environmental and reliability claims.”

Moreover, the D.C. Circuit stated that the MISO orders at issue suggest that the Commission does not believe that MISO transmission owners are entitled “to earn a return on capital” for network upgrades funded through MISO's interconnection customer initial funding despite transmission owners' assumption of such costs.

For these reasons, the D.C. Circuit stated that the Commission “must explain how investors could be expected to underwrite the prospect of potentially large non-profit appendages with no compensatory incremental return.”

Ameren,

880 F.3d at 573.

Id.

at 580.

Id.

at 581.

Id.

a. Requests for Rehearing and Clarification

15. MISO Transmission Owners (MISO TOs),

Ameren Services Company (Ameren), and Edison Electric Institute (EEI) argue that Order No. 845's option to build revisions are contrary to (1) the regulatory compact (under which utilities construct facilities, have an obligation to serve, and receive a level

of earnings in return) and (2) the D.C. Circuit decision in

Ameren.

EEI argues that Order No. 845 fails to consider that transmission owners should receive compensation for the risk of owning and operating facilities. Additionally, MISO TOs, EEI, and Ameren argue that the Commission should grant rehearing and return to the pre-Order No. 845 option to build provisions.

The MISO transmission owners that participated in MISO TOs' Rehearing Request consist of: Ameren Services Company, as agent for Ameren Missouri, Ameren Illinois, and Ameren Transmission Company of Illinois; American Transmission Company LLC; Big Rivers Electric Corporation; Central Minnesota Municipal Power Agency; City Water, Light & Power (Springfield, IL); Cleco Power LLC; Cooperative Energy; Dairyland Power Cooperative; Duke Energy Business Services, LLC for Duke Energy Indiana, LLC; East Texas Electric Cooperative; Entergy Arkansas, Inc.; Entergy Louisiana, LLC; Entergy Mississippi, Inc.; Entergy New Orleans, LLC; Entergy Texas, Inc.; Great River Energy; Hoosier Energy Rural Electric Cooperative, Inc.; Indiana Municipal Power Agency; Indianapolis Power & Light Company; ITC Transmission; ITC Midwest LLC; Michigan Electric Transmission Company, LLC; MidAmerican Energy Company; Minnesota Power (and its subsidiary Superior Water, L&P); Missouri River Energy Services; Montana-Dakota Utilities Co.; Northern Indiana Public Service Company LLC; Northern States Power Company, a Minnesota corporation, and Northern States Power Company, a Wisconsin corporation, subsidiaries of Xcel Energy Inc.; Northwestern Wisconsin Electric Company; Otter Tail Power Company; Prairie Power Inc.; Southern Illinois Power Cooperative; Vectren Energy Delivery of Indiana; Southern Minnesota Municipal Power Agency; Wabash Valley Power Association, Inc.; and Wolverine Power Supply Cooperative, Inc.

MISO TOs Rehearing Request at 11-12 (citing

Ameren,

880 F.3d at 581); Ameren Rehearing Request at 3-5; EEI Rehearing Request at 3-4.

MISO TOs Rehearing Request at 14; Ameren Rehearing Request at 14; EEI Rehearing Request at 6.

16. MISO TOs argue that the revised option to build “could impact the transmission provider's ability to construct, fund, and earn a return on stand alone network upgrades and transmission provider interconnection facilities” because the “the transmission provider could not place them into its rate base or otherwise earn a return on those upgrades and facilities.”

In support of their concerns, MISO TOs further state that “compulsory generator-funded upgrades and facilities raise serious statutory and constitutional concerns” similar to those addressed in

Ameren,

where the D.C. Circuit determined that, “the Commission failed to explain why transmission owners should be forced to add `non-profit appendages' to their transmission system[s].”

MISO TOs Rehearing Request at 12-13.

Id.

at 13 (citing

Ameren,

880 F.3d at 584).

17. If the Commission does not grant rehearing, MISO TOs and Ameren ask the Commission to clarify that the transmission owner may pay interconnection customers for construction costs incurred for the option to build facilities when the interconnection customer transfers them pursuant to article 5.2(9) of the

pro forma

LGIA and then charge the customer a return pursuant to a Facility Service Agreement.

They argue that, without this clarification, the option to build would be contrary to the transmission owner's right to earn a return on facilities that are part of its transmission system.

Id.

at 14-15; Ameren Rehearing Request at 12-13.

Ameren Rehearing Request at 13.

b. Determination

18. We deny MISO TOs', EEI's, and Ameren's requests for rehearing. We find that the concerns identified in

Ameren

pertain solely to unique features of MISO's tariff and precedent that applies in MISO. As such, the

Ameren

decision does not implicate the Commission's revisions to the

pro forma

LGIP and the

pro forma

LGIA as outlined in Order No. 845. Specifically, the D.C. Circuit recognized in

Ameren

that, under MISO's transmission owner initial funding option, a MISO transmission owner can levy a network upgrade charge on interconnection customers after the transmission owner initially finances a network upgrade. The D.C. Circuit recognized that this network charge, which is memorialized in a Facilities Services Agreement, is “paid [by] the incoming generator” and “includes

both

a return

capital . . . and a return

capital” and “is thus economically equivalent to inclusion in the rate base.”

We note that the network upgrade charge and Facilities Services Agreement are unique features of MISO's policy for recovering the cost of network upgrades, and the D.C. Circuit's primary concern was with the Commission's requirement that there be mutual agreement between the MISO transmission owner and the interconnection customer before the MISO transmission owner can elect MISO's transmission owner initial funding option. The D.C. Circuit found that, if the MISO transmission owner must obtain the interconnection customer's agreement to initially fund network upgrades, then the interconnection customer could effectively prevent the MISO transmission owner from assessing a network upgrade charge and receiving a return on its investment.

Ameren,

880 F.3d at 576.

Id.

at 580-81 (stating, among other things, that “FERC must explain how investors could be expected to underwrite the prospect of potentially large non-profits appendages with no incremental return” and that “the answer FERC offered—to cajole consent from the generators

[ ]

—is a

non sequitur

”).

19. Order No. 845 creates no such concerns. In reaching this conclusion, we first note that the Commission adopted the option to build in Order No. 2003 as part of the

pro forma

LGIA and that it did so in conjunction with the establishment of the Order No. 2003 crediting policy. Viewing the option to build in this context, we find that Order No. 845 does not deprive transmission providers of the ability to earn a return of, and on, network upgrades, including stand alone network upgrades constructed pursuant to the option to build as outlined in the

pro forma

LGIA. On the contrary, Order No. 2003 established the Order No. 2003 crediting policy, a mechanism that explicitly allows transmission providers to earn a return of, and on, the costs of network upgrades. To this end, under the Commission's policy as outlined in Order No. 2003, a transmission provider has the ability to earn a return

capital expenditure for network upgrades to the extent that it has reimbursed an interconnection customer with transmission credits.

Additionally, when the transmission provider includes in its rate base the cost of a network upgrade, the transmission provider earns a return

the costs of this facility.

Order No. 2003-A, 106 FERC ¶ 61,220 at P 657 (finding that a transmission provider “cannot include the cost of the [interconnection customer-funded] Network Upgrades in its transmission rates until it has provided credits to the Interconnection Customer, and as long as any part of the Network Upgrades remains the responsibility of the Interconnection Customer, that

part

of the cost cannot be recovered in transmission rates”). This is true for all network upgrades, including stand alone network upgrades.

20. In contrast to the option to build set forth in the

pro forma

LGIA, the concerns the D.C. Circuit identified in

Ameren

are present only in MISO because MISO's interconnection pricing policy is a unique variation from the Order No. 2003 crediting policy under which MISO directly assigns 90 or 100 percent of the network upgrade cost responsibility to interconnection customers. Commission precedent makes clear that, for variations from the Commission's

pro forma

provisions, it is the transmission provider that has the burden to demonstrate that it qualifies for the variation.

Thus, we find that the Commission's Order No. 845 option to build revisions, which do not alter the Order No. 2003 crediting policy, do not conflict with the

Ameren

decision because they do not deprive transmission owners of the ability to earn a return on, and of, stand alone network upgrade costs.

See S. Cal. Edison Co.,

141 FERC ¶ 61,100, at P 23 (2012) (“A transmission provider seeking a case-specific deviation from a

pro forma

interconnection agreement bears the burden of justifying and explaining what makes the interconnection unique and what operational concerns or other reasons necessitate the variations.”);

see also Pub. Serv. Co. of Colo.,

163 FERC ¶ 61,204, at P 31 (2018) (finding that applying this standard requires “evidence that `a reasonable mind might accept” as “adequate to support a conclusion” and that the Commission's findings may be based on “reasonable economic propositions” and “predictive judgments grounded in basic economic principles”).

Order No. 845, 163 FERC ¶ 61,043 at P 86.

33. Finally, we grant SoCal Edison's request and clarify that the Order No. 845 option to build provisions apply to all public utility transmission providers, including those that reimburse the interconnection customer for network upgrades. In Order No. 845, the Commission's option to build revisions only eliminated the limitation that prevents interconnection customers from exercising the option to build transmission provider's interconnection facilities and stand alone network upgrades unless the transmission provider informs the interconnection customer that it cannot meet dates proposed by the interconnection customer.

Order No. 845 made no other modifications relating to the treatment of stand alone network upgrades; nor did it alter the Order No. 2003 crediting policy, which provides a mechanism for an interconnection customer to receive transmission credits in reimbursement for the total amount that the interconnection customer pays for network upgrades, including stand alone network upgrades. Thus, as noted above, pursuant to the Order No. 2003 crediting policy, the transmission provider can recover the costs of such credits in their transmission rate base after it provides the credits to the interconnection customer.

Moreover, as noted above, the Commission relied on the reasonable economic proposition that interconnection customers have a greater economic incentive than

transmission providers to reduce the cost of stand alone network upgrades.

Id.

P 3.

See

Order No. 2003-A, 106 FERC ¶ 61,220 at P 657.

3. FPA Section 203 Blanket Authorization for Transfer of Facilities From Interconnection Customer to Transmission Provider

34. Article 5.2(9) of the

pro forma

LGIA, which Order No. 845 did not modify, states that “[u]nless Parties otherwise agree, Interconnection Customer shall transfer ownership of Transmission Provider's Interconnection Facilities and Stand Alone Network Upgrades to Transmission Provider.” Eversource Energy Service Company (Eversource) submitted comments in response to the NOPR asking the Commission to grant a blanket authorization under FPA section 203

for the transfer of transmission provider's interconnection facilities and/or stand alone network upgrades constructed pursuant to the option to build.

Eversource argued, among other things, that where electricity flows over transmission facilities in interstate commerce, such “facilities are considered to be [Commission-jurisdictional], even if not otherwise in service” and that the regulatory approval required by FPA section 203 is “an additional undertaking . . . that would not occur but for the interconnection customer's construction of the transmission owner's transmission facilities.”

In Order No. 845, the Commission did not address this request for a blanket authorization.

16 U.S.C. 824b.

Eversource 2017 Comments at 17-19 (citing 18 CFR 33.1).

Id.

at 18.

a. Requests for Rehearing and Clarification

35. EEI and MISO TOs ask the Commission to grant the request originally made in Eversource's NOPR comments for a FPA section 203 blanket authorization for facilities built pursuant to the option to build if the Commission decides to retain the Order No. 845 revisions to the option to build.

In support, EEI states that the Commission provided no reasoning for not granting such a blanket authorization and that the required transfer, coupled with a “likely increase” in the need for such transfers, weighs in favor of “decreasing the regulatory burden” on transmission providers and interconnection customers.

EEI argues that, like other FPA section 203 blanket authorizations, such transactions would not raise concerns under the Commission's traditional analysis.

EEI further argues that failure to create such a blanket authorization would require transmission owners to either accept ownership prior to energization or face the task of making an FPA section 203 filing prior to transfer.

EEI argues that such issues could delay the transfer of these facilities and cause other complications in the operability of assets where generating assets have obligations to come online on a certain timetable. EEI argues that a blanket authorization would increase the likelihood of timely transfer after the facilities are tested and determined to be safe to operate as part of the transmission system.

Finally, EEI argues that granting such a blanket authorization is consistent with the goal of reducing the regulatory burden of FPA sections 203 and 205.

EEI Rehearing Request at 8; MISO TOs Rehearing Request at 15.

EEI Rehearing Request at 8 & n.23.

Id.

at 8.

Id.

at 9.

Id.

36. MISO TOs argue that FPA section 203 approval is “sometimes a significant undertaking” and that the Commission should therefore grant this request for blanket authorization.

MISO TOs argue that Eversource raised this issue in comments on the NOPR and that failure to respond to this argument would demonstrate that Order No. 845 is arbitrary and capricious.

MISO TOs Rehearing Request at 16.

b. Determination

37. We deny MISO TOs' and EEI's requests for rehearing. The Commission has established, in its regulations, a number of blanket authorizations that apply to transactions for which specific approval under FPA section 203 would otherwise be necessary. A transaction covered by a blanket authorization is “pre-approved” pursuant to the regulation itself rather than requiring an application and specific finding under FPA section 203 that the transaction is consistent with the public interest. Blanket authorizations “under section 203 cannot be granted lightly, particularly generic authorizations.”

Because a blanket authorization is “an

ex ante

determination as to the appropriateness of a category of transactions under section 203 and a counterparty is not yet identified, a blanket authorization can be granted only when the Commission can be assured that the statutory standards will be met, including ensuring that the interests of captive customers are safeguarded and that public utility assets are protected under all circumstances.”

The limited hypothetical facts MISO TOs and EEI provide in their rehearing requests regarding facilities constructed pursuant to the option to build do not provide the assurance that such transactions will meet these statutory standards. Thus, we deny rehearing.

FPA Section 203 Supplemental Policy Statement,

120 FERC ¶ 61,060, at P 33. (2007),

order on clarification and reconsideration,

122 FERC ¶ 61,157 (2008).

Id.

4. Requirements Related to Reliability, CIP Standards, Liability, Security, and Posting of Standards and Specifications

38. Order No. 845 made no revisions to article 5.2 of the

pro forma

LGIA, which lays out the general conditions for exercising the option to build. Article 5.2 (1) of the

pro forma

LGIA provides that the interconnection customer “shall engineer, procure equipment, and construct Transmission Provider's Interconnection Facilities and Stand Alone Network Upgrades (or portions thereof) using Good Utility Practice and using standards and specifications provided in advance by Transmission Provider.” Article 5.2(2) of the

pro forma

LGIA requires that the interconnection customer's “engineering, procurement and construction . . . comply with all requirements of law to which Transmission Provider would be subject.”

39. Article 5.2(7) of the

pro forma

LGIA requires that the interconnection customer “indemnify Transmission Provider for claims arising from Interconnection Customer's construction . . . under the procedures applicable to Article 18.1 Indemnity.” In response to Edison Electric Institute's, National Grid's, and Xcel Energy Services, Inc.'s comments on the NOPR taking issue with article 5.2(7) in light of the changes made in Order No. 845, the Commission reiterated the language in this provision and stated that this provision is “sufficiently broad to address EEI's, Xcel's, and National Grid's concerns.”

Order No. 845, 163 FERC ¶ 61,043 at P 94.

a. Requests for Rehearing and Clarification

40. EEI and MISO TOs argue that the Commission's Order No. 845 revisions to the option to build do not address how the changes will impact transmission providers' ability to maintain system reliability.

MISO TOs state that the Commission's revisions to the option to build may substantially increase the number of instances when

the option to build is elected in, for example, RTOs/ISOs with large generation interconnection queues such as MISO.

EEI Rehearing Request at 3; MISO TOs Rehearing Request at 17.

MISO TOs Rehearing Request at 17-18.

41. Arizona Public Service Company (APS) argues that the option to build, as revised by Order No. 845, conflicts with the Critical Infrastructure Protection Reliability Standards (CIP standards). In explanation, APS states that the existing CIP standards require that transmission providers meet specific security and access requirements, which increase as the impact classification increases (from low to high). APS argues that the assets to which interconnection customers would interconnect would be subject to at least one CIP standard and that, while a transmission provider would have “continued responsibility to meet [its] compliance and security obligations . . . under the . . . [r]eliability [s]tandards,” an interconnection customer “may not be similarly obligated.”

APS draws this conclusion because, it argues, although the

pro forma

LGIA requires interconnection customers to comply with “applicable Reliability Standards for procurement, engineering, and construction” under the option to build, it addresses neither the reliability standards related to security nor transmission provider obligations related to the existing transmission assets within which the interconnection customer would build.

100

APS contends that requiring transmission providers to manage CIP standard compliance for interconnection customers would already be “extremely challenging” and “[was] rendered impossible” by the Commission's rejection of requests to require transmission provider approval for the interconnection customers' subcontractors.

101

If the Commission does not grant rehearing, APS asks the Commission to limit option to build construction activities so that they do not include “those facilities to which the [CIP standards] are applicable,

e.g.,

outside the substation perimeter.”

102

APS Rehearing Request at 8-9.

100

Id.

at 9 (citing

pro forma

LGIA Art. 5.1).

101

Id.

(citing Order No. 845, 163 FERC ¶ 61,043 at P 110).

102

Id.

at 10.

42. APS also states that the current

pro forma

LGIA liability and indemnification provisions are insufficient to protect transmission providers that may violate their regulatory requirements as a result of the expanded option to build. In particular, APS states that

pro forma

LGIA articles 5.1 and 18.1 do not explicitly address the need for interconnection customers to cooperate with, and adhere to, transmission provider processes to facilitate compliance with North American Electric Reliability Corporation (NERC) reliability standards.

103

APS also contends that article 18.2 specifically excludes either party from liability that results from “any losses, damages, costs or expenses for any special, indirect, incidental, consequential, or punitive damages.”

104

APS contends, however, that such damages are the types from which transmission providers need to protect themselves to ensure that the appropriate party will be responsible for penalties, required mitigation efforts, and other costs. In light of its interpretation of article 18.2, APS questions who would be liable for “direct facility damage” and “increased costs for the service of load and/or wholesale customers” if “during the course of construction, a significant error is made by the Interconnection Customer or its contractor, which . . . results in the loss or destruction of a portion of the Transmission Provider's facilities or equipment.”

105

For all these reasons, APS asserts that the Commission should withdraw the option to build reform unless it proposes additional revisions that reduce the administrative burden on transmission providers.

106

103

Id.

at 11.

104

Id.

at 11.

Pro forma

LGIA Article 18.2 states that:

Other than the Liquidated Damages heretofore described, in no event shall either Party be liable under any provision of this LGIA for any losses, damages, costs or expenses for any special, indirect, incidental, consequential, or punitive damages, including but not limited to loss of profit or revenue, loss of the use of equipment, cost of capital, cost of temporary equipment or services, whether based in whole or in part in contract, in tort, including negligence, strict liability, or any other theory of liability; provided, however, that damages for which a Party may be liable to the other Party under another agreement will not be considered to be special, indirect, incidental, or consequential damages hereunder.

105

Id.

at 12.

106

Id.

at 12.

43. EEI also asserts that the Commission erred in deciding that interconnection customers exercising the option to build no longer need to post security. EEI argues that the Commission's determination that “there would be no need for the interconnection customer to provide security . . . for facilities the transmission provider will not construct” fails to consider scenarios where the interconnection customer is unable to complete the project and the transmission provider must do so.

107

For these reasons, EEI argues that interconnection customers should have to post security for the project at the transmission provider's cost estimate.

108

107

EEI Rehearing Request at 12-13.

108

Id.

at 13.

44. Generation Developers request rehearing of the Commission's decision not to require that transmission providers post the “standards and specifications” required by article 5.2 of the

pro forma

LGIA for the transmission provider's interconnection facilities and stand alone network upgrades on their websites.

109

They reason that interconnection customers cannot decide whether to exercise the option to build without this information and that requiring the posting of this information will fulfill the requirement to provide such information “in advance.”

110

Generation Developers also argue that transmission providers already have these standards and specifications “[s]o far as Generation Developers are aware.”

111

In addition, Generation Developers argue that granting this request would enhance transparency and certainty.

109

Generation Developers Rehearing Request at 3.

110

Id.

at 4.

111

Id.

45. MISO TOs argue that “[w]ith the potential increase in elections of the option to build, coordination and balkanization are real concerns.”

112

Even with the safeguards provided by article 5.2(1) of the

pro forma

LGIA, MISO TOs argue that transmission providers will have the burdensome and costly responsibilities of developing sufficiently detailed standards and the responsibility of monitoring and policing the interconnection customer' equipment procurement and construction activities. MISO TOs further state that Order No. 845 does not address the need for coordination among multiple interconnection customers, contractors, or other third parties.

113

112

MISO TOs Rehearing Request at 19.

113

Id.

at 20.

b. Determination

46. We deny rehearing as to the arguments from EEI and MISO TOs that the Commission did not adequately address concerns about reliability related to the expanded option to build. In response to similar arguments made in comments to the NOPR, in Order No. 845, the Commission found that concerns that the option to build will compromise system reliability are misplaced because they ignore the safeguards for reliability already in place for the existing option to build.

114

In particular, the Commission stated

that such “vague reliability concerns about the option to build are misplaced and that articles 5.2.1, 5.2.3, 5.2.5, and 5.2.6 of the

pro forma

LGIA are sufficient to guarantee the reliability of the facilities in question.”

115

We again find that the safeguards embodied in article 5.2 of the

pro forma

LGIA are adequate.

114

Order No. 845, 163 FERC ¶ 61,043 at P 91.

115

Id.

(citing Order No. 2003-A, 106 FERC ¶ 61,220 at P 232).

47. We deny APS's request for rehearing regarding the potential for violations of CIP standards.

Pro forma

LGIA article 5.2(1) requires that interconnection customers “engineer, procure equipment, and construct” interconnection facilities and network upgrades using good utility practice and using standards and specifications provided in advance by the transmission provider. We clarify that such standards and specifications under

pro forma

LGIA article 5.2(1) would apply to any necessary contractor access to existing facilities while the interconnection customer exercises the option to build. In addition, Order No. 845 acknowledges that the transmission owner has the option of maintaining a list of contractors available to interconnection customers for the option to build.

116

Accordingly, APS can, if it elects, maintain and make available a list of contractors for the interconnection customer to use for the option to build, thus ensuring that contractors used by the interconnection customer can access existing facilities in accordance with the relevant CIP standards. Furthermore, article 5.2(5) gives transmission providers “unrestricted access to Transmission Provider's Interconnection Facilities and Stand Alone Network Upgrades.” We read these provisions in combination to give transmission providers the security and access necessary to ensure that interconnection customers exercise the option to build in accordance with applicable CIP standards. Therefore, there is no additional need to give transmission providers the ability to approve subcontractors or to further limit the transmission provider's interconnection facilities and stand alone network upgrades for which the interconnection customer may exercise the option to build.

116

Id.

P 110.

47. We also deny APS's request for rehearing regarding its liability and indemnity concerns, which appears to reflect a misunderstanding of the relationship between the

pro forma

LGIA's indemnification and consequential damages provisions. In Order No. 2003 and its progeny, the Commission explained its reasoning for adopting these provisions and how they relate to one another. To improve clarity, we further explain this reasoning below.

48. In Order No. 2003, the Commission observed that indemnification is defined as “compensating another for a loss suffered due a third party's act of Default.”

117

The Commission also stated that “interconnection presents a greater risk of liability than exists for the provision of transmission service.”

118

For this reason, article 18.1 (Indemnity)

119

requires that “the interconnecting generator and the transmission provider each indemnifies the other from all damages to

third parties

arising under the LGIA.”

120

Article 18.1 “provide[s] protection for acts of ordinary negligence, but not for acts of gross negligence or intentional wrongdoing.”

121

117

Order No. 2003, 104 FERC ¶ 61,103 at P 630 (citing Black's Law Dictionary 772 (7th ed. 1999)).

118

Id.

P 636.

119

Pro forma

LGIA Art. 18.1 reads:

Indemnity. The Parties shall at all times indemnify, defend, and hold the other Party harmless from, any and all damages, losses, claims, including claims and actions relating to injury to or death of any person or damage to property, demand, suits, recoveries, costs and expenses, court costs, attorney fees, and all other obligations by or to third parties, arising out of or resulting from the other Party's action or inactions of its obligations under this LGIA on behalf of the Indemnifying Party, except in cases of gross negligence or intentional wrongdoing by the indemnified Party.

120

Ne. Utils. Serv. Co.,

111 FERC ¶ 61,333, at P 28 (2005) (emphasis supplied).

121

Order No. 2003, 104 FERC ¶ 61,103 at P 636.

49. Additionally, as noted in Order No. 845,

122

Order No. 2003 created safeguards in

pro forma

LGIA article 5.2 to protect transmission providers when an interconnection customer exercises the option to build. One such safeguard, in

pro forma

LGIA article 5.2(7), is a requirement that the interconnection customer indemnify the transmission provider for specific aspects related to the option to build.

123

This provision “applies to all work, regardless of the side of the Point of Interconnection on which the work occurs.”

124

However, this provision (in contrast to the general language of

pro forma

article 18.1) “protect[s] the

Transmission Provider

from liability arising out of the Interconnection Customer's exercising its right to build.”

125

That is, while both article 18.1 and article 5.2(7) pertain to indemnification for third party claims, article 5.2(7) only indemnifies the transmission provider for third party claims arising from the interconnection customer's construction under the option to build.

122

Order No. 845, 163 FERC ¶ 61,043 at PP 40 & 91.

123

Pro forma

LGIA Art. 5.2 (7) provides that: “Interconnection Customer shall indemnify Transmission Provider for claims arising from Interconnection Customer's construction of Transmission Provider's Interconnection Facilities and Stand Alone Network Upgrades under the terms and procedures applicable to Article 18.1 Indemnity.” While the Commission modified the

pro forma

LGIA in Order No. 845 to allow interconnection customers to exercise the option to build regardless of whether the transmission provider can meet the interconnection customer's proposed in-service date, initial synchronization date, or commercial operation date, it made no other changes to the requirements that the interconnection customer must abide by, include the indemnity provision

pro forma

LGIA article 5.2 (7).

See id.

P 91 (“[i]n this Final Rule, we make no changes to the requirements in article 5.2”).

124

Order No. 2003, 104 FERC ¶ 61,103 at P 638.

125

Order No. 2003, 104 FERC ¶ 61,103 at P 357 (emphasis supplied).

50. Order No. 2003 also adopted a no consequential damages provision in

pro forma

LGIA article 18.2 (Consequential Damages).

126

This provision “protects either Party from liability for any special, indirect, incidental, consequential, or punitive damages, including profit or revenue.”

127

The interconnection customer and transmission provider, however, “remain liable for . . . any damages for which a Party may be liable to the other Party under another agreement.”

128

126

Supra

n. 103.

127

Order. No. 2003, 104 FERC ¶ 61,103 at P 906.

128

Id.

51. In a request for rehearing of Order No. 2003, Central Maine Power Company, New York State Electric & Gas Corporation, and Rochester Gas and Electric Corporation sought clarity on the relationship between article 18.2 and the

pro forma

LGIA's indemnification provisions. They argued that, because article 18.2 “does not exclude consequential damages which arise as part of [an indemnification] claim,” the Commission should “ensure the full implementation” of the

pro forma

LGIA indemnity protections by amending article 18.2 “to exclude consequential damages that arise in conjunction with indemnification.”

129

Central Maine Aug. 25, 2003 Rehearing Request at 4-5 (Docket No. RM02-1-001).

52. The Commission rejected this request in Order No. 2003-A and stated that “[t]he indemnification of one Party by another must be comprehensive and must include any liability the indemnified Party faces as a result of the indemnifying Party's misdeeds.”

130

It continued, stating that “[w]hile Article 18.2 prevents one Party from seeking consequential damages against another

Party, the purpose of the indemnification provisions is different; it protects the Party not at fault from liability to third parties (those who are not Parties to the interconnection agreement).”

131

The Commission stated that “[r]equiring the indemnifying Party to reimburse the indemnified Party only for, say compensatory damages and not for punitive damages that may be assessed against the indemnified Party would weaken the LGIA's protections and shield the indemnifying Party from full liability.”

132

Thus, the limitations in article 18.2 (Consequential Damages) apply only to claims by one LGIA party against the other directly, and are not applicable to third party claims under article 18.1 and article 5.2(7) for indemnification for claims.

130

Order No. 2003-A, 106 FERC ¶ 61,220 at P 455.

131

Id.

132

Id.

53. Thus, article 5.2(7) in combination with the

pro forma

LGIA indemnification provisions provide sufficient protection from third party claims against transmission providers for claims arising from the interconnection customer's construction under the option to build. Additionally, because

pro forma

LGIA articles 5.2(7) and 18.1

133

address an interconnection customer's liability to the transmission provider

only

when there is a third-party claim against the transmission provider, these articles do not preclude a transmission provider from making a direct claim against an interconnection customer. In particular, given the extensive safeguards in

pro forma

LGIA article 5.2, the transmission provider may argue that the interconnection customer has breached the interconnection agreement if the interconnection customer fails to abide by any requirement that results in the transmission provider accruing damages,

e.g.,

through harm to the transmission system.

134

133

We note, however, that, when indemnification is not pursuant to the option to build indemnification in

pro forma

LGIA article 5.2(7), article 18.1 requires that the interconnection customer and the transmission provider indemnify each other.

See Ne. Utils. Serv. Co.,

111 FERC ¶ 61,333 at P 28.

134

If, however, harm to the transmission provider's transmission system results in the transmission provider's liability to a third party, such as an industrial customer, and such harm to the transmission provider's transmission system arises from the interconnection customer's construction pursuant to the option to build, the transmission provider could invoke the indemnity provisions of the

pro forma

LGIA.

54. Regarding the Commission's statement in Order No. 845 that

pro forma

LGIA article 5.2(7) is “sufficiently broad to address”

135

the concerns expressed in NOPR comments, we reiterate that the Commission made no changes to

pro forma

article 5.2, including the indemnity provision related to the option to build in article 5.2(7).

136

Additionally, the Commission did not interpret

pro forma

LGIA article 5.2(7) to expand the terms of the indemnity provisions to include indemnification by the interconnection customer for activities other than the interconnection customer's option to build construction. The Commission did not expand the applicability of this provision for multiple reasons. First,

pro forma

LGIA article 5.2(7) related to the option to build indemnifies the transmission provider for “claims arising from Interconnection Customer's construction,” and this language already provides indemnification for the transmission provider for a significant number of third party claims arising from the interconnection customer's option to build construction. Second, as noted above, even if the indemnity provisions do not apply, the transmission provider may pursue a claim for breach if the interconnection customer's conduct pursuant to the option to build breaches the interconnection agreement. Third,

pro forma

LGIA article 5.2 gives the transmission provider “significant oversight authority” over the option to build, which, if exercised properly, gives the transmission provider a significant role in ensuring that the interconnection customer's exercise of the option to build does not expose the transmission provider to liability.

137

For example, the transmission provider has the ability to “set[ ] the specifications governing construction (Article 5.2.1), approve[ ] the Interconnection [Customer's] construction plans (Article 5.2.3), . . . an unlimited right of inspection (Article 5.2.3), and . . . the right to require the Interconnection Customer to remedy any deficiencies (Article 5.2.6).”

138

135

Order No. 845, 163 FERC ¶ 61,043 at P 94.

136

See, e.g.,

id.

P 91.

137

Id.

P 110.

138

Order No. 2003-A, 106 FERC ¶ 61,220 at P 232.

55. We also deny rehearing as to EEI's contention that the Commission erred by removing the requirement for the interconnection customer to provide security if the interconnection customer fails to complete any option to build facilities. If such a situation arises and the interconnection customer still wants to move forward with the interconnection request, this situation would re-trigger article 11.5 of the

pro forma

LGIA for “the applicable portion of Transmission Provider's Interconnection Facilities [and] Network Upgrades,” and the interconnection customer would then have to provide security no later than 30 days prior to the transmission provider recommencing “procurement, installation, or construction of a discrete portion of a Transmission Provider's Interconnection Facilities [or] . . . Network Upgrades.”

139

Thus, there is no need to require other revisions to the

pro forma

LGIA to account for EEI's suggested eventuality. In addition, the occurrence of such a scenario may indicate that the interconnection request is no longer viable, in which case, the transmission provider's interconnection facility or stand alone network upgrade would no longer be necessary.

139

Pro forma

LGIA Art. 11.5.

56. We also deny Generation Developers' request for rehearing of the decision not to require transmission providers to post on their websites the “standards and specifications” for exercising the option to build. Despite Generation Developers' assertions, there is nothing in the record to suggest that the engineering, procurement, and construction standards and specifications applicable to the transmission provider's interconnection facilities and stand alone network upgrades required for a particular interconnection request would be available prior to the submission of a specific interconnection request. In fact, it might be difficult or impossible to provide such information on a website before an interconnection customer submits its interconnection request and the required technical data. Regardless, pursuant to article 5.2(1) of the

pro forma

LGIA, if an interconnection customer has informed the transmission provider of its decision to exercise the option to build, the transmission provider must provide such standards and specifications “in advance” of the interconnection customer “engineer[ing], procur[ing] equipment, and construct[ing] Transmission Provider's Interconnection Facilities and Stand Alone Network Upgrades.”

140

Pro forma

LGIA Art. 5.2(1).

57. In response to MISO TOs, we find that article 5.2(1) of the

pro forma

LGIA equips the transmission provider with the ability to develop “standards and specifications” to avoid concerns about transmission system “balkanization.” We also note that, as discussed more fully below, the Commission is granting rehearing to allow transmission providers to recover oversight costs as negotiated between the interconnection customer and the transmission provider and memorialized in the LGIA.

58. As to MISO TOs' concerns regarding the lack of guidance about coordination, we note that each interconnection request and each transmission system is unique. The transmission provider and interconnection customer will have an opportunity to work through the relevant details regarding coordination during the negotiation phase of the LGIA. Therefore, we decline to provide detailed instructions to account for a multitude of dissimilar scenarios when transmission providers and interconnection customers are capable of coordinating the option to build process for multiple interconnection requests.

5. Affected Systems

59. The

pro forma

LGIP and

pro forma

LGIA define affected systems as “electric system[s] other than the Transmission Provider's Transmission System that may be affected by the proposed interconnection.”

141

The interconnection system impact study “evaluates the impact of the proposed interconnection on the safety and reliability of the Transmission Provider's Transmission System, and, if applicable, an Affected System.”

142

Impacts on affected systems may require the construction of network upgrades to address the impacts caused by a particular interconnection request.

141

Pro forma

LGIP Section 1 (Definitions);

Pro forma

LGIA Art. 1 (Definitions).

142

Pro forma

LGIP Section 1 (Definitions);

Pro forma

LGIA Art. 1 (Definitions).

a. Requests for Rehearing and Clarification

60. MISO TOs state that the Commission did not address whether the option to build extends to upgrades on affected systems. They also state that the burden created by the option to build revisions will be higher if affected systems must allow interconnection customers that do not interconnect with them directly to construct on their systems.

143

MISO TOs Rehearing Request at 21.

b. Determination

61. We grant MISO TOs' request for clarification and clarify that the option to build does not apply to stand alone network upgrades on affected systems. To make our intent clear, we revise the definition of stand alone network upgrade to read (with additions in italics):

Stand Alone Network Upgrades shall mean Network Upgrades

that are not part of an Affected System

that an Interconnection Customer may construct without affecting day-to-day operations of the Transmission System during their construction. Both the Transmission Provider and the Interconnection Customer must agree as to what constitutes Stand Alone Network Upgrades and identify them in Appendix A to the Standard Large Generator Interconnection Agreement.

144

This revision is the first of two changes to the definition of a stand alone network upgrade in the

pro forma

LGIP and

pro forma

LGIA. The additional revision is described in the option to build subsection on stand alone network upgrades (II.A.7).

6. Cluster Studies

62. Clustering is “the process whereby a group of Interconnection Requests is studied together, instead of serially, for the purpose of conducting the Interconnection System Impact Study.”

145

Transmission providers may “allocate the cost of . . . common upgrades for clustered Interconnection Requests without regard to Queue Position.”

146

Transmission providers have the discretion to decide whether to study interconnection requests serially or in clusters.

147

145

Pro forma

LGIA Art. 1 (Definitions).

146

Pro forma

LGIP Section 4.1

147

Pro forma

LGIP Section 4.2.

a. Requests for Rehearing and Clarification

63. APS argues that the expanded option to build provisions are incompatible for transmission providers that conduct cluster studies.

148

Specifically, regarding a cluster study that identifies stand alone network upgrades for which multiple interconnection customers are responsible, APS questions which interconnection customer may exercise the option to build. Further, if multiple interconnection customers want to build a stand alone network upgrade, APS asks who decides which interconnection customer has priority to exercise the option to build.

149

148

APS Rehearing Request at 13.

149

Id.

b. Determination

64. We deny APS's rehearing request on this issue. We disagree that the Order No. 845 option to build revisions are incompatible with a cluster study approach. APS has not pointed to any specific provisions in the

pro forma

LGIA that would preclude customers in a cluster study from exercising the option to build. Moreover, APS has not provided any evidence to indicate that stand alone network upgrades being required by more than one interconnection customer in a cluster will be a common enough occurrence to require

pro forma

LGIA revisions tailored to such a scenario. Additionally, the scenario APS envisions is not tied to the changes adopted in this proceeding because, to the extent that such a circumstance occurs, multiple interconnection customers could have sought to exercise the option to build for the same stand alone network upgrade under the pre-Order No. 845 option to build. However, if a transmission provider that studies interconnection requests in clusters believes this is a concern, it should, on compliance, propose revisions to address how it will process requests by multiple interconnection customers to exercise the option to build for the same stand alone network upgrade.

7. Stand Alone Network Upgrades

65. Stand alone network upgrades are “Network Upgrades that an Interconnection Customer may construct without affecting day-to-day operations of the Transmission System during their construction.”

150

Both the transmission provider and the interconnection customer “must agree as to what constitutes Stand Alone Network Upgrades and identify them in Appendix A” to the LGIA.

151

150

Pro forma

LGIP Section 1 (Definitions);

Pro forma

LGIA Art. 1 (Definitions).

151

Pro forma

LGIP Section 1 (Definitions);

Pro forma

LGIA Art. 1 (Definitions).

66. In Order No. 845, the Commission denied Generation Developers' request for a requirement that transmission providers explain why they do not think a network upgrade is a stand alone network upgrade. The Commission stated that “it would be difficult for a transmission provider” to make this determination “until it is presented with the results of a system impact study.”

152

Order No. 845, 163 FERC ¶ 61,043 at P 112.

a. Requests for Rehearing and Clarification

67. Generation Developers claim that the Commission erred by not requiring that transmission providers explain their reasoning when they disagree with an interconnection customer about whether a network upgrade is stand alone.

153

They reason that not requiring such an explanation undermines the interconnection customer's ability to exercise the option to build and increases process opacity.

154

They also disagree with the Commission that providing such an explanation would be difficult before the transmission provider has the system impact study results, as these results will be available prior to the LGIA stage of the

interconnection process, when the interconnection customer can first express its desire to exercise the option to build.

155

Furthermore, Generation Developers argue that, if there is a disagreement, dispute resolution or a complaint filed pursuant to FPA section 206 are not viable options because these options involve costly delays.

156

153

Generation Developers Rehearing Request at 5-6.

154

Id.

at 6.

155

Id.

at 8.

156

Id.

at 6-7.

b. Determination

68. We grant rehearing and find that the Commission erred by not requiring a transmission provider to explain why it does not consider a particular network upgrade to be a stand alone network upgrade. We recognize that, because of the mutual agreement requirement in the definition of stand alone network upgrade, disagreements may arise regarding whether a network upgrade is a stand alone network upgrade.

157

The Commission, in Order No. 2003, was aware that transmission providers had reliability concerns related to the option to build when the Commission defined stand alone network upgrades to include the mutual agreement requirement.

158

Even though the transmission provider has the ability to disagree when an interconnection customer believes a network upgrade is a stand alone network upgrade, the transmission provider may not unreasonably withhold its agreement because such an outcome would be unjust and unreasonable. That is, the transmission provider must explain why the upgrade in question is not one that an interconnection customer may construct without affecting the transmission system's day-to-day operations during construction. Therefore, we require that, when there is a disagreement, a transmission provider must provide the interconnection customer a written explanation within fifteen days of its determination that outlines the technical reasons why it does not consider a network upgrade to be a stand alone network upgrade. We consider this time period reasonable because it begins at the time of the transmission provider's determination outlining its technical reasons. To effectuate this revised requirement, we revise the definition of stand alone network upgrades in the

pro forma

LGIP and the

pro forma

LGIA to include the following new sentence at the end of the definition (with additions in italics):

157

See Duke Energy Florida, LLC,

163 FERC ¶ 61,174 (2018) (setting for hearing an LGIA that was filed unexecuted because of disagreement as to whether a network upgrade was stand alone).

158

See

Order No. 2003, 104 FERC ¶ 61,103 at PP 341, 356-57 (noting that the transmission provider must retain “adequate control of the engineering and construction of . . . Stand Alone Network Upgrades because of its obligation to protect the safety of the public and maintain the reliability of the Transmission System”).

Stand Alone Network Upgrades shall mean Network Upgrades

that are not part of an Affected System

If the Transmission Provider and Interconnection Customer disagree about whether a particular Network Upgrade is a Stand Alone Network Upgrade, the Transmission Provider must provide the Interconnection Customer a written technical explanation outlining why the Transmission Provider does not consider the Network Upgrade to be a Stand Alone Network Upgrade within 15 days of its determination.

159

As noted above in the affected systems section (II.A.5), this is the second of two clarifying revisions that we are making to the definition of stand alone network upgrades in the

pro forma

LGIP and

pro forma

LGIA.

8. Cost Estimates

69. Section 8.3 of the

pro forma

LGIP provides that transmission providers shall: Use Reasonable Efforts to . . . issue a draft Interconnection Facilities Study report to Interconnection Customer within . . . ninety . . . Calendar Days, with no more than a +/−20 percent cost estimate contained in the report; or one hundred eighty . . . Calendar Days if the Interconnection Customer requests a +/−10 percent cost estimate.

a. Requests for Rehearing and Clarification

70. Southern asks the Commission to grant rehearing with regard to Order No. 845's option to build changes, but, if it does not, it asks the Commission to clarify that the requirement in section 8.3 of the

pro forma

LGIP would apply to interconnection customers that construct stand alone network upgrades.

160

Specifically, it points to the requirement that transmission providers must provide an estimated cost that is “plus or minus 10 or 20 percent, depending on the length of the study” to provide some certainty regarding cost exposure to the interconnection customer.

161

Southern argues that interconnection customers exercising the option to build must do the same to provide cost certainty to transmission providers and their native load customers. In particular, Southern argues that the interconnection customer should either be bound by the estimate in the transmission provider's interconnection facilities study report or “should be required to provide an estimate that complies with the plus or minus 10/20 percent cost estimate.”

162

160

Southern Rehearing Request at 9.

161

Id.

162

Id.

b. Determination

71. We deny rehearing on this issue. Section 8.3 of the pro forma LGIP only requires the transmission provider to make reasonable efforts during the interconnection study process to estimate costs to construct network upgrades, and the

pro forma

LGIP does not impose any consequences on transmission providers that exceed the estimate or accuracy margin.

163

Southern's request would therefore require the Commission to hold the interconnection customer to a higher standard than it holds the transmission provider. We decline to do so.

163

See Duke Energy Fla., LLC,

165 FERC ¶ 61,230, at P 22 (2018) (“[t]he Commission's precedent is clear that the costs in an LGIA are simply estimates and that interconnection customers are responsible for paying the actual costs of interconnection facilities and network upgrades”).

9. Oversight Costs

72. In Order No. 845, in response to arguments that “interconnection customers should assume all additional costs that result from exercise of the option to build,” the Commission stated that it was making “no changes with regard to cost assignment for transmission provider's interconnection facilities and stand alone network upgrades.”

164

Additionally, in response to concerns that transmission providers “will have to expend significant resources to perform oversight functions” for the option to build, the Commission stated that “the Final Rule does not alter the role that the transmission provider would play in overseeing the option to build process.”

165

164

Order No. 845, 163 FERC ¶ 61,043 at P 95.

165

Id.

P 103.

a. Requests for Rehearing and Clarification

73. Southern argues that, as a result of Order No. 845, transmission providers will increasingly incur costs to provide additional coordination, oversight, and approval of stand alone network upgrade “design, equipment specifications, contractors, construction, and commissioning.”

166

EEI asks the Commission to clarify whether transmission providers can recover such

costs associated with overseeing an interconnection customer's construction when the option to build is exercised.

167

Specifically, it asks the Commission to allow transmission providers to recover the costs for “providing the coordination, oversight, and approval required for the Interconnection Customer's construction.”

168

As background, EEI states that, in Order No. 2003-A, the Commission stated that it would “not require the Transmission Provider [to] be reimbursed for construction oversight cost,” as the interconnection customer may only exercise the option to build “as a last resort” and that the transmission provider “can avoid the expense[s]” of oversight by meeting the milestones and avoiding the pre-Order No. 845 option to build trigger.

169

EEI argues that, since this reasoning no longer holds true, the Commission should amend article 5.2 of the

pro forma

LGIA to add the following provision: “(12) Transmission Provider shall recover all reasonable costs associated with the review, approval, testing, inspection and transfer of the Interconnection Facilities and Stand Alone Network Upgrades constructed by the Interconnection Customer in accordance with this Article 5.2.”

170

166

Southern Rehearing Request at 8.

167

EEI Rehearing Request at 13;