Client Alert

FERC Reboots Large Generator Interconnection Policies to Level the Playing Field for New Generation (and Storage) and Launches Inquiry on Possible Revisions to Natural Gas Pipeline Certificate Policy

26 Apr 2018

On April 19, 2018, the Federal Energy Regulatory Commission (FERC) adopted a new rule, Order No. 845, that reboots its large interconnection process for the first time since the Commission took significant action more than a decade ago.

Citing concerns from transmission providers as well as generation and storage developers, FERC approved modifications to the current pro forma Large Generator Interconnection Procedures and Interconnection Agreement intended to enhance the quality of information used to process interconnection requests, increase the transparency of the process, and address inefficiencies to reduce delay and uncertainty. For developers of new generation and storage facilities, this transparency and efficiency improvement will help level the playing field – providing a new tool to combat perceived discrimination and get electricity to market more quickly.

On the same day, FERC initiated an unrelated but potentially significant Notice of Inquiry seeking information and stakeholder perspectives to help FERC explore potential revisions to its review and certification of interstate natural gas transportation facilities.

Changes to the Generator Interconnection Process Procedures and Pro Forma Interconnection Agreement for Generating Facilities Over 20 MW

Aiming to bring new generation and storage online faster and mitigate the construction of unnecessary upgrades through interconnection service alternatives, FERC’s new rule revises the pro forma Large Generator Interconnection Procedures and the pro forma Large Generator Interconnection Agreement.[1] From the beginning, these procedures were put in place to reduce undue discrimination and inefficiency – in large part through transparency – around interconnection of new generation facilities. This revision takes important steps forward and integrates learning from the past decade, especially around renewables and storage.

The rule responds to broad stakeholder consensus that the procedures needed to be revisited. Leading up to the rulemaking and through the public comment period, both interconnection customers and transmission providers expressed concern with the status quo. Transmission providers highlighted that interconnection customers often submit requests for interconnection service for new generating facilities that have little chance of achieving commercial operation. Interconnection customers cited delays in the interconnection study process, the lack of transparency and consistency of information in the process, and the time required for new generation facilities to connect to the grid. Evolving market forces and the emergence of new technologies like energy storage are thought to have exacerbated the inefficiencies of the existing interconnection process.

Transparency and enhanced information gathering

The final rule:

  • requires transmission providers to outline and make public a method for determining contingent facilities;[2]
  • requires transmission providers to list the study processes and assumptions for forming the network models used for interconnection studies;
  • revises the definition of “Generating Facility” to explicitly include electric storage resources; and
  • establishes reporting requirements for aggregate interconnection study performance.

Efficiency enhancements

The final rule:

  • requires transmission providers to allow an interconnection customer to request a level of interconnection service that is lower than its generating facility capacity;[3]
  • requires transmission providers to allow for provisional interconnection agreements for limited operation of a generating facility prior to completion of the full interconnection process;[4]
  • requires transmission providers to create a process for the use of surplus interconnection service;[5] and
  • requires transmission providers to set forth procedures to assess and, if necessary, study changes in an interconnection customer’s proposed technology that occur during the interconnection process to determine if such changes would constitute a “Material Modification.”[6]

Energy storage policy

The final rule adds storage to the definition of generating facility for the purposes of the interconnection procedures and agreements governed by this Order. This is a significant win for the storage industry because it sweeps storage into an expansive regime designed to reduce undue discrimination in, and increase the speed of, interconnection.

However, FERC did not move forward with all of the storage-related reforms considered in the proposed rule. Although FERC evaluated a proposal to require transmission providers to standardize the way they evaluate modeling of electric storage resources for interconnection studies,[7] it declined to implement such a national requirement. FERC reasoned that it “encourage[d] transmission providers to continue to consider approaches to modeling electric storage resources that will save costs and improve the efficiency of the interconnection process;”[8] but, ultimately, felt that given the nascent nature of the storage market, FERC was better off yielding to regional solutions and providing flexibility for regulatory innovation.[9]

The final rule becomes effective 75 days after publication in the Federal Register. Transmission providers, including ISOs and RTOs, are required to submit compliance filings within 90 days of publication of the rule in the Federal Register.

NOI on Gas Pipeline Certificate Policy

FERC initiated a wide-ranging Notice of Inquiry (NOI) seeking comments on whether and how to revise FERC policies on the review and authorization of interstate natural gas transportation facilities under section 7 of the Natural Gas Act. The current Policy Statement was issued in September 1999.[10] FERC cited changes in the natural gas industry ranging from production technology improvements to an increased interest in the greenhouse gas emissions associated with proposed projects.

Other factors that led to FERC issuing the NOI include “new areas of major natural gas production;” “flows on pipeline systems becoming bidirectional or reversing;” “customers routinely entering into long-term precedent agreements for firm service during the formative stage of potential projects and the use of those precedent agreements as applicants’ principal evidence of the need for their projects;” the “increased use of natural gas as a fuel source for electric generation, resulting in a closer relationship between natural gas transportation and natural gas-fired electric generation;” “increased concerns expressed by landowners and communities potentially affected by proposed projects;” “an increased focus on environmental concerns within the NGA public interest determination;” and “a desire to generally expand or limit the Commission’s evaluation under the National Environmental Policy Act.”

The NOI seeks specific input on:

  • “the methodology for determining whether there is a need for a proposed project, including the Commission’s consideration of precedent agreements and contracts for service as evidence of such need;”
  • “the consideration of the potential exercise of eminent domain and of landowner interests related to a proposed project;”
  • “the evaluation of the environmental impact of a proposed project;” and
  • “changes it could consider implementing to improve the efficiency and effectiveness of its certificate processes including pre-filing, post-filing, and post-order issuance.”

An NOI reflects an initial step in the Commission’s review process, and it is possible there may be little to no material change in FERC’s Policy Statement. That said, given the breadth of issues covered by the NOI, it may lead to revisions not only to the existing Policy Statement but also to the scope of FERC’s environmental analysis of proposed natural gas projects. The NOI notes an increased interest in recent years among commenters on upstream and downstream GHG emission issues, with some commenters suggesting that FERC’s “current analyses of GHG emissions and climate change are inadequate.”[11] In addition, the NOI notes an increased interest in FERC’s employment of the “Social Cost of Carbon” tool, which aims to monetize climate change impacts from estimated GHG emissions.[12]

Comments are due within 60 days after publication of the NOI in The Federal Register.

[1] The pro forma generator interconnection procedures and generator interconnection agreement were established in 2003 when the Commission issued Order No. 2003.

[2] “Contingent Facilities are those unbuilt interconnection facilities and network upgrades upon which the interconnection request’s costs, timing, and study findings are dependent, and if not built, could cause a need for interconnection restudies or reassessments of the network upgrades, costs, or timing.” See Order No. 845, p. 117.

[3] The final rule modifies sections 3.1, 6.3, 7.3, 8.2, and Appendix 1 of the pro forma LGIP “to allow interconnection customers to request interconnection service that is lower than full generating facility capacity, recognizing the need for proper control technologies and penalties to ensure that the generating facility does not inject energy above the requested level of service.” Id. p. 215. The final rule notes further that “article 5.9 of the pro forma LGIA permits an interconnection customer to request the study and, if appropriate, subsequent use of, a lower level of interconnection service, termed ‘limited operation,’ in cases where the transmission provider’s interconnection facilities or network upgrades are not reasonably expected to be completed prior to the commercial operation date of the generating facility.” Id. p. 218.

[4] The final rule notes that the provisional interconnection agreements “will terminate upon completion of construction of interconnection facilities and network upgrades.” Id. at 257.

[5] The final rule defines “Surplus Interconnection Service” as “any unneeded portion of Interconnection Service established in a Large Generator Interconnection Agreement, such that if Surplus Interconnection Service is utilized the total amount of Interconnection Service at the Point of Interconnection would remain the same.” Id. at 269.

[6] Material modifications are “those modifications that have a material impact on the cost or timing of any Interconnection Request with a later queue priority date.” Properly regulating study changes that rise to the level of a material modification would therefore, in theory, lessen delays and increase efficiency.

[7] FERC was evaluating a proposal to require modeling of energy storage “as a single asset, as opposed to separate generation and load assets, and based on their intended use has merits,” see p. 331. FERC believed that such “approaches could streamline the interconnection of electric storage resources, save costs, and avoid modeling the charging of electric storage resources the same as other unpredictable, non-controllable load resources,” see id. Ultimately, however, FERC concluded that flexibility at this early stage of storage deployment in the market was a more prudent posture.

[8] Id. at p. 331.

[9] Id. at p. 327-31.

[10] FERC Policy Statement, “Certification of New Interstate Natural Gas Pipeline Facilities – Statement of Policy” (Docket No. PL99-3-000) (issued September 1999).

[11] NOI, p. 42.

[12] Id.



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