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FERC Final Rule Reforms Generator Interconnection Procedures and Agreements

The Federal Energy Regulatory Commission on July 27 approved a final rule that reforms the Commission’s standard generator interconnection procedures and agreements.

The final rule adopts many of the reforms proposed in a June 2022 Notice of Proposed Rulemaking with modifications based on the record.

The final rule also builds on Commission Order Nos. 2003 and 2006, in which FERC first required public utility transmission providers to adopt its standard procedures and agreements for interconnecting large and small generating facilities, and on Commission Order No. 845, in which the Commission added additional study mechanisms and types of interconnection service.

At the Commission’s monthly open meeting, FERC Chairman Willie Phillips said that he was “very excited” to announce that FERC would vote on the “much anticipated and historic” interconnection final rule, designated as Order No. 2023. “This rule will ensure that our country’s vast generation resources are able to interconnect to the transmission system in a reliable, efficient, transparent and timely manner,” he said. 

Phillips noted that “getting to this day required significant effort from all involved and was truly an unprecedented undertaking.” He pointed out that the record in this proceeding was “one of the largest in FERC history. There were over 4,500 pages of comments filed for the Commission to review and consider.”

As a result of the “lengthy record, this final rule is one of the longest in FERC’s history. It represents the largest and most significant set of interconnection reforms since the pro forma interconnection procedures were created two decades ago.”

Phillips noted that “this is FERC’s first major transmission reform in a generation. Our country has a severe interconnection backlog. Currently, there are 2,000 gigawatts of resources in interconnection queues – the largest backlog in history. We have wait times of over five years. The average project needed today won’t even begin construction until 2028. Interconnection reforms are desperately needed to speed up this process. Connecting new resources to the grid quicker and more efficiently will help provide more reliable, resilient and affordable electricity to everyone.”

Phillips also used his opening remarks to highlight some of the reforms that will be implemented with Order No. 2023.

For example, he noted that the final rule will implement a first ready, first served cluster study process, “which requires interconnection customers to have more skin in the game to ensure that projects being studied are more likely to be commercially ready.”

The final rule will also increase the speed of interconnection queue processing by imposing firm deadlines and penalties, he noted.

Commissioner Allison Clements in her opening remarks highlighted the “dizzying month of headlines about extreme weather around the world,” adding that “it is almost certain that this month that we are in is going to go down as the hottest month in recorded history.” At FERC, “we are grateful to the grid operators and the market participants who have so far managed this month’s heat challenges remarkably well and so I am pleased that it’s in this context that we are finalizing this rule.”  

Commissioner Mark Christie complimented Phillips on his leadership on Order No. 2023, saying the final rule “is a big step forward.” The final rule “focuses on what we set out to do last year when we adopted the NOPR [Notice of Proposed Rulemaking] and that was, in a nutshell, to move from a first come, first served system to a first ready, first served” approach. The final rule “is a lot better document than the NOPR, but that’s the way it ought to be.” 

After FERC staff provided a presentation related to the final rule, several Commissioners offered additional comments on, and asked questions related to, Order No. 2023.

Clements said that the rule “provides a strong baseline, based on best practices and lessons learned from around the country, to ensure all utilities are making strides towards breaking through their own interconnection log jams.”

She said that the final rule is fair because it “requires everyone to do their part” to address the causes of interconnection backlogs. Also, the final rule is “a great start for grid-enhancing technologies.”

Clements noted that “we’ve had really good engagement with stakeholders on this issue. There’s been a lot of back and forth – people proposing ideas.”

One set of stakeholders, she said, are regional transmission organizations, which have not been “sitting around twiddling their thumbs waiting for FERC to come out with a rule, but they’ve been working on their own sets of reforms and trying to tackle their own backlogs.”

Clements asked FERC staff to address how the final rule will interact with those RTO efforts.

Jaime Knepper with FERC’s Office of General Counsel said that the final rule “recognizes that transmission providers have undertaken efforts to address interconnection queue management issues” and is not intended “to divert or slow the potential progress represented by those efforts.”

For his part, Christie noted that in his concurrence to the NOPR he said that “it’s very important for us not to get in the way of the transmission providers – in particular, the RTOs – who are already doing a lot of work” related to “trying to clear their queues” and so “we need to sort of fashion this in a way that moves the ball, but doesn’t get in the way of what they’re already doing.”

He added, “I know there’s been an effort to do that…I look forward to seeing if we really hit the right sweet spot on that.”  

Details on Final Rule

The final rule requires utilities to adopt revised pro forma generator interconnection procedures and agreements to ensure that interconnection customers can interconnect to the transmission system in a reliable, efficient, transparent, and timely manner, and to prevent undue discrimination. 

The final rule adopts reforms to:

Implement a first-ready, first-served cluster study process

  • Transmission providers will conduct larger interconnection studies encompassing numerous proposed generating facilities, rather than separate studies for each individual generating facility. This approach will increase the efficiency of the interconnection process, help minimize delays and improve cost allocation by analyzing the transmission system impacts of multiple projects at once.
  • To ensure that ready projects can proceed through the queue in a timely manner, interconnection customers will be subject to specific requirements, including financial deposits and site control conditions, to enter and remain in the interconnection queue.

Speed up interconnection queue processing

  • The final rule imposes firm deadlines and establishes penalties if transmission providers fail to complete interconnection studies on time, but transmission providers may appeal their penalties at the Commission. 
  • Additionally, the rule establishes a detailed affected systems study process, including uniform modeling standards and pro forma affected system agreements. 

Incorporate technological advancements into the interconnection process

  • The final rule requires transmission providers to allow more than one generating facility to co-locate on a shared site behind a single point of interconnection and share a single interconnection request. This reform creates a more efficient standardized procedure for these types of generating facility configurations.
  • The final rule allows interconnection customers to add a generating facility to an existing interconnection request under certain circumstances without such a request being automatically deemed a material modification.
  • The final rule requires transmission providers to use operating assumptions in interconnection studies that reflect the proposed charging behavior of electric storage resources.
  • The final rule requires transmission providers to evaluate alternative transmission technologies in their cluster studies.  
  • Finally, the final rule establishes modeling and performance standards for inverter-based resources.

Effective Date and Transition Process

Compliance filings are due 90 days after publication of the final rule in the Federal Register.

To smooth the transition to the new rule, the Commission has adopted three options that can be exercised depending on the progress of the interconnection request.

Those interconnection customers that have been tendered facilities study agreements by the transmission provider may proceed to a transitional serial study (a facilities study) or may opt to move to the transitional cluster study.

Those interconnection customers in the interconnection queue that have not been tendered a facilities study agreement (have not completed the system impact study) will be eligible for the transitional cluster study.

All other interconnection customers will be subject to the new interconnection procedures.

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