[Federal Register Volume 73, Number 65 (Thursday, April 3, 2008)]
[Notices]
[Pages 18267-18270]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-6606]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

 [Docket No. AD08-2-000]


 Order on Technical Conference

Issued March 20, 2008.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Order on Technical Conference.

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SUMMARY: On December 11, 2008, the Federal Energy Regulatory Commission 
convened a technical conference on interconnection queuing practices. 
This order follows up that technical conference and directs Regional 
Transmission Organizations and Independent System Operators to file 
reports on the status of their efforts to improve the processing of 
their interconnection queues.

DATES: Reports are due April 21, 2008.

FOR FURTHER INFORMATION CONTACT:

Mary C. Morton, Federal Energy Regulatory Commission, 888 First Street, 
NE., Washington, DC 20426, (202) 502-8040.
Michael G. Henry (Legal Information), Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426, (202) 502-
8532.

SUPPLEMENTARY INFORMATION:

Before Commissioners: Joseph T. Kelliher, Chairman; Suedeen G. 
Kelly, Marc Spitzer, Philip D. Moeller, and Jon Wellinghoff.

[[Page 18268]]

Order on Technical Conference

    1. This order follows up on our December 11, 2007, technical 
conference (Technical Conference) on interconnection queuing practices. 
In this order, we direct the Regional Transmission Organizations (RTOs) 
and Independent System Operators (ISOs) to file reports on the status 
of their efforts to improve the processing of their interconnection 
queues. We also provide guidance to assist the RTOs and ISOs and their 
stakeholders in those efforts.

Background

    2. The Commission issued Order No. 2003 to standardize the 
agreements and procedures related to the interconnection of large 
generating facilities.\1\ We found that ``[a] standard set of 
procedures as part of the [Open Access Transmission Tariff] for all 
jurisdictional transmission facilities will minimize opportunities for 
undue discrimination and expedite the development of new generation, 
while protecting reliability and ensuring that rates are just and 
reasonable.'' \2\ Key to balancing these goals was queue management 
procedures, including timelines that Transmission Providers \3\ must 
use reasonable efforts to meet.
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    \1\ Standardization of Generator Interconnection Agreements and 
Procedures, Order No. 2003, FERC Stats. & Regs. ] 31,146 (2003), 
order on reh'g, Order No. 2003-A, FERC Stats. & Regs. ] 31,160, 
order on reh'g, Order No. 2003-B, FERC Stats. & Regs. ] 31,171 
(2004), order on reh'g, Order No. 2003-C, FERC Stats. & Regs. ] 
31,190 (2005), aff'd sub nom. Nat'l Ass'n of Regulatory Util. 
Comm'rs v. FERC, 475 F.3d 1277 (D.C. Cir. 2007), cert. denied, 76 
U.S.L.W. 3454 (Feb. 25, 2008). See also Standardization of Small 
Generator Interconnection Agreements and Procedures, Order No. 2006, 
FERC Stats. & Regs. ] 31,180, order on reh'g, Order No. 2006-A, FERC 
Stats. & Regs. ] 31,196 (2005), order granting clarification, Order 
No. 2006-B, FERC Stats. & Regs. ] 31,221 (2006), appeal pending sub 
nom. Consol. Edison Co. of N.Y., Inc. v. FERC, Nos. 06-1275 (DC Cir. 
filed July 14, 2006 and later); Interconnection for Wind Energy, 
Order No. 661, FERC Stats. & Regs. ] 31,186 (2005), order on reh'g, 
Order No. 661-A, FERC Stats. & Regs. ] 31,198 (2005).
    \2\ Order No. 2003, FERC Stats. & Regs. ] 31,146 at P 11.
    \3\ ``Transmission Provider'' is a defined term under Order No. 
2003. See Standard Large Generator Interconnection Procedures (``pro 
forma LGIP'') Sec.  1.
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    3. In response to concerns about the effectiveness of queue 
management, the Commission held the Technical Conference. The 
Commission also issued a notice afterward inviting comments.\4\ The 
speakers at the Technical Conference and the written comments confirm 
that some Transmission Providers are not processing their 
interconnection queues with the timeliness envisioned in Order No. 
2003, in certain cases greatly exceeding the timelines in their 
tariffs. Surges in the volume of new generation development are taxing 
the current queue management approach in some regions. Additionally, 
the unprecedented demand in some regions for new types of generation, 
principally renewable generation, places further stress on queue 
management because such generation technologies can, for example, be 
brought online more quickly than traditional generation. Finally, some 
regions have capacity markets that did not exist when the current queue 
management approach was developed and are struggling with how to manage 
their queues to accommodate those new markets.
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    \4\ Notice Inviting Comments, Interconnection Queuing Practices, 
Docket Nos. AD08-2-000, et al. (Dec. 17, 2007).
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Discussion

    4. The Commission is concerned about delays in processing 
interconnection queues. Although we are concerned about delays in all 
regions, the Technical Conference revealed that the delays are 
particularly significant in RTOs and ISOs that are attracting 
significant new entry. Many of the factors identified at the Technical 
Conference as contributing to delays are present for all Transmission 
Providers, independent and non-independent alike. For example, the need 
for restudy when multiple projects withdraw from a queue and the 
complexity of designing interconnections within a system with limited 
excess transmission capacity are not confined to RTOs and ISOs. All 
Transmission Providers should be evaluating whether changes are needed 
to their queue management practices to ensure the expediency called for 
by Order No. 2003. However, given the greater interest of new 
generation entrants in gaining access to RTO and ISO markets compared 
to other markets, the magnitude of the backlogs in RTO- and ISO-managed 
queues is particularly significant.
    5. These backlogs not only deprive generation developers of needed 
business certainty, they also undermine other important public goals. 
As detailed by speakers at the Technical Conference, delays in 
interconnecting renewable generation in the footprints of the Midwest 
Independent Transmission System Operator, Inc. and the California 
Independent System Operator Corporation are creating additional 
challenges in meeting state renewable portfolio standards. In the ISO 
New England Inc. and PJM Interconnection, LLC regions, queue delays 
could prevent least cost resources from being available in new capacity 
markets auctions.
    6. The Commission believes that over the long term, the improved 
transmission planning required under Order No. 890 \5\ will address 
some of the causes of the current interconnection queue problems. In 
particular, the planning reforms adopted by Order No. 890 should 
increase the transparency of planning information to all customers, 
increase coordination among transmission owners in each region, and 
otherwise result in a more robust transmission system. These 
improvements, in turn, should enable developers to make fewer, more 
tailored interconnection requests and make it easier to interconnect 
with the transmission system. However, while the efforts currently 
under way to comply with Order No. 890 hold promise for the long-term 
processing of interconnection queues, we cannot afford to wait until 
those efforts are completed to address the queue management problem.
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    \5\ Preventing Undue Discrimination and Preference in 
Transmission Service, Order No. 890, 72 FR 12,266 (Mar. 15, 2007), 
FERC Stats. & Regs. ] 31,241 (2007), order on reh'g, Order No. 890-
A, 73 FR 2984 (Jan. 16, 2008), FERC Stats. & Regs. ] 31, 261 (2007).
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    7. We note in particular the comments of the ISO/RTO Council on the 
scope and nature of the interconnection queue problems facing ISOs and 
RTOs. According to the ISO/RTO Council, the queue backlog has increased 
in many of the ISOs and RTOs because of the significant new entry that 
is occurring. The ISO/RTO Council states that prompt action is 
necessary to address these problems; however, the Council urges that 
the Commission allow each region to develop solutions that are tailored 
to its specific circumstances and contends that stakeholder processes 
to discuss reforms are already underway in several regions.
    8. While the Commission could take action to impose solutions, and 
may need to do so if the RTOs and ISOs do not act themselves, we agree 
that we should allow each region the opportunity to propose its own 
solution. Although there are some common issues affecting all the 
regions, there are also significant differences in the nature and scope 
of the problem from region to region; there may, therefore, be no one 
right answer for how to improve queue management. Further, any solution 
involves a balancing of interests. Therefore, we urge the RTOs and ISOs 
to work with their stakeholders to develop consensus proposals.
    9. While each of the RTOs and ISOs represented at the conference 
indicated

[[Page 18269]]

that it was evaluating its queue management, the RTOs and ISOs and 
their stakeholders must proceed more quickly, and the Commission 
intends to monitor their efforts. Thus, we direct each RTO and ISO to 
file a status report with the Commission within 30 days of the date of 
this order.\6\ The report must describe the current size of the RTO's 
or ISO's interconnection queue (i.e., number of pending interconnection 
requests and total megawatts represented by those requests), the 
current projected timeframes for processing pending interconnection 
requests, and the nature and extent of any problems that have led to 
any such queue backlogs, including a discussion of how clustering has 
or has not alleviated those problems. The report must also explain the 
status of stakeholder discussions on queue reform and provide a 
schedule for selecting and implementing any necessary reforms, 
including a target date for filing any necessary tariff amendments or 
waivers. To assist stakeholders in their deliberations, we offer the 
guidance set forth below.
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    \6\ The reports will be noticed and subject to public comment.
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    10. The reforms that can be implemented most quickly from a 
regulatory standpoint are those that do not require any revisions to an 
RTO's or ISO's current tariff. For example, no Commission filings are 
needed to increase the staff available to work on interconnection 
studies or adopt more efficient modeling for feasibility studies or 
system impact studies. Similarly, each of the RTO and ISO tariffs 
already provide an option for performing a single system impact study 
for a cluster of interconnection requests, so no further Commission 
filings would be necessary to take full advantage of the existing 
flexibility to cluster. Therefore, we urge the RTOs and ISOs when 
evaluating ways to improve their queue processing first to consider 
whether they have taken all effective steps under their current 
tariffs.
    11. While there likely are reforms that can be implemented without 
the need for Commission filings, more may need to be done. Reforms 
necessitating tariff changes come in two forms: (1) Reforms that apply 
to future interconnection requests as well as existing interconnection 
requests that are still at an early stage in the interconnection 
process; and (2) reforms that affect existing interconnection requests 
that are in later stages of the process. The issues raised by these two 
classes of reforms may well differ.
    12. With regard to reforms applicable to future and early-stage 
existing interconnection requests, we note that Order No. 2003 
authorizes a number of options to streamline the interconnection 
process. For example, Order No. 2003 already allows for the feasibility 
study to be combined with the system impact study at the request of the 
customer.\7\ Order No. 2003 permits Transmission Providers who perform 
system impact studies on a clustered basis to allocate the cost of 
common upgrades to members of a cluster without regard to queue 
position.\8\ Further, Order No. 2003 authorizes the use of third party 
consultants to conduct interconnection studies.\9\ When considering 
tariff changes applicable to future and early-stage existing 
interconnection requests, the RTOs and ISOs should first consider 
whether their current tariffs use all of the streamlining options 
already explicitly sanctioned under Order No. 2003.
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    \7\ Pro forma LGIP Sec.  6.1.
    \8\ Id. Sec.  4.2.
    \9\ Id. Sec.  13.4.
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    13. If an RTO or ISO concludes that the options already identified 
in Order No. 2003 are inadequate to address its queue problems, it may 
consider proposing variations from Order No. 2003. Because RTOs and 
ISOs do not own generation and thus do not have an incentive to unduly 
discriminate, variations sought by an RTO or ISO are reviewed under the 
``independent entity variation standard.'' This standard allows 
independent Transmission Providers flexibility in designing their 
interconnection procedures to accommodate regional needs.\10\
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    \10\ Order No. 2003 at P 822-27; Order No. 2003-A at P 759. An 
RTO or ISO proposing a variation must demonstrate that the variation 
is just and reasonable and not unduly discriminatory, and would 
accomplish the purposes of Order No. 2003. See, e.g., PJM 
Interconnection, LLC., 108 FERC ] 61,025, at P 7 (2004) (``[W]hen an 
RTO is the filing entity, the Commission will review the proposed 
variations to ensure that they do not provide an unwarranted 
opportunity for undue discrimination or produce an interconnection 
process that is unjust and unreasonable.''), order denying reh'g, 
110 FERC ] 61,099 (2005); and Midwest Indep. Transmission Sys. 
Operator, Inc., 117 FERC ] 61,128 (2006), order on reh'g, 119 FERC ] 
61,097, at P 7 (2007) (rejecting a proposed pricing variation 
because the RTO ``had not shown that the proposal would accomplish 
the purposes Order No. 2003 set forth as possible justifications for 
this type of pricing'').
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    14. The Commission recognizes that the business of developing 
generation is very dynamic and requires the coordination of a whole 
host of factors beyond interconnection, many of which are outside the 
full control of the developer. In the absence of alternative sources of 
information about available transmission capacity, the interconnection-
related study process may be the only reliable vehicle a customer has 
to evaluate the merits of different interconnection points and 
configurations. Thus, it is critical that reforms applicable to future 
and early-stage existing interconnection requests provide customers 
with enough flexibility and information to respond to business 
uncertainties. At the same time, the Commission realizes that the 
actions of one party in the queue can affect the interests of other 
parties in the queue. Thus, there needs to be a way to prioritize the 
processing of requests on a fair basis and to ensure that the 
flexibility for individual generators does not undermine the certainty 
and speed needed for the queue as a whole.
    15. Order No. 2003 struck a balance by establishing that material 
modifications to an interconnection request will result in loss of 
queue position, while allowing a customer to make multiple 
interconnection requests for the same basic project, if it makes a 
relatively modest demonstration that it is serious about the project. 
These requests are then processed and allocated costs on a first-come, 
first-served basis.\11\ While this approach made good sense at the time 
Order No. 2003 was issued and still works well in many situations, it 
has led to some unexpected consequences, particularly in transmission 
systems with numerous interconnection customers and limited excess 
transmission capacity. In markets with numerous interconnection 
customers, many of those customers may be competing for the same load, 
and not all will be needed. Further, in systems with limited excess 
transmission capacity, the first-come, first-served approach to cost 
allocation can result in great disparities between the costs faced by 
the customer whose request happens to trigger the need for a network 
upgrade as opposed to those in lower queue positions. Moreover, the 
relatively small deposit amounts, coupled with the incentives produced 
by a first-come, first-served approach to allocating capacity, provides 
an incentive for developers to secure a place in the queue even for 
projects that may not be commercially viable. These and other factors 
can result in large numbers of interconnection requests being 
ultimately withdrawn, which in turn slows down the process by 
necessitating more study and restudy. While the Commission is open to

[[Page 18270]]

considering a range of possible variations from Order No. 2003 with 
regard to future and early-stage existing interconnection requests, we 
believe that there are three types of variations that, individually or 
in combination, hold particular promise for speeding up queue 
processing while remaining faithful to the goals of Order No. 2003.
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    \11\ As noted above, Order No. 2003 did allow for some 
flexibility in the first-come, first-served approach where a 
Transmission Provider performs a single system impact study for a 
cluster of interconnection requests.
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    16. First, it may be appropriate to increase the requirements for 
getting and keeping a queue position. For example, it may be 
appropriate to increase the amount of the deposits required at the 
different stages of the process to more accurately reflect the cost of 
the necessary studies. Such a change would not only be consistent with 
traditional ratemaking principles, but would also increase the 
likelihood that only projects that are likely to be commercially viable 
(and hence willing to commit to the cost of such studies in advance) 
are in the queue. Such a change also would likely reduce the number of 
multiple interconnection requests made by the same customer for the 
purpose of speculating on the cost impacts of different locations. 
However, as discussed above, multiple requests for a single project can 
result from a legitimate desire to evaluate the merits of different 
interconnection points and configurations without having to go to the 
back of the queue. Therefore, the more stringent the requirements, the 
more important it is to ensure that customers have access to 
alternative sources of reliable information about available 
transmission capacity to help them tailor their interconnection 
requests more narrowly toward a single acceptable interconnection 
configuration. Further, the RTOs and ISOs should address the impact of 
any increases in the requirements on smaller customers or any other 
class of interconnection customers.
    17. Second, elimination of the feasibility study as a separate step 
could reduce processing time without harming interconnection customers. 
Under Order No. 2003, the feasibility study is intended, in part, to 
provide preliminary information to assist developers in deciding 
whether it is even worth their while to pursue more detailed 
interconnection studies. Elimination of a separate feasibility study 
could streamline the study process and could reduce interconnection 
requests by screening out those customers who are not willing to pay 
the higher deposit required for a system impact study. However, 
elimination of a feasibility study phase, like increased requirements 
to obtain and retain a queue position, creates a greater need to 
develop alternative mechanisms through which customers can gather the 
information necessary to more narrowly tailor their interconnection 
requests toward a final acceptable configuration.
    18. Third, there may be approaches to prioritizing queue processing 
that provide protection against discrimination comparable to the first-
come, first-served approach, but that are more efficient. For example, 
there may be merit in a first-ready, first-served approach, whereby 
customers who demonstrate the greatest ability to move forward with 
project development are processed first. Further, the Commission is 
open to considering methods of clustering other than that provided in 
Order No. 2003. Order No. 2003's approach to clustering is 
fundamentally based on a first-come, first-served paradigm, as clusters 
are limited to requests filed within the same time frame, not to exceed 
180 days.\12\ Clustering that takes into account factors other than 
proximity of filing date may allow for more efficient studies and we 
are open to reviewing such proposals.
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    \12\ See pro forma LGIP Sec.  4.2. But see id. Sec.  4.1 
(allowing allocation of cost of common upgrades for clustered 
interconnection requests without regard to queue position).
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    19. We note that reforms that would affect existing interconnection 
requests that are in later stages of the process create special 
circumstances that require careful consideration. Unlike reforms 
applicable to future and early-stage existing interconnection requests, 
any such reforms could significantly disrupt the activities of 
customers who may have taken action in reliance upon the existing 
process. Reforms of this sort could take the form of a filing to make 
generic revisions to the tariff, filings to modify individual 
interconnection-related agreements, or a request for a one-time waiver 
of the tariff.\13\ These reforms could change both the timing and the 
cost allocation for a customer. Some customers may experience an 
overall benefit from a particular reform, while others may be 
disadvantaged by a reform. In still other cases, perhaps the majority, 
the difference between continued processing under the existing tariff 
provisions and processing under a reformed process may be speculative, 
including as to ultimate timing and cost allocation. In those cases, we 
would expect proponents of reform to have an easier time justifying 
such reform.\14\ Whether and how a particular reform should apply to a 
late-stage request will depend on the specific facts. The Commission is 
open to considering such reforms. Further, while such reforms do pose 
more difficult issues than reforms applicable to future and early-stage 
existing requests, the Commission recognizes that they may be necessary 
in order to resolve current backlogs.
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    \13\ See, e.g., Midwest Indep. Transmission Sys. Operator, Inc., 
117 FERC ] 61,128 (2006), order on reh'g, 119 FERC ] 61,097 (2007) 
(rejecting as unsupported proposed tariff amendments applicable to 
existing interconnection agreements but without prejudice to future 
filings to revise individual interconnection agreements); and Cal. 
Indep. Sys. Operator Corp., 118 FERC ] 61,226, order on 
clarification, 120 FERC ] 61,180 (2007) (granting one-time waiver of 
procedures for conducting clustered system impact studies despite 
application to protestor who had already undergone a system impact 
study).
    \14\ See, e.g., New York Indep. Sys. Operator, Inc., 114 FERC ] 
61,207 (2006) (granting one-time waiver of interconnection procedure 
noting that protestor's claim that it would incur higher costs due 
to potential loss of its queue position was speculative).
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    The Commission orders:
    The RTOs and ISOs are hereby directed to file reports as discussed 
in the body of this order within 30 days of the date of this order.

    By the Commission.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. E8-6606 Filed 4-2-08; 8:45 am]
BILLING CODE 6717-01-P