This is the second post of three on this blog providing short summaries of the generic electricity policy initiatives already teed up and awaiting possible action by the newly-constituted FERC. Together, these three posts describe initiatives that address fundamental market and resource issues spanning a broad range of FERC’s electricity authorities.
Today’s post summarizes initiatives affecting new transmission development, generator interconnection and access to the market by qualifying facilities, also known as QFs. The first post addressed initiatives affecting wholesale market rules. The third post, in a few days, will deal with FERC initiatives concerning analytic issues.
Competitive transmission development
In Order No. 1000, FERC paved the way for new transmission companies that would compete with incumbents for the right to install new transmission resources by directing the RTOs to establish competitive processes. Since then, market participants have expressed a variety of concerns regarding perceived inadequacies in the competitive processes RTOs have implemented.
To air these concerns, FERC held a two-day conference in June 2016. The major issues addressed at the conference included:
- Cost containment provisions in offers to develop new transmission, including how transmission planning regions evaluate such proposals and whether rates that include cost containment provisions and result from a competitive process should be presumed to be just and reasonable.
- Incentives and competitive transmission development, including whether incentives are needed to encourage developers to participate in competitive processes, the relationship between cost containment provisions and incentives, and whether there are alternatives to return-on-equity adders for projects subject to competitive development processes.
- Interregional transmission coordination and competitive transmission development, including how interregional coordination processes interact with regional planning processes.
Post-conference comments have been filed. The Commission has not indicated how it will address the concerns aired in this conference.
Reform of generator interconnection procedures and agreements
In a December 2016 Notice of Proposed Rulemaking, FERC found that 1) aspects of the current interconnection process for large generators (larger than 20 MW) may hinder the timely development of new generation; 2) the process for conducting interconnection studies may result in uncertainty and inaccurate information; and 3) interconnection processes may be discriminatory with respect to new technologies entering the generation market.
Accordingly, FERC proposed reforms that fall into three broad categories.
The first category is improved certainty by giving interconnection customers more predictability in the interconnection process. Proposals include:
- Require transmission providers to set a schedule for conducting restudies.
- Allow the interconnection customer to unilaterally exercise the option to build.
- The transmission owner/provider and an interconnection customer must agree before the transmission owner/provider may elect to initially fund network upgrades.
- RTOs/ISOs must have dispute resolution procedures that allow a party to unilaterally seek dispute resolution.
- Set a cost cap to limit an interconnection customer’s network upgrade costs.
The second category is improved transparency by providing more information to interconnection customers. Proposals include:
- Require transmission providers to provide detailed information and models used for interconnection studies.
- Revise the definition of a “Generating Facility” to include electric storage resources.
- Set timeframes for transmission providers to report on their completion of interconnection studies.
The third category is an enhanced interconnection processes. Proposals include:
- Allow customers to request a level of interconnection service that is lower than the generating facility’s capacity.
- Provisionally allow new generating facilities to interconnect pursuant to existing and updated studies while needed additional studies are completed.
- Allow interconnection customers to utilize or transfer surplus interconnection service at existing generating facilities.
- Transmission providers must evaluate if their methods for modeling storage resources for interconnection studies account for the operational characteristics of those resources.
Comments on the proposals have been filed. Although the timing of further Commission action on this proposal is uncertain, FERC has been engaged in a steady march over several years aimed at perfecting its generator interconnection rules.
Implementation issues under PURPA
In June 2016, FERC held a conference regarding the Commission’s implementation of the Public Utility Regulatory Policies Act (PURPA).
Two major issues were aired at the conference. The first was utilities’ obligation to purchase QF power in light of changes in electricity markets since the enactment of PURPA in 1978, long before the introduction of competitive generation and open access to the grid. A concern of some utilities is that in order to be released from the purchase obligation they must rebut a presumption that QFs sized 20 megawatts and below do not have nondiscriminatory access to competitive organized wholesale markets.
The other major issue was avoided cost calculations that determine QF pricing, including whether an avoided cost methodology may reflect the locational and/or time value of QF output.
Post-conference comments have been filed. As well-structured wholesale electricity markets have become more prevalent, the Commission’s rules for market access by QFs have continued to evolve as well. The concerns raised at the conference may lead to further rule changes.