FERC Declines to Require Removal of the Security Requirement for Transmission Owning Interconnection Customers under the MISO Pro Forma GIA

On September 9, 2016, FERC conditionally accepted an unexecuted Generator Interconnection Agreement (“GIA”) filed by the Midcontinent Independent System Operator, Inc. (“MISO” or the “ISO”) involving Duke Energy Indiana, LLC (“Duke Indiana”) as the interconnection customer, Duke Energy Business Services, LLC, on behalf of Duke Indiana, as the transmission owner, and MISO as the transmission provider. In so doing, FERC declined a request from Duke Indiana to require MISO to amend its pro forma GIA to address potential future situations in which an integrated utility acts as both the transmission owner and interconnection customer.

MISO submitted the unexecuted GIA on July 11, 2016 and noted the parties’ disagreement over two milestones giving effect to pro forma GIA Articles 11.5 and 11.6. Under those provisions, MISO noted, the interconnection customer must either initially pay 20% of all “Network Upgrades and Transmission Owner Interconnection Facilities,” or 100 percent of the security required for those upgrades or facilities—payments that would amount to either $346,817 or approximately $1.7 million, respectively. MISO acknowledged that Duke Indiana would be acting as both the transmission owner and interconnection customer, and that no funds transfer would actually take place. However, the ISO argued, requiring such entities to at least provide 100 percent security for their transmission upgrades would ensure that they were subject to the same transparency and nondiscriminatory treatment as separate entities.

In its protest filing, Duke Indiana responded that, under FERC’s own precedent, neither initial payment nor security are required when a GIA-party is both the interconnection customer and transmission owner. As such, the company requested a waiver of Articles 11.5 and 11.6 from FERC and an order requiring MISO to submit a revised GIA noting as much. Duke Indiana also argued that, because MISO’s footprint was largely composed of integrated utilities, this situation was likely to arise again and that therefore FERC should consider requiring MISO to change its pro forma GIA to better accommodate these situations. Alternatively, the company suggested, FERC could simply allow parties to ignore those GIA provisions as inapplicable without having to seek a waiver.

In its decision, FERC stated that Duke Indiana’s requested waiver of Articles 11.5 and 11.6 would result in a non-conforming GIA, but that such a waiver was warranted and had been granted in a similar situation involving Pacific Gas & Electric (“PG&E”) in the California Independent System Operator Corporation (“CAISO”) footprint. In that case, FERC explained that the purpose of the GIA funding and security provisions was to shield transmission owners from financial risks resulting from interconnection customers’ facilities or upgrades. If the transmission owner and interconnection customer were the same entity, as was the case with PG&E, then those requirements become not only unnecessary but largely impractical. Thus, FERC granted the waiver in that case and suggested that CAISO amend its GIA if the situation were to arise frequently.

As with the PG&E decision, FERC waived the initial payment and security requirements and accepted the parties’ GIA. The Commission declined to require MISO to amend its pro forma GIA, but instead directed the ISO to submit a compliance filing within 30 days noting Duke Indiana’s requested changes solely to the parties’ agreement. As a result, parties will still need to seek FERC approval to waive the security requirements in GIAs involving the same entity as both the transmission owner and interconnection customer.

The Commission’s Order can be found here.