FERC Indicates “M2 Milestone Payment” Should Apply to All MISO Interconnection Customers

On March 29, 2016, FERC granted in part and denied in part a complaint filed by a group of merchant generators (the “Internal MISO Generation”) against the Midcontinent Independent System Operator, Inc. (“MISO”) which challenged, among other things, MISO’s protocol for providing network resource interconnection service (“NRIS”) delivery product to generators external to MISO that want to participate in MISO’s capacity and energy markets, without requiring the external generators to make an “M2 Milestone Payment.” The M2 Milestone Payment is a payment that certain classes of interconnection customers entering the final phase of MISO’s interconnection process are required to make to MISO, and is used to help alleviate the costs of necessary network upgrades and restudies that are shifted to other interconnection customers in the event that an interconnection customer withdraws from the interconnection queue. In its order, FERC initiated an investigation to analyze, among other things, whether or not all existing and future MISO interconnection customers should be required to make the M2 Milestone Payment.

In their September 4, 2015 complaint, the Internal MISO Generation noted that while generators that are internal to MISO are required to make the M2 Milestone Payment, generators that are external to MISO—which as a class are permitted to participate in MISO capacity auctions—are not required to do the same under the MISO’s protocol. On this basis, the Internal MISO Generation asserted that MISO’s protocol is unjust, unreasonable, unduly discriminatory and preferential.

In its March 29, 2016 order, FERC found, among other things, that MISO’s tariff may be unjust, unreasonable, unduly discriminatory or preferential “because the Tariff does not specify in sufficient detail which interconnection customers must make the M2 Milestone Payment.” FERC noted that MISO had confirmed during the proceeding that both external interconnection customers using MISO’s NRIS, and internal interconnection customers seeking NRIS-only, are not charged the M2 Milestone Payment. Reasoning that all interconnection customers are subject to harm in the form of restudies and network upgrade cost-shifting, FERC stated its belief that “it is appropriate that all interconnection customers post the M2 Milestone Payment.”

Accordingly, FERC instituted an investigatory proceeding pursuant to Section 206 of the Federal Power Act to analyze, among other things, the application of the M2 Milestone Payment to various classes of interconnection customers. FERC stated that its concerns could be addressed by revising MISO’s tariff to “make clear that the M2 Milestone Payment is assessed to all interconnection customers, whether new or existing, or internal or external, or a showing by MISO that it should not be required to do so.”

A copy of FERC’s order may be found here.