FERC Issues Notice of Inquiry on Open Access and Priority Rights on Interconnection Facilities

On April 19, 2012, FERC issued a Notice of Inquiry (“NOI”) on the open access and priority rights associated with capacity on interconnection facilities. The NOI is a direct result of a March 2011 technical conference. At the conference, several commenters stated that radial lines used to connect generation facilities to the transmission grid are not easily classified as “generation” or “transmission,” and may evade open access requirements. Some parties refer to these facilities as “generator lead lines,” but FERC is opting to use the term “interconnection facilities.”

The NOI solicits feedback on the scope of the proceeding. The Commission asks whether it should reconsider its policy, outlined in several recent cases, that allow certain interconnection facilities to be treated as “transmission facilities” for the purpose of Order No. 890 open access rules. The NOI asks the following:

  1. Has industry largely adapted to current policy in the time since the technical conference?
  2. Must interconnection facilities provide third-party access under an open-access transmission tariff (“OATT”) to ensure non-discriminatory access and just and reasonable rates?
  3. Does current policy blur the line between interconnection and transmission service with respect to third-party access, creating unintended consequences?

FERC’s current policy permits an interconnection facility owner to have priority to capacity over its facilities for its existing use at the time a third-party request for service is initiated. FERC also grants priority rights to certain generators who have had pre-existing expansion plans on the drawing board. Similarly, affiliates of owners can be granted priority rights when the owner develops its own generator projects and meets certain plans and milestones, provided the facilities will be transferred to the affiliate in the future. Finally, FERC requires that owners must file a pro forma OATT within sixty days of the request for service on the interconnection facilities.

The commenters at the March 2011 technical conference argued that the existing Commission policies are detrimental to the development and financing of transmission. Others said FERC should recognize commercial, technological, legal and other differences between transmission lines and generator lead lines when considering open-access principles. In particular, several commenters were concerned about the negative effects of FERC’s policy on the development of renewable energy.

The NOI also seeks comment on alternative approaches to govern third-party requests for service and priority rights on interconnection facilities. The first alternative option is continued use of an OATT framework with certain modifications, including a “safe harbor” period during which a generation developer would be assumed to have priority rights to capacity on its interconnection facilities and a case-by-case determination on a developer’s priority rights. The second approach involves the use of a Large Generator Interconnection Agreement (“LGIA”)/Large Generator Interconnection Procedure (“LGIP”) where the LGIA provisions govern third-party use of interconnection facilities.

The Commission noted the detail of the issues involved in this NOI, and FERC encouraged commenters to address the specific questions posed and to submit proposals for new tariff language. FERC has also asked commenters to discuss the public policy effect of any changes implemented, such as if the Commission were to adopt a safe harbor period, what impact that would have on the current policy of demonstrating specific plans and milestones to secure priority rights.

Comments are due 45 days after the NOI is published in the Federal Register.

A copy of the NOI is available here.

24 April 2012