United States: FERC Proposes New Regulations On Priority Rights And Access To Generator Interconnection Facilities

On May 15, 2014, the Federal Energy Regulatory Commission (FERC) issued a Notice of Proposed Rulemaking (NOPR) on open access and priority rights with regard to Interconnection Customer's Interconnection Facilities (ICIF).1 The proposed changes in FERC's regulations will affect generation developers, owners and operators of generator interconnection facilities, and transmission providers. This alert describes the NOPR and identifies some important implications for market participants.

OPEN ACCESS AND PRIORITY RIGHTS ON INTERCONNECTION FACILITIES

FERC has examined on several occasion issues related to whether developers that build new transmission facilities should have priority rights to use the new capacity and, if so, could such priority rights be granted consistent with the mandate that transmission providers and owners provide nondiscriminatory open access to their facilities. FERC's long-standing policy has been to subject interconnection facilities to its open access requirements on the same basis as transmission facilities.

FERC has granted many petitions filed by developers, owners and operators of ICIF for waiver of the open access requirements. Under current practice, these waivers are revoked if a third party requests service on ICIF and the ICIF owner and/or operator must file an open access transmission tariff (OATT) with FERC for service on ICIF within 60 days of the request for service. With regard to priority rights, while FERC has developed a case-by-case process for granting developers priority rights to use the capacity of the ICIF, "the priority rights do not diminish the risk that the ICIF owner may have to file an OATT within 60 days of a request for service," and thereby lose some of the capacity of these facilities that they had planned to use in the future.2

In April 2012, FERC opened a Notice of Inquiry (NOI) seeking comments on whether its regulations, policies, and precedents appropriately address open access to interconnection facilities, and whether and how developers of those facilities should receive priority rights to the use of those facilities.

THE NOPR

FERC has made a preliminary finding that its "current OATT requirements as applied to ICIF may impose risks and burdens on generators and create regulatory inefficiencies that are not necessary to achieve the Commission's open access goals."3 The NOPR has also determined that ICIF should not be subject to exactly the same open access requirements as transmission facilities (or interconnection facilities owned by the transmission owner).

Accordingly, the NOPR proposes to change Section 35.28 of FERC's regulations. New section 18 C.F.R. 35.28(d)(2) would grant a blanket waiver of all OATT requirements, including the requirements in 18 C.F.R. Part 37 (to establish and maintain an Open Access Same Time Information System (OASIS)) and Part 358 (to abide by the Standards of Conduct for Transmission Providers) to any public utility that is subject to such requirements solely because it owns, controls, or operates ICIF and sells electric energy from its generating facility.

The proposed regulations will also specify under what circumstances this blanket waiver could be revoked. New section 18 C.F.R. 35.28(d)(2)(i) would state that this blanket waiver is deemed revoked as of the date the public utility ceases to satisfy the qualifications for the waiver. In addition, FERC may revoke the blanket waiver if it determines that is in the public interest to do so.

Finally, FERC would codify in its regulations the process that must be followed by a third party that wants to use the capacity of any ICIF that are under the blanket waiver. Unlike current FERC policy, the ICIF owner would not have to make the facilities available under an OATT. Instead, the party seeking access would have to apply to FERC for an order under Sections 210 and 211 of the Federal Power Act (FPA) directing the ICIF owner to connect the applicant's facilities with the ICIF (Section 210) and provide the applicant with transmission services (Section 211).

In any such proceeding, the NOPR proposes FERC will: (1) consider it in the public interest to grant priority rights to the ICIF owner and/or operator to use the capacity when the owner and/or operator can demonstrate that it has "specific plans with milestones to use such capacity to interconnect its or its affiliate's future generation projects" and (2) grant the owner/operator a five-year "safe harbor" to use the ICIF. The "safe harbor" would cover the first five years after the ICIF are energized. During that time period, if there is a request by another party to access the facilities, there will be rebuttable presumptions that the ICIF owner and/or operator should have priority rights to the capacity and not be required to expand it.

IMPLICATIONS OF THE NOPR FOR MARKET PARTICIPANTS

As proposed by FERC, the blanket waiver of its open access requirements would not be available to entities that do not own both the ICIF and the generating facility. The reason FERC proposes to limit the blanket waiver is to ensure that the ICIF owner is subject to FERC's authority under both FPA Sections 210 and 211. Section 210 grants FERC authority to order "electric utilities" to interconnect and Section 211 grants FERC authority to order "transmitting utilities" to transmit. The FPA defines an "electric utility" as selling electric energy, and defines a "transmitting utility" as owning, controlling or operating facilities "used for transmission for the sale of electric energy at wholesale."

FERC notes that an interconnection-only entity would continue to have the option to seek waiver of the OATT requirements on a case-by-case basis. FERC states that it "seeks comment on what would be the appropriate criteria and procedures for granting such entities a waiver, and whether and under what procedures the safe harbor" could be extended to such entities.4 It also seeks comment on whether there are alternatives to the case-by-case process for applying the blanket waiver to entities with a broader set of ownership structures."5 It will be important for project developers to present FERC with a strong case that there will be no diminution of the benefits that the case-by-case waiver procedure affords. Developers may also wish to explain some of the reasons that different portions of a project might be developed under separate ownership structures, that these projects confront the same risks and burdens as a project where one company holds all of the project assets, and present options for FERC to consider applying the blanket waiver to interconnection-only entities (for example, to the extent they are affiliated or under common control with the generating facility.) FERC's proposal to use FPA Sections 210 and 211 as the vehicles to ensure that third parties are provided nondiscriminatory access to ICIF presents important legal and policy issues. FERC adopted the open access requirements partly in response to the view, in an increasingly competitive power generation industry, that the Sections 210/211 process for obtaining transmission access was unduly burdensome, cumbersome, and weighted in favor of the incumbent transmission owner. It is also potentially time consuming because applications under Sections 210 and 211 must also meet the requirements of FPA Section 212 which requires that FERC, before issuing a final order under either Section 210 or 211, issue a proposed order setting a reasonable time for the parties to agree to terms and conditions for carrying out the order including cost allocation.

FERC would deem the blanket waiver to be revoked as of the date the public utility ceases to satisfy the qualifications for the waiver. FERC gives as an example a change in the corporate structure such that the ICIF owner is no longer the entity that sells electric energy from the generating facility. Project developers and their lenders and investors need to assess this risk carefully when designing and structuring transactions.

Comments on the NOPR are due 60 days after the NOPR is published in the Federal Register.

Footnotes

1 Notice of Proposed Rulemaking, Open Access and Priority Rights on Interconnection Customer's Interconnection Facilities, 147 FERC ¶ 61,123 (May 15, 2014).

2 NOPR ¶¶ 31-32.

3 NOPR ¶¶ 23-25.

4 NOPR ¶ 52.

5 Id.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions