United States: FERC Further Clarifies Its Orders Reforming Generator Interconnection Procedures And Agreements

Last Updated: October 3 2019
Article by Mark Haskell, George Billinson and Lamiya Rahman

On August 16, 2019, the Federal Energy Regulatory Commission ("FERC" or "the Commission") issued an order granting in part and denying in part requests for further clarification of its reform of Large Generator Interconnection Agreements ("LGIA") and Procedures ("LGIP").1 Order No. 845-B affirms FERC's prior findings that the expansion of an interconnection customer's option to build does not impede transmission owners' ability to recover a return of and on network upgrades. The order also reiterates FERC's determination not to revise the pro forma LGIA's indemnity provisions.

Order No. 845—FERC's Final Rule revising the pro forma LGIP and LGIA—made various reforms to "improve certainty for interconnection customers, promote more informed interconnection decisions, and enhance the interconnection process."2 Among these changes, the Commission expanded interconnection customers' ability to exercise the option to build transmission providers' interconnection facilities and standalone network upgrades beyond instances where the transmission provider is unable to meet the interconnection customer's preferred construction timeline.

A subsequent decision, Order No. 845-A, among other things, rejected arguments that the option build revisions contradicted the United States Court of Appeals for the District of Columbia Circuit's ("D.C. Circuit") decision in Ameren Services Co. v. FERC. According to the Commission, "Ameren stands for the principle that the Commission cannot prohibit a transmission owner from earning a return of, and on, the cost of its network upgrades."3 In that case, the D.C. Circuit vacated FERC's orders requiring the Midcontinent Independent System Operator, Inc. ("MISO") to remove an option under its tariff allowing transmission owners to unilaterally elect to initially fund network upgrades and to thereafter recover the interconnection customer's portion of the cost burden through periodic network upgrade charges that included a return on the capital investment (i.e., the "transmission owner initial funding option"). Although the Commission initially found the transmission owner initial funding option unjust and unreasonable, the D. C. Circuit remanded the orders directing the Commission to "explain how investors could be expected to underwrite the prospect of potentially large non-profit appendages with no compensatory incremental return."4 The Commission reinstated the transmission-owner initial funding option on remand.

In Order No. 845-A, the Commission found that the expansion of the option to build did not implicate the same return recovery concerns underlying Ameren. The Commission preliminarily noted that the Ameren decision related to specific variations to FERC's crediting policy that were unique to MISO. Moreover, the Commission determined that the option to build revisions did not hinder a transmission owners' ability to earn a return of or on standalone network upgrades, finding that "a transmission provider has the ability to earn a return of capital expenditure for network upgrades to the extent that it has reimbursed an interconnection customer with transmission credits. Additionally, when the transmission provider includes in its rate base the cost of a network upgrade, the transmission provider earns a return on the costs of this facility."5

Order No. 845-A also rejected requests, in response to the broadened option to build, to expand the applicability of the pro forma LGIA's indemnity provisions and to make interconnection customers liable for consequential damages.

In the instant decision, Order No. 845-B, the Commission addressed a request for clarification, or in the alternative, rehearing of Order No. 845-A by American Electric Power Service Corporation ("AEP") regarding these issues.

Option to Build

Citing language in Order No.845-A that the Ameren decision related to the "unique features of MISO's tariff and precedent that applies in MISO," AEP requested clarification that FERC will address the concerns raised in Ameren in each regional transmission organization ("RTO") or independent system operator ("ISO") compliance filing for those RTOs/ISOs that, like MISO, have adopted participant funding. AEP argued that together with participant funding, the exercise of the option to build has resulted in investor-owned transmission owners not earning returns on network upgrades that are constructed by interconnection customers. In the alternative, AEP requested rehearing on this issue.

In response, the Commission first affirmed its determination in Order No. 845-A that the expanded option to build does not implicate the concerns underlying Ameren. The Commission explained that its grounds for rejecting Ameren-related arguments in Order No. 845-A did not hinge on the uniqueness of MISO's tariff. Rather, as the Commission explained, the D.C. Circuit's key concern in Ameren was that the Commission did not adequately justify its removal of MISO's transmission owner initial funding option or respond to transmission owners' concerns regarding the inability to earn a return of and on the cost of network upgrades. Finding that the option to build revisions do not preclude transmission owners from earning a return, Order No. 845-A determined that the concerns in Ameren were not at issue here.

While noting that participant funding in and of itself does not preclude recovery of a return on facilities costs or lead to issues similar to those in Ameren, the Commission nonetheless clarified that RTOs/ISOs were free to request independent entity variations and to address whether their tariff provisions implicate Ameren in their Order No. 845 compliance filings. The Commission reiterated that neither Order No. 845 nor Order No. 845-A changed FERC's procedures regarding the ability to protest an RTO/ISO compliance filing or to seek rehearing or appeal of a Commission decision.

Indemnification

AEP also made several requests for clarification with respect to the LGIA's indemnification provisions as they relate to the option to build. First, AEP sought clarification as to whether the Commission had granted various parties' requests to expand the indemnification protections for transmission owners and to hold interconnecting customers liable for consequential damages, in light of allegedly conflicting language in Order Nos. 845 and 845-A. The Commission denied this request, finding that it had sufficiently responded to and ultimately denied requests to expand the indemnification provisions in cases where the option to build is exercised.

Second, AEP requested clarification on whether limits on consequential damages can be litigated in individual RTO/ISO compliance filings based on the independent entity variation, and whether transmission owners have the right to seek both indemnification and direct damages for the life of facilities constructed by an interconnection customer. While acknowledging that transmission owners are free to argue that they qualify for variations from the pro forma LGIA and LGIP, the Commission declined to revise the limitation on consequential damages in the pro forma LGIA. The Commission also found no modifications were necessary to clarify survival of indemnification and direct damages rights because the pro forma LGIA already provides that these rights survive termination of the agreement.

Finally, AEP asked whether the indemnity provision under the option to build relating to "construction" also extends to other construction/installation-activities such as engineering and procurement, and whether RTOs/ISOs can clarify the term "construction" in their own tariffs so that it is less vague. The Commission disagreed that the term "construction" is unreasonably vague, and confirmed that it intentionally omitted engineering and procurement activities from the indemnity provision.

Footnote

1 Reform of Generator Interconnection Procedures and Agreements, Order No. 845-B, 168 FERC ¶ 61,092 (2019).

2 Id. at P 1.

3 Id. at P 35.

4 See Ameren Services Co. v. FERC, 880 F.3d 571, 581 (D.C. Cir. 2018).

5 Reform of Generator Interconnection Procedures and Agreements, Order No. 845-A, 166 FERC ¶ 61,137 at P 19 (2019)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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