FERC Filings
MOTION OF THE ELECTRIC POWER SUPPLY ASSOCIATION FOR LEAVE TO INTERVENE AND COMMENTS
IV.
In its March 31st filing, PJM states that it has received more than 70 requests to interconnect new generating capacity or expand existing generation capacity to date. PJM is proposing the changes to its Open Access Transmission Tariff (OATT or Tariff) and its Amended and Restated Operating Agreement (Operating Agreement) in this docket in order to clearly spell out the requirements for new and expanded interconnections. PJM's stated goals are to "accommodate these existing requests without further delay, allow studies of requests to proceed expeditiously, and ensure that there is adequate generation in the PJM control area." EPSA applauds all those goals.
Many of EPSA's members are developers of new merchant generating plants. EPSA members have also purchased many of the generating facilities recently sold by utilities. In some instances, the new owners have plans to expand those generating facilities. As developers of new and owners of expanding generation resources, it is of vital importance to EPSA members that PJM's stated goals be met. Transmission interconnection procedures are a critical part of new and expanded generation construction. Developers need clear, well-articulated, practical and non-discriminatory interconnection procedures.
Competitive generation, in the form of new or expanded merchant facilities, provides important benefits to the developing competitive electricity markets. New and expanded projects inject competition into pricing for power, promote diversity in products and services offered to the market, and mitigate the vertical market power of incumbent utilities. Fair, workable and well-established interconnection rules are critical to the success of merchant construction.
However, EPSA has several specific concerns about PJM's proposed procedures. As discussed in more detail below, EPSA has the following concerns:
any procedures to include projects out of date order in the queue must include objective, non-discriminatory and transparent procedures for evaluating the status of those projects;
interconnection procedures must include definitive time frames for completing the entire interconnection process;
the role of Regional Transmission Owners (RTOs) must be clearly defined and limited to ensure that projects are not delayed indefinitely;
issues affecting cost allocation for transmission upgrades and the rights associated with those upgrades, must be clear and non-discriminatory;
the posting of initial interconnection requests must be limited to ensure the confidential treatment of commercially sensitive information;
project milestones cannot impose unreasonable requirements; and,
all procedures applicable to interconnection procedures in PJM should be incorporated in one document: the Open Access Transmission Tariff (OATT).
Any Grandfathering Procedures Must Include Objective, Non-discriminatory Criteria for Evaluating Projects Seeking a Place in the Existing Queue
EPSA is very concerned about the proposed "grandfather" procedures for assigning priority to those projects that have failed to notify PJM of their development plans. While there may be legitimate reasons why a project has not yet notified PJM of its development plans, grandfathering cannot turn into an open season for new projects to bump existing ones.
While PJM sets out documentation that should accompany a new request to show that the project is a "pre-existing" one, the proposed rules include no objective criteria PJM will use to evaluate these demonstrations. On page 14, PJM's filing simply states: "PJM will consider the information provided by the requester, or lack thereof, in determining whether a requester's queue priority should be based on an earlier date." This statement wholly lacks any objective criteria that will form the basis for this "consideration." Any interconnection procedure should set forth objective, non-discriminatory and transparent criteria against which requests for earlier queue dates will be evaluated.
Interconnection Procedures Must Be Completed Within a Definite Time Frame
EPSA is also concerned that the Interconnection Procedures proposed by PJM are potentially open-ended and susceptible to endless delays. To proceed with project investment, generators need certainty on interconnection issues and they need that certainty within a reasonable time frame. As currently drafted, the PJM Interconnection Procedures could potentially drag on for years. In some instances, PJM commits to using "due diligence" to completing studies within a defined timeframe. In some instances, however, for example, the Facilities Studies, no time frames are included.
PJM should be required to complete the Interconnection Procedures - from initial request to completion of the Interconnection Service Agreement - within a defined and limited timeframe. EPSA recommends that the entire process take no more than nine months on a regular basis. Where unique circumstances preclude PJM completion of an Interconnection Agreement with that time frame, PJM should be required to notify the project, in writing, of the source of the delays and meet with the developer promptly to determine whether action by the developer (such as undertaking delayed studies, or agreeing to assume certain facts) can expedite the process.
Regional Transmission Owners Cannot Be Allowed to Delay Interconnection Projects
To achieve the certainty and timeliness generation developers require of the PJM Interconnection Procedures, all parties in the process must be accountable and the process must proceed swiftly. As proposed by PJM, the RTOs can potentially disrupt the timely processing of Interconnection Requests, holding a project hostage after considerable investment has been made. Specifically, EPSA is concerned that after PJM has recommended the necessary facilities' upgrades, RTOs may offer "construction alternatives." This sequential approach is inefficient and potentially open-ended, allowing recalcitrant RTOs to endlessly and unnecessarily delay interconnection projects. As noted above, the entire process should be completed within a defined and limited time period. Input from RTOs, where appropriate, must be included within that time frame.
4. Clarity on the Allocation of Costs and Rights is Critical
A very important issue for EPSA is how the cost of upgrades, beyond direct interconnection, will be funded and the rights attendant on upgrades will be allocated. EPSA strongly agrees with the Commission's conclusion in Champion International Corporation and Bucksport Energy L.L.C. v. ISO-New England, Inc., 85 FERC 61,142 (1998), Order on Rehearing (March 31, 1999), that generators should be required to provide only a safe and reliable interconnection to the transmission system. Doing so ensures that the interconnection of new generation has no adverse impact on the transmission system, but does not ensure that power from the new facility can necessarily reach every customer on the system. A "safe and reliable" interconnection can be considered "non-firm;" for the lower costs associated with the interconnection, power may not be able to flow anywhere on the system unrestricted.
PJM's filing, however, includes several unanswered questions on which greater clarity is appropriate. First, the issue of incremental versus rolled-in rate treatment is not clearly resolved. PJM proposes a "but for" pricing approach for incremental upgrades, but includes no analysis of how costs associated with upgrades that provide system benefits will be allocated.
Second, the PJM proposal includes the concept of both "Capacity Resources" and those used just for energy. However, it is not entirely clear who pays for and who receives the benefits associated with upgrades that benefits the system as a whole. Where a new generator chooses to pay for, or construct itself, transmission upgrades that benefit the system as a whole, those upgrades relieve congestion and should provide firm service. PJM's filing fails to clearly address the allocation of firm transmission rights associated with those upgrades. In that instance, the interconnection customer should be assigned the firm transmission rights associated with those upgrades.
Third, the filing is unclear on "sequencing issues." When a developer pays for upgrades that later benefit a subsequent project developer, should the first developer receive any credit from the second to offset its investment costs?
As with issues discussed above, developers need clarity and certainty on cost allocation issues, including those associated with new interconnections. Interconnection policy should also include clear procedures to ensure that generators who bear the costs of economically beneficial system upgrades receive the benefits thereof.
5. Confidential Information Must Be Protected
EPSA is also concerned about PJM's plans to post interconnection requests and their place in the queue on PJM's OASIS. EPSA shares PJM's interest in allowing the market to evaluate the fair and equitable treatment of interconnection requests, which is well-served by public posting. However, EPSA is concerned that PJM not inadvertently release commercially sensitive information, particularly at a preliminary stage of project development. PJM should be directed to initially post no more than the project location and size. Additional data, including ownership interests and fuel source, need not be made publicly available until a later stage in the process.
6. Milestone Requirements Must Be Negotiated
Another area of the PJM proposal that lacks specificity is the "milestones" associated with the "Interconnection Study" and the "Facilities Study Agreement." The PJM proposal notes that these documents "may contain reasonable milestone dates" that the developer must meet to retain its priority. While EPSA does not believe that it is necessary to define "reasonable milestones," PJM and the Commission should require that projects are treated comparably and fairly and that the milestone requirements reflect the realities of project development. These milestones should be the product of mutual agreement between a developer and PJM, and should not be unilaterally imposed, unless all milestones are set forth in the OATT and are applied to all customers. The only meaningful milestone may well be the notification to begin construction of the interconnection facilities once the Facilities Study is completed.
All Interconnection Procedures Should Be Included in PJM's Open Access Tariff
EPSA's final concern is that the PJM proposal is contained partly in revisions to its OATT and partly in its Operating Agreement. First, EPSA is concerned about "one-stop shopping." Given the sheer volume of rules, tariffs and procedures applicable to PJM, market participants should be able to look in one place - PJM's OATT - for all the applicable rules and procedures, including those affecting new interconnections. Moreover, it is important that every aspect of PJM's proposal be subject to the scrutiny imposed by the Commission in its review of tariff proposals and that they be consistent with or superior to the pro forma tariff. Finally, including the interconnection procedures in the OATT tariff will ensure that the dispute resolution procedures under the OATT are applicable to interconnection disputes. Thus, FERC should require PJM to include all rules and procedures applicable to interconnection in PJM's OATT.