FERC Filings

REPLY COMMENTS OF EPSA ON RTO NOPR

AN EXPEDITED NATIONAL INTERCONNECTION POLICY IS NEEDED TO FOSTER NEW GENERATION INVESTMENT

In its Initial Comments, EPSA urges the Commission to adopt an eighth function for RTOs: to facilitate the interconnection of new generators to the transmission grid. As noted above, EPSA’s latest "Announced Merchant Plant Matrix," attached, shows over 116,000 megawatts of planned new and expanded generation capacity. This capacity will provide several important benefits, ranging from environmental improvements, as newer facilities replace older generation assets, to minimizing incumbent utilities’ vertical and horizontal market power, to providing the liquidity needed to support robust wholesale trading. However, if interconnection issues cannot be resolved quickly and fairly, much of this needed generation investment will be delayed or deferred.

<spacer align="center">The Federal Trade Commission (FTC) eloquently describes the problem:

Concerns about vertical discrimination in transmission access are not limited to existing transmission and generation assets, but rather apply to expansion of generation and transmission as well. Transmission owners could discriminate in providing grid connections to new generators and in selecting transmission projects. Discrimination or uncertainty about the terms and conditions for obtaining connections to the grid will raise the risk of new generation investments with respect to their commercial viability and timing. . . . By eliminating or delaying generation entry, or deflecting it to a different site, a transmission owner may reduce competitive pressure on its own generation assets, particularly if the prospective entrant’s assets are likely to be more efficient. As a result of such discrimination, customers are likely to face higher electricity prices because more efficient generation fail to enter to displace less efficient generators.</spacer>

FTC Comments, page 13.

Focusing on transmission upgrades generally, the Virginia State Corporation Commission (VSCC) notes that:

<spacer align="center">vertically integrated transmission owners may have disincentives to construct additional facilities that would enable further competition for their generation. Transmission owners who have transmission construction responsibilities may resort to means of frustrating competition more subtle, and less detectable, than outright refusals. RTOs should not be dependent on incumbent transmission owners for constructing needed transmission enhancements.</spacer>

(VSCC Comments, page 7.) The same is particularly true for generation interconnections, and RTOs, not incumbent transmission owners, should have the responsibility for handling these new interconnections.

The significant growth in potential merchant generation has resulted in a high volume of requests for interconnection agreements to tie these new generating sources to the grid. Timely response to these requests and timely completion of the studies associated with these interconnections is critical to the development of these needed resources. Uniform national and regional approaches to addressing these issues, through RTOs, is the best way to accomplish this.

There are several key issues which uniform interconnection standards must address:

Incentives for New Development: The rules developed by RTOs should achieve the underlying goal of facilitating efficient siting and building of generation and transmission facilities. RTOs, not individual transmission owners, should have the decision-making authority on interconnection issues.

Prioritization and Queuing: In many areas, multiple projects are vying for priority rights to interconnect at a certain site, with the attendant reduction in study, interconnection and access costs. The process for prioritizing new generation projects must accord fair and non-discriminatory treatment to all proposed projects. While individual needs for confidentiality must be protected, the process must be sufficiently transparent to ensure that all proposed projects are treated comparably. Reasonable non-discriminatory means must be used to assure only viable projects are included.

Time Lines: Those proposing new generation are very sensitive to the timely completion of all required studies and ultimate completion of an interconnection agreement. Time is of the essence and studies should be completed promptly and the process must proceed on a predictable time line. Study costs and procedures should not create unreasonable barriers to entry. In addition, the risk of failure to complete either the interconnection or the project on time must be allocated to the proper party.

Criteria: Criteria for evaluating and processing interconnection requests must be objective, publicly available, transparent and applied in a consistent, predictable and non-discriminatory manner.

Interconnection Standards: While new generators should be obligated to meet all appropriate reliability requirements, developers should not be required to "gold plate" either interconnection or project facilities to obtain interconnection rights. To assure non-discrimination and encourage timely completion of the interconnection process, most issues should be handled through a standard interconnection agreement. Unique project conditions can be addressed through special amendments, while the bulk of the issues can be handled in a streamlined and consistent manner.

Transmission Service: New generators should not be required to commit to a particular level or type of transmission service in order to obtain a safe and reliable interconnection.

Dispute Resolution: RTO tariffs must include provisions for fair and timely resolution of any disputes arising from the application of interconnection procedures.

Interconnection of new generation facilities is an important issue, which is becoming increasingly significant as merchant generation investment grows. EPSA urges the Commission, in the Final Rule, to require RTOs to facilitate and encourage fair, non-discriminatory, timely, and efficient interconnection of new generation to the transmission grid.