FERC Filings

MOTION TO INTERVENE AND PROTEST OF EPSA

II. COMMENTS

A. Specific Comments

EPSA supports Entergy's filing in several important respects. In particular, Entergy appropriately recognizes the need for standardized interconnection agreements and interconnection procedures. Indeed, Entergy acknowledged EPSA's efforts to clarify the Commission's interconnection policy and to secure uniform interconnection agreements and procedures.5 EPSA addresses below certain aspects of Entergy's filing which require clarification and/or modification.

1. The Commission Should Not Accept Entergy's Interconnection Agreement As A Pro Forma Agreement.

Entergy proposes a pro forma agreement which all generators would be required to execute. EPSA cautions against mandating rigid adherence to any particular interconnection agreement.6 Each interconnecting generator undoubtedly will have unique, project-specific issues for which a departure from the pro forma terms and conditions may be required for technical, operational or business reasons. Interconnection service is more project specific than transmission service. Moreover, both generators and interconnection service providers should have the opportunity and flexibility to negotiate alternative provisions to whatever is on file with the Commission. For example, specific generators voluntarily may elect to assume certain risks, security obligations or cost responsibility that may not necessarily be appropriate to assign to each and every generator through a pro forma agreement.7 Oftentimes, a generator's business plan may dictate that the interconnection agreement include different terms depending upon, for example, whether the generator is a pure merchant generator; whether it has unique tolling arrangements; whether it will located in an area with a power exchange; and whether it will be offering ancillary services into a market. Considerably more leeway and less uniformity is required with respect to negotiating and executing interconnection agreements than is the case for transmission service agreements under the open access transmission tariff ("OATT").

Thus, rather than serving as a pro forma agreement, in the manner of the Commission's pro forma OATT, which must be adhered to absent special circumstances, and for which the generator would have the burden of proof with respect to deviations therefrom, the Entergy Interconnection Agreement, as well as future interconnection agreements filed by other transmission providers, instead should be treated as only a proposed model agreement that should be evaluated in the context of an industry collaborative process, discussed below Section B, below. Model terms and conditions of service that are found reasonable by FERC could serve as the default agreement in the absence of a mutually negotiated bilateral agreement.

2. Interconnection Service Is A FERC Jurisdictional Service

EPSA agrees with Entergy that, except with respect to the interconnection of certain qualifying facilities under the Public Utility Regulatory Policies Act of 1978, interconnection is an issue within the exclusive jurisdiction of this Commission. It appears that a driving force behind Entergy's decision to file the Interconnection Agreement and Interconnection Procedures was its desire to forestall or preempt action by the Louisiana Public Service Commission with respect to interconnection agreements and procedures. Because interconnection agreements and procedures clearly relate to wholesale sales or transmission of electric power within the meaning of the Federal Power Act, the Commission should indicate that it, not the states, has exclusive jurisdiction over the rates, terms and conditions of such agreements and procedures.

3. Interconnection Service Should Be Procured Separately From Transmission Service While Preserving A Generator Right To Network Capacity.
New generators should not be required to commit to transmission service in order to physically interconnect to the grid. Thus Entergy appropriately recognizes that transmission rights should be arranged separately under the terms and conditions of Entergy's OATT. However, consistent with recent Commission precedent, Entergy should be required to conform the definition of Interconnection Service in Section 1.11 of its Pro Forma Agreement (and other provisions as appropriate) to reflect the interconnecting generator's right to network capacity at the point of interconnection. In Tennessee Power Company, the Commission stated:

Interconnection by itself conveys no right to delivery service. However, once secured, the interconnection component of transmission service does convey a right to the network capacity at the receipt point, consistent with the parameters of the service agreement. The interconnected generator does not lose that right simply because it may not be taking the delivery component of transmission service at a particular time. 8

Since Entergy's filing preceded the Commission's issuance of Tennessee Power, Entergy necessarily should be afforded opportunity to conform its filing to reflect the Commission's clarification of its interconnection policy. To the extent that Tennessee Power means that a generator has the right to the network capacity required to interconnect the facility and to actually receive such network capacity once the physical interconnection is accomplished, Entergy should conform the Interconnection Agreement to convey such rights at the time the generator submits its request for interconnection service. Specifically, if system upgrades9 are in fact required in order to accomplish the interconnection, the Interconnection Agreement should clearly provide that the generator does not lose the network capacity associated with those system upgrades to subsequent requests for interconnection and/or transmission service. Section H of EPSA's attached position paper (Attachment No. 1 hereto) expounds upon the rights of an interconnecting generator to, at its option, secure the deliverability of its output.

4. Interconnection Procedures

In light of the Commission's recent order, Entergy's proposed Interconnection Procedures must be revised to more closely adhere to the interconnection procedures contained in the Commission's pro forma OATT. In Tennessee Power, the Commission clarified that "customers have the right under the pro forma OATT to request the interconnection component of transmission service separately from the delivery component, and when this occurs, the pro forma OATT procedures continue to apply."10 Thus, Entergy should conform its Interconnection Procedures to the pro forma OATT and include those procedures in its OATT.

While EPSA agrees that it is reasonable to apply the pro forma OATT procedures to requests for new interconnection, it also believes that more detailed procedures specifically tailored to the requirements of generators are required.11 EPSA, therefore, recommends that, consistent with the discussion below in favor of an industry collaborative, the Commission clarify that parties should adhere to the pro forma OATT procedures until such time as more detailed replacement procedures are accepted by the Commission.

While EPSA has not comprehensively compared the differences between the procedures in the Commission's pro forma OATT and those contained in Entergy's proposed Interconnection Procedures, an initial review has revealed several key differences. First, Entergy has created a three step study procedure for facilities interconnection to its transmission system. The three steps consist of (1) a "Feasibility Study", (2) a "Detailed Interconnection Study", and (3) a "Facilities Study", in that order.12 This procedure varies from the shorter two step study procedure required by the Commission's pro forma OATT, consisting only of a System Impact Study ("SIS") and a Facilities Study.13 While the three step study procedure is not inherently objectionable, Entergy contemplates significantly longer time frames for completion of the processes than the time frame for the comparable studies identified in the Commission pro forma OATT. In addition, the proposed Agreements contain absolutely no language actually committing Entergy to the timely completion of these same extended time frame studies.

Specifically, under the Commission's pro forma OATT, a Transmission Provider must exercise due diligence to complete a SIS within 60 days, and if the study cannot be completed in this time, to "notify the Eligible Customer and provide an estimated completion date along with an explanation of the reasons why additional time is required." 14 Similarly, with respect to a Facilities Study, a Transmission Provider must use due diligence to complete a Facilities Study within 60 days and to notify an eligible transmission customer if the study cannot be completed in this time, along with an explanation why and a revised estimated completion date.15 In contrast, the Entergy Interconnection Procedures contemplate that the Feasibility Study "should be available to Customer within forty-five (45) business days,"16 the Detailed Interconnection Study eight to ten weeks, and the Facility Study an estimated six to eight weeks.17 Thus, Entergy's proposal would take at least five months.

With respect to the Detailed Interconnection Study, Entergy states only that it "will attempt to complete the interconnection study within a reasonable time," and makes no mention of due diligence, time frame, or notice and explanation for delays. This too is inconsistent with the pro forma OATT. The extended time frames and lack of commitment to target dates contained in Entergy's Interconnection Procedures are thus at odds with the Commission's pro forma OATT and should be modified accordingly to reflect the procedures accepted by the Commission.

5. System Upgrades

Section 8.3 of Entergy's proposed Agreement provides that the customer shall bear the cost of any "System Upgrades." It is unclear whether this section refers to system upgrades required to complete the interconnection or system upgrades associated with transmission service from the point of interconnection. Specifically, there is an apparent disconnect between the following portions of Entergy's filing: (i) Section 1.21 of Entergy's OATT, defining "System Upgrades" to mean modifications or improvements to the transmission system required in order to interconnect; (ii) Section 8.3.1, which indicates parenthetically that System Upgrades are those "that are optional and related to load flow constraints that have been previously paid by Customer;" and (iii) Appendix B, which addresses both "Required System Upgrades" and "Optional System Upgrades."

Entergy should be required to more clearly define optional system upgrades and to make clear in the Interconnection Agreement how such upgrades differ from required system upgrades. As discussed in more detail in EPSA's attached position paper, Entergy's filing should clarify that a generator has a right to interconnect without the need for any system enhancements designed to enable the generator to obtain transmission service from the point of interconnection. While many generators may prefer to have the need for transmission system upgrades analyzed at the time of their interconnection, some generators would prefer to wait until a transmission service request is made to analyze whether, or to what extent, upgrades are needed to ensure deliverability. The transmission provider should not assume that the interconnecting generator will always want firm transmission service.

EPSA agrees, however, that, to the extent a generator pays for Optional Upgrades (i.e., upgrades beyond those required to complete the interconnection), it should receive a transmission credit computed on a dollar-for-dollar basis (or a reservation of rights to transmission) so as to avoid prohibited "and" pricing. Moreover, such credit should apply regardless of whether the generator or its power sales customer is the transmission customer.

B. The Commission Should Issue An Interconnection Policy Statement And Convene An Industry Collaborative For The Purpose Of Developing A Commission Approved Model Interconnection Agreement. -

EPSA believes that the industry would benefit from a more comprehensive review of the rights and obligations of both generators and transmission providers with respect to new interconnection and associated interconnection procedures and agreements. EPSA therefore requests that the Commission issue a policy statement with respect to these issues and recommends further that the Commission initiate a process whereby the various sectors of the electric industry jointly can develop (1) acceptable interconnection procedures, based substantially upon the existing procedures contained in the Commission's pro forma OATT, and (2) a model or "safe harbor" interconnection agreement. Such a model agreement could serve as the starting point for negotiations between transmission providers and individual interconnection service customers (i.e., interconnecting generators). It also could serve as a benchmark to which company specific interconnection agreements could be compared once they are filed with the Commission. The terms of the model agreement could also function as the form of unexecuted agreement to be filed in the event the parties are unable to reach agreement.

To jump start this process, EPSA is including as Attachment No. 1 hereto its recently prepared interconnection policy statement, entitled "A Bill Of Rights For New Generation Interconnection." As the title indicates, this Generator Bill of Rights focuses primarily upon interconnection issues from the perspective of interconnecting generators. EPSA requests that any Commission-issued interconnection policy statement reflect the Generator Bill of Rights.

In addition, the Commission should convene an industry collaborative for the purpose of developing a Commission approved model interconnection agreement. EPSA includes as Attachment No. 2 hereto its proposed Model Interconnection Agreement ("Model Agreement") which could facilitate an industry dialogue as to appropriate and reasonable interconnection agreement terms and conditions. EPSA believes that its proposed Model Agreement reflects a good faith attempt at balancing the disparate interests of generators and interconnection service providers.

From an industry standpoint, it would be efficient for the Commission to defer ruling on the specifics of Entergy's Interconnection Agreement and to initiate an industry collaborative for the purpose of building consensus on a model interconnection agreement, along the lines of EPSA's Model Agreement. If, however, the Commission does not pursue a collaborative approach, then it should set Entergy's Interconnection Agreement for hearing for the purpose of reconciling its proposal with EPSA's Generator Bill of Rights and the Model Agreement.
5. Entergy Filing Letter at 3-4, n.2 (citing EPSA's advocacy materials related to interconnection).

6. Entergy stated that it "intends to require each new generator to sign an Interconnection Agreement identical to the Pro Forma Interconnection Agreement before interconnecting to Entergy's grid." Entergy Filing Letter at 7.

7. The parties to the interconnection agreement should be afforded the latitude to allocate risks as they see fit within the bounds of the justness and reasonableness standards of the Federal Power Act.

8. Tennessee Power Co., 90 FERC 61,238, mimeo at 5 (2000) ("Tennessee Power").

9. The term "system upgrades" is intended to refer to any modifications, upgrades, and additions to the transmission system that are required solely to interconnect the generating facility to the transmission system. EPSA is not referring to system upgrades or transmission enhancements required to provide transmission service from the point of interconnection.

10.Tennessee Power, mimeo at 4.

11. EPSA notes that the Commission's pro forma tariff does not address all of the topics with respect to which interconnection procedures are needed. For example, the tariff does not address construction sequencing and priority procedures.

12. Procedures and Requirements for Adding Generation to Entergy's Transmission System (rev. Feb. 25, 2000) ("Procedures").

13. See Promoting Wholesale Competition Through Open Access Non-discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public and Transmission Utilities, 61 Fed. Reg. 21,540 (May 10, 1996), ("Order No. 888"), Appendix B - Pro Forma Open Access Transmission Tariff ("Pro forma OATT"), FERC Stats. & Regs. 31,036, at 30,524- 30,526.

14. Pro forma OATT, § 19.3.

15. Id. at § 19.4.

16. Interconnection Study, p.2 (emphasis added).