Midwest ISO Queue Reforms Take Effect
By: DANIEL A. YARANO & ZACHARY D. OLSON
October 2008
On June 26, 2008, the Midwest Independent Transmission System Operator (Midwest ISO) submitted a proposal to the Federal Energy Regulatory Commission (FERC) to reform queuing practices for generator interconnection applications. After reviewing the proposal, taking comments from stakeholders in the industry, and receiving Midwest ISO’s responses, FERC conditionally accepted Midwest ISO’s proposal on August 25, 2008. This article summarizes the reforms Midwest ISO put in place pursuant to FERC’s conditional acceptance.
“First-Ready, First-Served”
Midwest ISO proposed a fundamental transition in queue management from “first-in, first-served” to “first-ready, first-served.” Midwest ISO proposed a change to both its project phase and its milestone structures. The proposal created a new Pre-Queue Phase to identify viable project proposals early and to identify a possible fast track for those projects that meet certain requirements. These phases are linked to objective, concrete project milestones. FERC approved Midwest ISO’s proposed transition from “first-in, first served” to “first-ready, first served.”
The Pre-Queue Phase requires formal discussions between potential interconnection customers and Midwest ISO. Such discussions allow Midwest ISO to work with the prospective interconnection customers to better prepare them for interconnection procedures, suggest alternative points of interconnection, or discourage uneconomical projects altogether. Next, the Application Review Phase uses a modified Feasibility Study as a screening point to qualitatively assess whether a project proceeds via a fast track to the Definitive Planning Phase or merely advances to the next phase. Next, the System Planning and Analysis Phase is similar to the former System Impact Study Phase. However, queue position is not a guarantee of position as projects may proceed based on the achievement of milestones (described below) as opposed to strictly following their queue positions. As a result of this flexibility, projects in constrained areas may not delay other projects that have achieved the required milestones and are otherwise ready to move forward. Lastly, the Definitive Planning Phase provides a faster processing schedule for projects in unconstrained areas and formally incorporates the restudy process. In this phase, two studies will be performed: a System Impact Restudy and a Facilities Study. Ultimately, the reform should reduce the time Midwest ISO takes to process an interconnection request for projects in relatively unconstrained areas.
New Milestone Requirements and Deposit Schedules
Midwest ISO proposed three separate milestone structures: (1) Application Milestones, (2) Definitive Planning Milestones, and (3) Interconnection Feasibility Study Milestones. Midwest ISO intended each milestone’s phase to ensure that a project is ready to proceed and to help Midwest ISO determine the projects that are “first-ready.” FERC conditionally approved the proposed milestones because it determined that the proposed milestones struck a balance between screening out uneconomical projects from the queue and ensuring that projects in the queue that are ready to proceed may progress through to the interconnection process. FERC required Midwest ISO to evaluate whether a reasonable balance has been struck by the new milestones.
FERC also accepted Midwest ISO’s proposed deposit schedule. Midwest ISO changed the depositing schedule from a fixed dollar amount deposit, regardless of the proposed project’s size, to a sliding scale deposit schedule based on the proposed size of the project. This is another mechanism that Midwest ISO can use to discourage projects at the outset.
The Application Milestones (M1)
Under the Application Milestones, Midwest ISO will accept an initial Interconnection Request only if it complies with the following requirements: (1) a nonrefundable $5,000 fee, (2) a study deposit ranging from $10,000 (less than 6 MW) up to $120,000 (over 1,000 MW), (3) a completed application form, (4) demonstration of Site Control or posting of an additional $100,000 deposit, (5) representative stability model, (6) list of technical data relating to voltage specifications, and (7) an executed Interconnection Study Agreement. Once the Application Milestones have been reached, the project may move onto the Definitive Planning Milestones.
Definitive Planning Milestones (M2)
Once a project has met the Application Milestones, the project must then comply with additional Definitive Planning Milestones before entering the Definitive Planning Phase: (1) a study deposit ranging from $40,000 (less than 6 MW) up to $520,000 (more than 1,000 MW), (2) detailed stability model, (3) definitive Point of Interconnection, (4) one-line diagram showing a project’s generating facility and electrical equipment rating and impedance, (5) definitive amount of capacity requested, (6) recertification of Site Control or agreement that a previous $100,000 deposit in lieu of site control is nonrefundable, and (7) any two of the following: (a) documentation of progress on application for state or local air, water, land, or federal nuclear permits; (b) approval of the project by a state utility regulatory commission; (c) approval from an independent board of directors of the Interconnection Customer’s company; (d) security payment reasonably acceptable to the Transmission Provider equal to gross nameplate capacity times one month of drive-out point-to-point transmission service; (e) as an alternative to options (a) through (c), a second security payment may be made.
Start dates for the Definitive Planning Phase are on a periodic basis, so a project must meet all of these requirements within the available time before the next available start date after completing the System Planning and Analysis Phase or Interconnection Feasibility Study, whichever is applicable. A project may defer entering this phase for one cycle, only one time, for a fee of $5,000.
The American Wind Energy Association and Wind on the Wires believe the seventh requirement in the Definitive Planning Milestones may impede wind energy projects in particular. Such projects often do not require environmental permits or approval of a state utility commission, and wind energy companies rarely have an independent board of directors. Wind energy projects may often be forced to post a double security deposit to comply with this milestone.
Interconnection Feasibility Study Milestones (M3)
A project must comply with three requirements within 30 days of a request: (1) security reasonably acceptable to the Transmission Provider for the cost of Network Upgrades, as determined in the System Planning and Analysis Review; (2) execution of a power purchase agreement, inclusion in a state resource adequacy plan, or other evidence that the project qualifies as a Network Resource; and (3) demonstration that generation turbines have been ordered.
Other Elements of Midwest ISO Queue Reform
Reduced Suspension Periods
Midwest ISO proposed changes to the suspension rules, which had allowed multiple suspensions totaling three years for any reason. Midwest ISO’s new suspension regime requires force majeure conditions before a project is allowed to be suspended; this requirement excludes suspensions for economic reasons. If a force majeure event occurs, a project may be suspended for up to three years. To compensate for this restriction, Midwest ISO extended the time limit for complying with the Interconnection Feasibility Study Milestones from 15 days to six months. Interconnection Customers would also have three months in which to sign the final Interconnection Agreement. FERC approved the changed suspension standards as a way to improve the integrity of the queue by helping viable projects come to fruition within set time standards.
Elimination of Small Generator Interconnection Procedures (SGIP)
Midwest ISO proposed to eliminate SGIP because the new procedures give faster treatment to projects less than 20 MW. By approving Midwest ISO’s proposal, FERC approved the elimination of the SGIP for projects between 2 MW and 20 MW, while keeping the SGIP for projects 2 MW and smaller.
Energy Resources and Network Resources
Midwest ISO’s proposed changes in the evaluation standards for Energy Resource projects mean that the ability of a project to deliver electricity will now be considered, rather than only how a new project impacts the reliability of the system. FERC rejected this proposal stating that “[w]e find that Midwest ISO has not adequately explained how ERIS customers gain an unfair advantage over NRIS customers.”
Takeaway
The proposal was conditionally accepted and made effective two months ago, on August 25, 2008. The next few months will reveal the impact that these reforms have on transmission interconnection throughout the Midwest ISO territory. It will soon become clear as to whether Midwest ISO’s queue reforms correct the system or if more reform is needed to make the transmission interconnection a smoother process for everyone involved.