MISO Queue Reform Update

April 20, 2012

By Daniel A. Yarano, Todd J. Guerrero & Lindsey A. Hemly Remakel

On March 30, 2012, the Federal Energy Regulatory Commission (the Commission) issued an order conditionally accepting the Midwest Independent Transmission System Operator’s Tariff revisions in Docket No. ER12-309, effective January 1, 2012. MISO proposed the revisions to help further its policy of “first ready first served.” MISO believes that the Tariff changes, which modify its generator interconnection procedures (GIP), will help clear the backlog of projects in the queue and better enable projects that are ready to move forward to do so.

Overall, the Commission approved the majority of MISO’s revisions. The Commission rejected several proposals, however, and is requiring MISO to make certain modifications and clarifications via compliance filings within 30 days of its March 30, 2012, order. Net-zero-related modifications must be submitted by compliance filing within 180 days of the Commission’s order. While the Tariff revisions will undoubtedly impact many projects in the queue, the extent of some impacts remains unclear due to implementation uncertainties and issues remaining to be addressed in compliance filings. For example, the new M2 milestone will require interconnection customers to demonstrate project readiness by placing more cash at risk earlier in the interconnection process, but the formula for calculating the payment was rejected by the Commission, leaving customers without important specifics. MISO has begun to clarify several of its proposed modifications and implementation processes in meetings with stakeholders. Additional details will be provided at the Interconnection Process Task Force meeting on April 24, 2012, and when MISO makes its first compliance filing at the end of the month.

MISO’s key changes, the Commission’s related findings, and updates regarding implementation and compliance are summarized below.

  • Need for Reform. The Commission found that MISO had provided sufficient evidence justifying its Tariff revisions, but to ensure that all Tariff provisions are supported by substantial evidence, are in accordance with Commission precedent, and are fair to customers, MISO is required to submit informational filings in April 2013, April 2014, and April 2015, detailing progress in the queue and suggesting additional necessary tariff revisions.

  • Implementation and Transition. The Commission accepted MISO’s proposed effective date of January 1, 2012 for the GIP revisions. MISO’s GIP revisions apply to interconnection customers with “outstanding requests,” which the Commission clarified to include (i) any interconnection request that, on the effective date of the GIP, has been submitted but not yet accepted by MISO, (ii) any interconnection request that has a signed interconnection agreement but which has not yet been submitted to the Commission for approval, (iii) any interconnection request that has an interconnection study agreement that has not yet been executed, or (iv) any interconnection request that is currently in the process of being studied or restudied. Interconnection customers that are subject to restudy at a later date will be restudied under the revised GIP, as modified on compliance.

    To provide customers time to transition, the Commission provided interconnection customers with a 90-day period following the date of the Commission’s March 30, 2012 order to come into compliance with the revised Tariff.

    The Commission also ordered MISO to submit a compliance filing clarifying the projects that will not be subject to the M2 milestone, including (i) projects in commercial operation and with executed GIAs; (ii) projects that executed GIAs prior to January 1, 2012, and are not subject to restudy; (iii) projects that are subject to restudy but have been meeting milestones under an existing GIA; and (iv) projects that are subject to restudy but have reached the point under a GIA where the M2 milestone payment would have been refunded.

    The Commission rejected MISO’s proposal to the extent that it would require modification of any existing GIA. Instead, if MISO wants to modify any existing GIA, it must show to FERC that modifications are just and reasonable. At this point, it is unknown whether MISO intends to seek modification of any signed GIA. It is unlikely, however, that MISO will seek modification of existing agreements under which interconnection customers are in compliance with stated milestones.

  • M2 Milestone Payment. MISO revised the M2 milestone, replacing certain indicia of readiness with a capital contribution. Previously, a project could demonstrate readiness by taking certain non-monetary steps, such as submitting application documentation and proceeding through the approval processes for necessary permits and obtaining state regulatory commission approval. Now, projects are required to deposit substantial sums to move into the Definitive Planning Phase (DPP), with the payment only refundable under certain conditions. The Commission will require MISO to submit a compliance filing revising the formula for developing the deposit. MISO has indicated that it intends to replace the locational factor with the regional through and out rate.

    The Commission is also requiring that MISO revise its Tariff to provide that forfeited funds must be used to offset costs to interconnection customers resulting from another interconnection customer’s withdrawal. Additionally, MISO must revise its Tariff so that any portion of an M2 milestone payment retained by MISO above the costs resulting from an interconnection customer’s withdrawal be refunded to the withdrawing customer.

  • Two Queues. MISO’s proposal included changes to the System Planning and Analysis (SPA) Phase that would remove required timelines to proceed to the DPP. Previously, once eligible for DPP, a project had 1 year from the M2 and D3 submission deadline to submit the M2 study milestones and D3 study deposit. If the 1-year deadline was not met, MISO would withdraw the request. The Commission accepted MISO’s proposed changes, subject to certain definitional modifications. As a result, interconnection customers will not be placed on a timeline to enter the DPP. For every 18 months a project remains in the SPA, a project’s studies must be updated.

  • Elimination of Interest on Refunded Study Deposits. The Commission’s rejected MISO proposal to eliminate the refunding of interest earned on the interconnection customer’s study deposit under section 3.6 of the GIP. The Commission is also requiring that MISO pay interest on M2 milestone refunds.

  • Initial Payment. The Commission conditionally accepted MISO’s proposal to include an initial payment in cash or security for the cost of certain network upgrades as an indicator of project readiness under Section 11.5 of the GIA. MISO’s revisions require the interconnection customer to provide either: (1) a cash payment of 10 or 20 percent of the total cost of project upgrades or (2) 100 percent of the total costs of upgrades in the form of security, such as a letter of credit. The interconnection customer will get to choose whether to provide cash or some other form of acceptable security.

  • Section 8.7 “Interconnection Study Restudy”. The Commission conditionally accepted MISO’s proposal to require that when a project comes out of suspension, it will be subject to restudy under the GIP in effect at the time of the restudy.

  • Changes to Point of Interconnection. MISO asked that it be able to change the point of interconnection at the System Impact Study stage, which the Commission conditionally accepted. The Commission found, however, that allowing MISO to change the point of interconnection at the Facilities Study stage could significantly increase costs and unreasonably disadvantage the interconnection customer, and rejected that portion of MISO’s proposal.

  • Model Sign-Off. The Commission conditionally accepted MISO’s proposal to require each interconnection customer to review and sign off on study models in both the SPA and the DPP. The Commission, however, did not find just and reasonable MISO’s proposal that an interconnection customer complete the sign-off form for the SPA within the 30-day period MISO proposed. MISO must submit a compliance filing proposing a timeframe that takes into consideration that the interconnection customer may remain in the SPA phase indefinitely.  

  • Modifications. The Commission conditionally accepted MISO’s proposed changes to Section 4.4 of the GIP limiting the modifications deemed permissible once a project enters the DPP. The revisions provide that the only permissible changes during the DPP are changes to the technical parameters associated with generating facility technology (e.g., wind turbines) and changes to the point of interconnection. Additionally, MISO added language to Section 4.4.4 providing that extensions to the in-service date or commercial operation date of the generating facility shall be deemed a “material modification.” Where a party to the GIA other than the interconnection customer changes its milestones, resulting in the customer needing to revise its own commercial operation date and in-service date, MISO’s approval of such revision cannot be unreasonably withheld. Similarly, the Commission stated that MISO’s approval of a customer’s need to change a due date in response to changes in a higher-queued interconnection request cannot be unreasonably withheld. The Commission noted that in either case, the changes should not exceed three years beyond the original commercial operation date or in-service date.

  • Limited Operation. The Commission accepted MISO’s proposal to require that maximum limits be placed on the output of generating facilities and updated on a quarterly basis in the event that network upgrades are not completed within six months of a facility’s commercial operation date.

  • Dispute Resolution. The Commission accepted MISO’s proposal to eliminate dispute resolution as a method of stopping the 60-day period in which to decide whether to sign the GIA or file unexecuted.

  • GIP, Appendix 1. The Commission rejected MISO’s proposal to require wind generators to provide detail related to reactive power capability for wind turbines prior to entering the DPP. The Commission otherwise accepted MISO’s proposed information requirements to Attachment A to Appendix 1 of the GIP, with the condition that MISO revise its Tariff to acknowledge that interconnection customers may only be able to provide estimates of certain information.

  • Site Control. The Commission accepted MISO’s proposal to require interconnection customers to demonstrate a right to develop a site for the construction of interconnection facilities with the condition that MISO submit a compliance filing clarifying those instances in which the documentation required to demonstrate site control includes interconnection facilities.

  • Net Zero Interconnection Service. MISO proposed a new class of Energy Resource Interconnection Service called Net Zero Interconnection (NZI) Service, which the Commission conditionally accepted subject to modifications and compliance filings within 180 days. The Commission agreed that NZI Service will promote a more efficient utilization of existing interconnection capacity but expressed concern regarding MISO’s proposed implementation of NZI Service. The Commission noted the potential for MISO’s proposal to have competitive implications resulting in undue discrimination.  The Commission also indicated that modifications are necessary to provide for greater transparency in NZI Service provision.

If you have questions relating to MISO’s Tariff revisions or how to proceed under the new reforms, please contact any of the authors.