[Federal Register Volume 68, Number 160 (Tuesday, August 19, 2003)]
[Rules and Regulations]
[Pages 49846-49972]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-20157]
[[Page 49845]]
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Part II
Department of Energy
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Federal Energy Regulatory Commission
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18 CFR Part 35
Standardization of Generator Interconnection Agreements and Procedures;
Final Rule
Federal Register / Vol. 68, No. 160 / Tuesday, August 19, 2003 /
Rules and Regulations
[[Page 49846]]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Part 35
[Docket No. RM02-1-000; Order No. 2003]
Standardization of Generator Interconnection Agreements and
Procedures
July 24, 2003.
AGENCY: Federal Energy Regulatory Commission, DOE.
ACTION: Final rule.
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SUMMARY: The Federal Energy Regulatory Commission (Commission) is
amending its regulations under the Federal Power Act to require public
utilities that own, control, or operate facilities for transmitting
electric energy in interstate commerce to file revised open access
transmission tariffs containing standard generator interconnection
procedures and a standard agreement that the Commission is adopting in
this order and to provide interconnection service to devices used for
the production of electricity having a capacity of more than 20
megawatts, under them. Any non-public utility that seeks voluntary
compliance with the reciprocity condition of an open access
transmission tariff may satisfy this condition by adopting these
procedures and this agreement.
EFFECTIVE DATE: This final rule will become effective October 20, 2003.
FOR FURTHER INFORMATION CONTACT:
Patrick Rooney (Technical Information), Office of Market, Tariffs
and Rates, Federal Energy Regulatory Commission, 888 First Street,
NE., Washington, DC 20426, (202) 502-6205.
Roland Wentworth (Technical Information), Office of Market, Tariffs
and Rates, Federal Energy Regulatory Commission, 888 First Street,
NE., Washington, DC 20426, (202) 502-8262.
Bruce Poole (Technical Information), Office of Market, Tariffs and
Rates, Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426, (202) 502-8468.
Michael G. Henry (Legal Information), Office of the General Counsel,
Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426, (202) 502-8532.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
A. Background
1. Need for Standard Generator Interconnection Procedures and
Agreement
2. Interconnection ANOPR
3. Interconnection NOPR
a. Overview of the NOPR
b. Severing of Small Generator Issues from the NOPR
B. Legal Authority
1. The Federal Power Act and Order No. 888
2. Commission Interconnection Case Law
C. Differences Between the Proposed and Final Rules
II. Discussion
A. Issues Related to the Standard Large Generator Interconnection
Procedures (LGIP)
1. Overview
2. Section-by-Section Discussion of the Proposed LGIP
Section 1--Definitions
Section 2--Scope and Application
Section 3--Interconnection Request
Section 4--Queue Position
Section 5--Procedures for Interconnection Requests Submitted Prior
to Effective Date of Interconnection Procedures
Section 6--Interconnection Feasibility Study
Section 7--Interconnection System Impact Study
Section 8--Interconnection Facilities Study
Section 10--Optional Interconnection Study
Section 9--Engineering & Procurement (``E&P'') Agreement
Section 11--Standard Large Generator Interconnection Agreement
Section 12--Construction of Transmission Provider's Interconnection
Facilities and Network Upgrades
Section 13--Miscellaneous
Appendices
B. Issues Related to the Standard Large Generator Interconnection
Agreement (LGIA)
1. Overview
2. Article-by-Article Discussion of the Proposed LGIA
Article 1--Definitions
Article 2--Effective Date, Term and Termination
Article 3--Regulatory Filings
Article 4--Scope of Service
Article 5--Interconnection Facilities Engineering, Procurement, and
Construction
Article 6--Testing and Inspection
Article 7--Metering
Article 8--Communication
Article 9--Operations
Article 10--Maintenance
Article 11--Performance Obligation
Article 12--Invoice
Article 13--Emergencies
Article 14--Regulatory Requirements and Governing Law
Article 15--Notices
Article 16--Force Majeure
Article 17--Default
Article 18--Indemnity
Article 19--Assignment
Article 20--Severability
Article 21--Comparability
Article 22--Confidentiality
Article 23--Environmental Releases
Article 24--Information Requirements
Article 25--Information Access and Audit Rights
Article 26--Subcontractors
Article 27--Disputes
Article 28--Representations, Warranties and Covenants
Article 29--Joint Operating Committee
Article 30--Miscellaneous
Appendices
C. Other Significant Policy Issues
1. Interconnection Pricing Policy
Concerns about the Fairness and Efficiency of the Commission's
Crediting Policy
Interconnection Pricing and the Transition to Standard Market
Design
The Inability of a Transmission Owner To Recover the Costs of
Network Upgrades
Responsibility for Line Outage Costs Resulting from Interconnection
Issues Concerning the Five Year Refund Period and the Payment of
Interest
Rules Governing the Payment of Credits
Responsibility for the Costs Incurred by Affected Systems
Policies Regarding Previously Approved Cost Allocations and Pricing
Arrangements
Miscellaneous Pricing Issues
2. Interconnection Products and Scope of Service
Definition of Interconnection Products
Pricing of Network Resource Interconnection Service
Study Requirements for Network Resource Interconnection Service
Identification of Types of Interconnection Services to be Studied
Revisions to the Final Rule LGIP and Final Rule LGIA
3. ``Distribution'' Interconnections
4. Issues Relating to Qualifying Facilities
5. Variations from the Final Rule
6. Waiver Availability for Small Entities
7. OATT Reciprocity Requirements Applied to the Final Rule LGIP and
Final Rule LGIA
8. General Comments/Clarifications
a. Insurance
b. Liquidated Damages
[[Page 49847]]
c. Consequential Damages
d. Two vs. Three Party Agreements
D. Compliance Issues
1. Amendments to Transmission Providers' OATTs
2. Grandfathering of Existing Interconnection Agreements (ISOs and
non-ISOs)
3. Order No. 2001 and the Filing of Interconnection Agreements
III. Information Collection Statement
IV. Environmental Impact Statement
V. Regulatory Flexibility Act
VI. Document Availability
VII. Effective Date and Congressional Notification
Regulatory Text
Appendix A--Flow Chart of the Large Generating Facility Interconnection
Process
Appendix B--Commenter Acronyms
Appendix C--Standard Large Generator Interconnection Procedures (LGIP),
including Standard Large Generator Interconnection Agreement (LGIA)
Before Commissioners: Pat Wood, III, Chairman; William L. Massey,
and Nora Mead Brownell.
I. Introduction
1. This Final Rule requires all public utilities that own, control
or operate facilities used for transmitting electric energy in
interstate commerce to have on file standard procedures and a standard
agreement for interconnecting generators larger than 20 MW. The
Commission expects that this Final Rule will prevent undue
discrimination, preserve reliability, increase energy supply, and lower
wholesale prices for customers by increasing the number and variety of
new generation that will compete in the wholesale electricity market.
2. This Final Rule requires public utilities that own, control, or
operate facilities for transmitting electric energy in interstate
commerce to file revised open access transmission tariffs (OATTs) to
add Standard Large Generator Interconnection Procedures (Final Rule
LGIP)\1\ and a Standard Large Generator Interconnection Agreement
(Final Rule LGIA).\2\ Any non-public utility that seeks voluntary
compliance with the reciprocity condition of an open access
transmission tariff may satisfy this condition by adopting this
Agreement and these procedures.
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\1\ Readers may note that provisions of the Final Rule LGIP are
referred to as ``Sections'' whereas provisions of the Final Rule
LGIA are referred to as ``Articles.''
\2\ Such filings must be made within 60 days of publication of
this Final Rule in the Federal Register.
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3. The Final Rule LGIP sets forth the procedures that
Interconnection Customers and Transmission Providers are required to
follow during the interconnection process.\3\ The Final Rule LGIA sets
forth the legal rights and obligations of each Party, addresses cost
responsibility issues, and establishes a process for resolving
disputes.
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\3\ Unless otherwise defined in this Preamble, capitalized terms
used in this Final Rule have the meanings specified in Section 1 of
the Final Rule LGIP and Article 1 of the Final Rule LGIA. The term
Generating Facility means the specific device for which the
Interconnection Customer has requested interconnection. The owner of
the Generating Facility is referred to as the Interconnection
Customer. The entity (or entities) with which the Generating
Facility is interconnecting is referred to as the Transmission
Provider. The term Large Generator is intended to refer to any
energy resource having a capacity of more than 20 megawatts, or the
owner of such a resource.
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4. The Federal Energy Regulatory Commission's (Commission's)
authority to require the addition of the Final Rule LGIA and Final Rule
LGIP to the OATT derives from its findings of undue discrimination in
the interstate electric transmission market that formed the basis for
Order No. 888.\4\ The Commission here adopts standard procedures and a
standard agreement to be used by Transmission Providers with
Interconnection Customers proposing to interconnect a generator of more
than 20 MW to sell energy at wholesale in interstate commerce. The
Final Rule LGIP and Final Rule LGIA apply to any new Interconnection
Request to a Transmission Provider's Transmission System.\5\ The
Commission is not requiring any retroactive changes to individual
(versus generic) interconnection agreements filed with the Commission
prior to the effective date of this Final Rule.
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\4\ Promoting Wholesale Competition Through Open Access Non-
Discriminatory Transmission Services by Public Utilities; Recovery
of Stranded Costs by Public Utilities and Transmitting Utilities,
Order No. 888, 61 FR 21540 (May 10, 1996), FERC Stats. & Regs. ]
31,036 (1996), order on reh'g, Order No. 888-A, 62 FR 12274 (Mar.
14, 1997), FERC Stats. & Regs. ] 31,048 (1997), order on reh'g,
Order No. 888-B, 81 FERC ] 61,248 (1997), order on reh'g, Order No.
888-C, 82 FERC ] 61,046 (1998), aff'd in relevant part sub nom.
Transmission Access Policy Study Group v. FERC, 225 F.3d 667 (DC
Cir. 2000), aff'd sub nom. New York v. FERC, 535 U.S. 1 (2002).
\5\ New Interconnection Requests include those submitted after
the effective date of this Final Rule and include requests to
increase the capacity of, or modify the operating characteristics
of, an existing Generating Facility that is interconnected with the
Transmission Provider's Transmission System.
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A. Background
5. The electric power industry continues to be in transition. Where
the industry once comprised mainly large, vertically integrated
utilities providing bundled power at cost-based rates, companies
selling unbundled wholesale power at rates set by competitive markets
have now become common. Balanced market rules and sufficient
infrastructure are essential for achieving power markets that will
provide customers with reasonably priced and reliable service.
6. The Commission continues to work to encourage fully competitive
bulk power markets. The effort took its first major step with Order No.
888, which required public utilities to provide other entities
comparable access to their facilities for transmitting electricity in
interstate commerce, and continued with Order No. 2000,\6\ which
encouraged the development of Regional Transmission Organizations
(RTOs).
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\6\ Regional Transmission Organizations, Order No. 2000, 65 FR
810 (Jan. 6, 2000), FERC Stats. & Regs. ] 31,089 (1999), order on
reh'g, Order No. 2000-A, 65 FR 12,088 (Mar. 8, 2000), FERC Stats. &
Regs. ] 31,092 (2000), aff'd sub nom. Public Util. Dist. No. 1 v.
FERC, 272 F.3d 607 (DC Cir. 2001).
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7. In this proceeding the Commission, pursuant to its
responsibility under Sections 205 and 206 of the Federal Power Act
(FPA) to remedy undue discrimination, requires all public utilities
that own, control, or operate facilities for transmitting electric
energy in interstate commerce to append to their OATTs a Final Rule
LGIP and Final Rule LGIA. The Commission believes that these documents
will provide just and reasonable terms and conditions of transmission
service while ensuring that reliability is protected and that they will
provide a reasonable balance between the competing goals of uniformity
and flexibility.
1. Need for Standard Generator Interconnection Procedures and Agreement
8. In April 1996, in Order No. 888, the Commission established the
foundation necessary to develop competitive bulk power markets in the
United States: non-discriminatory open access transmission services by
public utilities and stranded cost recovery rules to provide a fair
transition to competitive markets. Order No. 888 did not directly
address generator interconnection issues.
9. In Tennessee Power Company \7\ (Tennessee) the Commission
clarified that interconnection is a critical component of open access
transmission service and thus is subject to the requirement that
utilities offer comparable service under the OATT. In Tennessee the
Commission encouraged, but did not require, each Transmission Provider
to revise its OATT to include interconnection procedures, including a
[[Page 49848]]
standard interconnection agreement and specific criteria, procedures,
milestones, and time lines for evaluating Interconnection Requests.\8\
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\7\ Tennessee Power Company, 90 FERC ] 61,238 (2002).
\8\ See, e.g., Commonwealth Edison Co., 91 FERC ] 61,083 (2000).
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10. The Commission to date has addressed interconnection issues on
a case-by-case basis. Although a number of Transmission Providers have
filed interconnection procedures as part of their OATTs,\9\ many
industry participants remain dissatisfied with existing interconnection
policy and procedures. With the increasing number of interconnection-
related disputes, it has become apparent that the case-by-case approach
is an inadequate and inefficient means to address interconnection
issues.
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\9\ See, e.g., American Electric Power Service Corp., 91 FERC ]
61,308 (2000), order denying reh'g and granting clarification, 94
FERC ] 61,166, order dismissing request for clarification, 95 FERC ]
61,130 (2001), appeal docketed sub nom. Tenaska, Inc. v. FERC, No.
01-1194 (DC Cir. Apr. 23, 2001); Southwest Power Pool, Inc., 92 FERC
] 61,109 (2000); Carolina Power & Light Co., 93 FERC ] 61,032
(2000), reh'g denied, 94 FERC ] 61,165 (2001), appeal docketed sub
nom. Tenaska, Inc. v. FERC, No. 01-1195 (DC Cir. Apr. 23, 2001);
Virginia Electric & Power Co., 93 FERC ] 61,307 (2000), order on
clarification, 94 FERC ] 61,045, reh'g denied, 94 FERC ] 61,164
(2001), appeal docketed sub nom. Tenaska, Inc. v. FERC, No. 01-1196
(DC Cir. Apr. 23, 2001); Consumers Energy Co., 93 FERC ] 61,339
(2000), order on reh'g and clarification, 94 FERC ] 61,230, order on
clarification and denying reh'g, 95 FERC ] 61,131 (2001).
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11. Interconnection plays a crucial role in bringing much-needed
generation into the market to meet the growing needs of electricity
customers. Further, relatively unencumbered entry into the market is
necessary for competitive markets. However, requests for
interconnection frequently result in complex, time consuming technical
disputes about interconnection feasibility, cost, and cost
responsibility. This delay undermines the ability of generators to
compete in the market and provides an unfair advantage to utilities
that own both transmission and generation facilities. The Commission
concludes that there is a pressing need for a single set of procedures
for jurisdictional Transmission Providers and a single, uniformly
applicable interconnection agreement for Large Generators.\10\ A
standard set of procedures as part of the OATT for all jurisdictional
transmission facilities will minimize opportunities for undue
discrimination and expedite the development of new generation, while
protecting reliability and ensuring that rates are just and reasonable.
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\10\ In another rulemaking, the Commission proposes a separate
set of procedures and an agreement applicable to Small Generators
(any energy resource having a capacity of no larger than 20 MW, or
the owner of such a resource) that seek to interconnect to
jurisdictional Transmission Providers. See Standardization of Small
Generator Interconnection Agreements and Procedures, Notice of
Proposed Rulemaking, Docket No. RM02-12-000 (issued concurrently
with this Final Rule). 104 FERC ] 61,104.
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12. Interconnection is a critical component of open access
transmission service, and standard interconnection procedures and a
standard agreement applicable to Large Generators will serve several
important functions: They will (1) Limit opportunities for Transmission
Providers to favor their own generation, (2) facilitate market entry
for generation competitors by reducing interconnection costs and time,
and (3) encourage needed investment in generator and transmission
infrastructure. The Commission expects that the Final Rule LGIP and
Final Rule LGIA (as well as the documents that will be developed in the
Small Generator Interconnection proceeding--see footnote 10, supra)
will resolve most disputes, minimize opportunities for undue
discrimination, foster increased development of economic generation,
and protect system reliability. Therefore, the Commission adopts the
Final Rule LGIP and Final Rule LGIA, which will be required as an
amendment to the OATT of each public utility that owns, controls, or
operates facilities for transmitting electric energy in interstate
commerce. As discussed below, more flexibility is available to
independent transmission entities in the procedures and agreement they
must adopt as compared with the standard provisions adopted herein.
2. Interconnection ANOPR
13. The Commission issued an Advance Notice of Proposed Rulemaking
(ANOPR) regarding generator interconnection on October 25, 2001.\11\ As
a point of departure, the ANOPR presented the Standard Generator
Interconnection Procedures and Standard Generation Interconnection
Agreement of the Electric Reliability Council of Texas (ERCOT).\12\ The
Commission supplemented and modified the ERCOT documents with various
``best practices'' that were identified in Attachment A to the ANOPR.
These ``best practices'' were based, in part, on generator
interconnection procedures and agreements that had been approved by the
Commission in past cases. The ANOPR instructed the commenters and
parties to assume that the Commission's current pricing policy, as
described in ANOPR Attachment B, would remain in effect.
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\11\ Standardizing Generator Interconnection Agreements and
Procedures, Advance Notice of Proposed Rulemaking, 66 FR 55140 (Nov.
1, 2001), FERC Stats. & Regs. ] 35,540 (2001).
\12\ The ERCOT agreement and procedure were appended to the
ANOPR as Appendix A.
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14. The ANOPR initiated a consensus-making process in which members
of various segments of the electric power industry, government, and the
public had an opportunity to provide input. This effort resulted in two
documents that largely shaped the Notice of Proposed Rulemaking (Large
Generator Interconnection NOPR) that followed.\13\ These two documents
are referred to as the Consensus LGIP and Consensus LGIA (although a
consensus was not reached on all issues). The Commission received
numerous comments, primarily from Transmission Providers, Transmission
Owners, generators (herein called Interconnection Customers), and state
regulators, on the ANOPR and the Consensus LGIP and Consensus LGIA.
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\13\ Standardization of Generator Interconnection Agreements and
Procedures, Notice of Proposed Rulemaking, 67 FR 22250 (May 2,
2002), FERC Stats. & Regs. ] 32,560 (2002).
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3. Interconnection NOPR
a. Overview of the NOPR
15. Although the negotiators did not reach consensus on every
issue, the Consensus LGIP and LGIA reflect substantial agreement among
diverse interests. The Commission used these documents and the comments
on them to create the proposed standard LGIP and LGIA documents (NOPR
LGIP and NOPR LGIA). Generally, the NOPR used the Consensus LGIP and
LGIA provisions where there was agreement. Where the participants could
not reach consensus on a particular issue and options were presented in
the Consensus LGIP and LGIA, the Commission chose between those options
guided by the principle of minimizing barriers to entry of new
generation without increasing the risk of reliability problems. Where
an issue remained unresolved and no option was presented, the
Commission generally proposed the ERCOT provision.
b. Severing of Small Generator Issues From the NOPR
16. In their comments on the interconnection NOPR, supporters of
Small Generators (which are defined herein as devices for the
production of electricity having a capacity no more than 20 MW)
requested that the Commission adopt separate rules and procedures for
interconnecting Small Generators. They argued that use of a Final Rule
LGIP and Final Rule LGIA
[[Page 49849]]
designed for Large Generators would unduly hinder the development of
Small Generators. They sought streamlined procedures and requirements
that would allow an Interconnection Customer with a Small Generator to
avoid delays caused by studying sequentially the effects of
interconnecting its generator with the Transmission Provider's electric
system.
17. Persuaded by this request, the Commission decided to propose
separate Small Generator interconnection procedures and an agreement
(SGIP and SGIA) to provide the right incentives for both Transmission
Providers and Interconnection Customers with Small Generators.\14\ To
that end, the Commission severed the issues related to interconnecting
generators no larger than 20 MW from this proceeding and initiated
another rulemaking docket, RM02-12-000, for the former.\15\
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\14\ The Small Generator Interconnection ANOPR proposed adopting
two Small Generator Interconnection Procedures documents and two
Small Generator Interconnection Agreements, with the distinction
between the two sets of documents being the size of the Small
Generator.
\15\ See Standardization of Small Generator Interconnection
Agreements and Procedures, Advance Notice of Proposed Rulemaking, 67
FR 54749 (Aug. 26, 2002), FERC Stats. & Regs. ] 35,544 (2002).
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B. Legal Authority
1. The Federal Power Act and Order No. 888
18. In fulfilling its responsibilities under Sections 205 and 206
of the Federal Power Act,\16\ the Commission is required to address,
and has the authority to remedy, undue discrimination. The Commission
must ensure that the rates, contracts, and practices affecting
jurisdictional transmission do not reflect an undue preference or
advantage for non-independent Transmission Providers and are just and
reasonable. Additionally, as discussed in Order No. 888, the
Commission's regulatory authority under the Federal Power Act ``clearly
carries with it the responsibility to consider, in appropriate
circumstances, the anticompetitive effects of regulated aspects of
interstate utility operations pursuant to [FPA] Sections 202 and 203,
and under like directives contained in Sections 205, 206, and
207.''\17\
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\16\ 16 U.S.C. 824d, 824e (2000).
\17\ Gulf States Utils. Co. v. FPC, 411 U.S. 747, 758-59 (1973);
see City of Huntingburg v. FPC, 498 F.2d 778, 783-84 (D.C. Cir.
1974) (noting the Commission's duty to consider the potential
anticompetitive effects of a proposed interconnection agreement).
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19. The record underlying Order No. 888 showed that public
utilities owning or controlling jurisdictional transmission facilities
had the incentive to engage in, and had engaged in, unduly
discriminatory transmission practices.\18\ The Commission in Order No.
888 also thoroughly discussed the legislative history and case law
involving Sections 205 and 206, concluded that it had the authority and
responsibility to remedy the undue discrimination it had found by
requiring open access, and decided to do so through a rulemaking on a
generic, industrywide basis.\19\ The Supreme Court affirmed the
Commission's decision to exercise this authority by requiring non-
discriminatory (comparable) open access as a remedy for undue
discrimination.\20\
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\18\ Order No. 888, FERC Stats. Regs ] 31,036 at 31,679-84;
Order No. 888-A, FERC Stats. & Regs ] 31,048 at 30,209-10.
\19\ Order No. 888, FERC Stats. & Regs ] 31,036 at 31,668-73,
31,676-79; Order No. 888-A, FERC Stats. & Regs ] 31,048 at 30,201-
12; TAPS v. FERC, 225 F.3d 667, 687-88 (DC Cir. 2000).
\20\ New York v. FERC, 535 U.S. 1 (2002).
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20. The Commission has identified interconnection as an element of
transmission service that is required to be provided under the
OATT.\21\ Thus, the Commission may order generic interconnection terms
and procedures pursuant to its authority to remedy undue discrimination
and preferences under Sections 205 and 206 of the Federal Power Act.
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\21\ See Tennessee Power Co., 90 FERC ] 61,238 at 61,761, reh'g
dismissed, 91 FERC ] 61,271 (2000).
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2. Commission Interconnection Case Law
21. Unless expressly changed in this Final Rule, the holdings in
the Commission's existing interconnection precedents will remain a
useful guide during the implementation of this Final Rule. The
Commission's interconnection cases have drawn the distinction between
Interconnection Facilities and Network Upgrades. Interconnection
Facilities are found between the Interconnection Customer's Generating
Facility and the Transmission Provider's Transmission System. The
Commission has developed a simple test for distinguishing
Interconnection Facilities from Network Upgrades: Network Upgrades
include only facilities at or beyond the point where the
Interconnection Customer's Generating Facility interconnects to the
Transmission Provider's Transmission System.\22\ The Commission has
made clear that Interconnection Agreements are evaluated by the
Commission according to the just and reasonable standard.\23\ Most
improvements to the Transmission System, including Network Upgrades,
benefit all transmission customers, but the determination of who
benefits from such Network Upgrades is often made by a non-independent
transmission provider, who is an interested party. In such cases, the
Commission has found that it is just and reasonable for the
Interconnection Customer to pay for Interconnection Facilities but not
for Network Upgrades. Agreements between the Parties to classify
Interconnection Facilities as Network Upgrades, or to otherwise
directly assign the costs of Network Upgrades to the Interconnection
Customer, have not been found to be just and reasonable and have been
rejected by the Commission.\24\
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\22\ Entergy Gulf States, Inc., 98 FERC ] 61,014 at 61,023,
reh'g denied, 99 FERC ] 61,095 (2002); see Public Service Co. of
Colorado, 59 FERC ] 61,311 (1992), reh'g denied, 62 FERC ] 61,013 at
61,061 (1993).
\23\ Pacific Gas & Electric Company, et al., 102 FERC ] 61,070
(2003).
\24\ See, e.g. Illinois Power Co., 103 FERC ] 61,032 (2003);
American Electric Power Service Corp., 101 FERC ] 61,194 (2002).
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22. Regarding pricing for a non-independent Transmission Provider,
the distinction between Interconnection Facilities and Network Upgrades
is important because Interconnection Facilities will be paid for solely
by the Interconnection Customer, and while Network Upgrades will be
funded initially by the Interconnection Customer (unless the
Transmission Provider elects to fund them), the Interconnection
Customer would then be entitled to a cash equivalent refund (i.e.,
credit) equal to the total amount paid for the Network Upgrades,
including any tax gross-up or other tax-related payments. The refund
would be paid to the Interconnection Customer on a dollar-for-dollar
basis, as credits against the Interconnection Customer's payments for
transmission services, with the full amount to be refunded, with
interest within five years of the Commercial Operation Date. The
Commission has clarified that transmission credits may be used whether
or not a Generating Facility is being dispatched and that credits must
be accepted for all network transmissions by the Interconnection
Customer, regardless of whether the plant from which the credits
originated is dispatched.\25\ Credits are not tied to any particular
Generating Facility.\26\ The Commission has stated that peaking
facilities, for instance, must be allowed to use credits even when the
Generating
[[Page 49850]]
Facility is not dispatched.\27\ The Commission has also allowed
Transmission Providers to require several Interconnection Customers to
share the costs of Network Upgrades, under certain circumstances.\28\
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\25\ Entergy Services, Inc., 101 FERC ] 61,289 (2002).
\26\ Id.
\27\ Colton Power, LP, 101 FERC ] 61,150 (2002).
\28\ Id.
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23. The Commission has also clarified that an Interconnection
Customer need not enter into an agreement for the delivery component of
transmission service to interconnect with a Transmission Providers'
Transmission System.\29\ At the same time, Interconnection Service or
an interconnection by itself does not confer any delivery rights from
the Generating facility to any points of delivery.\30\
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\29\ Entergy Services, Inc., 101 FERC ] 61,016 (2002); Southern
Company Services, Inc., 95 FERC ] 61,307 at 62,049, order dismissing
reh'g, 96 FERC ] 61,168 (2001); Tennessee Power Co., 90 FERC ]
61,238 at 61,761 (2000).
\30\ See Arizona Public Service Co., 94 FERC ] 61,027 at 61,076,
order on reh'g, 94 FERC ] 61,267 (2001).
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24. The Commission has clarified that ownership of the
Interconnection Facilities does not have a direct effect on reliability
of the system. Therefore, as long as the Transmission Provider operates
the Interconnection Facilities, the Commission will allow an
Interconnection Customer to own part, or all, of those facilities.\31\
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\31\ Arizona Public Service Company, 102 FERC ] 61,303 (2003).
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C. Differences Between the Proposed and Final Rules
25. The Final Rule LGIP and Final Rule LGIA largely track the
proposed documents. Changes made in the Final Rule tend to be specific
to an individual LGIP section or LGIA article, and do not require
fundamental changes to the documents. That being said, there are a few
significant issues, some substantive and others organizational, that
the Commission summarizes here.
26. Most importantly, we note that the Final Rule applies to
independent and non-independent Transmission Providers alike, but non-
independent Transmission Providers are required to adopt the Final Rule
LGIP and Final Rule LGIA into their OATTs, with deviations from the
Final Rule justified using either the ``regional differences'' or
``consistent with or superior to'' standard. We also allow Regional
Transmission Organizations (RTOs) and ISOs more flexibility to
customize an LGIP and LGIA to meet their regional needs. This applies
to terms and conditions as well as pricing. While RTOs and ISOs are
required to submit compliance filings, they may submit LGIP and LGIA
terms and conditions that meet an ``independent entity variation''
standard that is more flexible than the ``consistent with or superior
to'' standard and the regional differences standard.
27. We are also including in the Final Rule LGIA an article
addressing insurance requirements and limiting liability for
consequential damages, both of which were absent from the NOPR.
Provision for liquidated damages had been removed from the Final Rule
LGIP but remains an option in the Final Rule LGIA. Also, in the Final
Rule LGIP, when a Transmission Provider elects to study Interconnection
Requests in Clusters, it would simultaneously study all
Interconnections Requests received within a 180 day window, rather than
a 90 day window as proposed.
28. On pricing, we clarify the approach set forth in the NOPR. We
continue our current policy of requiring a Transmission Provider that
is not an independent entity to provide transmission credits for the
cost of Network Upgrades needed for a Generating Facility
interconnection. For a Transmission Provider that is an independent
entity, such as an RTO or ISO, we allow flexibility as to the specifics
of the interconnection pricing policy. Also, an RTO or ISO may propose
participant funding for Network Upgrades for a generator
interconnection, and, for a transitional period not to exceed a year, a
region may use participant funding as soon as an independent
administrator has been approved by the Commission and the affected
states.
29. Where the policy of transmission credits for upgrades required
as a result of the interconnection applies, the Commission provides
several clarifications in this Final Rule. For example, the
Interconnection Customer should receive transmission credits only if
its Generating Facility has achieved commercial operation. Transmission
credits are to be paid to the Interconnection Customer when upgrades to
an Affected System \32\ are constructed and the Interconnection
Customer has paid for them. Finally, the Transmission Provider may
decline to award credits for only those transmission charges that are
designed to recover out-of-pocket costs, such as the cost of line
losses, associated with the delivery of the output of the Generating
Facility.
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\32\ An Affected System is an electric system other than the
Transmission Provider's Transmission System that may be affected by
the proposed interconnection.
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II. Discussion
30. In part A of this discussion we address the Standard Large
Generator Interconnection Procedures (Final Rule LGIP) that specify the
details of the uniform process a prospective Interconnection Customer
and its Transmission Provider shall use to initiate, evaluate, and
implement an Interconnection Request pursuant to the Final Rule.
31. In part B we discuss the details of the Standard Large
Generator Interconnection Agreement (Final Rule LGIA) to be executed by
the prospective Interconnection Customer, the Transmission Provider
and, where appropriate, the Transmission Owner. This document is
incorporated as Appendix 6 to the Standard Large Generator
Interconnection Procedures and covers the related rights and
obligations of the Parties.\33\
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\33\ The Final Rule LGIP and Final Rule LGIA define Party or
Parties as ``Transmission Provider, Transmission Owner,
Interconnection Customer, or any combination of the above.''
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32. In part C, we discuss a number of other significant policy
issues in connection with this rulemaking, including pricing policies;
the required Interconnection Services; the treatment of
``Distribution'' level interconnections; Qualifying Facility matters;
variations from the Final Rule and accommodation of regional
differences; the availability of waivers for small entities; OATT
reciprocity implications for interconnection requests; assorted
clarifications to the NOPR's proposals; insurance and liquidated
damages matters; two- versus three-party interconnection agreements;
and consequential damage issues.
33. In part D, we address Compliance Issues pertaining to the
requirement for a Transmission Provider to file conforming amendments
to its existing OATT; the treatment to be accorded existing
interconnection agreements (grandfathering); and the method a
Transmission Provider is to use to file executed and unexecuted
interconnection agreements in accord with this Final Rule.
A. Issues Related to the Standard Large Generator Interconnection
Procedures (LGIP)
1. Overview \34\
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\34\ For the convenience of the reader, a flow chart depicting
the interconnection process is appended to this preamble as Appendix
A.
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34. The Final Rule Standard Large Generator Interconnection
Procedures (LGIP) document specifies the steps that must be followed
and deadlines that must be met when an Interconnection
[[Page 49851]]
Customer requests interconnection of either a new Generating Facility
or the expansion of an existing Generating Facility with the
Transmission Provider's Transmission System.\35\ The Commission directs
each public utility to amend its OATT with a single compliance filing
to incorporate the Final Rule LGIP and the Standard Large Generator
Interconnection Agreement (LGIA) documents. RTOs and ISOs must also
make compliance filings, but as discussed above, will have more
flexibility to propose different procedures and a different agreement.
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\35\ Any Transmission Provider with an Interconnection Request
outstanding at the time this Final Rule becomes effective shall
transition to the Final Rule LGIP within a reasonable period of
time. This is further described in Final Rule LGIP Section 5.1.
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35. The Final Rule LGIP sets forth the following steps to secure an
interconnection. First, the prospective Interconnection Customer will
submit an Interconnection Request to the Transmission Provider along
with a $10,000 deposit, preliminary site documentation, and the
expected In-Service Date.\36\ The Transmission Provider will
acknowledge receipt of the request and promptly notify the
Interconnection Customer if its request is deficient. When the
Interconnection Request is complete, the Transmission Provider will
place it in its interconnection queue with other pending requests. The
Transmission Provider will assign a Queue Position to each completed
Interconnection Request based on the date and time of its receipt.\37\
Queue Position is used to determine the order of performing the various
Interconnection Studies and the assignment of cost responsibility for
the construction of facilities necessary to accommodate the
Interconnection Request.\38\ The Transmission Provider will also
maintain a list of all Interconnection Requests \39\ on its OASIS.\40\
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\36\ The standard form of Interconnection Request is Appendix 1
of the LGIP document.
\37\ For example, the first complete Interconnection Request,
assigned an earlier Queue Position, is ``higher-queued'' relative to
the second complete Interconnection Request that is assigned a later
Queue Position and is ``lower queued.'' The withdrawal of a complete
Interconnection Request causes it to lose its Queue Position and all
succeeding complete Interconnection Requests to advance,
accordingly.
\38\ Any Interconnection Customer assigned a Queue Position
before the effective date of this Final Rule would retain that Queue
Position.
\39\ We emphasize that the Final Rule LGIP requires the
Transmission Provider, the Transmission Owner, and such entities'
officers, employees, and contractors to maintain proper procedures
for Confidential Information provided by an Interconnection Customer
related to the Interconnection Request, the disclosure of which
could harm or prejudice the Interconnection Customer or its
business.
\40\ Open Access Same-Time Information System and Standards of
Conduct, Order No. 889, 61 FR 21737 (May 10, 1996), FERC Stats. &
Regs. ] 31,035 at 31,590 (1996), order on reh'g, Order No. 889-A, 62
FR 12484 (Mar. 14, 1997), FERC Stats. & Regs. ] 31,049 (1997), reh'g
denied, Order No. 889-B, 81 FERC ] 61,253 (1997), aff'd in relevant
part sub nom. Transmission Access Policy Study Group v. FERC, 225
F.3d 667 (DC Cir. 2000), aff'd sub nom. New York v. FERC, 535 U.S. 1
(2002).
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36. The Parties will then schedule a Scoping Meeting to discuss
possible Points of Interconnection and exchange technical information,
including data that would reasonably be expected to affect such
interconnection options.\41\ The Scoping Meeting is followed by a
series of Interconnection Studies to be performed by, or at the
direction of, the Transmission Provider to evaluate the proposed
interconnection in detail, identify any Adverse System Impacts on the
Transmission Provider's Transmission System or Affected Systems, and
specify the facility modifications that are needed to safely and
reliably complete the interconnection.\42\ These studies include:
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\41\ The Scoping Meeting will address technical matters such as
facility loadings, general instability issues, general short-circuit
issues, general voltage issues, and general reliability issues that
would affect the Interconnection Customer's designation of its Point
of Interconnection.
\42\ The standard forms of agreement for the Interconnection
Feasibility Study, the Interconnection System Impact Study, the
Interconnection Facilities Study, and the Optional Interconnection
Study, are included at Appendices 2-4 to the Final Rule LGIP,
respectively.
(1) Interconnection Feasibility Study to evaluate on a
preliminary basis the feasibility of the proposed interconnection,
using power flow and short-circuit analyses (to be completed within
45 Calendar Days from the date of signing of an Interconnection
Feasibility Study Agreement) (study requires a $10,000 deposit);
(2) Interconnection System Impact Study to evaluate on a
comprehensive basis the impact of the proposed interconnection on
the reliability of Transmission Provider's Transmission System and
Affected Systems, using a stability analysis, power flow, and short-
circuit analyses (to be completed within 60 Calendar Days from the
date of signing of an Interconnection System Impact Study Agreement)
(study requires a $50,000 deposit);\43\
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\43\ At the Transmission Provider's option, Interconnection
System Impact Studies for multiple Generating Facilities may be
conducted serially or in clusters.
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(3) Interconnection Facilities Study to determine a list of
facilities (including Transmission Provider's Interconnection
Facilities and Network Upgrades as identified in the Interconnection
System Impact Study), the cost of those facilities, and the time
required to interconnect the Generating Facility with the
Transmission Provider's Transmission System (to be completed within
90-180 Calendar Days from the date of signing of an Interconnection
Facilities Study Agreement) (study requires a $100,000 deposit or an
estimated monthly cost developed by the Transmission Provider for
conducting the Interconnection Facilities Study); and
(4) Optional Interconnection Study or sensitivity analysis of
various assumptions specified by the Interconnection Customer to
identify any Network Upgrades that may be required to provide
transmission delivery service over alternative transmission paths
for the electricity produced by the Generating Facility and (study
requires a $10,000 deposit).
37. The Interconnection Feasibility Study, the Interconnection
System Impact Study, and the Interconnection Facilities Study must be
performed in the above order, with completion of each study before the
next begins.\44\ An Interconnection Customer may also request a restudy
of any of the above if a higher-queued project either drops out of the
queue, is subjected to Material Modifications, or changes its Point of
Interconnection.\45\ The Interconnection Customer will pay the actual
costs for performing each of the Interconnection Studies and restudies.
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\44\ These Interconnection Studies are typical of the kinds of
studies undertaken by Transmission Providers to evaluate
Interconnection Requests. The Interconnection Facilities Studies and
Interconnection System Impact Studies also correspond to
transmission service studies described in the pro forma open access
tariff. See Order No. 888-A (Tariff Part II, 19 Additional Study
Procedures for Firm Point-To-Point Transmission Service Requests;
and Tariff Part III, 32 Additional Study Procedures for Network
Integration Transmission Service Requests), FERC Stats. & Regs.,
Regulations Preambles (July 1996-December 2000), ] 31,048 at 30,524-
26 and 30,535-36.
\45\ An Interconnection Feasibility Restudy must be completed
within 45 Calendar Days of such request. Similarly, the Transmission
Provider has 60 Calendar Days to complete either an Interconnection
System Impact Restudy or an Interconnection Facilities Restudy.
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38. The Transmission Provider's Interconnection Facilities Study
report \46\ will include a best estimate of the costs to effect the
requested interconnection which are to be funded up-front by the
Interconnection Customer. At the same time as the report is issued, the
Transmission Provider shall also give the Interconnection Customer a
draft interconnection agreement completed to
[[Page 49852]]
the extent practicable.\47\ The Transmission Provider and the
Interconnection Customer will then negotiate the schedule for
constructing and completing any necessary Transmission Provider
Interconnection Facilities and Network Upgrades, and incorporate this
schedule into the interconnection agreement that is signed by the
Parties.\48\
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\46\ Upon the completion of each of the Interconnection Studies,
a report is prepared which presents the results of the analyses.
\47\ The draft interconnection agreement shall include: Appendix
A, Interconnection Facilities, Network Upgrades and Distribution
Upgrades; Appendix B, Milestones; Appendix C, Interconnection
Details; Appendix D, Security Arrangements Details; Appendix E,
Commercial Operation Date; and Appendix F, Addresses for Delivery of
Notices and Billings.
\48\ In general, the In-Service Date of an Interconnection
Customer's Generating Facility or Generating Facility expansion will
determine the sequence of construction of Network Upgrades. An
Interconnection Customer, in order to achieve its expected In-
Service Date, may request that the Transmission Provider advance the
completion of Network Upgrades necessary to support such In-Service
Date that would otherwise not be completed pursuant to a contractual
obligation of an entity other than the Interconnection Customer. The
Transmission Provider will use Reasonable Efforts to advance the
construction if the Interconnection Customer reimburses it for any
associated expediting costs and the cost of such Network Upgrades.
The Interconnection Customer is entitled to transmission credits for
the expediting costs that it pays.
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2. Section-by-Section Discussion of the Proposed LGIP
39. What follows is a discussion of the standard interconnection
procedures the Commission proposed, the comments received, and the
Commission's conclusion. The order of discussion follows the
organization of the proposed LGIP, covering Sections 1-13. Only
subsections for which issues are raised are presented. For example, we
discuss Section 2.3, but not Sections 2.1 or 2.2 because no significant
issues were raised regarding Sections 2.1 or 2.2. Readers should note
that section numbers referred to in the following discussion are the
numbers contained in the proposed LGIP. Some proposed sections are
renumbered in the Final Rule; mention of that fact will be made in the
Commission Conclusions discussion, where appropriate. Also, note that
Proposed LGIP Section 14 is eliminated from the Final Rule in its
entirety because provisions for interconnection procedures and an
interconnection agreement for Small Generators have been severed from
this proceeding, as discussed, supra.
40. Section 1--Definitions--Section 1 of the NOPR LGIP and Article
1 of the NOPR LGIA contained defined terms that appeared in the
respective documents. For the sake of consistency, the Final Rule LGIP
and Final Rule LGIA contain one common set of terms. Included in the
list of defined terms are a number of new terms which were not included
in the NOPR LGIP and NOPR LGIA. Comments relating to the definition of
terms in both documents are discussed below.
41. Ancillary Services (In the NOPR: Ancillary and Other
Services)--The NOPR proposed that Ancillary and Other Services would
have the same meaning as defined in the Transmission Provider's OATT
and include some other services such as generator balancing, black
start, and automatic generation control.
Comments
42. Cinergy and Entergy claim that this term is not used in the
LGIA and that its definition should be deleted.
Commission Conclusion
43. The Commission disagrees that the definition should be deleted.
The term is used in Article 9 of the NOPR LGIA and elsewhere. However,
to be consistent with the OATT, the Commission here adopts the
definition of Ancillary Services in Order No. 888: ``Those services
that are necessary to support the transmission of capacity and energy
from resources to loads while maintaining reliable operation of the
Transmission Provider's Transmission System in accordance with Good
Utility Practice.''
44. Commercial Operation Date--The NOPR proposed to define
Commercial Operation Date as the date on which the Generating Facility
commences commercial operation of a unit at the Generating Facility
after Trial Operation of the unit is completed, as confirmed in
writing, in accordance with proposed Appendix F to the NOPR LGIA.
Comments
45. Central Maine points out that when a Generating Facility
consists of more than one generating unit, under the NOPR, the
Commercial Operation Date depends on the operability of a generating
unit after its testing. Central Maine requests that the Commission
define the term Commercial Operation Date as the date on which the
Generating Facility as a whole commences commercial operation, not the
individual generating units.
Commission Conclusion
46. The Commission is not adopting Central Maine's proposal. The
Generating Facility (referred to as the Facility in the NOPR LGIP and
NOPR LGIA) could consist of multiple generating units with
substantially different Commercial Operation Dates. Under Central
Maine's proposal, all of the Generating Facilities at the complex would
be required to undergo a pre-commercial Trial Operation each time a new
generating unit at the Generating Facility is ready to commence
commercial operation. Central Maine gives no reason why this should be
required. Furthermore, revising the NOPR LGIP is unnecessary because
Article 6.1 of the NOPR LGIA (Pre-Commercial Operation Date, Testing
and Modifications) addresses testing of the Generating Facility and the
Interconnection Customer's Interconnection Facilities to ensure their
safe and reliable operation.
47. Generating Facility (In the NOPR: Facility)--The NOPR proposed
to define the term Facility as the Interconnection Customer's
generator, as identified in the Interconnection Request, but excluding
the Interconnection Customer's Interconnection Facilities. In this
Final Rule, the Commission has renamed Facility to Generating Facility
to avoid confusion between other facilities and equipment.
Comments
48. Central Maine states that a full description of the Generating
Facility should be attached to the interconnection agreement as an
appendix.
Commission Conclusion
49. The Commission concludes that it is unnecessary to append a
description of the Generating Facility to the interconnection agreement
because Appendix 1 of the Final Rule LGIP (Interconnection Request)
already provides detailed information about the Generating Facility.
Accordingly, the Commission adopts the proposed definition but changes
the defined term from Facility to Generating Facility.
50. Generator--In the NOPR, the Commission proposed to define the
term Generator to mean any Generating Facility, regardless of
ownership.
Comments
51. Dairyland Power points out that the term Generator is used in
the NOPR LGIP to refer to the entity that owns the Generating Facility,
as well as the facility itself. It asks for clarification.
Commission Conclusion
52. To clarify, we use the term Interconnection Customer in this
preamble and the Final Rule to refer to the owner of the Generating
Facility. The terms Small Generator and Large Generator refer to the
class of energy producing devices no larger than 20 MW and larger than
20 MW, respectively.
[[Page 49853]]
53. Good Utility Practice--In the NOPR, the Commission defined Good
Utility Practice to mean any of the practices, methods and acts
generally accepted in the region, including Applicable Reliability
Standards and the National Electrical Code.
Comments
54. NERC states that although the terms Good Utility Practice and
Applicable Reliability Standards have separate definitions, they have
often been used interchangeably. It notes that the Commission has
defined Applicable Reliability Standards to include NERC and regional
reliability council requirements while Good Utility Practice is a
broader term that includes Applicable Reliability Standards. NERC
comments that it is important that these terms be used consistently.
55. Cinergy notes that Good Utility Practice is defined to include
compliance with the National Electrical Code. It states that because it
is not subject to the National Electrical Code, it would be improper to
attempt to bind it to such compliance.
Commission Conclusion
56. The Commission agrees with NERC that there is some overlap in
the proposed definitions of Good Utility Practice and Applicable
Reliability Standards. To remove any misunderstanding in the definition
of Good Utility Practice, the Commission is adopting in the Final Rule
the Order No. 888 definition, which contains no references to
Applicable Reliability Standards and National Electrical Code. This
also addresses Cinergy's concern.
57. Interconnection Guidelines--The NOPR stated that the technical
requirements to be followed by the Parties are set forth in the
proposed Appendix G (Interconnection Guidelines).
Comments
58. Southern observes that proposed Appendix G is blank, inferring
that the Interconnection Customer and Transmission Provider negotiate
the technical and operational requirements. Southern believes that this
is inappropriate because interconnection guidelines should be
established by the Transmission Provider, not by negotiation. Southern
contends that requiring a Transmission Provider to negotiate the
technical and operational requirements with each Interconnection
Customer is inconsistent with the goal of uniform interconnection
procedures.
Commission Conclusion
59. Proposed Appendix G was intended to set forth uniform technical
and operational requirements applicable to all Interconnection
Customers established by the Transmission Provider, not to be a vehicle
for the Parties to negotiate technical and operational requirements on
a case-by-case basis. The Commission concludes, however, that most, if
not all, of the generic technical and operational requirements are
already set forth in the Final Rule LGIA. We are therefore not defining
the term Interconnection Guidelines as well as not including proposed
Appendix G in the Final Rule LGIA.\49\
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\49\ See, e.g., Article 7 (Metering), Article 8 (Communications)
and Article 9 (Operations).
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60. Joint Operating Committee--The NOPR proposed to define Joint
Operating Committee to mean a committee comprised of members of
individual operating committees that addresses issues arising out of
the duties, roles, and responsibilities of individual operating
committees described in Article 29 of the NOPR LGIA.
Comments
61. FirstEnergy and PSNM state that the Joint Operating Committee
would impose additional administrative costs on the Transmission
Provider and is also unnecessary.
Commission Conclusion
62. The Commission is not deleting the term. As discussed later,
the Final Rule does not require the Parties to form individual
operating committees. Instead, the Final Rule requires a Joint
Operating Committee comprising the Transmission Provider and all of its
Interconnection Customers. Among other things, the committee will
address issues arising out of the duties, roles, and responsibilities
of the Parties under their interconnection agreements.
63. Network Upgrades--In the NOPR, Network Upgrades were defined as
additions, modifications, and upgrades to the Transmission System
required beyond the Point of Interconnection in order to accommodate
the interconnection of the Generating Facility. Network Upgrades are
identified by the Parties in Appendix A to the interconnection
agreement (including any modifications, additions or upgrades made to
such facilities). The NOPR also stated that Network Upgrades benefit
all users of the Transmission System, without distinction or regard as
to the purpose of the upgrade.
Comments
64. Several commenters, including Calpine and SoCal Water District,
request that the definition of Network Upgrades be clarified and made
as specific as possible. Calpine and Nevada Power propose that Network
Upgrades should include only facilities shown to be ``integrated'' to
the Transmission System, that is, likely to be used by entities other
than the Interconnection Customer. Some commenters \50\ contend that
circuit breakers are not Network Upgrades, since they benefit only the
new Interconnection Customer.
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\50\ E.g., Edison Mission, Georgia Transmission, MidAmerican,
and SoCal Water District.
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Commission Conclusion
65. The Final Rule revises the definition of Network Upgrade to
include the phrase ``at or beyond the Point of Interconnection,''
instead of ``beyond the Point of Interconnection,'' to make it
consistent with established Commission precedent. The network begins at
the point where the Interconnection Customer connects to the
Transmission System, not somewhere beyond that point.\51\ Facilities
beyond the Point of Interconnection are part of the Transmission
Provider's Transmission System and benefit all users. We are also
removing the concept of beneficiary from the definition so as to avoid
implying a pricing policy in the definition.
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\51\ See Entergy Gulf States, Inc., 99 FERC ] 61,095 (2002).
---------------------------------------------------------------------------
66. We disagree with the comments stating that the term is not well
defined. The Commission has defined Network Upgrades as those
facilities ``at or beyond the Point of Interconnection'' partially in
order to clarify to all entities exactly what is a Network Upgrade. We
are removing references to beneficiaries from the definition, because
our well-established precedent regarding what constitutes Network
Upgrades does not require a case-specific determination that all users
benefit from Network Upgrade; instead we look only as whether the
upgrade is at or beyond the Point of Interconnection.\52\
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\52\ E.g., Entergy Services, Inc. v. FERC, 319 F.3d 536 (DC Cir.
2003); Southern Company Services, Inc., 101 FERC ] 61,309 (2002);
American Electric Power Service Corp., 101 FERC ] 61,194 (2002);
Tampa Electric Company, 99 FERC ] 61,192 (2002).
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67. Reasonable Efforts--The NOPR proposed to define Reasonable
Efforts as actions that are timely and consistent with Good Utility
Practice and are substantially equivalent to those a Party would use to
protect its own interests.
[[Page 49854]]
Comments
68. Some commenters including Central Maine found this definition
to be vague. They also contend that only Good Utility Practice should
be required.
Commission Conclusion
69. The Commission adopts the proposed definition. The standard in
the NOPR is necessary to ensure comparable treatment. If a Party
normally exceeds Good Utility Practice when it protects its own
interests, it must do so for others as well.
70. System Protection Facilities--The NOPR proposed to define
System Protection Facilities as the equipment required to protect the
Transmission System from faults and other electrical disturbances
occurring at the Interconnection Customer's Generating Facility, and
vice versa.
Comments
71. NERC proposes that the definition of System Protection
Facilities should include ``necessary protection signal communications
equipment'' in addition to the other equipment mentioned in the
definition. It argues that such communications equipment is needed to
coordinate and monitor the operation of protective devices.
Commission Conclusion
72. The Commission agrees with NERC and adopts the recommended
language.
73. Transmission Owner and Transmission Provider--In the NOPR, the
Commission proposed to define Transmission Owner to mean any entity
that owns, leases or otherwise possesses an interest in the
Transmission System at the Point of Interconnection. It proposed to
define Transmission Provider to mean the entity that provides
transmission service under its OATT.
Comments
74. EEI proposes that the definition of Transmission Provider be
revised to include Transmission Owner. National Grid states that the
proposed LGIA should clearly delineate the rights and responsibilities
of Transmission Owners that are not Transmission Providers.
Commission Conclusion
75. We agree with EEI. Accordingly, the definition of Transmission
Provider in the Final Rule includes the Transmission Owner as well.
While we recognize that the Transmission Provider and the Transmission
Owner may be distinct entities in some cases, throughout the Final Rule
we will refer to both the Transmission Provider and the Transmission
Owner generically as the Transmission Provider. There are a few
instances in which the distinction between Transmission Owner and
Transmission Provider becomes relevant and there we use the appropriate
terms.
76. Section 2--Scope and Application--Section 2 of the NOPR LGIP
provided that the Transmission Provider receive, process, and analyze
all Interconnection Requests in the same manner as it does for itself,
its subsidiaries or Affiliates.
77. Section 2.3--Base Case Data--Section 2.3 of the NOPR LGIP
required the Transmission Provider to provide base case power flow,
short-circuit and stability databases to the Interconnection Customer
upon request so that the Interconnection Customer may independently
study its Interconnection Request.
Comments
78. Mirant notes that certain of the language from the Consensus
LGIP Section 2.3 concerning confidentiality provisions and the makeup
of the Base Case data appears to have been unintentionally left out of
the NOPR LGIP Section 2.3.\53\
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\53\ Mirant states that the following language was left out of
Section 2.3 of the NOPR LGIP: ``and contingency lists upon request
subject to confidentiality provisions. Such databases and lists,
herein referred to as Base Cases, shall include all (I) generation
projects and (ii) transmission projects, including merchant
transmission projects that are proposed for a Transmission System
for which a transmission expansion plan has been submitted and
approved by the applicable authority.''
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79. Dominion Resources asks that the Commission revise LGIP Section
2.3 to state that Base Case data is subject to a confidentiality
provision between the Parties. Sempra comments that the Transmission
Provider should protect the confidentiality of other Interconnection
Customers' information that is part of those databases. Entergy states
that this Section should apply only to information that is not
commercially sensitive, so as to avoid providing a competitive
advantage to other Interconnection Customers.
80. Calpine argues that the Transmission Provider should provide,
in addition to the stated databases, all underlying assumptions, data
files and documents used to create the Base Case, because otherwise the
provision could be interpreted as a narrow set of data files that are
meaningless.
81. The Ohio PUC contends that the Commission should ensure that
rules for handling critical energy infrastructure information (CEII)
are not abused by utilities that seek to withhold from public
disclosure commercial information that is not really CEII and that has
historically been central to public regulatory proceedings. It believes
that there must be procedures to ensure protection of critical public
interests. The Ohio PUC recommends that the procedures be carried out
by an entity, such as the newly formed Department of Homeland Security,
that has specific experience in CEII and is qualified to review the
Commission's CEII decisions.
Commission Conclusion
82. As Mirant correctly notes, segments of the Consensus LGIP
Section 2.3 relating to confidentiality and the makeup of the Base Case
data were inadvertently omitted from the NOPR; this text is included in
the Final Rule. Both confidentiality and the Base Case data format were
significant topics in the Commission Staff Queuing Technical Conference
held on January 21, 2003. Most conference participants agreed that
providing this Base Case data was reasonable in that it would help the
Interconnection Customer and its subcontractor conduct Interconnection
Studies independently, expedite the evaluation process, and free up the
Transmission Provider's resources, and reduce the time that would
otherwise be devoted to performing Interconnection Studies or acting as
the Interconnection Customer's consultant. The Commission believes that
adding the missing text addresses other commenters' concerns regarding
the need for confidential treatment of the Base Case data and other
commercially sensitive information that may be provided to the
Interconnection Customer.
83. In response to Calpine, we clarify that Transmission Providers
must provide all underlying assumptions and data files so that the
Interconnection Customer or its subcontractor can independently conduct
Interconnection Studies.
84. As to the concerns of the Ohio PUC and others regarding the
security of critical energy infrastructure information, the security of
the energy infrastructure is essential. The Commission expects that all
Transmission Providers, market participants, and Interconnection
Customers will comply with the recommendations of the President's
Critical Infrastructure Protection Board, as well as any best practice
recommendations or requirements that may be issued by NERC or any other
electric reliability authorities. In particular, all public utilities
are expected to meet basic standards for system infrastructure and
operational
[[Page 49855]]
security, including physical, operational, and cyber-security
practices. However, they are not to abuse security requirements in an
effort to withhold from public disclosure commercial information that
lacks legitimate CEII status.
85. Section 3--Interconnection Request--In NOPR LGIP Section 3, the
Commission proposed that each Interconnection Request include, among
other things, a refundable deposit of $10,000 that would be applied
toward the cost of the Interconnection Feasibility Study.
86. Section 3.1--General--NOPR LGIP Section 3.1 would have required
that the Interconnection Customer submit to the Transmission Provider
an Interconnection Request and a refundable deposit of $10,000 to be
applied toward the cost of an Interconnection Feasibility Study. The
Interconnection Customer would submit a separate Interconnection
Request for each site to be studied and may submit multiple
Interconnection Requests for a single site. At the Interconnection
Customer's option, the Parties could identify alternative Points of
Interconnection and configurations at the Scoping Meeting and attempt
to eliminate alternatives from further consideration. The
Interconnection Customer would be required to select the Point of
Interconnection no later than the execution of the Interconnection
Feasibility Study Agreement.
Comments
87. Some commenters, including Entergy and PJM, state that an
initial evaluation of several alternative interconnection sites is
inconsistent with regional planning and can be accomplished only at the
expense of Transmission Providers and lower queued Interconnection
Customers seeking swift interconnection.
88. Cal ISO raises several questions related to the possibility of
multiple Interconnection Requests for a single site: (1) Do multiple
Interconnection Requests refer only to routing and interconnection
arrangements? (2) If so, how many alternatives are acceptable under one
submittal? (3) Is an Interconnection Request for one site that is to be
evaluated at two different voltage levels, one or two Interconnection
Requests? and (4) Is the $10,000 deposit required for each
Interconnection Request, resulting in multiple deposits for multiple
requests at a single site?
89. ISO New England recommends revising this section to give an RTO
or ISO authority to set reasonable interconnection deposit amounts,
taking into account the requested study's complexity. It also states
that concerns about discriminatory treatment of Interconnection
Customers should be alleviated because the RTO or ISO is independent.
Commission Conclusion
90. Except as noted below, we are adopting Section 3.1 in the Final
Rule as proposed. Allowing the Interconnection Customer the option to
have the Parties evaluate alternative interconnection sites and
configurations at the Scoping Meeting will greatly reduce the need to
conduct detailed analyses of interconnection options that are found to
have little merit. Providing the Interconnection Customer with more
information prior to authorizing an Interconnection Feasibility Study
should lead to more efficient use of the Transmission Provider's
planning resources and higher quality Interconnection Studies.
91. With regard to Cal ISO's first question, multiple
Interconnection Requests at a single site could involve more than just
alternative routing and interconnection arrangements. For example, they
could also involve substantially different Generating Facility designs.
Regarding Cal ISO's second question, we do not set a generic limit on
the number of Interconnection Requests that may be included in a single
submittal, but leave it to the Parties to reach agreement at the
Scoping Meeting, or, if they fail to agree, pursue dispute resolution.
As to the third question, a request to evaluate one site at two
different voltage levels would be two Interconnection Requests. With
respect to Cal ISO's fourth question, the Interconnection Customer must
submit a deposit with each Interconnection Request when more than one
request is submitted for a single site. However, if an Interconnection
Request is withdrawn before the execution of an Interconnection
Feasibility Study Agreement, perhaps as a result of discussions at the
Scoping Meeting, the Transmission Provider must promptly return the
deposit to the Interconnection Customer. Finally, the Commission is
clarifying Section 3.1 to eliminate the uncertainty underlying Cal
ISO's questions 3 and 4.
92. The Commission is not revising proposed LGIP Section 3.1 to
provide the flexibility that the New England ISO seeks. The proposed
study deposit requirements appropriately balance the interests of the
Transmission Provider and the Interconnection Customer. However, as
explained elsewhere in this preamble, we will entertain proposals by an
RTO or ISO to adopt alternative interconnection procedures that reflect
regional differences.
93. Section 3.2--Identification of Types of Interconnection
Services--Section 3.2 of the NOPR LGIP stated that, when the
Interconnection Customer submits its Interconnection Request, it must
identify the type of Interconnection Service it desires. The Final Rule
provides for two service products: (1) Energy Resource Interconnection
Service, which is a basic or minimal interconnection service, and (2)
Network Resource Interconnection Service, which is a more flexible and
comprehensive service. However, any Interconnection Customer requesting
Network Resource Interconnection Service may request that it also be
studied for the less comprehensive Energy Resource Interconnection
Service up to the point when an Interconnection Facility Study
Agreement is executed. Comments and conclusions relating to Section 3.2
of the NOPR LGIP are discussed in part II.C.2 (Interconnection Products
and Scope of Service).
94. Section 3.3.1--Initiating an Interconnection Request--According
to NOPR LGIP Section 3.3.1, in order to initiate an Interconnection
Request, the Interconnection Customer would be required to submit a
$10,000 deposit, a completed Interconnection Request, and either a
demonstration of Site Control (e.g., securing land rights, air permit,
etc.) or an additional deposit of $10,000, with the deposits applied
toward any required Interconnection Studies. The latter deposit would
be refundable only if the Interconnection Customer demonstrates Site
Control within the time period specified in the proposed LGIP Section
3.3.3.
95. Proposed LGIP Section 3.3.1 would allow the expected In-Service
Date of the Generating Facility to be no later than the completion date
of the relevant region's expansion planning period, not to exceed seven
years from the date of the Interconnection Request, unless the
Interconnection Customer can demonstrate that engineering, permitting
and construction of the Generating Facility will take longer. Under the
proposal, the In-Service Date may not exceed ten years from the date
the Interconnection Request is received by the Transmission Provider.
Comments
96. Some commenters contend that an Interconnection Customer should
be required to demonstrate Site Control when it submits an
Interconnection
[[Page 49856]]
Request.\54\ They disagree with the proposed LGIP Section 3.3.1
provision that allows for the posting of an additional $10,000 deposit
in lieu of the demonstration of Site Control. For example, PJM states
that Site Control is a strong indication of a serious project and is
essential for establishing a queue that will consist of projects that
are likely to be completed. PJM claims that this is not a burdensome
requirement, and that every one of the 285 requests for generator
interconnection that it has received since 1999 has included evidence
of Site Control at the Interconnection Feasibility Study stage. Edison
Mission believes that the Interconnection Customer must have
uninterrupted Site Control throughout the interconnection process. It
states that a $10,000 deposit is not sufficient to discourage
Interconnection Customers from filing premature Interconnection
Requests (in order to secure a favorable Queue Position) and only later
find themselves to be unable to secure Site Control. Edison Mission
further contends that such a minimal deposit requirement may encourage
Interconnection Customers, not acting in good faith, to speculate in
interconnection rights by placing deposits for Interconnection Requests
at promising locations. It believes that such speculation will
frustrate other Interconnection Customers that obtain a site but are
locked out of interconnection due to the superior Queue Position of a
Party that merely posted a deposit. Edison Mission predicts that this
will become an even greater issue as market designs based on locational
marginal pricing become the norm.
---------------------------------------------------------------------------
\54\ E.g., BPA, Central Maine, Cleco, Edison Mission, Georgia
Transmission, NYTO, PJM, PJMTO, and Salt River Project.
---------------------------------------------------------------------------
97. Cleco believes that the only deposit that should be refundable
is the $10,000 deposit paid in lieu of demonstrating Site Control, not
the original deposit initiating an Interconnection Request. Moreover,
Cleco states that the Commission should make clear that the $10,000
deposited in lieu of Site Control should be refundable if the
Interconnection Customer demonstrates Site Control within the time
period specified in Section 3.3.3.
98. Central Maine takes exception to allowing an Interconnection
Customer to remain in the queue for a period not to exceed ten years
from the date of receipt of the Interconnection Request; it says this
period is too long. FirstEnergy recommends replacing ``Regional
Expansion Planning Period'' with ``Transmission Provider Expansion
Planning Period.'' Salt River Project seeks clarification as to how to
reconcile a situation where the original In-Service Date is ten years
out and there is then a three year extension.
99. Some commenters, including American Wind Energy, Edison
Mission, NMA, Peabody, and WEPCO, contend that the development time for
certain large scale coal, wind power, and other types of projects raise
special issues. For example, they want the ten year restriction
eliminated because their equipment is not ``off-the-shelf,'' and siting
and permitting can exceed ten years. Some commenters also want the
Commission to revise Section 3.3.1 to allow them up to nine months
after the Interconnection Request is made to submit final design
specifications. They contend that because large non-gas-fired
generators are unique and not ``off-the-shelf,'' completion of the
final design specifications requires nine or more months after the
Interconnection Request is submitted.
Commission Conclusion
100. We retain the proposed text that requires a demonstration of
Site Control or a posting of an additional deposit of $10,000. There
may be instances when requiring Site Control could unduly delay the
interconnection process.
101. We also share Edison Mission's concern that some participants
may attempt to game the system by filing Interconnection Requests at
multiple sites knowing that Site Control is unlikely to be obtainable
at every site. However, under NOPR LGIP Section 11.3, the
Interconnection Customer must provide reasonable evidence of Site
Control within 15 Business Days after the receipt of the Final
Interconnection Agreement or post additional security of $250,000,
which will be applied toward future construction costs when the
demonstration of Site Control is made. This is sufficient incentive for
an Interconnection Customer to refrain from engaging in the speculative
behavior suggested by Edison Mission.
102. With respect to the ten-year period for allowing an
Interconnection Customer to remain in the queue, we believe that ten
years should be adequate time to complete the siting, permitting and
construction requirements for all plants unless major permitting delays
are encountered. Large non-gas-fired projects (e.g., coal or oil
projects) generally take eight years or less to complete. Thus, a ten-
year period gives large projects at least a two year buffer. Moreover,
we note that numerous Interconnection Customers and Transmission
Providers negotiated this time limit during the Consensus process.
Finally, if an Interconnection Customer believes it needs additional
time to complete its project, it should seek the approval of the
Transmission Provider to extend the In-Service Date. Accordingly, the
Commission clarifies that the term of the Final Rule LGIP Section 3.3.1
is ten years, or longer if the Parties agree, with such agreement not
to be unreasonably withheld.
103. Regarding the need for additional time for some
Interconnection Customers to complete design specifications, the
Commission is not convinced that an exception should be made in the
Final Rule LGIP to allow an Interconnection Customer proposing to
construct a large non-gas-fired Generating Facility to submit final
design specifications nine months after the Interconnection Request is
made. The Interconnection Customer should have its design substantially
completed prior to submitting its Interconnection Request so that it
does not block or disrupt the queuing process. The Transmission
Provider is not able to act on an Interconnection Request unless it
includes all necessary information, and to give one class of
Interconnection Customers extra time to submit design specifications
would be unfair to other Interconnection Customers in the queue.
104. As to FirstEnergy's recommendation, the Commission clarifies
that, in the absence of a regional expansion planning period, the
appropriate expansion planning period would be that of the Transmission
Provider.
105. Section 3.3.4--Scoping Meeting (In the NOPR: Initial Scoping
Meeting)--Proposed LGIP Section 3.3.4 would have required the
Transmission Provider to hold a Scoping Meeting with the
Interconnection Customer no later than 30 Calendar Days from receipt of
the Interconnection Request. The purpose of the Scoping Meeting would
be to discuss alternative interconnection options, including potential
feasible Points of Interconnection. The Interconnection Customer would
designate its Point of Interconnection and one or more alternative
Points of Interconnection on the basis of information gathered at the
Scoping Meeting. Section 3.3.4 would also provide that the
Interconnection Customer may forgo the Interconnection Feasibility
Study and proceed directly to an Interconnection System Impact Study.
Comments
106. Several commenters, including El Paso, Entergy, FirstEnergy,
and
[[Page 49857]]
Georgia Transmission, state that the Parties should be able to agree to
schedule a Scoping Meeting outside the 30-day window.
107. El Paso believes that the Interconnection Customer should not
make the final decision on designation of the Point of Interconnection;
instead, the Transmission Provider should designate the Point of
Interconnection with the Interconnection Customer's consent. At a
minimum, El Paso recommends that Section 3.3.4 be modified to state
that the Transmission Provider must consent to the designation of Point
of Interconnection and that such consent will not be unreasonably
withheld. El Paso explains this is because the designation of Point of
Interconnection has serious cost consequences for the Transmission
Provider and its customers.
108. PJM states that the Interconnection Feasibility Study is an
important first step in evaluating an Interconnection Request and that
about one-third of the Interconnection Requests are withdrawn after the
Interconnection Feasibility Study. PJM adds that the Interconnection
Customer should not be allowed to skip the Interconnection Feasibility
Study and go directly to the Interconnection System Impact Study
because this omission would have serious implications for the
Clustering of Interconnection of Studies and would create the need for
a large number of restudies. PJM proposes that this provision be
deleted from the Final Rule LGIP.
Commission Conclusion
109. In the Final Rule LGIP, the Commission is revising Section
3.3.4 to allow the Parties to hold the Scoping Meeting outside the 30
Calendar Day window upon agreement of the Parties, since either Party
can object to the postponement. With respect to El Paso's concern
regarding the designation of the Point of Interconnection, the purpose
of the Scoping Meeting is to discuss alternative interconnection
options, including potential Points of Interconnection. The Commission
notes that the Transmission Provider will have an opportunity to voice
its concerns at the Scoping Meeting and assess the likely cost
consequences of interconnecting at various points. It is appropriate
that the Interconnection Customer decide its Point of Interconnection
based on input from the Transmission Provider because the former must
consider its investment in the Generating Facility and its site
selection criteria, as well as its initial funding of Network Upgrades.
For these reasons, we adopt Section 3.3.4 as proposed.
110. Regarding PJM's concern about allowing the Interconnection
Customer to skip the Interconnection Feasibility Study and proceed
directly to the Interconnection System Impact Study, the Commission
agrees with PJM that the Interconnection Feasibility Study is an
important first step in evaluating an Interconnection Request and
should not be skipped. The Commission is therefore deleting this text
from the Final Rule LGIP Section 3.3.4.
111. Section 3.4--OASIS Posting--Proposed LGIP Section 3.4 required
that the Transmission Provider post on its OASIS a list of all
Interconnection Requests. It must post the following information for
each Interconnection Request: the location by county and state; the
station or transmission line or lines where the interconnection will be
made; and the projected In-Service Date. The list will not disclose the
identity of the Interconnection Customer until the Interconnection
Customer executes an interconnection agreement or requests that the
Transmission Provider file an unexecuted Agreement with the Commission.
The Transmission Provider also must post deviations from the study time
lines set forth in the interconnection procedures. Interconnection
Study reports and Optional Interconnection Study reports also must be
posted after the Parties meet to discuss the applicable study results.
Comments
112. Avista states that listing the location of a Generating
Facility by county and state is not sufficient. The location should be
specified in greater detail, because some counties cover hundreds of
square miles. Mirant and NYTO state that the identity of the
Interconnection Customer should be posted on the OASIS when the
Interconnection Request is made because it will help identify
Interconnection Customers that are unlikely to see their projects
through completion and drop out of the queue. Mirant claims that the
identity of the Interconnection Customer is important for conducting
meaningful Optional Interconnection Studies.
113. NSTAR seeks clarification about whether entire studies
consisting of base case data are to be posted on the OASIS, or just the
interpretive analysis contained in the study reports. Salt River
Project seeks clarification as to whether the posting of deviations
refers to the study time lines in proposed LGIP Section 6.3
(Interconnection Feasibility Study Procedures) or the study time lines
that were agreed to by the Parties in advance. MidAmerican recommends
that changes in the Generating Facility's In-Service Date should also
be posted on the OASIS.
Commission Conclusion
114. The Commission is not requiring that the location of a
Generating Facility be specified in any greater detail than proposed
because the OASIS posting also includes the substation or transmission
line where the interconnection is to be made. We are also not requiring
that the identity of the Interconnection Customer be posted when the
Interconnection Request is made because disclosing the identity at that
early stage may put the Interconnection Customer at a competitive
disadvantage and its project at risk. With regard to Mirant's assertion
that the identity of the Interconnection Customer is important in
conducting meaningful Optional Interconnection Studies because it helps
identify who may drop out of the queue, we note that the Optional
Interconnection Studies are to be performed after the Interconnection
System Impact Study, at which point only serious projects are likely to
remain in the queue.
115. The Commission clarifies that the study reports are to be
posted, not the actual studies. Regarding deviations from the study
time lines, the Commission clarifies that the Transmission Provider is
to post deviations from the study time lines as projected by the
Transmission Provider for completing future Interconnection Studies.
For example, Section 6.3 (Interconnection Feasibility Study Procedures)
calls for the Interconnection Feasibility Study to be completed within
45 Calendar Days after the Transmission Provider receives the fully
executed Interconnection Feasibility Study Agreement. If the
Transmission Provider anticipates that it will not be able to complete
the Interconnection Feasibility Study within 45 Calendar Days, it
should post its deviation along with an explanation for the delay
(e.g., backlog). Finally, we adopt MidAmerican's recommendation, and
Final Rule LGIP Section 3.4 requires the posting of any expected
deviation from a Generating Facility's In-Service Date.
116. Section 3.5--Coordination with Affected Systems--Proposed LGIP
Section 3.5 dealt with interconnections that may affect a Transmission
System other than that of the Transmission Provider. A third party
Transmission System was proposed to be defined in the NOPR LGIA as an
Affected System. Section 3.5 also proposed obligations and rights of
the Affected System, the
[[Page 49858]]
Transmission Provider, and the Interconnection Customer, including a
requirement to coordinate Interconnection Studies.
Comments
117. Interconnection Customers including Duke Energy, Independent
Producers, Norton Energy, and Peabody support requiring the
Transmission Provider (rather than the Interconnection Customer) to
coordinate and perform all necessary Interconnection Studies and
Network Upgrades with an Affected System. Duke Energy agrees that the
Affected System Operator should be required to cooperate with the
Transmission Provider in completing necessary studies. Duke Energy also
wants the Affected System Operator to enter into an agreement with the
Interconnection Customer. Other commenters, predominately Transmission
Providers, oppose placing these responsibilities on the Transmission
Provider.\55\ They contend that (1) a contract cannot bind a third
party that is not a signatory to it, (2) it is unfair to impose
liability for liquidated damages for an incomplete study on the
Transmission Provider where the Transmission Provider has no control
over the Affected System, (3) the Transmission Provider should be
required to use only ``reasonable efforts'' to coordinate with an
Affected System, (4) the Interconnection Customer should pay any costs
of conducting Interconnection Studies on an Affected System, including
all costs of delays caused by the studies, (5) the Interconnection
Customer should be required to pay for the necessary upgrades on the
Affected System and not be allowed to operate until such upgrades are
completed, and (6) the Transmission Provider should not be responsible
for actions (or inactions) of third parties either with regard to
funding or construction of Network Upgrades.
---------------------------------------------------------------------------
\55\ E.g., AEP, Ameren, BPA, Cal ISO, Central Maine, Central
Vermont PSC, Cleco, the Construction Issues Coalition, Dairyland
Power, Dominion Resources, Entergy, Georgia Transmission, Imperial
Irrigation, ISO New England, MidAmerican, the Midwest ISO, National
Grid, Nevada Power, NYTO, PGE, PJM, Salt River Project, SoCal
Edison, TANC, and TVA.
---------------------------------------------------------------------------
Commission Conclusion
118. The Commission continues to treat interconnection and delivery
as separate aspects of transmission service, and an Interconnection
Customer may request Interconnection Service separately from
transmission service (delivery of the Generating Facility's power
output). In the majority of circumstances, interconnection alone is
unlikely to affect the reliability of any neighboring Transmission
System. However, in those rare instances in which the interconnection
alone may cause a reliability problem on an Affected System, the
Commission adopts the approach of Order No. 888 for Network Upgrades
required to protect an Affected System from a reliability problem due
to delivery service.\56\ Under Order No. 888, the Transmission Provider
is required to assist the Transmission Customer in coordinating with
the Affected System on any Network Upgrades needed to protect the
reliability of that system.\57\ We will also allow the Transmission
Provider to coordinate the timing of construction of Network Upgrades
to its Transmission System with the construction required on the
Affected System.\58\ As provided in the OATT, the Commission's Dispute
Resolution Service is available should the Interconnection Customer
wish to challenge the Transmission Provider's decision to delay
construction pending completion of the Affected System's upgrades.\59\
---------------------------------------------------------------------------
\56\ See Section 21 of the OATT. See also Tampa Electric Co.,
103 FERC ]61,047 (2003), and Nevada Power, 97 FERC ]61,227 (2001),
reh'g denied, 99 FERC ]61,347 (2002); but see American Electric
Power Service Corporation, 102 FERC ]61,336 (2003).
\57\ Section 21.1 of the OATT states that: ``The Transmission
Provider will undertake reasonable efforts to assist the
Transmission Customer in obtaining such arrangements, including
without limitation, provided any information or data required by
such other Transmission System pursuant to Good Utility Practice.''
\58\ Section 21.2 of the OATT states that: ``Transmission
Provider shall have the right to coordinate construction on its own
system with the construction required by others. The Transmission
Provider, after consultation with the Transmission Customer and
representatives of such other systems, may defer construction of its
new transmission facilities, if the new transmission facilities on
another system cannot be completed in a timely manner.''
\59\ See Section 21.2 of the OATT.
---------------------------------------------------------------------------
119. The Commission reiterates that under Order No. 888, economic
losses from having to redispatch generation do not justify delaying the
provision of the delivery component of transmission service.\60\ The
Commission adopts the same standard here for interconnections.
---------------------------------------------------------------------------
\60\ See Section 13.2 of the OATT.
---------------------------------------------------------------------------
120. Thus, unless the interconnection alone will endanger the
reliability of an Affected System, a Transmission Provider may not
require an Interconnection Customer, as a condition of interconnection,
to accept responsibility for Network Upgrades on other systems. To hold
new Interconnection Customers responsible for upgrades to all
interconnected systems, including not only the system to which the
Generating Facility interconnects, but other, more distant systems as
well would create an unreasonable obstacle to the construction of new
generation.\61\ We reiterate that requiring a Transmission Provider to
coordinate intermediate studies and upgrades with other systems is just
and reasonable.
---------------------------------------------------------------------------
\61\ Nevada Power, 97 FERC ]61,227 (2001), reh'g denied, 99 FERC
]61,347 at 62,294 (2002).
---------------------------------------------------------------------------
121. Although the owner or operator of an Affected System is not
bound by the provisions of the Final Rule LGIP or LGIA, the
Transmission Provider must allow any Affected System to participate in
the process when conducting the Interconnection Studies, and
incorporate the legitimate safety and reliability needs of the Affected
System. However, the Affected System is not required to participate in
the interconnection of the Generating Facility, as proposed by Duke
Energy. If the Affected System declines to work with the Transmission
Provider, or fails to provide information in a timely manner, the
Transmission Provider may proceed in the interconnection process
without taking into account the information that could have been
provided by the Affected System. Neither the Final Rule LGIP nor the
Final Rule LGIA is intended to expose the Transmission Provider to
liability as a result of delays by the Affected System.
122. In addition, we note that NERC Planning Standards require
Transmission Providers to work together to minimize effects on each
others' systems. When a Transmission Provider adds its own new
generation to its system, this may have a reliability effect on other
systems, requiring coordination among systems. Such coordination must
extend to new generation of any Interconnection Customer because, as
stated in this provision, a Transmission Provider must offer all
generators service that is comparable to the service that it provides
to its own generation or that of its Affiliates.
123. Section 3.6--Withdrawal--Proposed LGIP Section 3.6 provided
that the Interconnection Customer would have the option to withdraw its
Interconnection Request at any time with written notice to the
Transmission Provider. If the Interconnection Customer fails to adhere
to the requirements of the interconnection procedures, its request
would be deemed withdrawn and the Transmission Provider would provide
written notice of the deemed
[[Page 49859]]
withdrawal along with a written explanation. In either instance, the
Interconnection Customer would lose its Queue Position and pay all of
the Transmission Provider's prudently incurred costs up to the
withdrawal. The Transmission Provider would be required to update its
OASIS queue posting and to refund the Interconnection Customer any
portion of the Interconnection Customer's deposits or study costs that
exceeds the costs that the Transmission Provider has incurred,
including interest. In the event of a withdrawal, the Interconnection
Customer would be able to request all information the Transmission
Provider developed for any completed Interconnection Studies, up to the
date of withdrawal of the Interconnection Request, subject to the
confidentiality provisions of Section 13.1.
Comments
124. FirstEnergy and WEPCO assert that an Interconnection Customer
should be given a reasonable amount of time to address purported
deficiencies before a Transmission Provider deems a request withdrawn
because the purported deficiency may not have been adequately
communicated to the Interconnection Customer.
125. Cinergy requests that this section be modified to require that
a Transmission Provider provide written notice to the Transmission
Owner of any Interconnection Customer withdrawal notice it receives or,
alternatively, that the Interconnection Customer provide notice to both
the Transmission Provider and the Transmission Owner.
126. When an Interconnection Customer withdraws its application,
NYTO supports having the Interconnection Customer pay the Transmission
Provider all monies due to the Transmission Provider before it is
allowed to obtain any Interconnection Study data or results. Duke
Energy argues that an Interconnection Customer's responsibility for
prudently incurred costs terminates either when the Transmission
Provider receives the Interconnection Customer's notice of withdrawal
or, in the event the Interconnection Customer is deemed to have
withdrawn its application for interconnection, when the Transmission
Provider provides notice of withdrawal.
127. PJM believes that the proposed language implies that if an
Interconnection Customer disputes its loss of Queue Position, it would
remain in the queue pending Dispute Resolution. PJM advocates instead
the approach the Commission has accepted in the PJM Tariff, that is,
when an Interconnection Customer is disqualified from the queue, it is
eliminated from the queue unless and until a Dispute Resolution process
restores its position.
Commission Conclusion
128. The Commission agrees with FirstEnergy and WEPCO that
Interconnection Customers should be given an opportunity to address any
deficiencies before their requests are deemed withdrawn by the
Transmission Provider. Proposed LGIP Section 3.6 is revised in the
Final Rule LGIP accordingly.
129. The Commission agrees with Duke Energy that an Interconnection
Customer's responsibility for a Transmission Provider's prudently
incurred cost terminates at the earlier of either when the Transmission
Provider receives the Interconnection Customer's notice of withdrawal
or when the Transmission Provider provides a notice of withdrawal after
deeming an Interconnection Request to be withdrawn. The Commission also
agrees with NYTO that when the Interconnection Customer withdraws its
application, it must pay all monies due to the Transmission Provider
before it is allowed to obtain any Interconnection Study data or
results.
130. We agree with PJM that it is unreasonable for an
Interconnection Customer to maintain its Queue Position pending Dispute
Resolution. In most cases, Dispute Resolution and any related
litigation would create delays, and it would be unfair to delay the
projects of lower queued Interconnection Customers while a higher-
queued Interconnection Customer's Queue Position is in dispute. The
Commission clarifies this section in the Final Rule LGIP accordingly.
131. Section 4--Queue Position--Proposed LGIP Section 4 would
establish the Interconnection Customer's Queue Position (i.e., the
chronological priority assigned to an Interconnection Request), which
would be used to determine both the order in which studies are
performed and the cost responsibility for the facilities necessary to
accommodate the Interconnection Request. At the Transmission Provider's
option, Interconnection System Impact Studies would be performed
serially as Interconnection Requests are received or in clusters, as
discussed below. Proposed LGIP Section 4 also described when a Queue
Position can be transferred to another entity, and when an
Interconnection Customer could modify its Interconnection Request
without losing its Queue Position.
132. Section 4.1--General--Proposed LGIP Section 4.1 required the
Transmission Provider to assign a Queue Position to the Generating
Facility based on the date and time of receipt of a valid
Interconnection Request. However, if the sole reason that an
Interconnection Request is deemed invalid is lack of information
required in the Interconnection Request, and if the Interconnection
Customer provides such information in accordance with Section 3.3.3 of
the proposed LGIP, the Transmission Provider would then be required to
assign the Interconnection Customer a Queue Position based on the date
and time that the Interconnection Request was initially filed. The
Queue Position of each Interconnection Request would be used to
determine the order of performing the Interconnection Studies, which
would determine the cost responsibility for the facilities necessary to
accommodate the Interconnection Request. This is because the facilities
needed for one Interconnection Customer are affected by the facilities
needed for other generators that come before it in the queue.
Comments
133. TVA observes that the level of commitment by Interconnection
Customers to complete an interconnection varies. A change in the
request of a higher queued Generating Facility will affect lower queued
generators because it may require restudies. It states that the
``first-come, first-served'' method rewards an Interconnection Customer
that simply is the first in line, even if it has not done the
preparation to make a complete and legitimate Interconnection Request.
According to TVA, this is costly and unfair to other Interconnection
Customers. It also asserts that if an Interconnection Customer seeks to
change its Point of Interconnection, it should be placed in a lower
position in the queue. Ameren has similar concerns and states that it
has a high withdrawal rate for Interconnection Requests. It claims that
fewer restudies would be needed if a Transmission Provider could study
only ``serious'' requests.
134. American Wind Energy believes that projects in the queue when
the Final Rule takes effect should receive equal treatment under the
new rule. It states that since summer 2000 several developers have
accelerated their projects and have executed interconnection
agreements. These developers should be able to have their
[[Page 49860]]
interconnection agreements revised to be consistent with the Final Rule
LGIA.
135. PJM believes that the proposed procedures do not help
eliminate projects that are not economically feasible. Accordingly, the
Interconnection Customer should be required to meet milestones to show
significant commitment to a project. The fixed schedule approach (which
fixes a time period for completing an Interconnection Study after the
receipt of an Interconnection Request) undermines integrated regional
planning, since it forces planners to study each Interconnection
Request independently of other Interconnection Requests that are
located in close electrical proximity. PJM also notes that such
projects could have related effects on the Transmission System and
overall expansion alternatives.
136. PacifiCorp believes that there will be problems in the queuing
and the Interconnection System Impact Study process if an
Interconnection Customer is allowed to request an Interconnection Study
when it does not expect to begin construction or operations for a long
time. According to PacifiCorp, long lead times substantially increase
the uncertainty that the project will be completed. An independent
Transmission Provider should be given more flexibility in addressing
these issues.
137. TECO Energy states that the Interconnection Request must
provide a demonstration of Site Control for the Generating Facility at
the time of the initial request before it may enter the queue. It
states that it is inefficient to commit a Transmission Provider's
resources to the study of a request until the project achieves a level
of certainty and specificity that justifies the commitment of
resources, even though the Interconnection Customer pays for the
Interconnection Studies.
138. EEI, PSEG, and SoCal Edison all state that they generally
support establishing a single integrated queue per RTO region.
139. EEI states that Interconnection Service and delivery service
are separate and that there is no need to combine them. It believes
that any combination of the two services requires a single
Interconnection Feasibility Study for several generators, would likely
overly complicate the queuing process, and subsequently delay study
completions. It contends that the separation of interconnection and
delivery services is critical to designing a queue that is appropriate
for both non-Standard Market Design and Standard Market Design service.
140. Xcel observes that the ``first-come, first-served'' queue
process does not take into account either the transmission planning
requirements of RTOs or state integrated resource planning statutes and
rules, which often require the use of a ``portfolio approach'' whereby
state-regulated load-serving entities select between competing
generation providers based on the total cost of generation and
transmission.
141. Xcel supports a process similar to the periodic ``open
season'' used for gas pipelines, in which the Transmission Provider or
RTO would periodically solicit market interest in incremental
transmission capacity and then develop a transmission plan that serves
the various market needs at the lowest overall cost.
142. TXU wants the Final Rule to allow a Transmission Provider,
RTO, or ISO to create queues that are periodically opened and closed,
based on a predetermined time period. Proposed projects should be
placed into a queue according to the date of the Interconnection
Request.
143. American Wind Energy, NYISO, and Tenaska believe that Queue
Position should not be used exclusively to determine the cost
responsibility for the facilities necessary to accommodate the
Interconnection Request. American Wind Energy states that the first
wind project in the queue should not be required fund the Network
Upgrades for what logically will be a long term large scale build-out
of an entire wind resource area. NYISO also contends that the
Commission's proposal is not workable in the NYISO system because its
interconnection cost allocation rules are not based on Queue Position.
Instead, Interconnection Facility costs are determined each year and
allocated on the basis of pro-rata electrical impact among the members
of a group of projects that have reached a specified point in the New
York State project permitting process.
Commission Conclusion
144. The Commission understands Ameren's and PJM's concerns that
uncertainty about project withdrawal creates difficulties for a
Transmission Provider in planning for necessary Network Upgrades.
Having an Interconnection Customer and a Transmission Provider
establish agreed upon milestones at the Scoping Meeting should help to
ensure that the Transmission Provider's planning process reflects only
the interconnection of Generating Facilities that are making
satisfactory progress toward completion. Also, a Transmission Provider
facing difficulties of this sort may wish to consider conducting
Interconnection Studies on a clustered basis (see discussion below).
Factors other than Queue Position also must be considered in
determining the cost responsibility of an Interconnection Customer,
especially when a Transmission Provider conducts Interconnection
Studies on a clustered basis. However, we believe that Queue Position
must play a critical role in determining cost responsibility, and
expect the Transmission Provider to give appropriate recognition to
Queue Position when it develops its cost allocation rules.
145. We agree with TVA's comment that moving the proposed Point of
Interconnection should lead to a lower Queue Position if it is a
Material Modification under Final Rule LGIP Section 4.4.3. Section 4.1
is revised accordingly in the Final Rule.
146. With respect to TECO Energy's comments on the need to
demonstrate Site Control in the initial application, the Commission
notes that LGIP Section 3.3.1 and the definition of Site Control in the
Final Rule already require early demonstration of Site Control or
posting a deposit of $10,000. Section 7.2 of the Final Rule LGIP
requires a demonstration of Site Control prior to executing the
Interconnection System Impact Study Agreement. We conclude that these
provisions adequately demonstrate Site Control.
147. There must be a single integrated queue per geographic region.
We note that it was the method generally agreed upon during the
Commission staff's Technical Conference on Queuing. However, we will
afford an RTO or ISO the flexibility to propose queues and queuing
rules designed to meet its regional needs.
148. Xcel's and TXU's comments are addressed in the Commission
Conclusions discussion for Section 4.2 (Clustering), which follows.
149. Section 4.2--Clustering--For the purpose of the
Interconnection System Impact Study, Section 4.2 of the NOPR LGIP
permitted the Transmission Provider to study Interconnection Requests
serially or in clusters. The Transmission Provider would be allowed to
simultaneously study all Interconnection Requests received during a
period not to exceed 90 Calendar Days (``the queue cluster window'')
except requests for Energy Resource Interconnection Service, which
would be studied serially. The Transmission Provider would be permitted
to study an Interconnection Request separately if warranted by Good
Utility Practice based upon the
[[Page 49861]]
electrical remoteness of the proposed Generating Facility.
Comments
150. Various Transmission Providers including BPA, NYTO, and PJM
recommend that the queue cluster window be extended from 90 to 180 days
so that the study process may be fully integrated into the Transmission
Provider's planning process, and to ensure that one set of
Interconnection Studies can be completed before the next round begins.
PJM states that a 180-day window reasonably balances the competing
objectives of completing Interconnection Studies as rapidly as possible
and ensuring that the study process produces meaningful regional
expansion plans that induce economically efficient decisions by
generation developers. PSEG sees merit in the clustering approach, but
states that it should be tied to the planning process and have
specified start and end dates. PJM opposes the requirement to study
requests for Energy Resource Interconnection Service serially, arguing
that most of the tests applied to Energy Resource Interconnection
Service and Network Resource Interconnection Service are the same.
151. The Midwest ISO seeks clarification whether a cluster refers
to a group of Interconnection Requests that were submitted during a
specified time period, such as 90 Calendar Days, or to a group of
Generating Facilities that are located in geographic proximity to one
other, or both. The Midwest ISO seeks further clarification whether
each Interconnection Request is to be studied serially within the
cluster in order to determine the cost of Network Upgrades for each, or
all of the Interconnection Requests are to be studied simultaneously,
which will determine only the total cost of Network Upgrades. It argues
that if the latter is the case, the Commission will need to prescribe a
way to allocate the total cost of Network Upgrades to each
Interconnection Customer within the cluster.
152. American Wind Energy states that clustering is the best method
to interconnect both large and small generators in a balanced regional
planning process, and also facilitates the coordinated completion of a
useful Interconnection System Impact Study.
Commission Conclusion
153. In the Final Rule, we are setting the queue cluster window for
conducting Interconnection System Impact Studies at 180 Calendar Days.
As the commenters make clear, the principal benefit of studying
Interconnection Requests in clusters is that it allows the Transmission
Provider to better coordinate Interconnection Requests with its overall
transmission planning process, and, as a result, achieve greater
efficiency in both the design of needed Network Upgrades and in the use
of its planning resources. We are persuaded by the arguments of PJM and
others that the proposed 90-day cluster window is too short to achieve
this result, and that a 180-day window is more appropriate.
154. We are also persuaded by PJM that if the Transmission Provider
elects to study Interconnection Requests in clusters, requests for both
Energy Resource Interconnection Service and Network Resource
Interconnection Service should be included in the clustered
Interconnection Studies. Requiring the Transmission Provider to perform
System Impact Studies for Energy Resource Interconnection Service
requests on a serial basis would mean that many of the efficiency
benefits of clustering would be lost. When a Transmission Provider
conducts Interconnection Studies on a clustered basis, the
Interconnection Customer may have to wait longer to obtain study
results than it would if its request were studied serially. However,
some of the information that an Interconnection Customer needs is
provided by the Interconnection Feasibility Study, which is conducted
serially and early in the study process.
155. Clustering is strongly encouraged in queue management and the
Interconnection Study process for all Transmission Providers. We
vigorously support the use of queue windows to manage the
Interconnection Study process. In response to the Midwest ISO's
comments, Final Rule IP Section 4.2 has been modified to better explain
the clustering process. Queue windows with regular, fixed opening and
closing dates are essential to an orderly process. Once fixed, any
changes to these dates should be announced with a posting on the
Transmission Provider's OASIS at least 180 days in advance of the
change. Cluster windows enable the Transmission Provider to evaluate
all pending Interconnection Requests periodically and systematically in
light of the Transmission Systems's capabilities at the time of each
clustered Interconnection System Impact Study.
156. Clustering (by queue position and electrical location) ensures
that the regional expansion plan considers all uses of the Transmission
System and enables expansion of the system to be accomplished in the
most efficient manner reasonably achievable. However, projects that are
electrically isolated can still be studied independently. Additionally,
allocation of cost responsibility for system upgrades and jointly used
facilities is more readily managed by studying requests in clusters.
Absent the ability to cluster interconnection requests, it is difficult
to distinguish the Transmission Provider's cost responsibility for
baseline reliability upgrades from the responsibility of
Interconnection Customers and other developers for the costs of
upgrades required to accommodate their Interconnection Requests since
each request would have to be studied serially. Equally important,
Interconnection Studies for smaller generators can be more easily
expedited. These efficiencies are best obtained using clustered queue
windows, not through the sequential processing of Interconnection
Requests.
157. Section 4.3--Transferability of Queue Position--The Commission
proposed in Section 4.3 of the NOPR LGIP that an Interconnection
Customer may transfer its Queue Position to another entity if such
entity acquires the Generating Facility identified in the
Interconnection Request and the Point of Interconnection does not
change.
Comments
158. National Grid states that the Commission should resist
requests from those that propose to make Queue Position a tradable
commodity to gain flexibility over the timing of their proposed
projects. National Grid offers several arguments against allowing this:
(1) It would create an unnecessary commodity that would encourage
gaming in competitive markets, (2) it would render the interconnection
queue process unmanageable because the trading of Queue Positions would
make it impossible to build sets of assumptions on which to base
studies, (3) it would add another layer of administrative burdens for
Transmission Providers; and (4) the disputes over Queue Position that
are likely to arise would divert the Transmission Provider's attention
away from facilitating reasonably prompt interconnections. Instead, the
Commission should adopt a subordinate application process like the one
implemented in NEPOOL, which allows a project sponsor to accelerate the
construction and operation of its facilities application ahead of other
projects in the queue in return for the sponsor's assumption of the
risks associated with building the facilities in a sequence different
from the study order of the queue.
159. The CPUC believes that changes resulting from an
Interconnection Customer selling its Queue Position
[[Page 49862]]
could harm subsequent Interconnection Customers in the queue, since it
could affect the portfolio of technologies in the queue and the
diversity of the Transmission System as a whole. According to the CPUC,
an Interconnection Customer wishing to sell its position should be
required to provide assurances that it will pay not only for any
Interconnection Studies needed as a result of the change, but also for
the costs to subsequent Interconnection Customers in the queue as a
result of the change. The seller of the Queue Position should also be
liable for any obligations that the buyer of the position is unable to
fulfill in the event of a Default.
Commission Conclusion
160. While the commenters raise legitimate concerns with Queue
Position trading in general, we conclude that the restrictions on
transferability that are already contained in Section 4.3 address these
concerns. Section 4.3 of the Final Rule LGIP permits an Interconnection
Customer to transfer its Queue Position to another entity only if such
entity acquires the specific Generating Facility identified in the
Interconnection Request and the Point of Interconnection does not
change. These limitations on transferability greatly reduce the
potential impact on lower queued Interconnection Customers. The new
Interconnection Customer would also be required to show, under Section
4.4.3 of the Final Rule LGIP, that any proposed change is not a
Material Modification.
161. Section 4.4--Modifications--Proposed LGIP Section 4.4 would
have required that the Interconnection Customer submit to the
Transmission Provider, in writing, modifications to any information
provided in the Interconnection Request. Either the Interconnection
Customer or the Transmission Provider would be permitted to identify
changes to the planned interconnection that may reduce the costs and
increase the benefits (including reliability) resulting from the
interconnection. If the changes are acceptable to the Transmission
Provider and Interconnection Customer (such acceptance not to be
unreasonably withheld), the Transmission Provider would make the
necessary changes and proceed with interconnection restudies in
accordance with Sections 6.4, 7.6 and 8.5 of the LGIP, as applicable.
Accordingly, the Generating Facility would retain its Queue Position.
162. Section 4.4.1--Proposed LGIP Section 4.4.1 LGIP would allow an
Interconnection Customer to make the following modifications to its
Interconnection Request, provided that it makes them before returning
the executed Interconnection System Impact Study Agreement to the
Transmission Provider: (1) A reduction of as much as 60 percent in the
megawatt output of the proposed project, (2) modification of the
technical parameters associated with the Generating Facility technology
or the step-up transformer impedance characteristics, (3) modification
of the interconnection configuration, or (4) any other type of change
except to the proposed Point of Interconnection. Any increase in the
Generating Facility's megawatt output would be placed at the end of the
queue.
Comments
163. Dynegy argues that item (4) is confusing, makes the other
items in the list redundant, and does not belong in this section.
Several commenters, including Duke Energy and WEPCO, advocate allowing
an Interconnection Customer to increase the output of its Generating
Facility by up to ten percent of the voltage level of the line to which
it is interconnecting without affecting its Queue Position.
Commission Conclusion
164. We agree with Dynegy that item (4) does not belong in this
section. The item more appropriately belongs in Section 4.4.3.
Accordingly, Final Rule LGIP Section 4.4.3 includes the following
sentence: ``Any change to the Point of Interconnection shall constitute
a Material Modification.''
165. We reject the other commenters' proposal to allow an
Interconnection Customer to increase the output of its Generating
Facility by up to ten percent. The percentage by which the capacity of
the proposed Generating Facility could be increased without
substantially changing the size and configuration of necessary Network
Upgrades needed to accommodate the change in output would depend on the
size and location of the Generating Facility and the voltage level at
the Point of Interconnection, among other things. This could vary
significantly from case to case, and may well be less than ten percent.
166. Section 4.4.3--Proposed LGIP Section 4.4.3 would have required
that, prior to making a modification other than one specifically
permitted by Sections 4.4.1, 4.4.2, and 4.4.5, the Interconnection
Customer may first ask the Transmission Provider to evaluate whether
the modification is actually a Material Modification. A Material
Modification would be a modification that has a material effect on the
cost or timing of a lower queued Interconnection Customer. The
Transmission Provider would be required to evaluate the proposed
modification and inform the Interconnection Customer in writing whether
the modification would considered be a Material Modification. The
Interconnection Customer could then either withdraw the proposed
modification or submit a new Interconnection Request for such
modification.
Comments
167. SoCal Water District and Dynegy ask the Commission to clarify
the definition of Material Modification to avoid disputes between the
Parties regarding the Generating Facility's Queue Position. Ameren
argues that a modification that is proposed as not being ``material''
may in fact be a Material Modification. FirstEnergy opposes giving the
Transmission Provider the discretion to determine whether a request is
a Material Modification. El Paso observes that reading proposed LGIP
Sections 4.4.3 and 4.4.5 together implies that the Transmission
Provider will be forced to judge whether an extension of three years or
more is material and to determine if a cost effect or other project
change is material. El Paso supports defining a Material Modification
as: (1) A change greater than 12 months in Commercial Operation Date,
(2) an increase of greater than $100,000 or 10 percent in the
Transmission Provider's cost that a later queued Interconnection
Customer would bear; or (3) a change greater than five miles in the
location of, or any change in the voltage level at, the Point of
Interconnection. Edison Mission believes that the Final Rule LGIP
should clarify the effect of material improvements and modifications to
existing Generating Facilities on the interconnection status and the
rights of such Generating Facilities. The Bureau of Reclamation
expresses concern that the NOPR does not define how or when an existing
Interconnection Customer would be affected by Material Modifications.
The Bureau of Reclamation is concerned because design and approval of
its generator refurbishment is a federal responsibility and would be
subject to the federal appropriation process.
Commission Conclusion
168. It is not necessary to revise proposed LGIP Section 4.4.3 to
define precisely what constitutes a Material Modification. The impact
of a modification depends in large part on the size, location, type of
project and the
[[Page 49863]]
configuration of the Transmission Provider's Transmission System. The
various Interconnection Studies will identify the modification's impact
on other Interconnection Customers. This impact determines if the
change is indeed a Material Modification. We leave it to the
Transmission Provider to make that determination; however, it must do
so on a reasonable basis.
169. Section 4.4.4--Proposed LGIP Section 4.4.4 in the NOPR LGIP
provided that, upon receipt of an Interconnection Customer's request
for modification permitted under Section 4.4, the Transmission Provider
would perform any necessary additional Interconnection Studies as soon
as practicable, but in no event later than 30 Calendar Days after
receiving notice of the Interconnection Customer's request. Any
additional Interconnection Studies resulting from such modification
would be done at the Interconnection Customer's expense.
Comments
170. Exelon asserts that this section is not practical and is
punitive to all lower queued Interconnection Customers. It contends
that each time a modification is requested, a Transmission Provider or
Transmission Owner must begin studying the modification within 30 Days
and all work on the Interconnection Studies of all lower queued
Interconnection Customers must be halted.
Commission Conclusion
171. We adopt Section 4.4.4 as proposed. While any modification
that requires additional study can pose a challenge to the Transmission
Provider's schedules and resources, the modifications that are
permitted under Section 4.4 occur early enough in the study process
that their effect on Interconnection Customers lower in the queue
should be limited. Furthermore, since all Interconnection Requests are
evaluated in the same restudy, this provision appropriately balances
the Interconnection Customer's need for flexibility to change the
project with the Transmission Provider's need for certainty in resource
costs and schedules.
172. Section 4.4.5--Section 4.4.5 of the NOPR LGIP provided that an
extension of less than three cumulative years in the Commercial
Operation Date of the Generating Facility should not be considered a
Material Modification and should be treated in the same manner as in
Section 12.3 (Construction Sequencing).
Comments
173. Salt River Project seeks clarification on what to do when the
original In-Service Date is at the maximum allowable ten years (under
Proposed LGIP Section 3.3.1) and there is a request for a three year
extension. Duke Energy supports allowing an Interconnection Customer to
request an extension of all dates, including the In-Service Date, for
periods of less than three cumulative years. Sempra believes that the
Transmission Provider needs greater flexibility to manage and evaluate
its Transmission System for delays of more than one year.
174. Westconnect RTO finds that two provisions in this Section
contradict Western Electricity Coordinating Council (WECC) procedures.
They are allowing the Interconnection Customer to decide to extend its
Generating Facility's Commercial Operation Date for up to a total of
three cumulative years and providing that such extensions are not
material and should be handled through construction sequencing.
Westconnect RTO asserts that regional practices concerning transmission
planning and reliability should be honored.
175. SoCal PPA and El Paso believe that a three year period is an
unreasonably long time to permit suspension of interconnection because
it interferes with the Transmission Provider's ability to manage the
queue and plan its system.
Commission Conclusion
176. With respect to Salt River Project's request, we clarify that
the term contained in Final Rule LGIP Section 3.3.1 is ten years, or
longer if the Transmission Provider agrees. Furthermore, such agreement
shall not be unreasonably withheld. This clarification also addresses
Duke Energy's and Sempra's concerns.
177. With respect to Westconnect RTO's assertion that this section
contravenes WECC procedures, as stated above, we would permit
modifications to the Final Rule LGIA and Final Rule LGIP where the
Transmission Provider shows that there are legitimate regional
differences, such as the WECC procedures, that would support such
modifications. As to other arguments that three years is an
unreasonably long time to permit extensions of the Commercial Operation
Date, the Commission recognizes that such flexibility places a burden
on the Transmission Provider's expansion planning process, but these
extensions in most cases are well within the scope of other unforeseen
changes that affect the planning process. The Final Rule therefore
adopts Section 4.4.5 as proposed.
178. Section 5--Procedures for Interconnection Requests Submitted
Prior to Effective Date of Interconnection Procedures--Section 5 of the
proposed LGIP described the procedures for assigning a Queue Position
prior to the effective date of the Final Rule LGIP. It also proposed a
transition process for a Transmission Provider with an Interconnection
Request that is outstanding when the Final Rule takes effect.
179. Section 5.1--Queue Position for Pending Requests--Proposed
LGIP Section 5.1 provided that any Interconnection Customer assigned a
Queue Position prior to the effective date of the Final Rule LGIP would
retain that Queue Position. Also, if an Interconnection Study Agreement
has not been executed as of the Final Rule effective date, then that
Interconnection Study and subsequent Interconnection Studies would be
processed in accordance with the Final Rule. However, an executed
Interconnection Study Agreement would be completed in accordance with
the terms in place at the time of execution of that agreement. The
proposed section also provided that if an interconnection agreement has
been tendered as of the Final Rule effective date, the Transmission
Provider and Interconnection Customer would finalize its terms. To the
extent necessary, outstanding requests would transition to the Final
Rule procedures within a reasonable period of time, not to exceed 60
Calendar Days. Reasonable extensions would be granted.
Comments
180. The Midwest ISO recommends adding a subsection to the LGIP
that permits Interconnection Requests in existing queues of non-RTO
Transmission Providers to be merged into the queue of the RTO or ISO
based on the original request dates at the time the Transmission
Provider joins the RTO.
181. Central Maine supports the grandfathering of existing
interconnection agreements that are filed with and accepted by the
Commission as of the effective date of the Final Rule LGIP and Final
Rule LGIA.
182. Sempra argues that it is inappropriate to mandate Parties to
agree to an interconnection agreement tendered but not fully negotiated
prior to the issuance of the Final Rule because, otherwise, the
tendering Party could tender them on the eve of the Final Rule going
into effect and the
[[Page 49864]]
other Party would be compelled to negotiate under the Final Rule's
terms and conditions. Therefore, either Party should be permitted to
set aside unexecuted but tendered interconnection agreements prior to
the effective date of the Final Rule.
183. MidAmerican states that the proposed provision of Section
5.1.2, which established a transition period from the old queue
processes to the new Final Rule provisions that should not exceed 60
days, is practical only for projects that are in their early stages. It
proposes adding the phrase ``provided that any existing interconnection
agreement or Interconnection Study Agreement shall remain in full force
and effect'' for projects that have an executed interconnection
agreement. MidAmerican also states that the Commission should clarify
that this transition period is only for those outstanding requests for
which Interconnection Studies Agreements and interconnection agreements
have yet to be executed prior to the Final Rule going into effect.
Similarly, Central Maine seeks clarification of the meaning of pending
or outstanding requests.
184. BPA states that this provision should be clarified with regard
to the circumstances under which an Interconnection Customer with an
existing Interconnection Request may request an extension of applicable
deadlines.
Commission Conclusion
185. The purpose of Proposed LGIP Section 5.1 was to ensure that a
Generating Facility that has an established Queue Position prior to the
Final Rule taking effect will continue to hold its position. This is
also the case mentioned by the Midwest ISO for merging new members into
the RTO's queue when the Transmission Provider joins an RTO. However,
on compliance, discretion will be granted to RTOs or ISOs to propose
queuing rules customized to their needs, in accordance with the
``independent entity standard'' (described in part II.C.5).
186. Under proposed LGIP Section 5.1.1, the Interconnection Studies
for which the Parties have an executed Interconnection Study Agreement
would be completed under the Interconnection Study Agreement's terms,
but any remaining studies would be completed under the Final Rule LGIP
study procedures. The Commission concludes that this situation may
cause confusion and unnecessary complications in the event that the
Transmission Provider's existing study procedures conflict with those
in the Final Rule LGIP. To provide further clarification, and to
prevent situations in which an Interconnection Customer may be forced
to comply with conflicting or redundant study requirements, the
Commission modifies this section to give the Interconnection Customer a
choice. Under the Final Rule LGIP Section 5.1.1.2, if an
Interconnection Customer has signed an Interconnection Study Agreement
as of the effective date of the Final Rule, the Interconnection
Customer will have the option to either continue with the rest of its
Interconnection Studies under the Transmission Provider's existing
study process or complete those remaining studies for which it does not
have a signed Interconnection Study Agreement under the Final Rule
LGIP.
187 .In response to Central Maine, we clarify that existing
interconnection agreements that are filed with and accepted by the
Commission prior to the effective date of this Final Rule will remain
in effect. Regarding Sempra's request to allow the Parties to set aside
interconnection agreements tendered but not executed before the
issuance of the Final Rule, the Commission concludes that this decision
is best left to the discretion of the Parties. If the Parties decide to
continue their negotiations, they have until the Final Rule's effective
date to submit their agreement to the Commission to qualify for
grandfathering. Accordingly, Final Rule LGIP Section 5.1.1.3 states
that an executed or unexecuted interconnection agreement submitted for
approval by the Commission before the effective date of the Final Rule
will be grandfathered and will not be rejected simply for failing to
conform to the Final Rule LGIA.
188. With respect to Central Maine's and MidAmerican's requests for
clarification of the term ``outstanding requests'' in Section 5.1.2, we
clarify that the term refers to any request for interconnection that
has been submitted to a Transmission Provider but has not yet been
submitted to the Commission for approval prior to the effective date of
this Final Rule.
189. There is no need to adopt MidAmerican's proposed language
regarding the adequacy of a 60 day transition period in Section 5.1.2
since the Final Rule allows an Interconnection Customer to extend
deadlines, and the 60 day period applies only to Interconnection
Requests with outstanding studies for which an Interconnection Study
Agreement has not been executed. We expect the Parties to work together
during the transition period to ensure that no Interconnection Request
is unreasonably delayed.
190. Finally, we deny BPA's request to explain the circumstances
under which an Interconnection Customer may request an extension
because these circumstances are likely to differ in each case. However,
we expect that a Transmission Provider will grant an extension if it
can be reasonably accommodated in a nondiscriminatory manner in the
transition to the Final Rule LGIP.
191. Section 5.2--New Transmission Provider--Proposed LGIP Section
5.2 provided that if the Transmission Provider transfers control of its
Transmission System to a successor Transmission Provider while an
Interconnection Request is pending, the original Transmission Provider
would also transfer to the successor any deposit or payment that
exceeds the cost that it has incurred. The original Transmission
Provider would be required to coordinate with the successor to complete
any appropriate Interconnection Study. If an Interconnection Agreement
has not been executed or if an unexecuted Interconnection Agreement has
been filed with the Commission, the Interconnection Customer would have
the option to complete negotiations with either the initial
Transmission Provider or the successor.
Comments
192. Dairyland Power observes that the initial Transmission
Provider should provide interest to the successor when the balance of
deposits or payments is transferred. Also, if the study costs of the
new Transmission Provider exceed the amount of the deposit, it is
reasonable that the Interconnection Customer make up the difference.
193. Without explanation, NYTO states that the Interconnection
Customer should not have the option of negotiating with a successor
Transmission Provider.
Commission Conclusion
194. With respect to Dairyland Power's comment, the Commission
clarifies that any additional costs incurred by the successor in excess
of the deposit amounts must be treated in accordance with the Final
Rule and paid upon completion of the Interconnection Studies. The
Commission does not adopt NYTO's position and instead permits the
Interconnection Customer to negotiate with the successor Transmission
Provider.
195. Section 6--Interconnection Feasibility Study; Section 7--
Interconnection System Impact Study; Section 8--Interconnection
Facilities Study; Section 10--Optional
[[Page 49865]]
Interconnection Study--Proposed LGIP Sections 6, 7 and 8 describe (1)
the analyses that would be conducted for each of the Feasibility,
System Impact, and Facilities Studies, (2) the Interconnection
Customer's responsibility regarding the actual cost of each study and
of any restudies that may be required; and (3) the right an
Interconnection Customer would have to maintain its Queue Position and
substitute a Point of Interconnection, identified by either the
Transmission Provider or the Interconnection Customer, if any of these
Interconnection Studies uncovers a result that the Interconnection
Customer and Transmission Provider did not contemplate during the
Scoping Meeting. These sections would also allow an Interconnection
Customer to direct that one of the alternative Points of
Interconnection specified in the related Interconnection Feasibility
Study Agreement and Scoping Meeting be used if the Transmission
Provider cannot agree on a substitute Point of Interconnection.
196. Section 10 proposed that the Interconnection Customer may ask
the Transmission Provider to perform a reasonable number of Optional
Interconnection Studies. An Optional Interconnection Study would be a
sensitivity analysis based on assumptions provided by the
Interconnection Customer. The scope of the Optional Interconnection
Study would be to identify the Interconnection Facilities, Network
Upgrades and the costs that may be required to provide transmission
service or Interconnection Service.
197. The following paragraphs group together discussions of
Sections 6, 7, 8, and 10 because of the relationships among the topics
and provisions.
General Comments Related to the Feasibility Study, the System Impact
Study, the Facilities Study and the Optional Interconnection Study
198. A number of commenters, including El Paso, FirstEnergy, the
Midwest ISO, National Grid, and PJM, are concerned that the proposed
Interconnection Studies will take longer to complete than the
Interconnection Studies that a Transmission Provider typically performs
today, and will lead to delays in the development of new generation
projects. TVA believes that the study deadlines are unrealistic,
particularly for Transmission Providers with medium to large
interconnection queues. It opposes having to study the Energy Resource
Interconnection Service and Network Resource Interconnection Service
during each phase of the Interconnection Study process. Instead, TVA
proposes that the Interconnection Customer should be able to designate
only one Interconnection Service for study purposes or adjusting the
time lines in Sections 6, 7, 8, and 10 to reflect the increased scope
of work required by giving the Interconnection Customer such
alternatives. Imperial Irrigation opposes the NOPR's proposed
Interconnection Studies because it does not have enough resources to
conduct them. NYISO urges the Commission to allow for regional
differences in the Final Rule.
199. Entergy opposes giving the Interconnection Customer the
ability to continually modify its selected Point of Interconnection
throughout the study process. TVA opposes an Interconnection Customer
maintaining its position in the queue if the Interconnection Customer
changes its Point of Interconnection in any of the Interconnection
Studies. PJM believes that to allow the Interconnection Customer to
require restudies throughout the Interconnection Study process is
inconsistent with a workable regional planning process.
200. Sempra opposes setting a dollar figure for good faith
estimates of Interconnection Study costs in the standardized study
agreements that are attached as appendices to the Final Rule LGIA. It
supports leaving the cost estimates blank in the appendices, with the
expectation that the Transmission Provider would provide the timely
good faith estimate later. Sempra also supports limiting the
Transmission Provider's ability to pass on cost overruns to the
Interconnection Customer.
201. Central Maine notes that the proposed Interconnection Study
agreements would fix the ``good faith estimated cost for performance''
of each particular study. It argues that this is inappropriate because
Interconnection Study costs vary greatly from one Generating Facility
to another. It believes that Transmission Providers should be able to
tailor each Interconnection Study agreement to the particular
Generating Facility, and to include the good faith Interconnection
Study cost estimate in each such agreement. If prepayment of
Interconnection Study costs is not required, the deposit should be a
percentage of the estimated total Interconnection Study cost, as
opposed to a fixed dollar amount.
202. Several commenters seek additional requirements in assigning
cost responsibility for Interconnection Studies to the Interconnection
Customer. Central Maine notes that there are no proposed payment terms
governing restudies, and supports clearly stating that the
Interconnection Customer should bear full cost responsibility for a
restudy. BPA supports requiring the Interconnection Customer to pay the
estimated cost of the Interconnection Feasability Study in advance
under Sections 6.1 and 7.2. National Grid's position is that the
Interconnection Customer should prepay the costs of all Interconnection
Studies because the Transmission Provider is exposed to the risk of
nonpayment. Central Vermont PSC believes that the Interconnection
Customer should bear study costs involving an Affected System.
203. Several entities seek clarification on the proper scope of,
and standards for, the Interconnection Studies. Cal ISO believes that a
study should encompass conditions that include off-peak scenarios and
contingency conditions. Entergy and Westconnect RTO argue that the NOPR
LGIP does not mention types of Interconnection Studies other than load
flow, short circuit, and stability studies. They suggest that the scope
of the Interconnection Studies not be limited to these named analyses,
but be expanded to include additional Interconnection Studies conducted
in accordance with Good Utility Practice. PSNM supports expanding the
scope of Interconnection Studies to encompass any analyses dictated by
Good Utility Practice and allow for additional time on specialized
Interconnection Studies, if needed. PacifiCorp supports permitting the
Transmission Provider to require additional Interconnection Studies
recommended or required by a regional reliability council, including
remedial action margin studies. Georgia Transmission believes that the
Transmission Provider's obligation under Sections 6.2 and 6.3 is
inconsistent with the limited scope of the Interconnection Feasibility
Study, which is defined to consist only of a power flow study and a
short circuit analysis.
204. Southern asks whether, if one Interconnection Request is
required to be restudied by a date certain, all other lower queued
requests would have to be restudied by that same date. Southern
believes that this would be unworkable and unrealistic.
205. NYTO seeks details on specific study procedures for each of
the Interconnection Studies.
Comments Related to Interconnection Feasibility Studies
206. SoCal Water District argues that an Interconnection Customer
should
[[Page 49866]]
lose its position in the queue when the Interconnection Feasability
Study uncovers a result that was not contemplated during the Scoping
Meeting, instead of being allowed to designate a different site for the
Point of Interconnection, as proposed. It says that this will encourage
the Interconnection Customer to make the right choice at the beginning.
It also comments that the Interconnection Customer should not be
assigned a Queue Position until after the completion of the
Interconnection Feasability Study.
207. NSTAR believes that Interconnection Feasibility and
Interconnection Facilities Studies should be at the option of the
Interconnection Customer.
208. The Midwest ISO points out that it is not always possible to
determine accurately when an Interconnection Customer in a high Queue
Position will actually come on line and that this could affect the
accuracy of the Interconnection Feasability Study requested by a lower
queued Interconnection Customer.
209. Sempra supports allowing a Transmission Provider or
Transmission Owner to consider in its Interconnection Studies the In-
Service Dates of all proposed generation projects, even those lower in
the queue. This is so that the studies produce sound results for
reliability purposes and consider all projects that will come on line
at approximately the same time.
Comments Related to Interconnection System Impact Studies
210. FirstEnergy opposes as unreasonably short the proposed three
day period of time during which a Transmission Provider must give an
Interconnection Customer a non-binding good faith estimate of the cost
and time frame for completing an Interconnection System Impact Study.
Comments Related to Optional Interconnection Studies
211. Proposed LGIP Section 10.1 would allow the Interconnection
Customer to ask the Transmission Provider to perform a reasonable
number of Optional Interconnection Studies on or after the date the
Interconnection Customer receives the results of the Interconnection
System Impact Study associated with its Interconnection Request. A
Transmission Provider would have five days from the date it receives a
request for an Optional Interconnection Study to give the
Interconnection Customer an Optional Interconnection Study Agreement.
Commenters raise concerns with the requirement to perform Optional
Interconnection Studies, cost responsibilities for such studies, and
the proposed deadlines.
212. Southern opposes allowing an Interconnection Customer to
require that a Transmission Provider perform Optional Interconnection
Studies. Southern believes that Optional Interconnection Studies will
delay the process by tying up Transmission Provider resources that
could be dedicated to performing the required studies. BPA contends
that allowing the Interconnection Customer to require an unspecified
number of Optional Interconnection Studies, while requiring that the
standard Interconnection Studies be performed within the standard
deadlines, places an unreasonable burden on the Transmission Provider.
213. Nevada Power opposes having to conduct Optional
Interconnection Studies on the grounds that allowing changes to the
original Interconnection Request violates the queue rights of other
Interconnection Customers by giving additional study time and priority
to the Optional Interconnection Study request. Dominion Resources makes
a similar point.
214. SoCal Edison believes that the Final Rule should provide for
Optional Interconnection Studies (1) that are performed outside the
NOPR LGIP time line, (2) if it is understood by the Interconnection
Customer who elects to implement a study that implements Material
Changes, that it could impact the Generating Facility's Queue Position;
and (3) may not exceed for each requester a maximum of two Optional
Interconnection Studies. NYISO urges the Commission to delete Section
10.1 to reduce the number of studies that the Transmission Provider
must perform. The Midwest ISO believes that the Interconnection
Feasibility Study may be elected and can serve as the Optional
Interconnection Study described in Section 10.
215. On the issue of cost responsibility, Central Vermont PSC
supports having the Interconnection Customer compensate the
Transmission Provider for the costs of an Optional Interconnection
Study, including all charges incurred by an Affected System.
216. With respect to the deadlines associated with Optional
Interconnection Studies, FirstEnergy believes that the five day
turnaround period for the Transmission Provider to provide an Optional
Interconnection Study Agreement, as called for in Section 10.1, is too
short and that a ten day period would be better. Cal ISO also supports
a ten day turnaround time.
Commission Conclusion--General Comments
217. The proposed time frames for completing Interconnection
Studies are reasonable. For each of the studies, the NOPR LGIP allows
for the possibility that the Transmission Provider will not be able to
complete the study within the allotted time. In these cases, the NOPR
LGIP provides that the Interconnection Customer and the Transmission
Provider will come to an acceptable accommodation. As to Imperial
Irrigation's concern that it lacks sufficient resources to conduct the
Interconnection Studies, Section 13.4 gives the Parties the option of
using a contractor to complete the required studies at the
Interconnection Customer's expense and Section 4.2 allows the
Transmission Provider to cluster Interconnection Studies, thereby
saving time and money.
218. We believe that the proposed Interconnection Study deposit
amounts are high enough to ensure that an Interconnection Customer is
serious about its Interconnection Request. In the absence of
standardized Interconnection Study cost estimates, a Transmission
Provider could set the Interconnection Study costs at such high levels
so as to discourage entry by competing generators.
219. Central Maine does not identify the benefits of making
Interconnection Study deposits a percentage of the estimated
Interconnection Study costs. Because the proposed dollar amounts are
reasonable and are the result of the consensus process, the Commission
adopts them for the Final Rule LGIP.
220. We find that the proposed provisions regarding the payment of
study costs by the Interconnection Customer are adequate. The NOPR LGIP
makes clear that the Interconnection Customer is responsible for the
actual costs of all Interconnection Studies. We reject the proposal
that the Interconnection Customer fully prepay the costs of
Interconnection Studies because the advance payment would be based on
Transmission Provider estimates rather than actual costs. The
Commission recognizes that the costs of performing Interconnection
Studies may vary by Interconnection Customer because each
interconnection is unique. The unique features of each interconnection
should be identified either in the Scoping Meeting or early in the
Interconnection Study process so that the Transmission Provider can
offer the Interconnection Customer a reasonable estimate of what the
actual
[[Page 49867]]
study costs will be. However, we will require the Transmission Provider
to provide a detailed and itemized accounting of the Interconnection
Study costs in the relevant invoices. If the Interconnection Customer
disputes the study cost, it may pursue dispute resolution procedures as
described in Section 13.5 of the Final Rule LGIP.
221. With regard to commenters' various concerns about the proper
scope of, and standards for, the Interconnection Studies, the
Commission emphasizes that the Final Rule LGIP should not be
interpreted as preventing the Transmission Provider from studying
Interconnection Requests in accordance with Good Utility Practice and
regional reliability requirements. The Transmission Provider may
conduct necessary Interconnection Studies using any standards that are
generally accepted within the region and consistently applied to all
generation projects, including those of the Transmission Provider. If
these standards differ from those specified in the LGIP, the
Transmission Provider must include them in its compliance filing and
may implement them only upon approval of the Commission. For this
reason, we decline to specify detailed study procedures for each
Interconnection Study beyond what is specified in the Final Rule LGIP.
Commission Conclusion--Interconnection Feasibility Studies
222. With regard to the concern that allowing changes to original
Interconnection Requests would be unworkable and would violate the
rights of lower queued Interconnection Customers due to the need to
conduct numerous restudies, the Final Rule allows the Transmission
Provider to take additional time to complete the necessary work. In
addition, although lower queued Interconnection Customers may be harmed
when their Interconnection Requests must be restudied due to actions of
an Interconnection Customer higher in the queue, they also benefit from
the flexibility to request that the Transmission Provider study a
substitute Point of Interconnection. In this respect, the Commission
finds that the NOPR LGIP strikes an appropriate balance and,
accordingly, adopts it in the Final Rule.
223. Regarding Sempra's question about which projects within the
queue should be considered when performing Interconnection Studies, the
Commission requires the Transmission Provider to consider in its
Interconnection Studies all generators with both higher and lower
queued Interconnection Requests that could affect the Network Upgrades
associated with integrating these generators with the Transmission
System, as specified in the Final Rule LGIP.
Commission Conclusion--Interconnection System Impact Studies
224. In response to FirstEnergy's comment that there is
insufficient time to provide cost and time estimates for completing an
Interconnection System Impact Study, we find that three Business Days
is reasonable. We note that prior to the Interconnection System Impact
Study, the Transmission Provider will have conducted the
Interconnection Feasibility Study and the Parties will have met to
discuss the study results. Accordingly, through this ongoing process,
the Transmission Provider will have had ample time to anticipate and
prepare such estimates.
Commission Conclusion--Optional Interconnection Studies
225. The Commission finds that commenters' concerns about allowing
an Interconnection Customer to request Optional Interconnection Studies
are misplaced. Such studies are for informational purposes only and are
to be completed within an agreed upon time period using Reasonable
Efforts. If Optional Interconnection Studies place too great a burden
on the resources of the Transmission Provider, the Final Rule permits
the use of a contractor at the Interconnection Customer's expense. The
Commission is neither eliminating these provisions nor, as SoCal Edison
proposes, limiting the number of Optional Interconnection Studies an
Interconnection Customer may request. These studies may provide
information needed by the Interconnection Customer. Since the
Interconnection Customer pays for the Optional Interconnection Study
and a contractor may be used for this purposes, the impact on a
Transmission Provider is minimal.
226. Section 9--Engineering & Procurement (``E&P'') Agreement (In
the NOPR: Agreements)--Proposed LGIP Section 9 provided a mechanism for
the Transmission Provider and the Interconnection Customer to enter
into an Engineering & Procurement Agreement prior to executing the
LGIA. An Interconnection Customer may ask that the Transmission
Provider begin engineering and procurement of long lead-time items
necessary for the establishment of the interconnection. The
Transmission Provider is not obligated to offer an agreement if the
Interconnection Customer is in Dispute Resolution as a result of an
allegation that the Interconnection Customer has failed to meet any
milestones or comply with any other sections of the LGIP. This section
also specifies the cost and other obligations of the Interconnection
Customer.
Comments
227. Calpine and Duke Energy propose that Section 9.1 be expanded
to cover situations where the construction of certain Network Upgrades
takes place prior to the execution of the LGIA. Duke Energy states that
the Transmission Provider should be prohibited from refusing to enter
into an interim Engineering & Procurement Agreement unless the
Interconnection Customer's failure to meet milestones directly affects
the Transmission Provider's ability to meet its obligation under the
Engineering & Procurement Agreement. FirstEnergy states that it is
inappropriate to enter into an Engineering & Procurement Agreement
prior to the execution of an LGIA, or the filing of an unexecuted LGIA
with the Commission.
Commission Conclusion
228. We disagree with Calpine and Duke Energy regarding
construction. The Final Rule does not require the construction of
Network Upgrades prior to the execution of the LGIA; nor do we see why
the Transmission Provider should be placed at risk by committing to the
construction of such Network Upgrades prior to the execution of an
LGIA. Regarding FirstEnergy's comments, we conclude that it is
reasonable to allow the Parties to enter into an Engineering &
Procurement Agreement for long lead-time items necessary to accommodate
the interconnection as long as the Interconnection Customer bears the
cost risk. Likewise, in response to Duke Energy and consistent with the
language in the NOPR, we conclude that it is reasonable to require a
Transmission Provider to offer an Engineering & Procurement Agreement
only if the Interconnection Customer has met its obligations under the
Final Rule LGIP. Accordingly, we adopt Section 9 in the Final Rule as
proposed.
229. Section 11--Standard Large Generator Interconnection Agreement
(In the NOPR: Interconnection Agreement)--Proposed LGIP Section 11
includes procedures for tendering, negotiating, executing, and filing
an interconnection agreement.
230. Section 11.1--Tender--Proposed LGIP Section 11.1 provided that
the Transmission Provider simultaneously submit to the Interconnection
Customer
[[Page 49868]]
the draft Interconnection Facilities Study Report and a draft LGIA, to
the extent practicable, in the form of the pro forma LGIA. Within 30
Calendar Days after the issuance of the draft Interconnection
Facilities Study report and a draft pro forma LGIA, the Transmission
Provider shall submit the completed draft of the LGIA.
Comments
231. Central Maine believes that 30 days is an unreasonable time
frame in which to prepare such technically detailed documents as the
appendices to the interconnection agreement, and it should therefore be
increased to 60 days.
Commission Conclusion
232. Central Maine has not convinced us of the difficulty of
preparing the interconnection agreement appendices in 30 Calendar Days
or shown a need to extend the time in which to prepare them to 60
Calendar Days. Accordingly, the Commission retains the proposed 30
Calendar Day requirement for the Transmission Provider to tender the
completed interconnection agreement.
233. Section 11.2--Negotiation--Proposed LGIP Section 11.2 provided
that the Transmission Provider and the Interconnection Customer be
required to negotiate the terms contained in the appendices to the
interconnection agreement for up to 60 Calendar Days after tender of
the final Interconnection Facilities Report. If the Interconnection
Customer determines that negotiations are at an impasse, it could
either request termination of the negotiations and request submission
of the unexecuted interconnection agreement to the Commission, or
initiate Dispute Resolution procedures. If the Interconnection Customer
requests termination of the negotiations, but within 60 Calendar Days
thereafter fails to request either the filing of the unexecuted LGIA or
initiate Dispute Resolution, it would be deemed to have withdrawn its
Interconnection Request.
Comments
234. FirstEnergy contends that the provisions of this section
unduly restrict the ability of the Parties to negotiate a resolution.
It argues that proposed LGIP Section 11.2 provides no recourse for the
Transmission Provider in circumstances where the negotiations are at an
impasse and the Interconnection Customer neither terminates the
Interconnection Request nor continues to negotiate in good-faith.
FirstEnergy recommends that Section 11.2 of the NOPR IA be revised to
include the following language: ``Unless otherwise agreed to by the
Parties, if the Interconnection Customer has not executed the
Interconnection Agreement, requested the filing of an unexecuted
[interconnection agreement], or initiated Dispute Resolution procedures
within 60 days of the tender of the completed draft of the LGIA
Appendices, the Interconnection Customer will have been deemed to have
withdrawn its Interconnection Request.
Commission Conclusion
235. The Commission agrees with FirstEnergy that there could be
circumstances where the Parties could be unduly restricted in their
negotiations and therefore adopts the language proposed by FirstEnergy
in the Final Rule LGIP.
236. Section 11.3--Execution and Filing--Proposed LGIP Section 11.3
would have the Interconnection Customer demonstrate Site Control to the
Transmission Provider, and provides specific milestones as evidence of
Site Control. It would also provide that the Transmission Provider file
the LGIA as soon as practicable, but not later than ten Business Days
after receiving either the two executed originals of the LGIA, or the
request by the Interconnection Customer to file an unexecuted LGIA.
Comments
237. Mirant does not oppose requiring an Interconnection Customer
to maintain Site Control and provide reasonable evidence that the
Interconnection Customer has met some of the specified milestones.
However, it asks the Commission to clarify what constitutes
``reasonable evidence'' of Site Control. Other commenters, including
PJM and PJMTO, assert that the Commission should give the
Interconnection Customer more milestones to meet.
238. PJM opposes letting an Interconnection Customer deposit
$250,000 instead of demonstrating meaningful progress and believes that
doing so can lead to clogging and gaming of the queue.
239. Central Maine requests that the Commission extend from ten to
30 days the obligation to file, as additional time is needed to prepare
the filing. It claims that neither Party would be adversely affected by
such an extension.
Commission Conclusion
240. We shall modify Proposed LGIP Section 11.3 to better reflect
the Commission's unexecuted agreement procedure in the OATT.\62\
Accordingly, the unexecuted agreement should contain terms and
conditions deemed appropriate by the Transmission Provider for the
Interconnection Request. But the LGIA approach differs from the OATT
approach, since the Parties' obligations may be significantly different
in the LGIA context. The OATT unexecuted agreement provision requires
the Transmission Provider to commence providing service as long as the
Transmission Customer agrees to compensate the Transmission Provider at
the rate the Commission ultimately determined to be just and
reasonable. Since the LGIA involves obligations different from those in
the OATT, including facilities construction that may be undertaken by
either Party, it is appropriate to give both Parties more flexibility
to determine whether to proceed under the non-disputed terms of their
unexecuted agreement. Once the unexecuted agreement is filed, if the
Parties agree to proceed with design, procurement, and construction of
facilities and upgrades under the agreed upon terms of the unexecuted
agreement, they may proceed pending Commission action.
---------------------------------------------------------------------------
\62\ See Section 15.3 of the OATT.
---------------------------------------------------------------------------
241. In response to Mirant's request to clarify what constitutes
``reasonable evidence'' of Site Control, the Commission notes that the
Final Rule definition of the term specifically lists the types of
documentation that reasonably demonstrates evidence of Site Control.
242. PJM proposes to eliminate the $250,000 additional deposit if
the Interconnection Customer is unable to provide evidence of Site
Control. It would also have the Generating Facility lose its place in
the queue if the Interconnection Customer misses a milestone. We find
that the deposit is a sufficient showing that the Interconnection
Customer is serious about the project and will continue to work to meet
the requirements of Site Control and other milestones. Finally, this
section provides sufficient milestones and penalties to reasonably
ensure that the Interconnection Customer is intent on completing the
project.
243. Central Maine has not provided any support for its request to
extend the time from ten to 30 days to meet the filing obligations.
Accordingly, the Final Rule retains the ten Business Days requirement.
244. Section 12--Construction of Transmission Provider's
Interconnection Facilities and Network Upgrades--Proposed LGIP Section
12 required the
[[Page 49869]]
Transmission Provider and the Interconnection Customer to agree to a
schedule for the construction of Interconnection Facilities and Network
Upgrades that are needed to accommodate the Interconnection Request. It
also provided for an Interconnection Customer to request the
acceleration of Network Upgrades that are needed for a higher-queued
Interconnection Customer that would not have otherwise been completed
in time to support the lower queued Interconnection Customer's In-
Service Date as long as it commits to pay any costs associated with
expediting the project, including the cost of any Network Upgrades
assigned to the higher-queued Interconnection Customer.
245. Section 12.1--Schedule--Proposed LGIP Section 12.1 provided
that the Transmission Provider and Interconnection Customer negotiate
in good faith to develop a schedule for the construction of the
Transmission Provider's Interconnection Facilities and Network
Upgrades.
Comments
246. Duke Energy and FirstEnergy contend that this section should
be deleted, since it is already covered in Article 5 of the NOPR LGIA.
Commission Conclusion
247. The Commission finds no reason to delete Section 12.1. It
merely states that the Parties must negotiate a construction schedule
in good faith. The fact that the negotiated construction schedule is in
Appendix B (Milestones) of the LGIA does not require us to delete
Section 12.1 from the Final Rule LGIP.
248. Section 12.2--Permits--Proposed LGIP Section 12.2 provided
that the Parties specify in the LGIA each Party's responsibility for
obtaining permits, licenses, and authorizations necessary to construct
the Interconnection Facilities and Network Upgrades needed to
accommodate the proposed interconnection in conformance with all
Applicable Laws and Regulations.
Comments
249. Duke Energy states that the first sentence of Section 12.2
should be stricken because it duplicates NOPR LGIA Article 14.1.
FirstEnergy contends that the entire section should be deleted because
the topic is more properly addressed in the LGIA. Cinergy asks the
Commission to clarify that nothing in the section requires the
Transmission Provider to exercise its power of eminent domain. Central
Maine argues that the phrase ``nothing in this Section 12.2 shall be
construed to waive any rights under Applicable Laws and Regulations''
should be either deleted or applied to the entire Final Rule LGIP,
because its inclusion in just one provision creates confusion.
Commission Conclusion
250. The Commission disagrees with Duke Energy. Proposed LGIP
Section 12.2 merely requires the Parties to specify in the LGIA each
Party's responsibility for obtaining permits, licenses, and
authorizations necessary to construct the Interconnection Facilities
and Network Upgrades. Article 14.1 of the NOPR LGIA, on the other hand,
states that each Party's obligations under the LGIA are conditioned
upon regulatory approval from relevant Governmental Authorities.
251. In response to Cinergy's assertion, while the Commission does
not require that the Transmission Provider exercise its right of
eminent domain in all instances, we do not prohibit it from doing so.
Rather, in the Final Rule, consistent with the Commission's discussion
of NOPR LGIA Article 5.11 (now Final Rule LGIA Article 5.13), Lands of
Other Property Owners, we require that a Transmission Provider or
Transmission Owner use efforts similar to those it typically undertakes
on its own behalf (or on behalf of an Affiliate), which may include use
of eminent domain rights, to secure permits for the Interconnection
Customer, unless restricted from doing so by state law.
252. We agree with Central Maine's arguments and are therefore not
incorporating into this section the proposed text dealing with the
waiving of rights under Applicable Laws and Regulations.
253. Finally, the Commission agrees with FirstEnergy that the
issues contained in this section are more appropriately discussed in
the Final Rule LGIA. Accordingly, proposed LGIP Section 12.2 is being
deleted from the Final Rule LGIP and is being incorporated into the
Final Rule LGIA as Article 5.14.
254. Section 12.3--Construction Sequencing (In the Final Rule LGIP:
Section 12.2)--Proposed LGIP Section 12.3 stated that an
Interconnection Customer may ask the Transmission Provider to advance
construction of Network Upgrades supporting other generators that were
assumed to be completed in time to support the Interconnection
Customer's Generating Facility's In-Service Date. The Transmission
Provider would have to use Reasonable Efforts to advance the
construction of such Network Upgrades, provided that the
Interconnection Customer commits to pay the Transmission Provider the
cost of the Network Upgrades and any associated expediting costs. The
Transmission Provider must refund to the Interconnection Customer the
costs of any expedited Network Upgrades after the Transmission Provider
receives payment from the entity for which the Network Upgrades were to
be originally constructed. Until such costs are refunded, the
Transmission Provider must provide the Interconnection Customer with
transmission credits for the costs of the expedited Network Upgrades.
Comments
255. Duke Energy seeks clarification that (1) the Interconnection
Customer earlier in the queue is obligated to pay the Transmission
Provider only the amount not refunded, through credits, to the
Interconnection Customer requesting the acceleration (and thus is
eligible for transmission credits only for that amount), (2) the
Interconnection Customer requesting the accelerated construction is
reimbursed for Network Upgrade costs only up to the amount of the
transmission credits not received, (3) the Transmission Provider is not
required to advance funds for construction or to pay total credits in
excess of the cost of the Network Upgrades; and (4) the higher-queued
Interconnection Customer must pay for the expedited Network Upgrades on
the date that it would have been required to pay were it not for the
request for acceleration. Duke Energy also notes that there may be
circumstances when acceleration requires greater expenditures than
would be required to meet a reasonable construction schedule. It
therefore recommends that if a Transmission Provider believes that the
Commission would not allow such expenditures to be included in the
revenue requirement under traditional ratemaking principles, the
Transmission Provider should have the opportunity to challenge the
provision of credits for these costs.
Commission Conclusion
256. The Commission affirms that an Interconnection Customer higher
in the queue is obligated to pay the Transmission Provider for only
that portion of the costs of the expedited Network Upgrades not already
paid to the Interconnection Customer that requested expedition through
transmission credits. The Transmission Provider can then forward this
amount to the expediting Interconnection Customer as a lump sum payment
for
[[Page 49870]]
the balance of costs that the higher-queued Interconnection Customer is
owed. At this point, the payment of credits will cease and the payment
of credits to the higher-queued Interconnection Customer can begin. The
latter credits will continue until the higher-queued Interconnection
Customer has been reimbursed for the portion of the Network Upgrade
costs that it has paid. The Transmission Provider is also not required
to advance funds for construction or to pay total credits in excess of
the cost of the Network Upgrades, including any interest that may be
due. Finally, the higher-queued Interconnection Customer is responsible
for paying the costs of the advanced Network Upgrade on the date that
it would have been required to pay had there been no request for
accelerated construction.
257. In response to Duke Energy's final concern, the Commission
recognizes that there may be circumstances under which the Transmission
Provider, in attempting to accommodate the Interconnection Customer's
request to accelerate the project, may have to incur costs that would
exceed what would normally be required to meet a reasonable
construction schedule. However, we will consider such costs to have
been prudently incurred unless it is demonstrated in a rate proceeding
that the Transmission Provider could have met the Interconnection
Customer's requested In-Service Date at a lower cost through the
construction of alternative Network Upgrades, or by other means.
Consequently, the Transmission Provider should have no reason to
challenge the provision of credits for any costs that it prudently
incurs.
258. Consistent with the above discussion, the Final Rule clarifies
Section 12.3 and removes certain text that is largely redundant.
259. This section is designated Section 12.2 in the Final Rule
LGIP.
260. Section 13--Miscellaneous--Proposed LGIP Section 13 included a
variety of provisions, described below.
261. Section 13.1--Confidentiality--Proposed LGIP Section 13.1
would have required that the Transmission Provider afford confidential
treatment to all information it receives from the Interconnection
Customer to process its request for Interconnection Service except for
information that is in the Interconnection Request and information that
is or becomes generally available to the public. The Transmission
Provider would be permitted to use this information only for the
Interconnection Study and to share it only with those who need it for
Interconnection Studies and actions to interconnect the Generating
Facility. The Transmission Provider would not be permitted to share
such information with the merchant generation or marketing functions of
the Transmission Provider or its Affiliates' merchant functions or as
otherwise prohibited by Order No. 889.
262. The Transmission Provider would be liable to the
Interconnection Customer for any Breach of confidentiality caused by
its agent or contractor. If requested by the Interconnection Customer,
the Transmission Provider would be required to destroy or return to the
Interconnection Customer information no longer needed. If the
Transmission Provider is required to disclose the information to any
regulatory body, it would be obligated to request confidential
treatment of the information. The Transmission Provider must provide
the Interconnection Customer with prompt written notice if it receives
a request for the Confidential Information to allow the Interconnection
Customer an opportunity to contest the disclosure. The confidentiality
provisions would not require the Transmission Provider or
Interconnection Customer to disclose information in violation of any
confidentiality obligations to third parties.
Comments
263. Several commenters, including Central Maine and MidAmerican,
argue that these confidentiality protections should be extended to the
Transmission Provider as well. Central Maine seeks a clear policy about
what information may be disclosed, what information must be disclosed,
the manner of disclosure, and what information must remain confidential
as part of the interconnection process.
264. Lakeland seeks reconciliation of the differences between the
confidentiality provisions of the NOPR LGIA and the NOPR LGIP.
Specifically, the Final Rule LGIP should accommodate compliance with
state Open Records laws, including Florida's, as in the NOPR LGIA.
265. Entergy opposes requiring a Transmission Provider to provide
Confidential Information, or disclose anything not public, to an
Interconnection Customer. If that disclosure is required by the Final
Rule, the confidentiality requirements should be reciprocal and a Party
should be required to designate which materials warrant confidential
treatment.
266. The Midwest ISO agrees with the proposal that Confidential
Information only be shared among employees of the Transmission Provider
(including Transmission Owners of Affected Systems) and third parties
that need the information to perform or review Interconnection Studies.
Moreover, in accordance with Order No. 889, the information should not
be shared with individuals responsible for merchant or marketing
functions. The Midwest ISO also requests that the Commission clarify
what type of planning information should be kept confidential for
security reasons and what information should be made available, perhaps
under a non-disclosure agreement executed by the Parties. Proposed LGIP
Section 13.1 would have required that the Transmission Provider keep
confidential all information provided by the Interconnection Customer
related to Interconnection Service that is not provided in the
Interconnection Request; the Midwest ISO and NERC state that some
information in the Interconnection Request may be commercially
sensitive, such as unit-specific data, and should be kept confidential.
267. GE Power notes that developers generally prefer to look at
alternative project scenarios before going ``on the record'' with their
plans. GE Power requests that the Commission address the balance
between commercial confidentiality or security-based secrecy and the
need to make the data available so that studies and business
forecasting can be completed.
268. NERC comments that the information provided by Interconnection
Customers that may be considered confidential under Section 13.1 is
needed to protect reliability because it generally is shared not only
with directly affected neighboring systems, but also with regional and
NERC study groups for modeling inter-regional and interconnection
reliability effects. NERC states that this data is generally provided
in a manner that masks ownership and other commercial terms and that
NERC has standards of conduct for Reliability Coordination and a data
confidentiality agreement. It requests that mechanisms remain in place
to ensure the availability and confidentiality of such data so that
Interconnection Customers will provide data needed for reliability
assessment. NERC proposes that an Interconnection Customer identify
specific information to be protected as confidential and that the
Transmission Provider share this information only with parties to
confidentiality agreements.
[[Page 49871]]
Commission Conclusion
269. In response to Central Maine's and several others' requests
that the confidentiality provision in the NOPR LGIP be made more
specific, the Commission is incorporating into Section 13.1 certain
aspects of the confidentiality provisions in Article 22 of the LGIA.
These include a definition of Confidential Information, procedures for
the release of Confidential Information, and guidance regarding how
Confidential Information should be treated when it is requested by the
Commission as part of an investigation. Both Parties are eligible to
use the protection afforded by the revised section as long as the
information is identified as Confidential Information in accordance
with the section. This revision should satisfy commenters that sought
greater specificity regarding procedures for maintaining and disclosing
information in the confidentiality provisions in the LGIP. It also
eliminates any significant conflicts between the LGIP and LGIA
confidentiality provisions. The Final Rule LGIP Section 13.1 differs
from Final Rule LGIA Article 22 only with respect to the provisions in
Article 22 that address the fact that the confidentiality obligations
arise under a signed Interconnection Agreement.
270. This revision eliminates from the Section 13.1 the exception
for information that appears in the Interconnection Request. Under the
revised provision, it is the Interconnection Customer's responsibility
to designate the information submitted in its Interconnection Request
that should remain confidential.
271. Lakeland requests that the Commission adopt provisions that
accommodate compliance with state open records laws. Public utilities
also may be subject to information restrictions arising from national
security concerns. As noted above, the Commission expects all public
utilities to meet basic standards for system infrastructure and
operational security. In addition, if state laws indeed conflict with
the confidentiality and information sharing addressed in this
provision, the Commission expects that public utilities will make
conforming changes to these provisions in their compliance filings and
explain the statutory basis for such changes.
272. The Commission agrees with the Midwest ISO and NERC that the
Final Rule must allow information to be shared with Transmission
Provider representatives of NERC and other regional planning groups,
since to deny them this information may undermine Transmission System
reliability and modeling efforts. Section 13.1 of the Final Rule allows
the Parties to share Confidential Information with an independent
transmission administrator or reliability organization as long as the
disclosing party agrees to promptly notify the other Party in writing
and to seek to protect the Confidential Information from public
disclosure by separate confidentiality agreement or other reasonable
measures. We do not, as the Midwest ISO requests, specify the planning
information that may be made available, as it is likely that the data
will vary by region.
273. Finally, GE Power proposes that this rulemaking address what
information a Transmission Provider should make available to a would-be
Interconnection Customer before the submission of an Interconnection
Request. We decline to do so. This Final Rule addresses
interconnection, not the general availability of information to all
those who have not yet submitted an Interconnection Request.
274. Section 13.3--Obligation for Study Costs--Proposed LGIP
Section 13.3 would have required the Interconnection Customer to pay
the actual costs of the Interconnection Studies. If any deposit exceeds
the actual cost of the study, that amount would be refunded to the
Interconnection Customer or offset against the cost of any future
Interconnection Studies associated with the Interconnection Request.
Proposed LGIP Section 13.3 also stated that the Transmission Provider
would not be obligated to perform or continue to perform any
Interconnection Studies unless the Interconnection Customer has paid
all undisputed amounts under this section.
Comments
275. PJM argues that the absence of significant milestones in
Section 13.3 amplifies the opportunities for an Interconnection
Customer to dispute its bill and string its project along at little
cost. Any refusal to pay an invoiced study cost should be a Default
that triggers withdrawal of the Interconnection Request.
276. The Midwest ISO believes that the Transmission Provider should
be permitted to collect interest on any unpaid amounts not in dispute,
and Duke Energy believes that deposits in excess of the actual study
cost should be entitled to earn interest from the day a deposit is
credited to an account.
277. Sempra would require the Interconnection Customer to pay for
simple and inexpensive Interconnection Studies up front, and to pay for
expensive and complicated studies through periodic payments.
Commission Conclusion
278. The Commission declines to adopt any of the proposed changes
to Section 13.3 in the Final Rule. While an Interconnection Customer
could delay the interconnection process merely by disputing its bill,
the Commission is not convinced that a significant number of
Interconnection Customers will to act in this manner, since most
Interconnection Customers presumably will want to have their projects
on line as soon as possible. Furthermore, requiring the Interconnection
Customer to pay all invoiced amounts, no matter how unreasonable, or
lose its Queue Position would invite abuse on the part of the
Transmission Provider.
279. In response to the Midwest ISO and Duke Energy, the payment of
interest on study deposits and unpaid study costs tend to offset one
another over time. Moreover, the Commission is not persuaded that the
interest costs would be large enough to warrant the additional
administrative expense that the Transmission Provider would incur in
tracking the amounts due. Also, the requirement to pay a deposit and
then additional amounts as they come due will generally achieve the
result that Sempra seeks.
280. Finally, to ensure that the Interconnection Customer is
adequately informed regarding the actual costs of Interconnection
Studies, we revise Section 13.3 to require the Transmission Provider to
provide a detailed and itemized accounting of the Interconnection Study
costs in the relevant invoices.
281. Section 13.4--Third Parties Conducting Studies--Proposed LGIP
Section 13.4 provided that the Interconnection Customer be able to
require the Transmission Provider, within 30 days of its notification,
to use a consultant to complete the Interconnection Study at issue if
(1) the Parties cannot agree to the timing of the completion of the
Interconnection Study, or (2) the Interconnection Customer receives
notice from the Transmission Provider that the Transmission Provider
will not complete an Interconnection Study within the applicable time
frame, or (3) the Interconnection Customer receives from the
Transmission Provider neither the Interconnection Study nor a notice
about not completing the Interconnection Study. In such situations, the
Interconnection Study would be conducted at the Interconnection
Customer's expense and
[[Page 49872]]
in the case of (3), the Interconnection Customer could submit a claim
to Dispute Resolution to recover the costs of the third party study.
The consultant would be required to follow the LGIP protocols and use
the information it receives to do the Interconnection Study for the
sole purpose of completing the study. The Transmission Provider would
be required to cooperate with the consultant to complete and issue the
Interconnection Study in the shortest reasonable time.
Comments
282. Some commenters, including Duke Energy, EPSA, NYISO, and
Sunflower Electric, endorse the NOPR proposal to allow an
Interconnection Customer to request a consultant to undertake or
complete an Interconnection Study, while others advocate the
Transmission Provider being allowed to initiate use of a consultant to
accelerate completion of Interconnection Studies, as well. Sunflower
Electric sees use of a consultant as a short-term means to alleviate a
Transmission Provider's backlog. Central Maine seeks clarification of
the process for selecting the consultant. It argues that a 30 day
deadline for a Transmission Provider to issue an RFP and select a
consultant is not realistic.
283. BPA, MidAmerican, and PJM question whether use of a consultant
will speed up the study process, whether it will significantly reduce a
Transmission Provider's overall study effort, and whether it will help
a Transmission Provider to more efficiently study multiple
Interconnection Requests. They are concerned that any benefits may be
limited to situations in which Interconnection Customers' projects are
studied individually, on a non-integrated basis, in isolation from
other higher-queued Interconnection Requests and system improvements
and expansions. Others recommend allowing a Transmission Provider to
complete pending Interconnection Studies for higher-queued
Interconnection Requests before turning its databases, workpapers, and
study results over to the consultant to help it move forward with its
study. In addition, PJM observes that an independent Transmission
Provider, such as an RTO or ISO, has no incentive to delay completion
of an Interconnection Study. NYISO would have the ISO direct and review
any consultant Interconnection Studies.
284. BPA proposes allowing a Transmission Provider to ignore the
consultant's study if it is not completed by the deadline. BPA also
wants sufficient time for the Transmission Provider, as ``the expert''
in regard to its system, to review the study to ensure that it is
adequate and to make necessary changes to it.
Commission Conclusion
285. Based on the foregoing comments and a balancing of the
interests of an Interconnection Customer (to obtain the results of any
necessary Interconnection Studies as soon as possible) and the
responsibility of Transmission Provider (to efficiently and effectively
plan its Transmission System), the Commission will permit use of a
consultant upon the request of an Interconnection Customer at any time
during the Interconnection Study process. This is subject to the
Transmission Provider deciding that such use will (1) help maintain or
accelerate the study process for the Interconnection Customer's pending
Interconnection Request and (2) not interfere with the Transmission
Provider's planning processes or hamper the Transmission Provider's
progress on any other Interconnection Studies for pending
Interconnection Requests. Moreover, a consultant hired to perform an
Interconnection Study must follow the same rules and procedures as does
a Transmission Provider that conducts the study in-house.
286. The Commission will not specify in Section 13.4 all the terms,
conditions, and selection processes that would be applicable. Instead,
the Final Rule leaves it up to the Parties to negotiate the details of
the timing and process for selecting the consultant, the deadlines for
the consultant's work, the Transmission Provider's direction and review
of the consultant's work, the contingency rights and obligations of the
Parties if the consultant fails to timely deliver a study of adequate
quality, and any other relevant matters. This added flexibility may
increase opportunities for the use of a consultant to accelerate the
completion of necessary Interconnection Studies when it is feasible to
do so.
287. Section 13.6--Disputes--Proposed LGIP Section 13.6 detailed
requirements for the Dispute Resolution process. Upon written notice of
a dispute arising out of the Interconnection and Operating Agreement or
its performance, a senior representative or representatives of each
Party would be required to try to resolve the dispute informally.
Failing informal resolution within 30 Calendar days, by mutual
agreement the dispute would be submitted to arbitration, or each Party
would exercise its other legal or equitable rights. Section 13.6.2
specified external arbitration procedures, and Section 13.6.3 stated
that unless otherwise agreed, the arbitrator would be required to
render a decision within 90 Calendar Days of its appointment that shall
be binding upon each Party. Final decision affecting jurisdictional
rates, terms, and conditions would be filed with the Commission.
Finally, Section 13.6.4 delineated responsibility for costs related to
the resolution of disputes.
Comments
288. Central Maine believes that the Parties should be precluded
from settling by binding arbitration matters that are under the
Commission's jurisdiction.
Commission Conclusion
289. Although Section 13.6 proposed making Dispute Resolution
available only for disputes arising under the LGIA, the Final Rule
extends the procedures to disputes arising under the LGIP. This section
is designated Section 13.5 in the Final Rule LGIP.
290. The Commission has long encouraged the use of alternative
dispute resolution to resolve disagreements over Commission-
jurisdictional contracts. The Commission's complaint rule, in fact,
requires Parties to specify in a formal complaint whether they have
attempted an informal resolution of contract-related disputes, and if
they have not done so, to explain why not.\63\ Final Rule LGIP Sections
13.5.1 through 13.5.3 reflect the Commission's policy of encouraging
alternative dispute resolution without compromising the Commission's
authority. Final Rule LGIP Section 13.5.3 prevents arbitrators from
changing the provisions of the interconnection agreement in any manner.
Arbitrators may only interpret and apply the provisions. Any such
changes to the interconnection agreement could be made only pursuant to
Sections 205 and 206 of the Federal Power Act, and would require
Commission review. Although the arbitrator's decision is binding in so
far as it is enforceable in any court having jurisdiction, an
arbitrator's decision must be filed with the Commission if it affects
jurisdictional rates, terms and conditions of service, Interconnection
Facilities, or Network Upgrades. Thus, the Commission retains the
authority to review the arbitrator's decision. Nor do we agree that the
provision circumscribes the Parties' right to avail themselves of the
Commission's
[[Page 49873]]
complaint process because under Section 13.5.1, a Party that does not
agree to arbitration may exercise its rights, including its right to
bring a complaint to the Commission.
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\63\ 18 CFR 385.206(b)(9) (2003).
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291. The Commission also adds language to Section 13.6.1 to
emphasize that Parties should consider using informal dispute
resolution as well as more formal options. The Commission encourages
Parties to settle their disputes through other mechanisms (e.g.,
mediation, assisted negotiations, settlement judge procedures) prior to
commencing arbitration proceedings. Of course, at any point during the
process the disputing Parties may have recourse to alternative methods
of dispute resolution, provided that both Parties agree.\64\
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\64\ Disputing parties may retain mediators from outside
sources, or they may use the Commission's Dispute Resolution Service
or the Commission's settlement judge process.
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292. Appendices--Proposed Appendix 1 is the application form for
making an Interconnection Request. Proposed Appendices 2, 3, 4, and 5
set forth the terms for the Interconnection Feasibility Study
Agreement, the Interconnection System Impact Study Agreement, the
Interconnection Facilities Study Agreement, and the Optional
Interconnection Study Agreement; and require a deposit of $10,000 for
the Interconnection Feasibility Study, $50,000 for the Interconnection
System Impact Study, $100,000 for the Interconnection Facilities Study,
and $10,000 for the Optional Interconnection Study. The Final Rule LGIP
retains these appendices. In addition, the Final Rule LGIP incorporates
the Final Rule Standard Large Generator Interconnection Agreement at
Appendix 6.
B. Issues Related to the Standard Large Generator Interconnection
Agreement (LGIA)
1. Overview
293. The proposed LGIA contained the Parties' contractual
Interconnection Service rights and obligations. It addressed matters
such as the effective date and termination costs; regulatory filings;
scope of service, including interconnection product options; generator
provided services; Interconnection Facilities engineering, procurement
and construction; testing and inspection, including start-up and
synchronization, system protection and controls requirements;
emergency, and disconnect obligations; metering and communications;
operations and maintenance; Defaults and indemnifications; transmission
crediting; audits; and Dispute Resolution.
294. The proposed LGIA also specified the allocation of the
responsibilities among the Interconnection Customer, the Transmission
Provider and Transmission Owner (where the latter is a Party other than
the Transmission Provider that owns the facilities to which the
interconnection is being made), in regard to obtaining all permits and
authorizations necessary to accomplish the interconnection.
295. Under this Final Rule, if an Interconnection Customer agrees
to pay for any modification to the Transmission Provider's facilities
necessitated by the requested interconnection, the Transmission
Provider is obligated to offer an executable form of LGIA to the
Interconnection Customer. The interconnection agreement becomes
effective upon execution by the Parties, subject to acceptance by the
Commission. If the Interconnection Customer executes the LGIA, the
Transmission Provider, the Interconnection Customer, and the
Transmission Owner must perform their respective obligations in
accordance with the terms of the executed interconnection agreement,
subject to modification by the Commission.
296. If the Interconnection Customer determines that negotiations
are at an impasse, it may initiate Dispute Resolution procedures and,
if not successful, request submission of the unexecuted agreement to
the Commission by the Transmission Provider in accordance with Final
Rule LGIP Section 11. Pending Commission action, the Parties will
comply with the unexecuted agreement to the extent they can proceed
under the agreed upon terms.
2. Article-by-Article Discussion of the Proposed LGIA
297. What follows is a discussion of the proposed LGIA, the
comments received, and the Commission's conclusion. The order of
discussion follows the organization of the proposed LGIA, covering
Articles 1 through 30. Similar to the section-by-section discussion of
the proposed LGIP, only articles for which issues are raised are
presented. Readers should note again that article numbers referred to
in the following discussion are the numbers contained in the proposed
LGIA. Some proposed articles are renumbered in the Final Rule; mention
of that fact is made in the Commission Conclusions discussion, where
appropriate.\65\
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\65\ For some of the LGIA provisions that the Commission is
adopting here, few if any written comments were submitted.
Commenters tended to use the 30 pages to which they were limited to
explain what they would change. They made statements of support for
the rule in general, but did not make article-by-article comments on
parts that they supported. As a result, the only comments received
on some articles were calls for change, even if a majority of
commenters may have indicated general support for the proposed
articles that they did not specifically comment on.
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298. Article 1--Definitions--Proposed LGIA Article 1 contained the
definitions of terms used throughout the NOPR LGIA. Many of these terms
appear both in the NOPR LGIP as well as the NOPR LGIA and we have
decided that a common list of all the defined terms should be included
in both the Final Rule LGIA and Final Rule LGIP. However, for
simplicity, discussion of commenters' concerns regarding defined terms
are discussed in part II.A.2, Section 1 (Definitions).
299. Article 2--Effective Date, Term and Termination--Proposed LGIA
Article 2 included the proposed effective date, the term of the
proposed LGIA, and the procedures for its termination.
300. Article 2.2--Term of Agreement--Article 2.2 proposed that the
LGIA remain in effect for ten years, or longer by request, and be
automatically renewed for each successive one year period thereafter.
Comments
301. Exelon, NYTO and PG&E believe that automatic renewal is
unreasonable because it allows the LGIA to remain in effect for an
indefinite period. PG&E argues that the LGIA should be for a fixed term
(20 years, for example), because the ten year initial term coupled with
automatic renewals could make it last forever without giving the
Transmission Provider an opportunity to terminate the LGIA except in
the case of a Default by the Interconnection Customer. PG&E further
argues that a longer fixed term without automatic renewal gives the
Parties the flexibility to change the terms of the LGIA at the end of
the term to reflect new market structures as they may develop.
Commission Conclusion
302. We adopt Article 2.2 as proposed. Automatic renewal is an
efficient mechanism to renew the LGIA. It mitigates a non-independent
Transmission Provider's market power by allowing the Interconnection
Customer to renew without renegotiation. At the same time, the
interests of the Transmission Provider
[[Page 49874]]
are adequately protected as it can terminate the LGIA in case of
Default by the Interconnection Customer.
303. The Commission also notes that the LGIA, in addition to
addressing the electrical connection of the Interconnection Customer to
the Transmission Provider's Transmission System, also fixes the
performance, operational, and financial obligations of the Parties even
after the Generating Facility begins commercial operation. These
obligations and responsibilities are of indefinite duration, existing
as long as the Generating Facility is connected to the Transmission
Provider's Transmission System. Therefore, it is appropriate for the
term of the LGIA to be indefinite as well.
304. In addition, a ten year minimum term allows the Parties to
avoid tax liability for the payments to the Transmission Provider under
current Internal Revenue Service policy.\66\
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\66\ See part II.B.2 Article 5.14.1 (Interconnection Customer
Payments Not Taxable).
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305. Article 2.3.1--Written Notice--Proposed LGIA Article 2.3.1
provides that the Interconnection Customer may terminate the LGIA after
giving the Transmission Provider 30 Calendar Days advance written
notice.
Comments
306. MidAmerican proposes requiring an Interconnection Customer to
provide three years' advance notice to terminate the LGIA. According to
MidAmerican, the unexpected retirement of the Generating Facility may
result in reduced system reliability due to decreased generation
resources, and a Transmission Provider may need to construct or upgrade
its own generating or transmission facilities if this occurs.
MidAmerican notes that three years is the time customarily required to
construct such facilities. Therefore, a three year termination
provision would provide a Transmission Provider the opportunity to
maintain reliability if the Generating Facility shuts down
unexpectedly.
Commission Conclusion
307. We are not persuaded to increase the advance notice and
termination period to three years as proposed by MidAmerican.
MidAmerican's concern appears to be that the Generating Facility, due
to several years of load growth and other changes, may be essential to
system reliability. Utilities should not allow themselves to become
critically dependent on one generator; however, if they do, they can
enter into a ``reliability must-run'' contract before the
Interconnection Customer exercises its right to terminate. While there
may be a problem if many Interconnection Customers were to cancel
concurrently, we do not believe that the LGIA is the best vehicle for
addressing this problem, or that every Interconnection Customer in
every circumstance should be constrained by a three year termination
provision whether or not such a general problem exists.
308. However, we extend the notice period to 90 Calendar Days in
order to conform with the Commission's Regulations, which provide that
the Transmission Provider is required to notify the Commission of the
proposed cancellation or termination of a contract at least 60 Calendar
Days, but no more than 180 Calendar Days, before the cancellation or
termination is proposed to take effect.\67\
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\67\ 18 CFR 35.15 (2003).
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309. Article 2.3.2--No Commercial Operation--Proposed LGIA Article
2.3.2 would have provided that the Transmission Provider be allowed to
terminate the LGIA if the Interconnection Customer has not met its
obligation to achieve commercial operation of its Generating Facility
within five years of the scheduled Commercial Operation Date or fails
to be available for operation for a period of five years unless a major
Generating Facility upgrade is in progress.
Comments
310. Mirant favors deleting this provision. It asserts that there
is no valid reason for a Transmission Provider to terminate the LGIA if
the Interconnection Customer has paid for the necessary system upgrades
and has met every other obligation under the LGIA. Others point out
that PJM's interconnection agreement does not include such a provision.
Mirant argues that the Transmission Provider should be able to
terminate the LGIA only if the Interconnection Customer defaults under
the terms and conditions of the LGIA. PSNM and Dairyland Power also
favor deleting this provision altogether and claim that, at best, it
should be left to the Parties to negotiate a reasonable period for not
achieving commercial operation without risking termination of the LGIA.
311. Most Transmission Providers, on the other hand, object to the
five year window for achieving commercial operation as being too long,
claiming that one to three years is a more reasonable period of
time.\68\ They point out that the Interconnection Customer determines
the Generating Facility's Commercial Operation Date without any input
from the Transmission Provider and that the Interconnection Customer
should not have an additional five years to achieve commercial
operation.
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\68\ E.g., Central Vermont PSC, Cinergy, El Paso, Exelon,
MidAmerican, and PG&E.
---------------------------------------------------------------------------
312. Central Vermont PSC also advocates shortening the period from
five to two years, and expresses concern that proposed LGIA Article
2.3.2, read with proposed Article 4.1.2, might require a Transmission
Provider to reserve transmission capacity on its transmission system
for an Interconnection Customer taking Network Resource Interconnection
Service for up to five years if the Interconnection Customer fails to
meet its scheduled Commercial Operation Date or fails to be operable
for a consecutive five-year period.
Commission Conclusion
313. We agree with Mirant that the Transmission Provider should not
be allowed to terminate the LGIA if the Interconnection Customer has
paid all costs for which it is responsible and has met all of its other
obligations under the LGIA. The Commission is removing this provision
from the Final Rule LGIA because it contains other provisions for
termination, such as failure to meet milestones and other obligations.
Furthermore, we note that an Interconnection Customer cannot begin to
receive credits for Network Upgrades until its Generating Facility has
achieved commercial operation, thereby providing an incentive to the
Interconnection Customer to perform.
314. Article 2.4--Termination Costs--Proposed LGIA Article 2.4
would have required a Party terminating the interconnection agreement
to pay for all costs incurred by the other Party (including costs of
cancellation orders or contracts for Interconnection Facilities and
equipment).
Comments
315. Mirant argues that an Interconnection Customer should be held
responsible only for the Network Upgrades that it has agreed to pay
for. It and others are concerned that a higher-queued Interconnection
Customer responsible for numerous Network Upgrades might terminate its
LGIA and leave lower-queued Interconnection Customers to pay for the
Network Upgrades that would otherwise have been assigned to the higher-
queued Interconnection Customer. Dominion Resources argues that if a
higher-queued Interconnection Customer suspends or terminates
construction of its Generating Facility, the lower-queued
Interconnection
[[Page 49875]]
Customers must be made responsible for the costs of the Network
Upgrades.
316. Some Transmission Providers argue that this provision does not
make the Interconnection Customer responsible for all costs associated
with the termination of an interconnection agreement. For example,
Southern says that proposed LGIA Article 2.4.1 covers only that portion
of the Transmission Provider's Interconnection Facilities not yet
constructed or installed, and should be modified to include all Network
Upgrades for which the Transmission Provider has incurred expenses. BPA
argues that proposed LGIA Article 2.4.1 should be clear about which
Party is responsible for the termination costs and allocate costs
accordingly. Central Maine believes that the Transmission Provider and
its other customers should not incur any costs associated with the
termination of the LGIA, regardless of who is responsible for the
termination. The Midwest ISO also states that the termination provision
must ensure that the Transmission Provider is made whole for the costs
it incurs.
Commission Conclusion
317. As for the obligations of the lower-queued Interconnection
Customer with respect to the Network Upgrades that would have been paid
for by the terminating Interconnection Customer, this issue is
addressed in our discussion of Article 5.13 (Suspension).
318. We clarify that if an Interconnection Customer terminates the
LGIA, it will be held responsible for all costs associated with that
Interconnection Customer's interconnection, including any cancellation
costs relating to orders or contracts for Interconnection Facilities
and equipment, and any Network Upgrades for which the Transmission
Provider has incurred expenses and has not been reimbursed by the
Interconnection Customer. This clarification should resolve the Midwest
ISO's and Mirant's concerns while ensuring that the Transmission
Provider is made whole for the costs it incurs.
319. Article 2.5--Disconnection--Proposed LGIA Article 2.5 would
have provided that the cost of disconnecting the Generating Facility
from the Transmission Provider's Transmission System be borne by the
terminating Party unless the disconnection is the result of Default by
the other Party.
Comments
320. A number of commenters express concern that this article
suggests that the Transmission Provider may somehow be responsible for
certain disconnection costs. For example, PacifiCorp emphasizes that
the Transmission Provider must be able to disconnect (and not
reconnect) a Generating Facility if the Interconnection Customer
materially Breaches its obligations to maintain electrical standards or
operational requirements, or in the event of Default by the
Interconnection Customer. In such a situation, PacifiCorp argues, the
Transmission Provider should not be required to bear the costs of
disconnecting the Generating Facility. Southern and Dairyland Power ask
that this article be revised to make the Interconnection Customer
responsible for all costs of disconnection under all circumstances.
Commission Conclusion
321. We agree with PacifiCorp that the Transmission Provider must
be able to disconnect the Generating Facility from the Transmission
System to protect its system if the Interconnection Customer fails to
maintain electrical standards and operational requirements.
Accordingly, the Final Rule clarifies that all disconnection costs are
borne by the terminating Party, unless the termination results from the
non-terminating Party's Default of the LGIA.
322. Article 2.7--Reservation of Rights--Proposed Article 2.7 would
have reserved to each Party their rights to unilaterally seek
modification to the executed LGIA pursuant to Sections 205 and 206 of
the FPA, except as restricted by the other provisions of the executed
LGIA.
Comments
323. Dynegy and Mirant note that this clause is redundant because
another Reservation of Rights provision appears in proposed Article
30.11.
Commission Conclusion
324. We agree that this Article 2.7 is redundant, and we delete it
from the Final Rule LGIA.
325. Article 3--Regulatory Filings--Proposed LGIA Article 3 would
have provided that the Transmission Provider is responsible for filing
the LGIA with the appropriate state and federal regulatory authorities
(collectively ``Governmental Authorities'') having jurisdiction over
the Parties. Article 3 also describes how Confidential Information
should be treated. It also prohibits an Interconnection Customer from
protesting the filing of an LGIA or an amendment to an LGIA that the
Interconnection Customer has executed.
Comments
326. MidAmerican recommends that Article 3 be modified to make both
Parties responsible for maintaining the confidentiality of information
provided by the other Party. The DG Alliance states that an
Interconnection Customer has the right to file unilaterally an
unexecuted LGIA if the Transmission Provider declines to negotiate in
good faith.
Commission Conclusion
327. MidAmerican's concerns are addressed in Article 22 of the
Final Rule LGIA, which deals with the rights and responsibilities of
each Party with respect to treatment of Confidential Information. The
DG Alliance's comments are addressed in Section 10.3 of the Final Rule
LGIP, which contains the procedure for filing an unexecuted agreement.
328. Regarding the prohibition against the Interconnection Customer
protesting an executed and filed LGIA or amendment, the Commission
concludes that this is contrary to the reservation of rights provision
of the LGIA, which allows the parties to retain their respective rights
to unilaterally amend their executed LGIA under Sections 205 and 206 of
the FPA. Because this prohibition effectively negates the
Interconnection Customer's Section 206 rights under the LGIA, this
clause favors the Transmission Provider at the expense of the
Interconnection Customer with respect to rights that, if present,
should be mutual. Accordingly, we delete this prohibition from the
Final Rule LGIA.
329. Article 4--Scope of Service--Proposed LGIA Article 4
identified two types of Interconnection Service from which the
Interconnection Customer must choose: Energy Resource Interconnection
Service, which is a basic or minimal service, and Network Resource
Interconnection Service, which is a more flexible and comprehensive
service. Because this topic generated so much controversy, and because
the two services are addressed both in the NOPR LGIA and NOPR LGIP,
discussion of proposed LGIA Articles 4.1 through 4.1.2.2 is included in
part II.C.2 (Interconnection Products and Scope of Service).
330. Article 4.3.1--Generator Balancing Service Arrangements--
Proposed LGIA Article 4.3.1 described certain requirements that the
Interconnection Customer would have to satisfy before submitting a
schedule for delivery service. In particular, the Interconnection
Customer would have to ensure that the Generating Facility's actual
output matches its scheduled delivery, on an integrated clock hour
basis, including ramping into and out of its schedule. The
Interconnection
[[Page 49876]]
Customer would have to arrange for the supply of energy when there is a
difference between actual and scheduled output.
Comments
331. Some commenters, such as NERC, PacifiCorp and American Wind
Energy, argue that the provision of energy imbalance service is not
related to interconnection and should not be addressed in this
rulemaking.
332. Cinergy and others object to the use of a clock hour basis to
match Generating Facility output to delivery, indicating that a 10-
minute interval basis may be more appropriate so that energy injections
will be more consistent across the scheduled hour. NERC likewise has
concerns about adopting an integrated clock hour specification, and
notes that the Generating Facility's scheduling period may be something
other than a clock hour, as specified in the Transmission Provider's
Commission-approved Tariff or market structure. NERC recommends
revising this provision to ensure consistency with the Tariff and
market structure.
333. Cinergy argues that any balancing arrangement to be
implemented by the Interconnection Customer should be determined to be
technically feasible by the Transmission Provider and recommends that
ramp time be excluded in the balancing arrangement because it may
conflict with NERC scheduling requirements. Arkansas Coops notes that
use of the clock hour may be inconsistent with operating procedures
developed in RTOs.
Commission Conclusion
334. The Commission concludes that a provision for balancing
service arrangements must be included in the Final Rule LGIA because it
describes one of the important requirements that the Interconnection
Customer must meet before it takes delivery service. Therefore, the
Commission retains Article 4.3 in the Final Rule LGIA.
335. However, the Commission agrees with commenters that Article
4.3 of the NOPR LGIA is overly prescriptive. Accordingly, in the Final
Rule, the Commission adopts NERC's proposal to revise NOPR LGIA Article
4.3.1 to omit the reference to an integrated clock hour basis, and to
add the phrase, ``consistent with the scheduling requirements of the
Transmission Provider's Commission-approved Tariff and any applicable
Commission-approved market structure.''
336. Article 5--Interconnection Facilities Engineering,
Procurement, and Construction--Proposed LGIA Article 5 described
procedures for designing, procuring, and constructing the Transmission
Provider's Interconnection Facilities and Network Upgrades and the
Interconnection Customer's Interconnection Facilities. Construction
options, rights, and responsibilities were also presented. This article
would have provided that the Interconnection Customer will not be
directly assigned the costs of modifications made to the Transmission
Provider's Interconnection Facilities or the Transmission System to
facilitate interconnection of a Generating Facility of another
Interconnection Customer or to provide transmission service under the
Transmission Provider's Tariff.
337. Article 5.1--Options--Proposed LGIA Article 5.1 specified the
method for determining which Party is responsible for the construction
of the Transmission Provider's Interconnection Facilities and Network
Upgrades. The Interconnection Customer would specify various
construction completion dates (such as the In-Service Date, the Initial
Synchronization Date, and the Commercial Operation Date), and the
Transmission Provider would then choose among three options: (1) Option
A would have provided that the Transmission Provider construct the
Transmission Provider's Interconnection Facilities and Network Upgrades
using Reasonable Efforts to complete construction by the dates
designated by the Interconnection Customer, but would not be
responsible for any liquidated damages in case it fails to meet the
construction completion dates established by the Interconnection
Customer; (2) Option B(i)a would have provided that the Transmission
Provider construct the Transmission Provider's Interconnection
Facilities and Network Upgrades according to the construction
completion dates established by the Interconnection Customer, and if it
fails to meet those dates, it may be liable for liquidated damages;
however, the Transmission Provider can opt out of this provision by
notifying the Interconnection Customer of its intention to do so within
30 Calendar Days; and (3) Option B(i)b would have provided that, if the
Transmission Provider notifies the Interconnection Customer that it
cannot meet the dates established by the Interconnection Customer, the
Interconnection Customer could assume responsibility for the
construction of the Transmission Provider's Interconnection Facilities
and Stand Alone Network Upgrades.\69\ This option would also provide
that if the Interconnection Customer does not want to assume
responsibility for construction, the Parties would negotiate in good
faith to revise the construction completion dates and other provisions.
Any agreement reached by the Parties during this negotiation shall be
binding. However, if the Parties are unable to reach an agreement, the
Transmission Provider would assume responsibility for construction of
its Interconnection Facilities and Network Upgrades in accordance with
Option A. Proposed LGIA Article 5.1 would establish standards for the
Interconnection Customer to follow if it assumes responsibility for
constructing the Transmission Provider's Interconnection Facilities and
system upgrades that are not Stand Alone Network Upgrades. It does not
grant any right to the Interconnection Customer to construct upgrades
that are not Stand-Alone Network Upgrades.
---------------------------------------------------------------------------
\69\ Stand-Alone Network Upgrades are those Network Upgrades
that the Interconnection Customer may construct without affecting
day-to-day operations of the Transmission System during their
construction.
---------------------------------------------------------------------------
Comments
338. Cinergy states that the distinction between Options A and
B(i)a is not clear. Monongahela Power recommends that the Commission
rename Option B(i)a as Option B and Option B(i)b as Option C.\70\
---------------------------------------------------------------------------
\70\ A typographical error in the NOPR added to the lack of
clarity.
---------------------------------------------------------------------------
339. Cinergy and NSTAR seek clarification as to whether the
Commission intended that the Interconnection Customer take the
responsibility for the construction of upgrades that are not Stand-
Alone Network Upgrades.
340. Several commenters, including Cinergy, NYTO, and SoCal PPA,
argue that the Interconnection Customer may choose unrealistic
construction completion dates and expose the Transmission Provider to
liquidated damages. Cinergy states that if several Interconnection
Customers choose their construction completion dates close to each
other, the Transmission Provider may not be able to meet the dates due
to limited construction staff. PacifiCorp recommends that any
construction completion date should be treated as an estimate and that
any delays on the part of the Interconnection Customer completing its
Generating Facility should automatically extend the time for the
Transmission Provider to complete its Interconnection Facilities and
Network Upgrades.
[[Page 49877]]
341. A number of Transmission Providers oppose giving the
Interconnection Customer the option to build or have a contractor build
the Transmission Provider's Interconnection Facilities and Stand Alone
Network Upgrades. TXU argues that this could threaten the reliability
of the Transmission System. SoCal Edison argues that the Transmission
Provider must retain adequate control of the engineering and
construction of any Transmission Provider Interconnection Facilities
and Stand Alone Network Upgrades because of its obligation to protect
the safety of the public and maintain the reliability of the
Transmission System. Cinergy and NYTO assert that if the Commission
does not eliminate the Interconnection Customer's option to build, the
Final Rule must provide that an Interconnection Customer exercising
this right shall indemnify or hold harmless the Transmission Provider
from any resulting liability.
342. Southern states that to ensure that construction of the
Transmission Provider's Interconnection Facilities and Stand Alone
Network Upgrades does not impair the reliability or safety of the
Transmission System: (1) The Transmission Provider should be allowed to
approve the Interconnection Customer's contractors and engineers, as
well as the vendors from which equipment and materials are purchased;
(2) the Transmission Provider's Interconnection Facilities and Stand
Alone Network Upgrades should be constructed, and equipment and
materials purchased, pursuant to contracts that are reasonably
acceptable to the Transmission Provider, including acceptable equipment
warranty provisions; (3) the Transmission Provider should retain some
level of supervision over the construction, with unrestricted access to
construction sites to perform inspections; (4) the Interconnection
Customer should provide a construction schedule to the Transmission
Provider before construction begins; (5) the Interconnection Customer
should be required to respond promptly to all requests for information
from the Transmission Provider; and (6) the Transmission Provider
should be able to require the Interconnection Customer or its
contractors to remedy any situation that does not meet the Transmission
Provider's specifications or standards.
343. Similarly, the Construction Issues Coalition argues that the
Interconnection Customers' right to build the Transmission Provider's
Interconnection Facilities and Stand Alone Network Upgrades should be
under specific conditions, such as: (1) The Transmission Provider must
provide approval and oversight during design and construction; (2) the
Transmission Provider must approve contractors in advance; (3) adequate
time should be provided to the Transmission Provider for approval of
engineering and construction activities; and (4) all equipment and
construction must carry warranties to avoid risk exposure to the
Transmission Provider. SoCal Edison argues that costs associated with
the Transmission Provider's oversight of the construction should be
borne by the Interconnection Customer.
344. NERC argues that if the Interconnection Customer assumes
responsibility for construction, it should comply with Good Utility
Practice and the Transmission Provider's safety and reliability
criteria.
345. NYTO claims that several essential elements of the ERCOT model
are absent from the Commission's proposal. It argues, for example, that
the Commission should adopt ERCOT's 15 month minimum time period for
completing construction after siting permits and land rights have been
obtained.
346. American Transmission argues that the Transmission Provider
must have the right to step in and assume construction responsibilities
to protect the integrity of the system and rights of the third parties
in case of serious lapses by an Interconnection Customer.
347. Southern argues that the Final Rule LGIA should require the
Interconnection Customer to transfer the Transmission Provider's
Interconnection Facilities and Stand Alone Network Upgrades to the
Transmission Provider for ownership and operation after it completes
construction.
348. PJMTO asserts that Final Rule LGIA Article 5.1 should contain
more explicit provisions addressing the Transmission Owner's role in:
(1) Obtaining permits and authorizations, (2) obtaining land rights,
(3) performing direct line attachment tie-in work, and (4) calibrating
remote terminal unit settings.
349. American Transmission states that proposed LGIP Section 8
(Interconnection Facilities Study) requires the Transmission Provider
to develop detailed cost estimates for constructing the Transmission
Provider's Interconnection Facilities and Network Upgrades under the
assumption that the Transmission Provider will perform all of the
construction, yet the Interconnection Customer may assume the
responsibility for part of the construction. It asks the Commission to
clarify whether there is any relationship between the Transmission
Provider's cost estimates and the actual cost of construction performed
by the Interconnection Customer. It wants to require approval by the
Transmission Provider of the Interconnection Customer's budget for the
construction of the Transmission Provider's Interconnection Facilities
and Stand Alone Network Upgrades.
350. Dynegy asserts that the last sentence of Article 5.1.A(iv),
which provides that the Interconnection Customer's selection of
subcontractors is subject to the Transmission Provider's standards and
specifications, is overly broad and conflicts with proposed LGIA
Article 26.1 (Subcontractors--General), which states that ``nothing in
this Agreement shall prevent a Party from utilizing the services of any
subcontractor as it deems appropriate to perform its obligations under
this Agreement.''
Commission Conclusion
351. The Commission is revising Proposed LGIA Article 5.1 to
distinguish the various options more clearly. NOPR Option A is now
renamed Standard Option. Under the Standard Option, the Transmission
Provider shall construct the Transmission Provider's Interconnection
Facilities and Network Upgrades using Reasonable Efforts to complete
the construction by the dates designated by the Interconnection
Customer, but shall not be responsible for any liquidated damages if it
fails to complete the construction by the designated dates. The
Standard Option also serves as the default in the event the Parties are
unable to reach an agreement under the Negotiated Option
352. Option B(i)a is renamed Alternate Option. Under the Alternate
Option, the Transmission Provider shall construct the Transmission
Provider's Interconnection Facilities and Network Upgrades according to
the construction completion dates established by the Interconnection
Customer, and if it fails to meet those dates, it may be liable for
liquidated damages; however, the Transmission Provider can decline to
use this option by notifying the Interconnection Customer of its
intention to do so within 30 Calendar Days of executing the LGIA.
353. The last option--Option B(i)b in the NOPR--gives the
Interconnection Customer two choices in the Final Rule LGIA: the Option
to Build and the Negotiated Option. This is because the proposed Option
B(i)b actually presented two options. Under the Option to Build, the
Interconnection
[[Page 49878]]
Customer may assume responsibility for the construction of the
Transmission Provider's Interconnection Facilities and Stand Alone
Network Upgrades if the Transmission Provider notifies the
Interconnection Customer that it cannot meet the dates established by
Interconnection Customer. However, as clarified in Final Rule LGIA
Article 5.1.3, it does not grant any right to the Interconnection
Customer to construct upgrades that are not Stand-Alone Network
Upgrades. Furthermore, both the Transmission Provider and the
Interconnection Customer must agree on which facilities are the Stand
Alone Network Upgrades and identify them in Appendix A to the LGIA.
354. The Negotiated Option provides that, if the Transmission
Provider notifies the Interconnection Customer that it cannot meet the
dates established by Interconnection Customer, and the Interconnection
Customer does not want to assume responsibility for construction, the
Interconnection Customer may decide that the Parties shall negotiate in
good faith to revise the construction completion dates and other
provisions under which the Transmission Provider is responsible for the
construction. If the Parties are unable to reach an agreement, the
Transmission Provider shall assume responsibility for construction of
the Transmission Provider's Interconnection Facilities and Network
Upgrades in accordance with the Standard Option.
355. Regarding Cinergy, NYTO, and SoCal PPA's concerns about the
selection of unrealistic construction completion dates by an
Interconnection Customer, the Final Rule Alternate Option allows the
Transmission Provider to avoid unrealistic construction completion
dates by notifying the Interconnection Customer that it is unable to
meet the established dates. We agree with PacifiCorp that any delay on
the part of the Interconnection Customer in meeting its construction
completion dates should grant an automatic extension to the
Transmission Provider. We note that Final Rule LGIA Article 5.3
(Liquidated Damages) provides that no liquidated damages shall be paid
to the Interconnection Customer if the Interconnection Customer is not
ready to commence use of the Transmission Provider's Interconnection
Facilities and Network Upgrades on the specified construction dates
except if such delay is due to the Transmission Provider's delay.\71\
356. With regard to the concern that giving the Interconnection
Customer the right to construct the Transmission Provider's
Interconnection Facilities and Stand Alone Network Upgrades could
threaten the safety and reliability of the Transmission System, Final
Rule LGIA Article 5.2 (General Conditions Applicable to Options to
Build) has several safeguards. For example, the Interconnection
Customer is required to use Good Utility Practice and the standards and
specifications provided in advance by the Transmission Provider. In
addition, the Transmission Provider has the right to approve the
engineering design, the equipment acceptance tests, and the
construction of the Transmission Provider's Interconnection Facilities
and Stand Alone Network Upgrades.
---------------------------------------------------------------------------
\71\ Other comments on this issue are addressed in part II.C.8.b
(Liquidated Damages).
---------------------------------------------------------------------------
357. In response to those comments seeking an indemnification or
hold harmless provision to protect the Transmission Provider from
liability arising out of the Interconnection Customer's exercising its
right to build, the Commission adds an indemnification clause to Final
Rule LGIA Article 5.2 (General Conditions Applicable to Options to
Build).
358. With respect to various modifications that Southern and the
Construction Issues Coalition seek, Final Rule LGIA Article 5.2
(General Conditions Applicable to Options to Build) adds several
provisions proposed by these commenters, such as a requirement that the
Interconnection Customer (1) provide a construction schedule in advance
of the start of construction, (2) remedy deficiencies brought to its
attention by the Transmission Provider, and (3) carry warranties for
equipment similar to those carried by the Transmission Provider.
However, the Commission declines to grant fully the high level of
Transmission Provider control that Southern and the Construction Issues
Coalition seek, such as approval of subcontractors and vendors. Such
control would be overly broad, and the Transmission Provider's ability
to seek remedy of any deficiencies should enable it to carry out its
responsibilities. The Commission also will deny SoCal Edison's request
that the Interconnection Customer bear the Transmission Provider's
costs associated with the oversight of construction performed by the
Interconnection Customer because such costs are de minimus.
359. With respect to NERC's comment that an Interconnection
Customer should follow Good Utility Practice and the safety and
reliability criteria of the Transmission Provider, such standards are
in Final Rule LGIA Article 5.2 (General Conditions Applicable to Option
to Build).
360. Regarding NYTO's argument that a minimum of 15 months is
needed to complete construction of the Transmission Provider
Interconnection Facilities and Network Upgrades, we conclude that
specifying such a minimum period is unnecessary because under the
Alternate Option, the Transmission Provider will be protected from
incurring liquidated damages liability due to delays beyond its
reasonable control or reasonable ability to cure.
361. The Commission rejects American Transmission's proposal that
the Transmission Provider have a right to step in and assume
construction responsibilities in case of lapses by an Interconnection
Customer. Since Article 5.1 permits the construction of only
Transmission Provider Interconnection Facilities and Stand Alone
Network Upgrades, the Commission believes that any such lapses would
affect only the Interconnection Customer. If it has the potential to
affect anyone other than the Interconnection Customer, the Commission
will address such concerns when brought to its attention.
362. The Final Rule does not require that the Interconnection
Customer transfer ownership of the Transmission Provider's
Interconnection Facilities and Stand Alone Network Upgrades to the
Transmission Provider after the Interconnection Customer completes
them; however, the Commission will require transfer of control of such
facilities. Reliability does not require ownership, but it does require
control by the Transmission Provider.\72\
---------------------------------------------------------------------------
\72\ See Arizona Public Service Company, 102 FERC ] 61,303
(2003). We also note that the ownership of Stand Alone Network
Upgrades by an Interconnection Customer is discussed further under
``Rules Governing the Payment of Credits'' in part C.1 of this
Preamble.
---------------------------------------------------------------------------
363. With respect to PJMTO's request for provisions regarding the
Transmission Owner's role in obtaining permits and land rights, Final
Rule LGIA Articles 5.12 (Access Rights) and 5.13 (Lands of Other
Property Owners) do not distinguish between the role of the
Transmission Provider and the Transmission Owner in assisting the
Interconnection Customer in obtaining land rights and permits. The
Final Rule LGIA is not the appropriate place to set forth the nature of
the relationship between the Transmission Owner and Transmission
Provider. In addition, the Commission is stating in this Final Rule
that it will give an independent transmission provider such as an RTO
[[Page 49879]]
or ISO the flexibility to propose different rules in its compliance
filing.
364. The Commission denies American Transmission's request to
include a provision in the Final Rule LGIA for the Transmission
Provider to review and approve the Interconnection Customer's budget if
an Interconnection Customer assumes the responsibility to construct the
Transmission Provider's Interconnection Facilities and Stand Alone
Network Upgrades. The Interconnection Customer is likely to act in its
best interests to keep the costs down because it initially funds the
construction costs. In addition, allowing a Transmission Provider
unfettered discretion to review the budget would encourage
anticompetitive behavior.
365. With regard to Dynegy's concern regarding subcontractors,
Article 26.1 provides that nothing in the LGIA prevents a Party from
using the services of any subcontractor to perform its obligations
under the LGIA and that it is up to the Party to ensure that the
subcontractor complies with the LGIA. In addition, the hiring Party
remains primarily liable to the other Party for the performance of the
subcontractor. Thus, if the subcontractor fails to meet the
Interconnection Customer's obligations under the LGIA or to the
Transmission Provider, the Interconnection Customer is obligated to
remedy any deficiencies. Accordingly, the Commission is removing the
words ``including selection of subcontractors'' from Article 5.1 to
ensure consistency between that article and Article 26.1.
366. Article 5.2--Power System Stabilizers (In the Final Rule LGIA:
Article 5.4)--Proposed LGIA Article 5.2 would have required the
Interconnection Customer to install, operate and maintain power system
stabilizers, if required by the Interconnection System Impact Study.
The Transmission Provider would establish minimal acceptable settings
subject to the design and operating limitations of the Generating
Facility.
Comments
367. Several commenters, including Cal ISO, Dairyland Power,
Dominion Resources, and NSTAR, argue that the Transmission Provider's
ability to require the installation of a power system stabilizer should
not be limited to when required by the Interconnection System Impact
Study because the Generating Facility may become a source of power
system oscillations on the Transmission System many years after
operations commence. Dominion Resources contends that a Transmission
Provider should be able to require an Interconnection Customer to
install a power system stabilizer any time it determines through its
operating experience that a power system stabilizer is needed.
368. Cal ISO argues that the requirement to install a power system
stabilizer should not be based on the ``Interconnection System Impact
Study,'' but should be based on the ``guidelines and procedures of the
Applicable Reliability Council.'' NERC points out that the Transmission
System reliability criteria and use of power system stabilizers vary
from one region to another, depending on the electrical characteristics
of the system. NERC states that, as a result, it is important that the
system operator be notified if a power system stabilizer is inoperable
or removed from service.
Commission Conclusion
369. The Commission agrees with Cal ISO that an Interconnection
Customer should be required to install a power system stabilizer in
accordance with the standards of the Applicable Reliability Council.
This also addresses Dominion Resources' concern that installation of a
power system stabilizer on a Generating Facility may be needed at a
later time; such a requirement should be covered in the guidelines of
the Applicable Reliability Council. If the Applicable Reliability
Council guidelines do not cover such matters, a Transmission Provider
may justify its reasons for wishing to require a power system
stabilizer despite the lack of such a requirement in the Applicable
Reliability Council guidelines when it makes its compliance filing.
370. The Commission will adopt NERC's recommended language
requiring notification when power system stabilizers are removed or are
not available for automatic operation.
371. This article is designated Article 5.4 in the Final Rule LGIA.
372. Article 5.8.1--Generator Specifications (In the Final Rule
LGIA: Article 5.10.1)--Proposed LGIA Article 5.8.1 would have required
that the Interconnection Customer submit the final specifications for
the Interconnection Customer's Interconnection Facilities, including
System Protection Facilities, to the Transmission Provider for review
at least 90 Calendar Days prior to the Initial Synchronization Date. It
proposed to require the Transmission Provider to provide comments to
the Interconnection Customer within 30 Calendar Days of the
Interconnection Customer's submission.
Comments
373. Cleco and NYTO assert that the Interconnection Customer should
have to submit initial specifications for the Interconnection
Customer's Interconnection Facilities to the Transmission Provider at
least 180 Calendar Days prior to the Initial Synchronization Date with
the understanding that the initial specifications are subject to
change. Such initial specifications would give them an opportunity to
perform the planning required for the new facilities and upgrade.
Commission Conclusion
374. The Commission agrees with Cleco and NYTO and adopts their
proposal in the Final Rule.
375. This article is designated Article 5.10.1 in the Final Rule
LGIA.
376. Article 5.8.2--Transmission Provider's Review (In the Final
Rule LGIA: Article 5.10.2)--Proposed LGIA Article 5.8.2 would have
required that the Interconnection Customer to modify the
Interconnection Customer's Interconnection Facilities as may be
reasonably required by the Transmission Provider to ensure that they
are compatible with the telemetry communications and safety
requirements of the Transmission Provider.
Comments
377. NERC requests that the word ``reasonably'' be removed from the
article and recommends referring to Good Utility Practice.
Commission Conclusion
378. The Final Rule revises this article to refer to Good Utility
Practice, as requested by NERC, but it does not eliminate the term
``reasonably.'' The Interconnection Customer's Interconnection
Facilities are installed at the expense of the Interconnection
Customer, but must be reviewed and meet the specifications and
requirements established by the Transmission Provider. The term
``reasonably'' helps to ensure that the Transmission Provider does not
require the installation of equipment beyond what is necessary for
compatibility and reliability, or beyond the standards the Transmission
Provider would apply to its own Interconnection Facilities.
379. This article is designated Article 5.10.2 in the Final Rule
LGIA.
380. Article 5.8.3--Interconnection Customer Interconnection
Facilities Construction (In the Final Rule LGIA: Article 5.10.3)--
Proposed LGIA Article 5.8.3 would have required the Interconnection
Customer to provide to
[[Page 49880]]
the Transmission Provider certain ``as built'' drawings, information,
and documents pertaining to the construction of the Interconnection
Customer's Interconnection Facilities.
Comments
381. NERC proposes that the Interconnection Customer also provide
the Transmission Provider specifications for the excitation system,
automatic voltage regulator, generator control and protection settings,
transformer tap settings, and communications.
Commission Conclusion
382. The Commission adopts NERC's proposal and revises Proposed
LGIA Article 5.8.3 to make clear that the list of information to be
provided is not exhaustive.
383. This article is designated Article 5.10.3 in the Final Rule
LGIA.
384. Article 5.11--Lands of Other Property Owners (In the Final
Rule LGIA: Article 5.13)--Article 5.11 proposed that Transmission
Providers would be required to use Reasonable Efforts, including use of
its eminent domain authority if necessary, to facilitate the
interconnection of Generating Facilities. The Interconnection Customer
would be required to pay any expenses related to obtaining rights of
use, rights of way, easements, or eminent domain costs that the
Transmission Provider might incur, up to the fair market value of the
land or ``such other price as required by the applicable inter-
affiliate transaction requirements.''
Comments
385. EPSA and several Interconnection Customers, including Calpine,
El Paso, and Reliant Energy, request that the Transmission Provider or
Transmission Owner be required to use its eminent domain authority to
facilitate the exercise of the Parties' rights and obligations under
the LGIA to the extent it is permitted to do so. Numerous Transmission
Provider commenters express concern that the eminent domain provisions
of the NOPR are too broad, placing the Transmission Provider in an
untenable situation. Specifically, several argue that the Commission's
proposal conflicts with state limitations on their eminent domain
authority.\73\ Cleco, for example, states that in Louisiana, a utility
cannot legally request eminent domain on behalf of another entity.
National Grid and the Construction Issues Coalition argue that many
states require that eminent domain authority be used only ``to further
a public need''--something that is lacking in the NOPR. Cinergy
proposes deleting the entire eminent domain provision, arguing that it
imposes an inappropriate burden on the Transmission Provider and
reiterates that it conflicts with existing state laws. Similarly, El
Paso requests that the use of eminent domain be at the sole discretion
of the Transmission Provider or Transmission Owner, citing the numerous
factors that must be considered in such an undertaking.
---------------------------------------------------------------------------
\73\ E.g., Cinergy, Cleco, the Construction Issues Coalition,
Duke Energy, National Grid, PJMTO, Salt River Project, SoCal Edison,
and Southern.
---------------------------------------------------------------------------
386. Duke Energy proposes that the Commission require a
Transmission Provider to use eminent domain only when it reasonably
determines that (1) other alternatives are not available and (2) use of
eminent domain is permissible under state law. Duke Energy also asserts
that the Transmission Provider should provide a written explanation of
why other alternatives are appropriate or why the use of eminent domain
would not be permitted under state law.
387. National Grid argues that the Commission should eliminate the
eminent domain provision, citing the long delays and heavy litigation
that often accompany the seizure of property. National Grid, the
Construction Issues Coalition, and others argue that regulation of
eminent domain differs from state to state, making the type of national
contract clause envisaged by the Commission impossible.
388. PJMTO also opposes the eminent domain provision, arguing that
eminent domain is an unpopular last resort and one that is rarely
exercised even by a Transmission Provider or Transmission Owner on its
own behalf. Instead, it proposes requiring that a Transmission Provider
or Transmission Owner, upon receipt of a reasonable request, to assist
an Interconnection Customer in acquiring land rights using efforts
similar to those it typically undertakes on its own behalf.
389. PJMTO also argues for eliminating the cap on land value,
noting that individual state laws already contain mechanisms for
valuing property. The Commission may lack authority to require a price
cap on property sold by an Affiliate of a Transmission Provider,
according to National Grid and the Construction Issues Coalition.
390. Salt River Project also opposes the eminent domain language
and instead proposes that the Commission work with federal land holding
agencies to streamline the procurement of land rights. SoCal Edison
adds that it does not believe the Commission has the authority to
impose an eminent domain requirement. Instead, it proposes requiring
Transmission Providers to exercise good faith efforts in using whatever
eminent domain authority state law may allow on an Interconnection
Customer's behalf.
Commission Conclusion
391. We agree that a mandatory eminent domain requirement can be
difficult for a Transmission Provider or Transmission Owner. The Final
Rule requires that a Transmission Provider or Transmission Owner use
efforts similar to those it typically undertakes on its own behalf (or
on behalf of an Affiliate) to secure land rights for the
Interconnection Customer. We are also clarifying that the Transmission
Provider or Transmission Owner's efforts must also comply with state
law.
392. If the Transmission Provider is an independent entity, the
Transmission Owner, the Transmission Provider, and the Interconnection
Customer may all sign the LGIA. This allows a Transmission Owner and a
Transmission Provider to jointly undertake efforts to secure land
rights for the Interconnection Customer.
393. Regarding the cap on land value, while the Commission remains
concerned that Affiliates of a Transmission Provider or Transmission
Owner might request above-market compensation for land necessary to
facilitate the interconnection, the Commission also recognizes that the
valuation of property is a matter of state law. Therefore, we eliminate
this cap in the Final Rule.
394. This article is designated Article 5.13 in the Final Rule
LGIA.
395. Article 5.12--Early Construction of Base Case Facilities--
Proposed LGIA Article 5.12 would have required that, at the
Interconnection Customer's request, the Transmission Provider must
construct, using Reasonable Efforts to accommodate the Interconnection
Customer's In-Service Date, all or any portion of Network Upgrades
reflected in the Base Case of the Interconnection Customer's Facilities
Study that are necessary to accommodate the Interconnection Customer's
In-Service Date. Construction of the Network Facilities would be
required even if the Network Facilities are shared with other
interconnecting generators that would not be completed in time to meet
the Generating Facility's In-Service Date.
Comments
396. MidAmerican contends that this article is inconsistent with
Section 12.3
[[Page 49881]]
of the NOPR LGIP (Construction Sequencing), which requires that the
Transmission Provider use Reasonable Efforts to accommodate the
Generating Facility's In-Service Date. Accordingly, it proposes that
Article 5.12 be revised.
397. Cleco argues that the Party requesting early construction
should pay all Network Upgrade costs associated with the early
construction. FP&L argues that to avoid the need to continuously
restudy and revise Network Upgrades, the LGIA should require the timely
construction of Network Upgrades relied upon by lower-queued
Interconnection Customers.
398. Entergy, Dairyland Power, and others state that the Final Rule
should address which Interconnection Customer finances Network Upgrades
in the event of a delay by the higher-queued Interconnection Customer
to whom the Network Upgrades are assigned. Cal ISO states that language
regarding milestones should be inserted between proposed LGIA Articles
5.12 and Article 5.13.
Commission Conclusion
399. In response to the concerns of Entergy and others, the
Commission notes that a lower-queued Interconnection Customer always
has the right under this article to accelerate its construction
schedule by completing all required Network Upgrades on schedule
despite any delays by higher-queued Interconnection Customers. This
would require the lower-queued Interconnection Customer to fund those
Network Upgrades at least initially; however, in the absence of
participant funding, it would be reimbursed over time through credits,
with interest. Article 5.12 does not need to be changed to allow this.
400. Regarding ``best'' versus ``reasonable'' efforts, the
Commission agrees with MidAmerican that there was an inconsistency
between proposed LGIA Article 5.12 and proposed LGIP Section 12.3,
which requires the Transmission Provider to use Reasonable Efforts to
accommodate the Interconnection Customer's requested In-Service Date.
Article 5.12 is the more stringent of the two because it requires the
Transmission Provider to construct facilities necessary to accommodate
the Interconnection Customer's In-Service Date. The Commission's intent
is to expedite the interconnection of new generators in a manner that
does not undermine the reliability of a Transmission Provider's
Transmission System. However, there may be circumstances beyond the
Transmission Provider's control that would prevent it from meeting the
construction deadline. To address this concern and to ensure
consistency between this article and LGIP Section 12.3, the Commission
agrees with MidAmerican's comment that the term ``Reasonable Efforts''
is appropriate. This article, which is designated Article 5.15 in the
Final Rule LGIA, uses that term.
401. An additional article regarding milestones is not needed. By
the time the LGIA is executed, the Parties will have already
established under Article 5.1 the milestones Cal ISO refers to.
402. Article 5.13--Suspension (In the Final Rule LGIA: Article
5.16)--Proposed LGIA Article 5.13 would allow the Interconnection
Customer, upon written notice to the Transmission Provider, to suspend
work on Interconnection Facilities or Network Upgrades as long as the
Interconnection Customer agrees to be responsible for all reasonable
and necessary costs incurred by the Transmission Provider in suspending
work. This article proposed that the LGIA be deemed terminated if the
Interconnection Customer has not requested the Transmission Provider to
recommence work within three years from the date of the suspension
request.
Comments
403. Peabody supports allowing an Interconnection Customer to
suspend work on the interconnection for up to three years because this
offers the Interconnection Customer the flexibility that large-scale
generation projects need to accommodate permitting and other delays.
Other commenters, including BPA, Cinergy, and SoCal PPA, argue that a
three year suspension period is unreasonably long. SoCal PPA further
states that substantial changes to the Transmission System could occur
during that time. Western believes that letting an Interconnection
Customer contract with a Transmission Provider for an interconnection
and then suspend operation for as long as three years could allow the
Interconnection Customer to game the system. Consequently, Western and
other commenters argue that the suspension period should be limited to
six months, while Cinergy recommends limiting the suspension period to
one year. NYTO believes the entire provision is unreasonable.
404. Cinergy requests that Article 5.13 make it clear that if an
Interconnection Customer gives a Transmission Provider written notice
of suspension of work, the Transmission Provider does not have to
obtain written permission from the Interconnection Customer to cancel
or suspend material, equipment and labor contracts associated with that
work, and that the Commission clarify what is included in the
definition of ``suspension of work.'' Further, to prevent gaming the
process, Cinergy proposes that an Interconnection Customer be allowed
to provide written notice of suspension of work only once per
Generating Facility.
405. Dominion Resources questions whether the responsibility for
funding the cost of Network Upgrades would fall on the Interconnection
Customer suspending or terminating construction or on other
Interconnection Customers remaining in the queue. The Interconnection
Customer actually using the Network Upgrades should be required to pay
for them. Dominion Resources recognizes that this may shift costs from
the Interconnection Customer requesting the suspension to
Interconnection Customers further down the queue, which could mean that
an Interconnection Customer will be subject to potential cost increases
even after signing an LGIA. However, it views this as a more acceptable
allocation of cost responsibility than requiring an Interconnection
Customer that desires to suspend or terminate its project to bear the
full cost of Network Upgrades it may never use. In order to avoid
gaming of the interconnection queue, if the suspending Interconnection
Customer later continues with its project, it should be required to
reimburse any lower-queued Interconnection Customers for any Network
Upgrade costs related to its suspension.
406. NERC and MidAmerican comment that there must be a requirement
to leave the system in a safe and reliable condition, consistent with
Good Utility Practice, if a project is suspended in a partially
complete state.
407. The Midwest ISO requests that Article 5.13 make it clear that
a suspending Interconnection Customer must provide notice to the
Transmission Owner and to any independent Transmission Provider.
408. The Midwest ISO and Georgia Transmission request clarification
that the Transmission Provider will be reimbursed for any expenses
related to the suspension.
Commission Conclusion
409. Many commenters express concern over the effect that a
suspending Interconnection Customer might have on lower-queued
Interconnection Customers. We agree with Dominion Resources that, in
some cases, a subsequent (i.e., lower queued) Interconnection Customer
may be responsible for funding the costs of completing the Network
Upgrades constructed for a higher-queued
[[Page 49882]]
Interconnection Customer that suspends or terminates construction of
such Network Upgrades. However, the Commission is not obligating in
this Final Rule a subsequent (i.e., lower queued) Interconnection
Customer to pay for these costs regardless of whether that
Interconnection Customer benefits from the facilities, since this would
subject that Interconnection Customer to significant financial risk.
Prices quoted for interconnection in the LGIA are estimates based on
the results of studies conducted during the LGIP phase of the
interconnection process. If it is apparent to the Parties at the time
they execute the LGIA that contingencies (such as other Interconnection
Customers terminating their LGIAs) might affect the financial
arrangements, the Parties should include such contingencies in their
LGIA and address the effect of such contingencies on their financial
obligations. If no such contingencies are accounted for in the executed
LGIA, since the costs of Network Upgrades may influence an
Interconnection Customer's decision whether it can enter into an
Interconnection Agreement, we leave it to the subsequent
Interconnection Customer and the Transmission Provider to revisit the
negotiated terms of their executed Interconnection Agreement. We deny
the requests to revise or delete Proposed LGIA Article 5.13 on these
grounds.\74\
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\74\ An RTO or ISO with participant funding may propose an
alternative policy for Commission approval.
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410. We also retain the three year period. The Commission agrees
with Peabody that allowing the Interconnection Customer to have the
Transmission Provider suspend work for up to three years allows
generation projects the flexibility necessary to accommodate permitting
and other delays that are particularly likely to affect large projects.
411. The Final Rule requires the Interconnection Customer to pay
all reasonable costs that the Transmission Provider incurs in
suspending work on its Interconnection Facilities, as well as costs
that are reasonable and necessary to ensure the safety and integrity of
the Transmission Provider's Transmission System during the suspension.
412. We reject Cinergy's proposal that an Interconnection Customer
be limited to one suspension period per Generating Facility. The LGIA
is designed to be a standard agreement that will operate in any number
of situations, and to limit arbitrarily each Generating Facility to
only one suspension period, regardless of circumstances, is
unreasonable.
413. We adopt NERC's proposal that Article 5.13 require a
suspending Interconnection Customer to leave the system in a safe and
reliable condition in accordance with Good Utility Practice and the
Transmission Provider's safety and reliability criteria.
414. In response to Cinergy's request for clarification of the term
``suspension of work,'' the Commission clarifies that a Transmission
Provider, upon receiving written notice of suspension from the
Interconnection Customer, is authorized to cancel or suspend material,
equipment and labor contracts associated with that work. If reliability
could be compromised by stopping construction, the Transmission
Provider must continue construction until it reaches a stage where it
can safely discontinue work. Any costs associated with suspension (or
of completing a discrete Network Upgrade) shall be deducted from the
Interconnection Customer's security deposit.
415. With respect to the Midwest ISO's request to require an
Interconnection Customer to notify both the Transmission Owner and the
Transmission Provider, we clarify that if both Parties are signatories
to the LGIA, the Interconnection Customer is required to notify both
the Transmission Owner and the Transmission Provider.
416. This article is designated Article 5.16 in the Final Rule
LGIA.
417. Article 5.14--Taxes--Proposed LGIA Article 5.14 addressed the
allocation of responsibilities that would apply with respect to the tax
treatment of an Interconnection Customer's payments or property
transfers to the Transmission Provider for the installation of the
Transmission Provider's Interconnection Facilities and Network
Upgrades.
418. Internal Revenue Service policy, as expressed in IRS Notice
2001-82 and IRS Notice 88-129, delineates the standards under which an
Interconnection Customer's payments to build interconnections
facilities will not create a current tax liability for a Transmission
Provider. The ``safe harbor'' provisions described in these notices
generally prevent the transaction from being considered a taxable
transfer. If the IRS changes its policy, or if the transaction no
longer qualifies for safe harbor protection and tax liability results,
under the provisions in Article 5.14 the Interconnection Customer would
indemnify the Transmission Provider for any tax liability that may
arise from the payments to build the Transmission Provider's
Interconnection Facilities and Network Upgrades.
Comments
419. Several entities argue that the IRS safe harbor does not
eliminate all risk of these payments being treated as taxable income to
the Transmission Provider because the IRS may revisit its policies in a
manner that establishes tax liability for interconnections, including
the credits provided against transmission service in exchange for the
reimbursement of Network Upgrades.\75\ These commenters argue that
Article 5.14 should account for these risks.
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\75\ E.g., EEI, FP&L, MidAmerican, and TXU.
---------------------------------------------------------------------------
420. Some commenters, including Duke, EPSA, NYTO, and PG&E, argue
that the Commission should adopt Article 5.16.5 of the Consensus LGIA,
which ensures that a Transmission Owner is made whole when a
contribution from an Interconnection Customer is non-taxable when made,
but the IRS later imposes tax liability. NYTO further suggests that the
two revisions to Consensus LGIA Article 5.16.5 that were proposed by
the Transmission Owners should be retained. These provisions would
ensure that the Transmission Owner would be reimbursed for taxes
imposed more than ten years after the date the Interconnections
Facilities are placed in service and allow for security for such
potential tax liability.
Commission Conclusion
421. The Commission finds that Article 5.14 as proposed
appropriately addresses the risk that the contracting Parties face
because of the uncertainties regarding IRS policy, because it requires
the Interconnection Customer to indemnify the Transmission Provider in
the event that the IRS changes or clarifies its policy.
422. The Commission concludes that a discussion of subsequent
taxable events is appropriate for the Final Rule LGIA.\76\ The two
additions NYTO requests are unnecessary because Final Rule LGIA Article
5.17.3 addresses limitation of indemnification and the ability of the
Transmission Provider to require security from the Interconnection
Customer.
---------------------------------------------------------------------------
\76\ Subsequent taxable events are discussed in Final Rule LGIA
Article 5.17.6. This discussion retains the article numbers that
appeared in the NOPR LGIA.
---------------------------------------------------------------------------
423. Article 5.14.1--Interconnection Customer Payments Not Taxable
(In the Final Rule LGIA: Article 5.17.1)--Proposed LGIA Article 5.14.1
would have provided that, consistent with IRS Notice 2001-82 and IRS
Notice 88-129 (discussing the IRS safe harbor provisions), all payments
made by the Interconnection Customer to the
[[Page 49883]]
Transmission Provider for the installation of Transmission Provider's
Interconnection Facilities and Network Upgrades are non-taxable, either
as contributions to capital, or as advances.
Comments
424. Peabody endorses this proposed provision. It argues that it is
in the best interest of Interconnection Customers, Transmission
Providers and customers to take advantage of the tax exemption for
payments that Interconnection Customers make to Transmission Providers
for Network Upgrades made pursuant to an LGIA.
425. Progress Energy argues that an Interconnection Customer's
right to terminate the LGIA on 30 Calendar Days' written notice may
jeopardize the safe harbor treatment of Interconnection Customer
contributions because the IRS safe harbor provisions apply only to
interconnection agreements with a minimum term of ten years.
Commission Conclusion
426. In response to Progress Energy, the mere existence of the 30
day termination provision does not mean that the Interconnection
Agreement conflicts with the IRS minimum term requirement of ten years.
Nevertheless, if either Party in fact terminates the LGIA before ten
years have passed, the IRS may then conclude that the Interconnection
Customer's payments are indeed taxable. Accordingly, the Parties should
consider these possible tax consequences when deciding whether to
terminate an LGIA within ten years.
427. This article is designated Article 5.17.1 in the Final Rule
LGIA.
428. Article 5.14.2--Representations and Covenants (In the Final
Rule LGIA: Article 5.17.2)--Proposed LGIA Article 5.14.2 set forth the
representations and covenants that would be agreed to by the Parties to
conform to the requirements of the IRS safe harbor provisions set forth
in the relevant IRS Notices.
Comments
429. FirstEnergy argues that in order for the Interconnection
Customer's payments to the Transmission Provider to be deemed non-
taxable under the IRS safe harbor provisions, ownership of the
electricity generated at the Generating Facility must pass to another
entity prior to the transmission of the electricity on the Transmission
System. FirstEnergy asks the Commission to clarify the representations
and proposed covenants in proposed LGIA Article 5.14.2 to refer to the
Point of Interconnection or Point of Change of Ownership.
Commission Conclusion
430. We do not intend to interpret the IRS safe harbor provisions,
and so we leave it to the Parties to ensure that their conduct,
including the point at which the ownership of electric energy produced
by the Generating Facility changes hands, conform to IRS policy.
431. This article is designated Article 5.17.2 in the Final Rule
LGIA.
432. Article 5.14.3--Indemnification for Taxes Imposed Upon
Transmission Provider--Proposed LGIA Article 5.14.3 would have required
that the Interconnection Customer indemnify (hold harmless) the
Transmission Provider from income taxes imposed against the
Transmission Provider as a result of payments or property transfers
made by Interconnection Customer to the Transmission Provider under the
LGIA--that is, if the IRS safe harbor provisions do not keep the
Transmission Provider from having to pay income taxes. The Transmission
Provider would not include a gross-up \77\ for income taxes unless
either it has made a good faith determination that the payment or
transfers should be recorded as income subject to taxation, or any
Governmental Authority directs Transmission Provider to treat the
payment or transfers as subject to taxation. As an alternative to the
gross-up, the Transmission Provider would be able to require the
Interconnection Customer to provide security in a form reasonably
acceptable to the Transmission Provider and in an amount equal to the
Interconnection Customer's estimated tax liability.
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\77\ A gross-up for income taxes is a dollar amount calculated
to determine the Interconnection Customer's estimated tax liability
to the Transmission Owner.
---------------------------------------------------------------------------
Comments
433. MidAmerican supports Article 5.14.3 and recommends that the
Transmission Owner be added to this provision by changing Transmission
Provider to Transmission Provider or Transmission Owner.
434. LADWP argues that although Section 5 of the Commission's OATT
provides that the transmission customer must indemnify the Transmission
Provider that owns facilities financed by tax-exempt debt, it is not
clear whether that provision would apply to an Interconnection
Customer. LADWP asks the Commission to clarify that an Interconnection
Customer is liable for the cost of any adverse tax consequences visited
on the public power Transmission Owner because of the interconnection.
435. SoCal PPA believes that the Interconnection Customer's
obligation to reimburse the Transmission Provider for taxes should
cover ad valorem property taxes and other taxes assessed against the
Transmission Provider.
436. NE Utilities seeks an alternative method for a Transmission
Provider to recover tax liability for which it is not reimbursed due to
circumstances beyond its control--for example, if the security
instrument provided by the Interconnection Customer does not cover the
full tax liability or if the Interconnection Customer defaults on its
obligation to indemnify the Transmission Provider. It argues that in
these situations, the Commission should authorize the Transmission
Provider to recover the remaining balance from customers.
437. TXU says that the Commission should provide comprehensive
protection for a Transmission Provider if the IRS decides that
Interconnection Customer payments are taxable. A letter of credit, as
provided for in proposed LGIA Article 5.14.3, would provide some
security for the Transmission Provider, but may limit the process of
contesting IRS positions and may prove otherwise difficult to
administer. Without elaborating, TXU requests that a more comprehensive
security device be required until definitive guidance is received from
the IRS.
438. SoCal Edison states that if a Transmission Provider or
Transmission Owner is unable to recover from a generator any income tax
incurred as a result of an interconnection arrangement, the Commission
should provide Transmission Providers and Transmission Owners with a
regulatory backstop that would guarantee the recovery of these income
taxes in transmission rates. It adds that to the extent that a
Transmission Provider or Transmission Owner is unable to include income
taxes in transmission rates because of other regulatory restrictions
(such as a rate freeze or the requirement to have state commission
approval for such rates), the Transmission Provider or Transmission
Owner should have discretion in determining the appropriate form and
level of security required from the generator at the time the IA
becomes effective, and a right to offset any tax liability against any
transmission credit owed. Further, SoCal Edison says Article 5.14 must
state that any future payment shall include interest and penalties, as
well as any other costs imposed by the IRS.
[[Page 49884]]
439. Progress Energy advocates that Article 5.14.3 include certain
requirements regarding the Interconnection Customer-provided financial
guaranty, such as requiring that the guaranty be issued by a financial
entity acceptable to the Transmission Provider and that it be non-
revocable for the term of the LGIA.
440. Dynegy proposes that the Commission make the security
obligation mutual. The Final Rule should state that, when the
Transmission Provider requires the Interconnection Customer to pay a
tax gross-up because the Transmission Provider has determined in good
faith that the payments or property transfers made to Transmission
Provider should be reported as income subject to taxation, the
Transmission Provider must post security for the amount of the gross-
up, plus interest. This will protect the Interconnection Customer from
becoming an unsecured creditor in the event of a Transmission Provider
insolvency before the issuance of a private letter ruling that could
result in the refund of the tax gross-up payment and interest to the
Interconnection Customer.
441. Calpine argues that the security requirement should bear a
reasonable relationship to the risk to which a transmission owner is
exposed. Instead of allowing the Transmission Provider to require an
Interconnection Customer to meet a costly security requirement--using
funds that the Interconnections Customer could put to better use
developing generation and infrastructure--the Commission should
authorize the Transmission Provider to recover in its rates any future
tax liability. If the Commission is unwilling to expose ratepayers to
this risk, it should modify the Final Rule to ensure that any residual
security that the Interconnection Customer would be obligated to post
be reasonably related to the actual risk to which the Transmission
Provider is exposed.
442. EPSA argues that an Interconnection Customer should not be
required to pay the taxes of a Transmission Owner unless the
Interconnection Customer is entitled to a refund if it is ultimately
determined that the amounts paid for Interconnection Facilities and
Network Upgrades are not subject to tax. If the Transmission Owner in
an Affected System is not a Party to the Interconnection Customer's
LGIA, the Interconnection Customer will have no means to enforce its
right to a refund of any amounts it has previously paid in taxes. A
Transmission Owner is able to insist on security indefinitely, to
protect against the remote possibility of a change in circumstances
that might become a subsequent taxable event, the balance reflected in
the Consensus Tax Provisions would be upset.
Commission Conclusion
443. In response to MidAmerican's request that proposed LGIA
Article 5.14.3, which is designated Article 5.17.3 in the Final Rule
LGIA, specify that the Transmission Owner as well as the Transmission
Provider is indemnified, the term ``Transmission Provider'' in the LGIA
includes the Transmission Owner, where applicable. Accordingly, there
is no need to revise this provision.
444. SoCal PPA raises tax issues beyond the scope of Article 5.17,
since this article addresses only federal tax liability. The Commission
rejects the proposal that ad valorem property taxes be included in the
Interconnection Customer's obligation to reimburse the Transmission
Provider for taxes, since these expenses are annual and are more
analogous to operating expenses that are not covered under the LGIA.
445. The Commission rejects requests that the Transmission Provider
may recover any outstanding federal tax liability balance from
customers. A Transmission Provider is to use the security option in
Article 5.17.3 to protect itself from the risk that an Interconnection
Customer will not pay the potential tax liability, so there should not
be any outstanding liability. This, along with the ability to require
security or, where appropriate, a gross-up, should sufficiently protect
the Transmission Provider from potential tax liability. Should the
Transmission Provider be unable for some reason to recover the full
cost of its tax liability, it may propose to recover such costs in its
rates, but the Commission is not pre-authorizing the recovery of these
costs generically.
446. In response to SoCal Edison's request for a requirement that
future payment include interest and penalties, as well as any other
costs imposed by the IRS, this requirement is in Article 5.17.3.
447. The Commission rejects as unnecessary Progress Energy's
request for greater specificity regarding the guaranty because Article
5.17.3 already gives the Transmission Provider the discretion to choose
the security in a form ``reasonably acceptable'' to the Transmission
Provider. Accordingly, the Transmission Provider has the discretion to
require the Interconnection Customer to offer security that meets the
criteria Progress Energy specifies.
448. The Commission agrees with Dynegy that the Interconnection
Customer should receive security if a Transmission Provider determines
that the payments or property transfers should be reported as income
subject to taxation. It is reasonable to require the Transmission
Provider to post security, since the gross-up puts the Interconnection
Customer at risk in the event that it turns out that taxes do not have
to be paid, but the Transmission Provider has become insolvent. Final
Rule LGIA Article 5.17 gives the Interconnection Customer the option to
request such security when the Transmission Provider has made an
independent determination that taxes should be payable.\78\
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\78\ Security will not be available when a Governmental
Authority directs a Transmission Provider to report payments of
property as income subject to taxation.
---------------------------------------------------------------------------
449. Regarding EPSA's argument that an Interconnection Customer
should not be required to pay a gross-up unless it is entitled to a
refund if the amounts paid ultimately are not taxed, the Commission
notes that the refund protection is already in Article 5.17.7. This
protection, together with the ability to require security for a gross-
up, should afford an Interconnection Customer sufficient protection
against the risk of nonrecovery.
450. EPSA raises issues regarding tax liability and Network
Upgrades on Affected Systems. Obligations regarding tax liability and
related indemnification should be set forth in a separate agreement
between the Interconnection Customer and the Affected System related to
the Network Upgrade.\79\
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\79\ See Part II.A.2--Section 3.5 (Coordination with Affected
Systems).
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451. Finally, in response to EPSA's argument that proposed LGIA
Article 5.14.3 of the LGIA permits a Transmission Provider to insist on
security indefinitely, the Final Rule has been revised to state that
indemnification will terminate at the earlier of the expiration of the
ten year testing period, as contemplated by the IRS safe harbor
provisions, or the applicable statute of limitations, or the occurrence
of a subsequent taxable event contemplated by this article and the
payment of any related indemnification obligation. These are reasonable
end points for the indemnification obligation because once the earlier
of either of these events occurs, there is no further risk of new tax
liability and, therefore, no further need for indemnification.
452. Article 5.14.4--Tax Gross-Up Amount (In the Final Rule LGIA:
Article 5.17.4)--Proposed LGIA Article 5.14.4
[[Page 49885]]
described how the Parties would calculate the Tax Gross-Up Amount.
Comments
453. FP&L argues that the tax gross-up methodology in proposed LGIA
Article 5.14.4, when combined with the requirement that the
Transmission Provider provide refunds in the form of transmission
service credits for its full costs of Network Upgrades (including
income taxes), will not allow the Transmission Provider to be made
whole for the income tax payments for Network Upgrades. It states that
Article 5.14.4 requires the Interconnection Customer to pay up front
the net present value of the income taxes due on Network Upgrades,
based on the assumption that the Transmission Provider will get income
taxes back through the future stream of tax depreciation benefits. But
if the Transmission Provider is also required to give back to the
Interconnection Customer the net present value of income tax payments,
plus interest, through refunds, then the Transmission Provider is
paying the full cost of income taxes on assets that it is purchasing
and it will not be made whole. FP&L further states that the Commission
should authorize two alternatives for the tax gross-up methodology: (1)
The Interconnection Customer pays the full amount of taxes up front,
but then receives refunds for its tax payments; or (2) the
Interconnection Customer pays a reduced amount for the taxes up front,
which is the present value of the Transmission Provider's carrying
costs, calculated at its current weighted average cost of capital, for
its tax payment associated with the contribution in aid of construction
until it receives the payment back over time through tax depreciation,
but then does not receive refunds for the payment of taxes. Under
either alternative, it is essential that the Interconnection Customer
not receive interest from the Transmission Provider on tax payments
actually made to the government because, if it does, the Transmission
Provider will not be made whole.
454. Southern asks the Commission to modify this article so that
the calculation of the tax gross-up for payments that entitle the
Interconnection Customer to credits is not reduced by depreciation
deductions available to the Transmission Provider. FirstEnergy says the
method of calculating the Present Value Depreciation Amount, should be
clarified by adding the phrase ``used for Federal and state purposes''
after ``* * * Transmission Provider's anticipated tax deductions as * *
*.''
455. EPSA supports the tax gross-up calculation in Proposed LGIA
Article 5.14.4. It argues that the calculation was drafted by tax
professionals during the ANOPR process in an effort to ensure that the
Transmission Provider is made whole. The drafting group determined that
the most appropriate manner for calculating the tax gross-up is the
methodology set forth in Ozark Gas Transmission Corp., 56 FERC ] 61,349
(1991). EPSA also states that this formula has been approved by the
Commission and many existing interconnection agreements use the Ozark
Gas methodology to compute tax gross-ups for both interconnection
facilities and network upgrades, without regard to whether the
Interconnection Customer will receive transmission credits. EPSA
further argues that the calculation takes into account a Transmission
Provider's federal and state tax rate and the present value of all tax
depreciation deductions to which the Transmission Provider is entitled
over the life of the Interconnection Facilities and Network Upgrades.
Finally, EPSA argues that the tax benefits associated with depreciation
are not returned to the Interconnection Customer as transmission
credits, as some commenters contend. Although the Transmission Provider
will return the gross tax costs to the Interconnection Customer in the
form of Transmission Credits, the Transmission Provider still benefits
from being able to deduct the cost of the Interconnection Facilities
and Network Upgrades.
Commission Conclusion
456. The Commission agrees with EPSA that Proposed LGIA Article
5.14.4 offers the appropriate methodology for ensuring that a
Transmission Provider is fully compensated for tax consequences. FP&L
and Southern have not sufficiently explained how the calculation fails
to make the Parties whole, and we do not revise this article.
457. This article is designated Article 5.17.4 in the Final Rule
LGIA.
458. Article 5.14.5--Private Letter Ruling or Change or
Clarification of Law (In the Final Rule LGIA: Article 5.17.5)--Proposed
LGIA Article 5.14.5 would have required that, at the Interconnection
Customer's request and expense, a Transmission Provider file with the
IRS a request for a private letter ruling as to whether any property
transferred or sums paid or to be paid by the Interconnection Customer
to the Transmission Provider under the LGIA would be subject to federal
income taxation. The point of obtaining such a ruling is to get a
definitive answer up front as to whether taxes will be due. If a
private letter ruling concludes that such sums are not taxable, the
Interconnection Customer's obligations would be reduced accordingly.
Comments
459. Commenters criticize the proposed relationships between the
Interconnection Customer and the Transmission Provider in seeking a
private letter ruling. El Paso argues that the Transmission Provider
should have sole discretion to decide how to minimize its taxes,
including whether to seek a private letter ruling or to contest a tax
determination. While the Interconnection Customer must indemnify the
Transmission Provider for tax liability, El Paso argues that this does
not justify allowing the Interconnection Customer to require the
Transmission Provider to dedicate its taxpayer status, time, and
resources to seeking a private letter ruling or contesting a tax
determination. This inappropriately places the Interconnection Customer
in the position of deciding how the Transmission Provider will meet its
obligations to the Interconnection Customer. In addition, even if the
Interconnection Customer pays filing and legal fees associated with a
private letter ruling or contest, this does not compensate the
Transmission Provider for its internal costs of prosecuting such
proceedings.
460. Dynegy generally supports this provision but contends that it
should be revised because it (1) fails to recognize that the
Interconnection Customer is the Party at risk of paying a tax gross-up
that turns out not to have actually been required by the tax laws, and
(2) unduly restricts the Interconnection Customer's ability to make the
arguments it wants made in pursuing a private letter ruling. For
instance, Dynegy says, Article 5.14.5 allows the Interconnection
Customer to prepare only the ``initial draft'' of the private letter
ruling request, and Article 5.16.6 provides for only one level of
judicial review for appeals of adverse rulings. Such restrictions
should be removed because it is the Interconnection Customer, not the
Transmission Provider, that is paying the gross-up and funding the
efforts to obtain a private letter ruling.
461. Salt River Project notes that this provision would require a
Transmission Provider to file a private letter ruling, at an
Interconnection Customer's request and expense, but establishes that
the Interconnection Customer would prepare the initial draft of the
letter. This will give rise to disclosure and
[[Page 49886]]
confidentiality problems and is a bad business practice.
462. FP&L proposes, without elaboration, that the Commission modify
proposed LGIA Article 5.14.5 to permit the Transmission Provider to
require a jointly filed request for a private letter ruling.
463. FirstEnergy asks the Commission to clarify that the last
sentence of this article refers to the need to maintain a parental
guarantee or letter of credit as required by proposed LGIA Article
5.14.3, and not the Interconnection Customer's indemnification
obligations under proposed LGIA Article 5.14 generally.
464. NYTO argues, without elaboration, that a provision is needed
to ensure that a Transmission Owner can ask the Interconnection
Customer to provide financial security to backstop its potential tax
liability where the Transmission Owner has not asked for a gross-up
payment from the Interconnection Customer pending any ruling from the
IRS.
Commission Conclusion
465. The Commission rejects comments that seek to deny the
Interconnection Customer the right to ask the Transmission Provider, at
the Interconnection Customer's expense, to seek a private letter ruling
from the IRS. The Interconnection Customer would otherwise be without
recourse if it disagrees with the Transmission Provider's conclusion
regarding either tax liability (and gross-up) or the need for security,
and it is the Interconnection Customer that pays the taxes.
466. In response to Dynegy, we will not grant the Interconnection
Customer greater latitude with respect to the Transmission Provider's
request for a private letter ruling because the proposed provision
already offers a fair balance between the interests of the Parties.
While the Interconnection Customer funds the request for a private
letter ruling, permitting it to submit an ``initial draft'' of the
private letter ruling request, and to insist on a single appeal, allows
the Interconnection Customer to have adequate participation in the
effort to secure an IRS determination.
467. The Commission disagrees with Salt River Project's argument
that allowing the Interconnection Customer to prepare the initial draft
of the request for a private letter ruling from the IRS gives rise to
disclosure and confidentiality problems. The Commission leaves it to
the Parties to work within the confidentiality and other provisions of
the LGIA to determine the most appropriate means for allowing the
Interconnection Customer to draft the request.
468. FP&L offers no explanation for why the Transmission Provider
should be permitted to require a jointly filed request for a private
letter ruling. As a result, we reject FP&L's request.
469. The Commission agrees with FirstEnergy that the last sentence
of Proposed LGIA Article 5.14.5 should be revised. This sentence refers
to the Interconnection Customer's obligations if a private letter
ruling concludes that the transfers or sums paid to the Transmission
Provider are not subject to federal income taxation. In this event, the
Interconnection Customer's obligations with respect to the guaranty or
gross-up allowed under Final Rule LGIA Article 5.17.3 will be reduced
or eliminated. The private letter ruling would not eliminate the
Interconnection Customer's obligation to indemnify the Transmission
Provider in the event that the IRS changes its ruling or policy or a
subsequent taxable event occurs.
470. As for NYTO's argument that the Transmission Provider should
be able to ask the Interconnection Customer to provide financial
security when the Transmission Provider has foregone the gross-up, such
authority is already in Final Rule LGIA Article 5.17.3. Under this
article, the Transmission Provider may secure a guaranty from the
Interconnection Customer in an amount equal to the Interconnection
Customer's estimated tax liability. Since the article does not specify
the timing of such a request, the request may be made at any time the
Transmission Provider believes that it is appropriate.
471. This article is designated Article 5.17.5 in the Final Rule
LGIA.
472. Article 5.14.6--Contests--Proposed LGIA Article 5.14.6
described the obligations that would apply if any Governmental
Authority determines that the Transmission Provider's receipt of
payments or property is income subject to taxation. At the
Interconnection Customer's sole expense, the Transmission Provider
would appeal or oppose such a determination. Proposed LGIA Article
5.14.6 also described the procedures for settling the contested ruling.
Comments
473. Southern proposes clarifying that the Interconnection
Customer's obligation for the settlement amount is calculated on a
basis that is fully grossed-up for taxes.
474. NYTO argues that the Transmission Owner's obligation to
contest a determination by a Governmental Authority should be subject
to the Interconnection Customer providing an opinion of tax counsel
that there is high likelihood of success.
Commission Conclusion
475. The Commission rejects the commenters' requests. The
Transmission Provider may determine if the settlement amount is
appropriate under Article 5.14.6, which is designated Article 5.17.7 in
the Final Rule, and, therefore, has the opportunity to ensure that the
amount is calculated in an acceptable manner. The Commission will not
require that the Interconnection Customer tender a tax counsel opinion.
Under Article 5.17.7, the Interconnection Customer must pay all of the
costs of an appeal of the ruling. The Commission believes that the
prospect of paying for an appeal with a low likelihood of success
should be a sufficient incentive not to pursue a weak case.
476. Article 5.14.7--Refund (In the Final Rule LGIA: Article
5.17.8)--Proposed LGIA Article 5.14.7 described the conditions under
which a refund would be payable to the Interconnection Customer for any
payments made related to income tax liability and the formula for
calculating the refund.
Comments
477. The Florida PSC recommends that the indemnification treatment
in the LGIA be subject to review by state commissions on a case-by-case
basis since there are local consequences. In some instances,
indemnification alone is insufficient and letters of credit, parental
involvement or other forms of guarantees may be required to protect
retail customers adequately from becoming the default responsible
Party. The Transmission Provider should be able to petition the state
commission for a more stringent indemnification standard.
Commission Conclusion
478. The Commission does not grant Florida PSC's request. When the
Commission, under the authority of sections 201, 205 and 206 of the
Federal Power Act \80\ sets a rate, term or condition for such
transmission, a state may not exercise its jurisdiction over a retail
rate to review the reasonableness of the rate, term or condition set by
the Commission.\81\
---------------------------------------------------------------------------
\80\ 16 U.S.C. 824, 824d and 824e (2000).
\81\ See, e.g., Mississippi Power & Light v. Mississippi ex rel.
Moore, 487 U.S. 354, 371-72 (1988); Nantahala Power & Light Co. v.
Thornburg, 476 U.S. 953, 970 (1986) (both applying the same
principle to the Commission's jurisdiction over wholesale sales of
electric energy).
---------------------------------------------------------------------------
479. This article is designated Article 5.17.8 in the Final Rule
LGIA.
[[Page 49887]]
480. Article 5.14.8--Taxes Other Than Income Taxes (In the Final
Rule LGIA: Article 5.17.9)--Proposed LGIA Article 5.14.8 described the
Parties' obligations if taxes other than federal or state income taxes,
and for which the Interconnection Provider may be required to reimburse
the Transmission Provider under the terms of the LGIA, are imposed. At
the Interconnection Customer's expense, the Transmission Provider would
appeal or oppose such a determination. Proposed LGIA Article 5.14.8
also described the procedures for settling the contested ruling.
Comments
481. FP&L asks the Commission to clarify Article 5.14.8 to require
the Interconnection Customer to pay tax costs, other than income tax,
related to interconnection payments.
Commission Conclusion
482. The Commission notes that Article 5.14 does not limit recovery
to state or federal income taxes related to interconnection payments.
This provision by itself does not create additional tax liability
beyond income taxes. Because FP&L offered no justification for why
additional tax protection is necessary, the Commission rejects its
request.
483. This article is designated Article 5.17.9 in the Final Rule
LGIA.
484. Article 5.15--Tax Status (In the Final Rule LGIA: Article
5.18)--Proposed LGIA Article 5.15 provided that each Party cooperate
with the other to maintain the other Party's tax status. It also
proposed that the LGIA would not be intended to adversely affect any
Transmission Provider's tax exempt status with respect to the issuance
of bonds.
Comments
485. NYTO proposes modifying the LGIA to be consistent with the
tax-exempt bond provisions of the Transmission Owner's (or the ISO's)
OATT. Thus, the LGIA would provide that the Transmission Owner is not
obligated to take any action, and the Interconnection Customer is
prohibited from taking any action, that would adversely affect the tax-
exempt status of the Transmission Owner's (or the ISO's) local
furnishing bonds.
486. Several commenters, including LADWP and TANC, are concerned
about the effect that providing Interconnection Service will have on
the tax-exempt status of their bond funding. TANC asks the Commission
to provide flexibility for municipal utilities that adopt the Tariff
additions. NRECA-APPA is concerned that contributions by an
Interconnection Customer for construction of interconnection facilities
and Network Upgrades may result in loss of its tax-exempt status. A
tax-exempt cooperative must ensure that at least 85 percent of its
income comes from members.
487. LPPC urges the Commission to give public power utilities the
option to: (1) Refuse to provide an interconnection if doing so would
jeopardize the tax-exempt status of the public power utility's
financing; or (2) proceed with the interconnection with an
indemnification provision that would require Interconnection Customers
to reimburse public power entities if any aspect of compliance with the
Final Rule causes the utility to lose the tax-exempt status of its
bonds.
Commission Conclusion
488. The Commission concludes that the tax status of the Parties is
sufficiently protected by Proposed LGIA Article 5.15.
489. As described more fully in the reciprocity discussion in this
preamble, public power and other nonjurisdictional entities with ``safe
harbor'' tariffs may add the Final Rule LGIP and Final Rule LGIA to
their safe harbor tariffs if they wish to continue to have safe harbor
protection.\82\ The Commission limits reciprocity compliance to those
services a nonjurisdictional entity is capable of providing on its
system.\83\ The Commission will consider the restrictions on
nonjurisdictional and jurisdictional entities' conduct that would
endanger the tax exempt status of their bond funding during compliance
or upon submission of amended safe harbor tariffs, and we will act to
ensure that they retain their tax-exempt status. Accordingly, the
Commission need not address further here the argument raised by LPPC.
---------------------------------------------------------------------------
\82\ See part II.C.7 (OATT Reciprocity Requirements Applied to
the Final Rule LGIP and Final Rule LGIA).
\83\ Order No. 888-A, FERC Stats. & Regs ] 31,048 at 30,286.
---------------------------------------------------------------------------
490. This article is designated Article 5.18 in the Final Rule
LGIA.
491. Article 6--Testing and Inspection--Proposed LGIA Article 6
provided that, prior to the Commercial Operation of the Generating
Facility, the Transmission Provider shall test the Transmission
Provider Interconnection Facilities and Network Upgrades, and the
Interconnection Customer shall test the Generating Facility and the
Interconnection Customer's Interconnection Facilities to ensure their
safe and reliable operation. The Interconnection Customer would bear
the cost of these tests and any modifications. After the Commercial
Operation Date, each Party shall conduct routine inspection and testing
of its own facilities, at its own expense, in accordance with Good
Utility Practice.
Comments
492. Entergy generally supports the testing and inspection
provisions, but urges that Article 6.1 provide the Parties with
additional scheduling flexibility if testing reveals the need for
modifications to the Generating Facility. Entergy therefore proposes
that the Parties' schedules for completing their respective obligations
to construct and install facilities shall be extended to the extent
reasonably necessary to complete any necessary modifications to the
Generating Facility.
493. Arkansas Coops propose that Article 6.1 of the NOPR LGIA be
modified to prohibit a Transmission Provider from preventing an
Interconnection Customer sale of test energy to an entity other than
the Control Area operator.
Commission Conclusion
494. The Commission does not believe that a change to the LGIA is
required in order to satisfy Entergy's concern. The LGIA is premised on
the idea that the Interconnection Customer and Transmission Provider
will coordinate the interconnection of the Interconnection Customer's
Interconnection Facilities on an ongoing basis. If the testing reveals
a problem with the Interconnection Facilities or Network Upgrades, the
LGIA contemplates that the Parties will work together to modify the
schedule.
495. In response to Arkansas Coops, the Interconnection Customer
may sell its energy to anyone; the LGIA does not need to address this
matter, as it is not an interconnection matter.
496. Article 7--Metering--Proposed LGIA Article 7 would have
required that, unless otherwise agreed to by the Parties, the
Transmission Provider shall install, own, operate, and maintain
Metering Equipment at the Point of Interconnection, with the
Interconnection Customer bearing all reasonable documented costs.
497. Article 7.2--Check Meters--Proposed LGIA Article 7.2 provided
that the Interconnection Customer, at its own expense, may install one
or more meters on its side of the Point of Interconnection to check the
accuracy of Transmission Provider's meters.
498. Article 7.3--Standards--Proposed LGIA Article 7.3 provided
that if Article 7 conflicts with the manuals,
[[Page 49888]]
standards or guidelines of the Applicable Reliability Council, the
latter shall control.
499. Article 7.4--Testing of Metering Equipment--Proposed LGIA
Article 7.4 provided that if at any time Metering Equipment fails to
register or is found to be inaccurate by more than one percent, the
Transmission Provider shall correct all measurements made by the
inaccurate meter.
500. Article 7.5--Metering Data--Proposed LGIA Article 7.5 provided
that the official measurement of the amount of energy delivered from
the Generating Facility to the Point of Interconnection is the metered
data, which would be telemetered to one or more locations designated by
the Transmission Provider and one or more locations designated by the
Interconnection Customer.
Comments
501. Cal ISO and SoCal Edison argue that, in California, it is the
Cal ISO Tariff that governs metering provisions. They further argue
that many provisions of proposed LGIA Article 7 appear to be at odds
with Cal ISO's Tariff and WECC requirements. For example, Cal ISO
points out that proposed Article 7.1 appears to require metering only
at the Point of Interconnection which would mean ``net metering,''
whereas WECC requires Cal ISO to meter a generator's gross output.
502. SoCal Edison and WEPCO argue that the Transmission Provider
should not be required to own the meters because owning meters carries
with it some liability associated with inaccurate meter readings.
503. Dynegy comments that meters should be installed at an agreed-
upon location rather than at the Point of Interconnection, and metering
information should be provided in analog and digital form to no more
than two locations specified by the Transmission Provider. It also
proposes that check meter measurements be used when the primary meter
is inaccurate, and that the Final Rule specify in more detail the cost
responsibility of the Transmission Provider if it does not properly
maintain the metering equipment.
504. Baker & McKenzie and Dynegy argue that proposed LGIA Article
7.2 incorrectly references Article 7.3 and should refer instead to
Article 7.4. Several commenters, including Baker & McKenzie, the Bureau
of Reclamation, Dynegy, and Monongahela Power, propose that language
should be added to Article 7.4 to use check meters to correct the
measurements read by failed or inaccurate Metering Equipment. Baker &
McKenzie proposes several editorial changes to clarify Article 7.4.
505. FirstEnergy argues that the one percent metering accuracy is
very difficult to achieve and its current interconnection agreement as
well as the industry standard allows for a two percent metering error.
It asserts that the provision should be changed to allow for a metering
error of two percent. Monongahela Power argues that the allowed
metering error should be 1.5 percent.
506. Several commenters including EEI, FirstEnergy, and Southern
argue that the last sentence of proposed LGIA Article 7.5 incorrectly
states that ``metering data [is] provided by the Interconnection
Customer'' because the metering data is being provided by the
Transmission Provider to the Interconnection Customer.
Commission Conclusion
507. Cal ISO's concern with regard to metering being allowed only
at the Point of Interconnection is misplaced. Proposed LGIA Article
7.1, which provides that ``[u]nless otherwise agreed by the Parties,
Transmission Provider shall install Metering Equipment at the Point of
Interconnection,'' clearly allows Metering Equipment to be placed at an
agreed upon location different from the Point of Interconnection.
However, in response to Cal ISO's and SoCal Edison's concern that their
metering provisions are governed by WECC requirements, we are adding
the following language to Article 7.1: ``Each Party shall comply with
the Applicable Reliability Council requirements.'' The Commission does
not expect that Applicable Reliability Council requirements will
conflict with our provisions in Final Rule LGIA Article 7. Accordingly,
we find the following language to be unneeded and are deleting it from
Article 7.3 (Standards): ``To the extent this Article 7 conflicts with
the manuals, standards, or guidelines of the Applicable Reliability
Council regarding interchange metering and transactions, the manuals,
standards and guidelines of such Applicable Reliability Council shall
control.''
508. In response to SoCal Edison and WEPCO, we are not revising
proposed LGIA Article 7.1 because the Final Rule contains the phrase
``[u]nless otherwise agreed by the Parties'' which allows any Party to
own the meters. In response to Dynegy and Baker & McKenzie we are
changing the reference in Final Rule LGIA Article 7.2 to Article 7.4.
We are also adding language in Final Rule LGIA Article 7.4 for the use
of check meters to correct the measurements read by failed or
inaccurate Metering Equipment. In response to FirstEnergy and
Monongahela Power's argument, the Commission adopts a metering error of
two percent because, as pointed out by FirstEnergy, two percent is the
industry standard. Finally, we are correcting the error in the last
sentence of proposed LGIA Article 7.5 noted by EEI, FirstEnergy and
Southern.
509. Article 8--Communication--Proposed LGIA Article 8 described
the operating communications and dedicated data circuits between the
Parties that would be necessary and the cost and maintenance
responsibility for such equipment.
510. Article 8.1--Interconnection Customer Obligations--Proposed
LGIA Article 8.1 would have required the Interconnection Customer to
maintain satisfactory operating communications with the Transmission
Provider's Transmission System dispatcher or designated
representatives.
Comments
511. NERC and Western recommend that a Transmission Provider be
permitted to use a voice communications system that does not rely on
the public telephone system.
512. Dairyland Power proposes that maintenance be performed by the
Transmission Provider, in an agreed upon manner, at the Interconnection
Customer's expense.
513. Cleco and FirstEnergy propose that the Interconnection
Customer be responsible for the cost of maintaining any communications
and computer equipment belonging to either Party, as well as the
hardware and software necessary for the Transmission Provider to
interface properly with the Interconnection Customer's system.
514. Progress Energy requests that the first sentence of proposed
LGIA Article 8.2 be rewritten to read: ``Prior to the Initial
Synchronization Date of the [Generating] Facility, a remote terminal
unit, or equivalent data collection and transfer equipment acceptable
to both Parties shall be installed * * *''
515. The Bureau of Reclamation believes that cyber-security and
data security issues should be addressed in the body of the LGIA, and
not in an Appendix.
Commission Conclusion
516. The Commission concurs with the recommendations of NERC,
Western and Progress Energy, and revises Proposed LGIA Articles 8.1 and
8.2 to allow greater flexibility.
517. In response to the Bureau of Reclamation, the Commission notes
that
[[Page 49889]]
the Appendices are as binding as provisions within the body of the
LGIA.
518. Articles 8.1 and 8.2 require that the Interconnection Customer
transmit the data to a point specified by the Transmission Provider.
Once the data has reached that point, it becomes the responsibility of
the Transmission Provider to maintain its own hardware and software
equipment. In response to Dairyland Power, the Commission notes that
the Parties may enter into an agreement regarding which Party actually
performs the data system maintenance, but the Interconnection Customer
is ultimately responsible for paying for that maintenance.
519. Article 9--Operations--Proposed LGIA Article 9 would have
required the Interconnection Customer and Transmission Provider to
operate their facilities in a safe and reliable manner. It also
proposed reactive power requirements and provided that the
Interconnection Customer will be compensated for capital expenses
incurred based on the use of the Interconnection Facilities by the
Transmission Provider, all third party users, and the Interconnection
Customer.
520. Article 9.1--General--Proposed LGIA Article 9.1 would have
required the Parties to comply with LGIA Appendix G (Interconnection
Guidelines). It would also require that each Party provide to the other
Parties all information that may be required to comply with Applicable
Laws and Regulations.
Comments
521. Southern, Lakeland, and FirstEnergy state that Article 9.1
should refer to Applicable Reliability Council requirements instead of
Appendix G Interconnection Guidelines, which is blank. FirstEnergy
states that each Party should be required to comply with the
requirements of any RTO or ISO and any procedures agreed to by the
Joint Operating Committee.
522. Exelon requests that proposed LGIA Article 9.1 be modified to
include the following language: ``To the extent interconnection
requirements are inconsistent with ISO/RTO rules, the ISO/RTO rules
shall govern.''
Commission Conclusion
523. In the Final Rule, Article 9.1 refers to Applicable
Reliability Council requirements. The Commission is deleting Appendix G
(Interconnection Guidelines). With respect to FirstEnergy's request
that Parties be required to comply with any procedures agreed to by the
Joint Operating Committee, the Commission does not believe that any
language changes are required. We clarify that the Parties are expected
to comply with the procedures established by the Joint Operating
Committee. We also clarify that the RTO or ISO rules, once approved by
the Commission, shall govern the LGIA.
524. Article 9.2--Control Area Notification--Proposed LGIA Article
9.2 would have required the Interconnection Customer to notify the
Transmission Provider in writing of the location of its Control Area at
least three months before the Generating Facility's Initial
Synchronization Date. The proposed article also provided that the
Interconnection Customer has the right to change the Control Area after
the Initial Synchronization Date.
Comments
525. Some commenters, including PG&E and Cal ISO, believe that the
Generating Facility must be the Control Area to which it is
electrically connected.
526. MidAmerican believes that the Interconnection Customer must
provide the metering and communications necessary to be a part of a
Control Area other than the Transmission Provider's Control Area. Cleco
proposes that since switching Control Areas is labor-intensive for the
employees of both Control Areas, the Interconnection Customer should be
required to remain in a Control Area for at least 12 months before
switching.
527. NERC asks that proposed LGIA Article 9.2 be clarified to
ensure that the host Control Area (the Control Area to which the
Interconnection Customer is physically connected, regardless of whether
the Generating Facility is electrically telemetered to another Control
Area through a dynamic transfer) can enforce an Interconnection
Customer's power factor, voltage control, and other similar
obligations. Others commenters, including WEPCO, MidAmerican, Avista,
National Grid, Southern, express concerns that a separate agreement and
control equipment modification should be required, and that if the
Interconnection Customer designates a different Control Area, it should
be required to follow the rules for all applicable Control Areas.
528. Duke Energy asks what the consequence would be if an
Interconnection Customer fails to notify a Transmission Provider of its
Control Area three months prior to its Commercial Operating Date. The
Maine PSC requests that Article 9.2 permit waiver of Control Area
notification in certain situations.
Commission Conclusion
529. In response to Cal ISO, PGE, and Cleco, the Commission does
not prohibit dynamic scheduling of a Generating Facility physically
connected in one Control Area but scheduled into another. Nor does it
place restrictions on changing Control Areas and how long an
Interconnection Customer must remain in a Control Area. Moreover, in
Order No. 888 the Commission did not require that Transmission
Providers offer dynamic scheduling.\84\ However, we also agree with the
concerns expressed by NERC and other commenters that the process of
changing Control Areas and the attendant implementation brings about
requirements for coordination, control equipment modification, and
agreement on operational details. In such cases, the Commission
confirms that the Transmission Provider's OATT shall apply.
---------------------------------------------------------------------------
\84\ Order No. 888 at 31,709-10.
---------------------------------------------------------------------------
530. We also confirm that the Interconnection Customer must notify
the Transmission Provider at least three months before the Initial
Synchronization Date of the Control Area in which it will be located.
Failure of an Interconnection Customer to make the appropriate Control
Area designation would be treated as a Breach of the Final Rule LGIA,
subject to opportunity to cure. Similarly, while an Interconnection
Customer could request that the Transmission Provider waive the three
month notice requirement, we decline to make that a provision of the
Final Rule LGIA.
531. Article 9.3--Transmission Provider Obligations--Proposed LGIA
Article 9.3 would have required the Transmission Provider to operate
and maintain its Transmission System in a safe and reliable manner and
in accordance with the LGIA. It also proposed that the Interconnection
Customer would not be obligated to follow the Transmission Provider's
instructions if those instructions would undermine the safe and
reliable operation of the Generating Facility.
Comments
532. NERC proposes deleting the proposed language allowing an
Interconnection Customer to not follow the Transmission Provider's
instructions if doing so would cause material damage to the Generating
Facility. NERC is concerned that the language appears to grant the
Interconnection Customer a blanket right not to follow operating
instructions of the Transmission Provider.
[[Page 49890]]
533. NYTO proposes revising Article 9.3 of the NOPR LGIA to remove
any incentive for the Interconnection Customer to ``create''
circumstances (e.g., emergencies) that would warrant noncompliance.
534. Southern asserts that it is inappropriate to impose broad
obligations on a Transmission Provider's Transmission Systems in the
LGIA. The LGIA should govern only the interconnection of an
Interconnection Customer and the Interconnection Facilities necessary
to achieve the interconnection, not the entire Transmission System.
535. Dynegy states that proposed LGIA Article 9.3 fails to consider
the economic effect of operating instructions on the Interconnection
Customer, which could be financially devastating, and that the article
should make clear that the Transmission Provider must compensate the
Interconnection Customer for responding to such operating instructions.
Commission Conclusion
536. We agree with NERC's concern that the proposed language
appears to grant the Interconnection Customer a blanket right not to
follow the operating instructions of the Transmission Provider during
normal operating conditions and accordingly delete the proposed
language in the Final Rule. We expect a Transmission Provider to follow
NERC procedures and to take every precaution not to cause any material
adverse impact on the safe and reliable operation of the Generating
Facility. It is essential that the Interconnection Customer follow all
orders given by the Transmission Provider, unless they would result in
impairment to public health or safety, since otherwise the Transmission
Provider would be unable to effectively manage its Transmission
System.\85\ Final Rule LGIA Article 13.6 (Interconnection Customer
Authority) allows Interconnection Customers to take ``actions or
inactions'' necessary to ``preserve the reliability of the
Interconnection Customer's Generating Facility'' during an Emergency
Condition.
---------------------------------------------------------------------------
\85\ Pacific Gas and Electric Company, et al., 81 FERC ] 61,122
at 61,456 (1997).
---------------------------------------------------------------------------
537. In response to NYTO's comments, all Parties are obligated to
follow Good Utility Practice and to abide by their obligations under
the LGIA. If a Party were to manufacture an Emergency Condition, it
would be a violation of the LGIA, as well as a serious Breach of NERC
and other reliability rules.
538. Southern's concerns are misplaced. Proposed LGIA Article 9.3
simply stated that the Transmission Provider shall maintain its system
in a safe manner and that the Interconnection Customer is required to
follow the instructions of the Transmission Provider under normal
circumstances.
539. Dynegy's comment also appears to be misplaced. Proposed LGIA
Article 9.3 dealt with the obligations of the Transmission Provider,
not the obligations of the Interconnection Customer. Assuming that
Dynegy's comment applies to Article 9.4 instead, we clarify that a
Party is not obligated to follow a Transmission Provider's instructions
that would cause harm to its Generating Facility, unless public health
and safety would be threatened by noncompliance.
540. Article 9.6.1--Power Factor Design Criteria--Proposed LGIA
Article 9.6.1 would have required the Generating Facility to be
designed so that at the continuous rated power output, its power factor
would be within a range of 0.97 leading to 0.95 lagging, unless the
Transmission Provider has established different requirements applicable
to all Interconnection Customers in the Control Area on a comparable
basis.
Comments
541. NERC proposes that the Commission require power factor
capabilities to be ``within a range required by Good Utility
Practice,'' which incorporates NERC standards by reference. It cites
its own Planning Standard, which allows a generator to be within the
range of 0.95 leading to 0.90 lagging and argues that such a range
provides more responsive reactive absorption and supply than the range
proposed in Article 9.6.1. That Planning Standard also requires that if
the Generating Facility does not meet the requirements, the
Interconnection Customer must make alternate arrangements for supplying
dynamic reactive power to meet the area's reactive power requirements.
However, NERC concedes that a power factor requirement of 0.95 leading
to 0.95 lagging is a common practice in some NERC regions.
Commission Conclusion
542. We adopt the power factor requirement of 0.95 leading to 0.95
lagging because it is a common practice in some NERC regions. If a
Transmission Provider wants to adopt a different power factor
requirement, Final Rule LGIA Article 9.6.1 permits it to do so as long
as the power factor requirement applies to all generators on a
comparable basis.
543. Article 9.6.3--Payment for Reactive Power--Proposed LGIA
Article 9.6.3 would have provided that the Transmission Provider pay
the Interconnection Customer for reactive power that the Generating
Facility provides or absorbs. Such payment would be in accordance with
the Interconnection Customer's rate schedule unless service is subject
to a Commission-approved RTO or ISO rate schedule. If no rate schedule
is in effect, the Transmission Provider would compensate the
Interconnection Customer in an amount that would be due the
Interconnection Customer had the rate schedule been in effect when the
service commenced; provided, however, that the rate schedule must be
filed with the Commission within 60 Calendar Days of the commencement
of service.
Comments
544. El Paso and others maintain that the Interconnection Customer
should not be compensated for reactive power provided or absorbed
within the power factor range established in Article 9.6.1 (Power
Factor Design Criteria) since it is only meeting its obligation to do
so. MidAmerican, Cleco, El Paso, Nevada Power, PG&E, and Western state
that the Interconnection Customer should be compensated for the
reactive power it provides or absorbs when the Transmission Provider
asks the Interconnection Customer to operate its Generating Facility
outside the established power factor range. Cleco and Nevada Power also
contend that if the Transmission Provider pays for reactive power, so
should the Interconnection Customer, when it does not meet the
Transmission Provider's voltage schedule that can be met by the
established power factor range.
545. MidAmerican and Cleco argue that reactive power should be paid
for only if the Interconnection Customer has filed a rate schedule with
the Commission prior to the commencement of service. Duke argues that
the last sentence of the NOPR LGIA Article 9.6.3 that provides for
filing of a rate schedule within 60 Calendar Days of having provided
reactive service without a rate schedule should be moved to Article
11.6 (Interconnection Customer Compensation) to cover a similar
situation during an Emergency Condition. Cal ISO believes that the
procurement of reactive power should be left to another proceeding
(such as a Regional Market Design proceeding),
[[Page 49891]]
and NYISO states that this issue is already being dealt with in its
Market Administration and Control Area Services Tariff.
Commission Conclusion
546. We agree that the Interconnection Customer should not be
compensated for reactive power when operating its Generating Facility
within the established power factor range, since it is only meeting its
obligation. Proposed Article 9.6.3 required payment for reactive power
to an Interconnection Customer only when the Transmission Provider
requests the Interconnection Customer to operate its Generating
Facility outside the range established in Article 9.6.1 (Power Factor
Design Criteria). In response to Cleco and Nevada Power, we agree that
the Interconnection Customer should be penalized or otherwise
compensate the Transmission Provider if the Interconnection Customer
does not meet the Transmission Provider's voltage schedule
requirements, so long as the voltage schedule requirements can be met
by the established power factor range. The Commission is not including
a standard penalty or compensation provision here, but will entertain
reasonable requests to do so on compliance. We agree with Duke and move
the last sentence of Article 9.6.3 to 11.6.
547. With respect to the argument that payment for reactive power
should be required only if the Interconnection Customer has a rate
schedule on file when service commences, we note that the Commission's
Regulations allow an applicant to file a rate schedule within 60 days
of the commencement of service.\86\
---------------------------------------------------------------------------
\86\ See 18 CFR 35.3 (2003).
---------------------------------------------------------------------------
548. An RTO or ISO, at the time its compliance filing is made, may
propose variations from this policy, as discussed below.\87\ An RTO or
ISO has different operating characteristics depending on its size and
location and is less likely to act in a discriminatory manner than a
Transmission Provider that is also a market participant. An RTO or ISO
will have greater flexibility to customize its LGIP and LGIA to respond
to regional needs.
---------------------------------------------------------------------------
\87\ See Part II.C.5 (Variations from the Final Rule and
Regional Differences).
---------------------------------------------------------------------------
549. Article 9.7.1.2--Outage Schedule--Proposed LGIA Article
9.7.1.2 would have a Transmission Provider post transmission facility
outages on the Open Access Same-Time Information System (OASIS) and
require an Interconnection Customer to schedule its maintenance on a
rolling 24 month basis. It also stated that a Transmission Provider may
ask the Interconnection Customer to reschedule its maintenance as
necessary to maintain the reliability of the Transmission System;
however, the Transmission Provider will compensate the Interconnection
Customer for any costs of rescheduling such maintenance.
Comments
550. Several commenters argue that the Transmission Provider should
not be required to compensate the Interconnection Customer for the
costs of rescheduling maintenance when the purpose of rescheduling the
maintenance is to ensure the reliability of the Transmission System.
For example, Cal ISO claims that the compensation issue should be
resolved by deferring to the RTO or ISO outage coordination provisions
in its Tariff. Southern contends that the Interconnection Customer
benefits from a reliable Transmission System and should therefore
maintain the reliability of the Transmission System without any
compensation for rescheduling its outages. Southern also argues that
the provision seems to require the Transmission Provider to compensate
the Interconnection Customer for rescheduling maintenance even if such
rescheduling is required to interconnect another Interconnection
Customer. If the provision is adopted, Southern requests clarification
that the Interconnection Customer, not the Transmission Provider, is
required to pay the costs that other Interconnection Customers incur to
reschedule their maintenance. Southern also requests clarification that
the reimbursed costs are limited to direct costs and will not include
consequential or indirect costs (such as lost profits).
551. Dairyland Power, PSNM, and Western assert that an
Interconnection Customer may try to game the outage scheduling process.
It could revise its maintenance schedule to coincide with a maintenance
project (by listing it on the Transmission Provider's OASIS) and thus
create congestion or reliability conditions on the Transmission System
for the purpose of receiving compensation from the Transmission
Provider. PSNM further states that while curtailment and redispatch
costs under the OATT generally are shared on a pro rata basis when
transmission service is not available, this article anticipates that
the Transmission Provider will compensate an Interconnection Customer
for changes in the Interconnection Customer's maintenance plan, with no
reciprocal compensation if the Interconnection Customer changes its own
plans.
552. Western believes that requiring the Transmission Provider to
compensate for ``any costs'' leaves too much to interpretation. The
provision should be limited to actual costs incurred by the
Interconnection Customer, such as remobilization costs, to prevent
gaming. AEP believes that compensation should be provided on rare
occasions when maintenance must be rescheduled for reliability
purposes. Cleco believes that the payment to the Interconnection
Customer should occur only if the Transmission Provider is initially
allowed to approve the maintenance schedule proposed by the
Interconnection Customer.
Commission Conclusion
553. We agree that the proposed requirement to compensate
Interconnection Customers for ``any costs'' incurred in rescheduling
maintenance is overly broad. Compensation should be limited to the
additional, direct costs that the Interconnection Customer incurs as a
result of having to reschedule maintenance.
554. We also agree that this article, as proposed, could create an
opportunity for gaming on the part of the Interconnection Customer,
which might schedule its maintenance at a time when the Transmission
Provider could be expected to ask it to reschedule. Therefore the
proposed article is modified so that an Interconnection Customer will
not receive compensation if it had modified its schedule of maintenance
activities during the year before the date of the initially scheduled
maintenance.
555. Article 9.7.1.3--Outage Restoration--Proposed LGIA Article
9.7.1.3 would have provided that if an outage on a Party's
Interconnection Facilities or Network Upgrades harms the other Party's
facilities, the Party owning or controlling the facility that is out of
service will use Reasonable Efforts to promptly restore it to a normal
operating condition.
Comments
556. NERC proposes to require the first Party to provide the other
Party information on the nature of the Emergency Condition, including
an estimated time of restoration, and on any corrective actions
required, as soon as practical, followed by a written explanation of
the nature of the outage. The clarification is necessary because the
outage may affect outage clearances on other equipment, calculation of
[[Page 49892]]
transfer capabilities, system deratings, and so on.
Commission Conclusion
557. We incorporate NERC's proposed change. NERC's proposal
recognizes not only the importance of restoration after an outage, but
the necessity of coordinated restoration and information-sharing to
make all affected Parties aware of the restoration, the corrective
actions taken, and the time the restoration occurred, so that all
Parties may determine whether the interconnected system has been
returned to a normal operating condition.
558. Article 9.7.2--Interruption of Service (In the NOPR:
Continuity of Service)--Proposed LGIA Article 9.7.2 would have provided
that the Transmission Provider may require the Interconnection Customer
to reduce or interrupt deliveries of electricity if such delivery of
electricity would adversely affect the Transmission Provider's ability
to perform activities that are necessary to safely and reliably operate
and maintain the Transmission System. It also would require the
Transmission Provider to schedule the reduction or interruption to
either coincide with the scheduled outage of the Generating Facility or
during periods of low demand.
Comments
559. Several commenters, mostly Transmission Providers such as
Exelon, MidAmerican, PG&E and Southern, argue that the last sentence of
proposed LGIA Article 9.7.2.4 that requires the Transmission Provider
to schedule the reduction or interruption to either coincide with the
scheduled outage of the Generating Facility or during periods of low
demand unreasonably limits the Transmission Provider when it can
perform maintenance and repair work. PG&E asserts that the periods of
low demand either occur at night or during winter, and those times are
not suitable for performing maintenance and repair work because it may
jeopardize the safety of maintenance personnel. MidAmerican argues that
the impact on both the Transmission Provider and Interconnection
Customer should be considered when scheduling maintenance and repair
work on the Transmission System. MidAmerican offers this alternative
last sentence of proposed LGIA Article 9.7.2.4: ``Transmission Provider
shall coordinate with the Interconnection Customer using Good Utility
Practice to schedule the interruption or reduction during periods of
least impact to the Interconnection Customer and the Transmission
Provider.''
560. Exelon argues that a separate provision should be added to
require the Transmission Provider to notify the Interconnection
Customer before the Transmission Provider undertakes any construction,
repair or maintenance work on its Transmission System that may require
the Interconnection Customer to reduce output from its Generating
Facility.
Commission Conclusion
561. In response to MidAmerican and PG&E's concern, we adopt
MidAmerican's proposed language because it balances the interests of
both the Transmission Provider and the Interconnection Customer. With
regard to Exelon's argument, we note that Article 9.7.2.4 of the Final
Rule LGIA provides that: ``Except during the existence of an Emergency
Condition, when the interruption or reduction can be scheduled without
advance notification, Transmission Provider shall notify
Interconnection Customer in advance regarding the timing of such
scheduling and further notify Interconnection Customer of the expected
duration.''
562. Article 9.7.3--Under-Frequency and Over-Frequency Conditions
(In the NOPR: Under-Frequency Load Shed Event)--Proposed LGIA Article
9.7.3 stated that the Transmission System is designed to activate a
load-shed program automatically in the event of an under-frequency
system disturbance. It proposed that an Interconnection Customer shall
implement an under-frequency relay set point for the Generating
Facility to ensure ``ride through''\88\ capability of the Transmission
System, to the extent allowed by equipment limitations or warranties.
---------------------------------------------------------------------------
\88\ ``Ride through'' means a Generating Facility staying
connected to and synchronized with the Transmission System during
system disturbances within a range of over- and under-frequency
conditions, in accordance with Good Utility Practice.
---------------------------------------------------------------------------
Comments
563. NERC, MidAmerican, and SoCal Edison state that the scope of
Article 9.7.3 should be expanded to include over-frequency conditions
as well.
564. NERC, Florida RCC, and TECO Energy oppose relying on equipment
limitations or warranties as an excuse for an Interconnection Customer
to avoid following Applicable Reliability Council rules. They claim
that in a limited number of instances where equipment limitations do
exist, the Applicable Reliability Council's rules permit the
Interconnection Customer to propose alternative load shedding
procedures. They also express concern that should the Commission retain
the language relating to equipment limitations or warranties, load
shedding procedures may not be effective to prevent full collapse of an
electrical ``island,'' thereby threatening the reliability of the
Transmission System.
565. NERC recommends that the Generating Facility's response to
both under- and over-frequency conditions be studied and coordinated
with the Transmission Provider's Transmission System in accordance with
Good Utility Practice.
Commission Conclusion
566. We agree with many commenters that their proposed changes
would better protect reliability. Therefore, we revise Article 9.7.3 to
refer to Applicable Reliability Council requirements and to include
over-frequency conditions. Equipment limitations or warranties should
not be an excuse for not following Applicable Reliability Council
rules; in case of genuine equipment limitations, Applicable Reliability
Council rules permit the Interconnection Customer to offer alternative
proposals. As such, the Commission eliminates the phrase ``equipment
limitations or warranties'' in the Final Rule. In addition, the
Commission is adopting NERC's proposed language regarding studies to
determine the Generating Facility's response to frequency deviations
because of its importance in stabilizing the power system during an
electrical disturbance.
567. Article 9.7.4.1--System Protection Facilities (In the NOPR:
Protection and System Quality)--Proposed LGIA Article 9.7.4.1 would
have required that the Interconnection Customer, at its expense,
install, operate and maintain System Protection Facilities.
Comments
568. NERC states that the title of proposed LGIA Article 9.7.4.1
should be changed from ``Protection and System Quality'' to
``Protection Required by Study'' because system quality issues are not
addressed here.
Commission Conclusion
569. The title of Final Rule LGIA Article 9.7.4.1 is changed to
``System Protection Facilities.'' This change addresses the NERC
comment to eliminate reference to ``System Quality.''
570. Article 9.7.4.2--Proposed LGIA Article 9.7.4.2 would have
required that
[[Page 49893]]
each Party's facility be designed to isolate any fault or abnormality
that would negatively affect the other Party or third parties connected
to the Transmission Provider's Transmission System.
Comments
571. NERC notes that the term ``negatively affect'' is too vague.
It proposes that proposed LGIA Article 9.7.4.2 be revised to state that
each Party's protection facilities will be designed and coordinated
with other systems in accordance with Good Utility Practice.
Commission Conclusion
572. The Commission adopts NERC's proposed change.
573. Article 9.7.5--Requirements for Protection--Proposed LGIA
Article 9.7.5 would have required the Interconnection Customer, in
compliance with Applicable Reliability Standards, to install, operate
and maintain protective devices necessary to remove faults ``promptly''
and to protect the Generating Facility from other conditions, such as
negative sequence currents and over- or under-frequency.
Comments
574. NERC comments that the term ``promptly'' is not useful when
describing requirements for, or actions taken to preserve, system
reliability. It also notes that the Generating Facility's fault
protection must be coordinated with system protection. ``Good Utility
Practice'' should replace ``Applicable Reliability Standards,'' since
Applicable Reliability Standards is a subset of Good Utility Practice.
Commission Conclusion
575. The Commission agrees with NERC and adopts its proposals.
576. Article 9.9--Use of Transmission Provider's Interconnection
Facilities by Third Parties--Proposed LGIA Article 9.9 would have
provided, among other things, that third parties may use the
Transmission Provider's Interconnection Facilities if required by
Applicable Laws and Regulations, or if the Parties agree.
Comments
577. APS believes that it is inappropriate to prohibit the use of
Interconnection Facilities for other functions such as the housing of
fiber optic circuits.
Commission Conclusion
578. Since proposed LGIA Article 9.9 specifically allows the
Parties to agree to permit third party usage of the Interconnection
Facilities, there is no need to revise it.
579. Article 9.10--Disturbance Analysis Data Exchange (In the NOPR:
Data Exchange)--Proposed LGIA Article 9.10 would have provided that the
Parties cooperate with one another in the analysis of disturbances to
either the Generating Facility or the Transmission Provider's
Transmission System by the gathering and sharing of any information
related to any disturbance.
Comments
580. NERC states that since this article is limited to data
exchange for disturbance analysis, the title should be ``Disturbance
Analysis Data Exchange.'' NERC also recommends covering ``and any
disturbance information required by Good Utility Practice.''
Commission Conclusion
581. The Commission adopts NERC's proposals in the Final Rule.
582. Article 10--Maintenance--Proposed LGIA Article 10 would have
made the Interconnection Customer responsible for all reasonable
expenses of owning, operating and maintaining Interconnection Customer
and Transmission Provider Interconnection Facilities (except for
operations and maintenance expenses associated with modifications
necessary for providing service to a third party that pays for such
expenses). No significant comments were submitted on this article.
Accordingly, the Commission adopts in the Final Rule LGIA Article 10 as
proposed.
583. Article 11--Performance Obligation--Proposed LGIA Article 11
described the Transmission Provider's and the Interconnection
Customer's obligations with respect to construction of Interconnection
Facilities and Network Upgrades, security arrangements and deposits,
refunds in the form of transmission credits with interest for amounts
funded by the Interconnection Customer, and compensation to the
Interconnection Customer for services the Transmission Provider
requests.
584. Most of the issues in Proposed LGIA Article 11 relate to
pricing. All pricing matters are discussed in part II.C.1
(Interconnection Pricing Policy).
585. Article 11.5--Financial Security Arrangements--Proposed LGIA
Article 11.5 would have required the Interconnection Customer to
provide the Transmission Provider with a form of security at least 90
Calendar Days before the procurement, installation, or construction of
discrete Transmission Provider Interconnection Facilities or Network
Upgrades begins. The security amount would have had to be sufficient to
cover the costs of procuring, constructing, and installing the
Transmission Provider's Interconnection Facilities or Network Upgrades,
and it would have been reduced on a dollar-for-dollar basis as payments
were made. Articles 11.5.1.1, 11.5.1.2 and 11.5.1.3 would have required
that the issuer of the guarantee, letter of credit, surety bond or
other form of security meet the creditworthiness requirements of, or be
acceptable to, the Transmission Provider and that the security
instrument contain specified provisions, such as a reasonable
expiration date.\89\
---------------------------------------------------------------------------
\89\ NOPR LGIA Article 11.5.1 is identical to Article 11.5
except that the former required the Interconnection Customer to
provide the Transmission Provider with a form of security at least
30 Calendar Days prior to the commencement of the procurement,
installation, or construction of discrete Transmission Provider
Interconnection Facilities or Network Upgrades. The inclusion of
both provisions in the NOPR LGIA was an error. As explained below,
we are eliminating Article 11.5 in the Final Rule LGIA.
---------------------------------------------------------------------------
Comments
586. Commenters identify three areas of concern with this
provision. First, some commenters believe that 30 days is insufficient
time for the Interconnection Customer to provide a reasonable form of
security to the Transmission Provider. For example, Dairyland Power
argues that 30 days is not enough time for delivery of the necessary
equipment and materials. SoCal PPA maintains that the security should
be provided 90 days in advance. Progress Energy argues that security
should be provided when an interconnection agreement is executed, and
FP&L requests that security should be provided within 30 days of either
execution of the interconnection agreement or its acceptance by the
Commission.
587. Exelon argues that the amount of the security should be
allowed to increase (or decrease), based on any changes in the
construction cost estimate. According to Progress Energy, the
Interconnection Customer should offer security to cover the full cost
of the Network Upgrades. EPSA contends that the Interconnection
Customer should be allowed to provide security on a rolling six month
basis based on the Transmission Provider's cost exposure at each six
month interval to ensure that the security costs paid by the
Interconnection Customer are reasonable at any given time and are
consistent with the Transmission Provider's obligations. In the
alternative, EPSA supports the 30 day period. Duke
[[Page 49894]]
Energy also supports the 30 day requirement.
588. NMA and Peabody state that while a Transmission Provider
should not be placed at risk financially if an Interconnection Customer
either terminates its interconnection agreement or breaches its
obligation to make monthly payments to the Transmission Provider, at no
time will the Transmission Provider be exposed to the financial costs
of all the amounts of Network Upgrades or additions as contemplated
under the NOPR LGIA. Requiring an Interconnection Customer to guarantee
the total cost of the Network Upgrades is unfair because it causes the
Interconnection Customer seeking to interconnect a very large generator
to incur significant interest costs that it will never be able to
recover, and this does not represent the true financial exposure the
Transmission Provider faces for Network Upgrades. Further, limiting the
security requirement to an amount that reflects the Transmission
Provider's cost exposure during a 120 day forward-looking period is
more appropriate than requiring an Interconnection Customer with a very
large generator to provide security for the total cost of the project.
Calpine warns that unnecessary financial security would be a barrier to
entry.
589. Several commenters, mostly Transmission Providers, believe
that the Transmission Provider or Transmission Owner should determine
the form of security to be provided by the Interconnection
Customer,\90\ since they bear the risk if an Interconnection Customer
abandons a project. The Financial Security Issues Coalition argues that
the specific reference to surety bonds should be deleted from proposed
LGIA Article 11.5 because surety bonds are not in the OATT as an
acceptable form of collateral. Also, to reduce bankruptcy and
fraudulent conveyance issues, any proposed guaranty should be from a
parent, and not merely an Affiliate, of the Interconnection Customer.
Finally, any proposed guarantor should have a BBB+ bond rating or
higher.
---------------------------------------------------------------------------
\90\ E.g., BPA, Central Maine, Duke Energy, Exelon, the
Financial Security Issues Coalition, Georgia Transmission, NSTAR,
and NYTO.
---------------------------------------------------------------------------
590. Sempra argues that proposed LGIA Article 11.5.1 should be
revised to clarify that the decision whether to provide security is the
option of the Interconnection Customer. The provision should require an
Interconnection Customer to provide a substitute security if it suffers
serious financial erosion and financial-ratings downgrades that could
lead the Transmission Provider to require assurances of a guarantor's
ability to perform its financial and performance obligations. Dominion
Resources does not object to the NOPR provision, provided that a
subsequent Interconnection Customer is responsible for the costs of
completing Network Upgrades if a higher-queued Interconnection Customer
chooses to suspend or terminate construction of the Interconnection
Facilities.
591. Arkansas Coops argue that Article 11.5.1 should require the
Transmission Provider to accept security from the National Rural
Utilities Cooperative Finance Corporation (CFC), since this is critical
for cooperatives that obtain financing from the CFR.
Commission Conclusion
592. We note at the outset that Article 11.5 and Article 11.5.1 are
substantially identical, and the inclusion of both provisions in the
NOPR was redundant. We are therefore deleting Article 11.5 in the Final
Rule, and renumbering the remaining articles accordingly. The
discussion that follows, however, will refer to article numbers
contained in the NOPR LGIA.
593. With respect to commenters' concern that the 30 day window for
providing a reasonable form of security is too short, the NOPR stated
that the form of security must be provided by the Interconnection
Customer at least 30 Calendar Days in advance of the procurement,
installation, or construction of Interconnection Facilities or Network
Upgrade projects. Parties, therefore, remain free to agree to an
earlier deadline for the security if they foresee circumstances such as
a long lead time for delivery of equipment. We expect that an
Interconnection Customer will honor a reasonable request for an earlier
deadline for providing a reasonable form of security. And, we will not
require that the security be available at an earlier time, or at some
specified period after execution of an interconnection agreement,
because the purpose of the security is to fund procurement and
construction. Since it is uncertain when procurement and construction
will begin, it is reasonable to make such activity the trigger for
tendering the security.
594. We are not persuaded that providing security on a 120 day or
six month rolling basis is superior to the approach proposed in the
NOPR. We retain the article as proposed for the following reasons.
First, the Final Rule LGIA provides for the reduction of the security
amount on a dollar-for-dollar basis as payments are made; this protects
the Interconnection Customer against providing too much security and
ensures that the Transmission Provider is always adequately protected
against its cost exposure. Second, commenters provide inadequate
support for their claim that they would be unduly burdened if the
article remained unchanged, or that a Transmission Provider and its
other customers would suffer no financial harm if the Commission
adopted a rolling 120 Calendar Days or six month security period.
Third, retaining the proposed language will help to ensure that only a
financially sound generation project will advance to the point where a
Transmission Provider must make an irreversible financial commitment on
its behalf. Fourth, the approach proposed by the commenters could
expose a Transmission Provider and its other customers to financial
risk if the Interconnection Customer defaults before the construction
of new facilities and Network Upgrades have advanced to the point where
those facilities can be put to productive use.
595. In response to Exelon's concern that the amount of security be
permitted to increase as well as decrease, Final Rule Article 11.5 does
not prohibit the Parties from increasing the total amount of security
required under an executed LGIA. The prices quoted for interconnection
in the LGIA are estimates based on the results of studies conducted
during the LGIP phase of the interconnection process. As a result, the
final cost of Network Upgrades may rise or fall and with it, the
security required under the LGIA.
596. We disagree with commenters' contention that the article
requires the Interconnection Customer to guarantee the total cost of
the Network Upgrades. Final Rule Article 11.5 requires the
Interconnection Customer to provide security to the Transmission
Provider for discrete portions of the Transmission Provider's
Interconnection Facilities or Network Upgrades, not the total amount of
the Network Upgrades. It also provides that the security amount is
reduced on a dollar-for-dollar basis for payments made to the
Transmission Provider, thereby protecting the Interconnection Customer
from having to provide too much security.
597. With respect to commenters' arguments as to the form of
security, the Final Rule states that the Interconnection Customer has
the right to select a form of security that is acceptable to the
Transmission Provider and that the Transmission Provider cannot
unreasonably refuse to accept a
[[Page 49895]]
particular form. As the Commission has noted in recent orders, allowing
the Interconnection Customer to provide an ``irrevocable letter of
credit * * * or an alternative form of security proposed by the
Transmission Customer and acceptable to the Transmission Provider and
consistent with commercial practices'' is not unreasonable, and no
commenter has convinced us otherwise.\91\ Granting the Transmission
Provider absolute discretion on what forms of security to allow would
provide too great an opportunity to erect hurdles to new generation, by
allowing it to act in an unduly discriminatory or preferential
manner.\92\ Moreover, Final Rule Article 11.5 grants the Transmission
Provider the discretion to reject security from a financial institution
that is not reasonably acceptable. As a result, the Commission rejects
comments that would grant the Transmission Provider greater discretion
with respect to the Interconnection Customer's chosen security or
eliminate forms of credit specified in the article.
---------------------------------------------------------------------------
\91\ See Florida Power & Light Company, 98 FERC ] 61,226 at
61,893-94, reh'g granted in part on other grounds, 99 FERC ] 61,318
(2002); Florida Power & Light Company, 98 FERC ] 61,324 at 62,358-59
(noting that Florida Power & Light Company's practice of limiting
interconnection customers to a letter of credit is unreasonable),
reh'g rejected as moot, 100 FERC ] 61,094 (2002).
\92\ Southwest Power Pool, Inc., 100 FERC ] 61,096 at P 12
(2002).
---------------------------------------------------------------------------
598. In response to Sempra, Final Rule Article 11.5 clearly states
that the Interconnection Customer ``shall provide'' security to the
Transmission Provider. It is only the form of that security that is the
Interconnection Customer's option, within the restrictions specified.
We are not adding language to the provision to establish requirements
if an Interconnection Customer receives a financial downgrade that
makes it difficult to secure a guaranty. The Interconnection Customer
remains responsible for providing an acceptable form of guaranty under
the existing terms of the article.
599. Regarding Dominion Resources' comment, this issue is addressed
in our discussion of Article 5.13 (Suspension).
600. Regarding the Arkansas Coops' concern that a Transmission
Provider would not accept security from the CFC, we would not consider
such a rejection to be a reasonable decision on the part of the
Transmission Provider under the existing terms of Article 11.5.
Accordingly, we are not revising the provision.
601. Article 12--Invoice--Proposed LGIA Article 12 set out a
monthly invoice and billing dispute procedure. The Transmission
Provider would have been required to provide an invoice for the final
cost of construction of the Transmission Provider's Interconnection
Facilities and Network Upgrades within six months, in sufficient detail
to enable the Interconnection Customer to compare actual costs with
estimates. No significant comments were submitted on this article.
Accordingly, the Commission adopts in the Final Rule LGIA Article 12 as
proposed.
602. Article 13--Emergencies--Proposed LGIA Article 13 explained
the Transmission Provider's and the Interconnection Customer's
responsibilities when Emergency Conditions arise.
603. Article 13.1--Definition--Proposed LGIA Article 13.1 would
define Emergency Condition as a condition or situation: (1) That in the
judgment of the Party making the claim is imminently likely to endanger
life or property, or (2) that, in the case of the Transmission Provider
making the claim, is imminently likely (as determined in a non-
discriminatory manner) to cause a material adverse effect on the
security of, or damage to the Transmission System, the Transmission
Provider Interconnection Facilities, or the Transmission Systems of
others to which the Transmission System is directly connected, or (3)
that, in the case of the Interconnection Customer making the claim, is
imminently likely (as determined in a non-discriminatory manner) to
cause a material adverse effect on the security of, or damage to, the
Generating Facility or its Interconnection Facilities. Any condition or
situation that results from a lack of sufficient generating capacity to
meet load requirements and that results solely from economic conditions
would not, on its own, be an Emergency Condition.
Comments
604. PG&E and Cal ISO believe that lack of sufficient generation to
meet load requirements that results solely from economic conditions can
be a genuine Emergency Condition. PG&E states that when insufficient
generation occurs, regardless of the reason, the Transmission Provider
is still responsible for maintaining system stability to the extent
possible. It believes that taking away the tools necessary in such an
emergency could harm the Transmission System. Cal ISO and Salt River
Project make a similar point; they consider lack of generation, for any
reason, to be an Emergency Condition that can endanger reliability and,
at a minimum, warrants an emergency notification such as those provided
for under the Cal ISO's procedures. According to Cal ISO, without a
declaration of an Emergency Condition, the Transmission Provider will
not be able to invoke its obligation under Article 13.5 of the NOPR
LGIA to take actions necessary to preserve reliability.
605. El Paso seeks to revise both the proposed definition of the
term Emergency Conditions and NOPR LGIA Article 13 to include a
definition of an abnormal condition and to provide the Transmission
Provider and Interconnection Customer the discretion to prevent an
Emergency Condition (by taking action or inaction) during an abnormal
condition.\93\ El Paso notes that such action or inaction would require
prompt oral notification to the other Party as well as compensation for
changes in real power output and reactive power production.
---------------------------------------------------------------------------
\93\ El Paso would define Abnormal Condition as ``any condition
at the [Generating] Facility, on the Interconnection Facilities, on
the Transmission System, or on the transmission system of other
utilities which is outside normal operating parameters such that
facilities are operating outside their normal ratings or reasonable
operating limits have been exceeded and would result in an Emergency
Condition if these conditions continue. Any condition or situation
that results from lack of sufficient planned generating capacity to
meet load requirements or that results solely from economic
conditions will not, standing alone, constitute an Abnormal
Condition.''
---------------------------------------------------------------------------
Commission Conclusion
606. The Commission agrees with the comments concerning the
potential harm to the Transmission Provider's Transmission System by
reducing its flexibility to respond during Emergency Conditions. The
Commission is removing from the Final Rule LGIA Article 13.1 definition
of Emergency Condition the sentence that reads, ``Any condition or
situation that results from a lack of sufficient generating capacity to
meet load requirements that results solely from economic conditions
shall not, on its own, constitute an Emergency Condition.'' The
Commission denies El Paso's request to add a definition of an abnormal
condition and to provide the Transmission Provider and Interconnection
Customer the discretion to take certain actions or inactions in the
event of an Emergency Condition. The Commission would expect the
Parties to treat any abnormal conditions appropriately, regardless of
whether it is a defined term in the Final Rule.
607. Article 13.5.1--Transmission Provider Authority--General--
Proposed LGIA Article 13.5.1 provided that the
[[Page 49896]]
Transmission Provider would be able to take whatever actions or
inactions it deems necessary during an Emergency Condition to preserve
the safety and reliability of the Transmission System or the
Transmission Provider Interconnection Facilities.
Comments
608. Dynegy contends that during an Emergency Condition, the
Transmission Provider should compensate the Interconnection Customer
for starting up or shutting down a Generating Facility or increasing or
decreasing its real or reactive output.
Commission Conclusion
609. Compensation during an Emergency Condition is appropriately
addressed in Final Rule LGIA Article 11.6.1 (Generator Compensation for
Actions During Emergency Conditions).
610. Article 13.6--Interconnection Customer Authority--Proposed
LGIA Article 13.6 would allow the Interconnection Customer to take
actions or inactions necessary to protect the integrity of its
Generating Facility or Interconnection Facilities during an Emergency
Condition.
Comments
611. NERC proposes that Article 13.6 be revised to read as follows:
``Consistent with Good Utility Practice and the [LG]IA and [LG]IP, the
Interconnection Customer may take actions or inactions with regard to
the [Generating] Facility or the [Interconnection Customer's]
Interconnection Facilities during an Emergency Condition in order to
(1) preserve public health and safety, (2) preserve the reliability of
the [Generating] Facility or the [Interconnection Customer's]
Interconnection Facilities, (3) limit or prevent damage, and (4)
expedite restoration of service.'' Central Maine requests that proposed
LGIA Article 13.6 be revised to require that an Interconnection
Customer exercise its rights in an Emergency Condition in accordance
with Good Utility Practice.
Commission Conclusion
612. We adopt NERC's proposed language in Final Rule Article 13.6
because it provides greater specificity concerning the Interconnection
Customer actions or inactions that may be taken during the course of an
Emergency Condition.
613. Article 14--Regulatory Requirements and Governing Law--
Proposed LGIA Article 14 described the regulatory requirements and
governing law for each Party's obligations under the LGIA.
614. Article 14.1--Regulatory Requirements & Article 14.2--
Governing Law and Applicable Tariffs--Article 14.1 of the NOPR LGIA
proposed that each Party's obligations shall be subject to its receipt
of any required approval or certificate from Governmental Authorities
in a form and substance satisfactory to the applying Party, or the
Party making any required filings with, or providing notice to, such
Governmental Authorities. Article 14.1 also stated that nothing in the
LGIA shall require an Interconnection Customer to take any action that
could result in its inability to obtain, or its loss of, status or
exemption under the Federal Power Act or the Public Utility Holding
Company Act of 1935, as amended. Article 14.2 of the NOPR LGIA provided
that the LGIA is governed by the laws of the state where the Point of
Interconnection is located, without regard to conflicts of state law
principles, and that the LGIA is subject to all Applicable Laws and
Regulations.
Comments
615. The Bureau of Reclamation states that it does not have
investors or shareholders, is not subject to the Commission's
jurisdiction under sections 205 or 206 of the Federal Power Act, and is
not subject to the jurisdiction of state public utility commissions.
The Bureau of Reclamation has sovereign immunity except to the extent
that immunity has been waived by Congress. It believes that proposed
LGIA Article 14.2 does not reflect that, as a federal agency, it must
comply with the Constitution of the United States and all applicable
laws. It states that this includes statutory and regulatory limitations
on its ability to submit disputes to arbitration. SoCal PPA requests
that Parties have the option of selecting the laws of a state other
than the state where the interconnection will occur as the governing
law for the LGIA.
Commission Conclusion
616. The Bureau of Reclamation and SoCal PPA argue that public
power entities cannot adopt Article 14 without variation. We will not
require these entities to adopt provisions that they are legally
forbidden to adopt in order to have their reciprocity tariffs approved.
As described more fully in the reciprocity discussion,\94\
nonjurisdictional entities with safe harbor status for their tariffs
may add the Final Rule LGIP and Final Rule LGIA if they wish to
continue to have safe harbor protection, but only need to provide
services they are ``capable'' of providing.\95\ We will consider the
legal restrictions on nonjurisdictional entities when we evaluate their
reciprocity compliance filings.
---------------------------------------------------------------------------
\94\ See Part II.C.7 (OATT Reciprocity Requirements Applied to
the Final Rule LGIP and Final Rule LGIA).
\95\ Order No. 888-A, FERC Stats. & Regs ] 31,048 at 30,286.
---------------------------------------------------------------------------
617. Article 15--Notices--Proposed LGIA Article 15 contained the
addresses at which the Transmission Provider and Interconnection
Customer will receive, among other things, notices, bills and payments.
No significant comments were submitted on this article. Accordingly,
the Commission adopts this article in the Final Rule as proposed.
618. Article 16--Force Majeure--A Force Majeure clause excuses
performance under a contract due to an event beyond a Party's control.
Article 16 of the NOPR LGIA proposed to adopt the Force Majeure
language of the OATT. It defined Force Majeure events as: ``[A]ny act
of God, labor disturbance, act of the public enemy, war, insurrection,
riot, fire, storm, or flood, explosion, breakage or accident to
machinery or equipment, any curtailment order, regulation or
restriction imposed by governmental military or lawfully established
civilian authorities, or any other cause beyond a Party's control * *
*.'' The NOPR provision would have required the Parties ``to make all
Reasonable Efforts'' to comply with their obligations and resolve the
Force Majeure condition.
Comments
619. Several commenters ask that the Commission establish a list of
non-Force Majeure events.\96\ More specifically, some commenters
believe that Article 16 should exclude economic hardship from the
definition of Force Majeure,\97\ while the Coalition for Contract Terms
and PSEG comment that the Commission should not treat ``removable or
remediable causes'' as Force Majeure.
---------------------------------------------------------------------------
\96\ E.g., The Coalition for Contract Terms, Monongahela Power,
PJMTO, and PSEG.
\97\ E.g., The Coalition for Contract Terms, Entergy, Mirant,
PJMTO, and PSEG.
---------------------------------------------------------------------------
620. Some commenters request that the Commission establish a formal
notice requirement that Parties must follow when claiming Force
Majeure.\98\ NYTO asks the Commission to require the Party claiming
Force Majeure to notify those affected of what steps the
[[Page 49897]]
Party is taking to remedy the Force Majeure condition. Dominion
Resources and Progress Energy request that the Commission clarify the
obligations and responsibilities of each Party during a Force Majeure
occurrence. Specifically, they ask the Commission to clarify how a
Party invokes the Force Majeure provision.
---------------------------------------------------------------------------
\98\ E.g., The Coalition for Contract Terms, Dominion Resources,
Mirant, Monongahela Power, and Progress Energy.
---------------------------------------------------------------------------
621. A number of commenters ask the Commission to clarify that the
Party claiming Force Majeure must return to complying with the LGIA as
soon as the Force Majeure event ends and that the other Party's
obligation to pay for services rendered is not suspended during the
Force Majeure event.\99\
---------------------------------------------------------------------------
\99\ E.g., The Coalition for Contract Terms, Exelon, PSEG, and
PJMTO.
---------------------------------------------------------------------------
622. PacifiCorp argues that the Force Majeure clause should cover
acts of negligence or intentional wrongdoing by someone other than the
claimant, while MidAmerican requests the opposite. Cinergy comments
that the NOPR does not define curtailment, and is concerned that this
term might unnecessarily broaden the definition of Force Majeure.
Commission Conclusion
623. We agree that the contracting Parties would benefit from
greater specificity in the Force Majeure provision, so the Final Rule
LGIA sets forth the procedural obligations and responsibilities of the
Parties during a Force Majeure event. We adopt a requirement that the
Party experiencing a Force Majeure event formally notify the other
Party and that it keep the other Party informed about its attempt to
remedy the situation. A Party shall exercise due diligence to remove
the disability with reasonable dispatch, and it will resume its duties
under the LGIA as soon as reasonably possible. For instance, a fire
that triggers a Force Majeure claim may be put out within hours, but it
may take the Party days or weeks to resume normal operation. The Party
would not be in Default of its obligations during that time. The Final
rule article also clarifies that the obligation to pay money when due
is not suspended by reason of Force Majeure.
624. We agree that it would be useful to identify economic hardship
as a non-Force Majeure event. Economic hardship is not considered an
event outside the control of the Party. However, it is unnecessary to
specify that a ``removable or remediable'' cause does not qualify as
Force Majeure event. Final Rule Article 16 defines a Force Majeure
event as one that is ``beyond a Party's control.''
625. NOPR Article 16.1 proposed to except from the list of Force
Majeure events acts of ``negligence or intentional wrongdoing.'' We
clarify in the Final Rule LGIA that acts of negligence or intentional
wrongdoing committed by an entity other than the Party claiming Force
Majeure would qualify for Force Majeure protection. This is an event
beyond a Party's reasonable control.
626. With respect to Cinergy's comments regarding use of the term
``curtailment,'' we conclude that while the curtailments imposed by
governmental military or lawfully established civilian authorities are
considered Force Majeure events under Section 10.1 of the OATT, it is
an inappropriate Force Majeure event in the Final Rule LGIA.
Curtailments to transmission service should not serve as the cause for
excusing performance under an interconnection contract. As a result,
the Commission omits curtailment from the definition of Force Majeure
in the Final Rule LGIA.
627. Article 17--Default--Proposed LGIA Article 17 defined Default
as the failure of either Party to perform any obligation in the time or
manner provided in this LGIA. No Default would exist as a result of
Force Majeure or an act or omission of the other Party. Article 17 also
described notice and cure procedures: the defaulting Party would have
30 Calendar Days from receipt of a Default notice to cure the Default;
or, if the Default cannot be cured within 30 Calendar Days, the
defaulting Party must begin the cure within 30 Calendar Days and must
complete the cure within 90 Calendar Days. NOPR Article 17.1.2 provided
the non-defaulting Party with the right to terminate the LGIA and
recover damages if a Default is not cured, or is not capable of being
cured, within the time provided in Article 17.1.1.
Comments
628. Calpine is concerned that not all Defaults are capable of
being cured within 90 Calendar Days, especially if they involve the
purchase, modification or installation of equipment. It therefore
argues that it is sufficient to require that the cure begin in 30
Calendar Days, and that the defaulting Party ``continuously and
diligently complete such cure,'' as required under Article 17.1.1.
Commission Conclusion
629. The Commission declines to adopt Calpine's proposed change.
The non-defaulting Party needs to be protected from lengthy Defaults by
having the right to terminate, even if the Default cannot be cured
within 90 Calendar Days through diligent action by the defaulting
Party. The LGIA does not prevent the Parties from agreeing to an
extension of the time permitted to cure a Default. Calpine's proposal
would provide the non-defaulting Party with too little protection.
630. Article 18--Indemnity--Indemnification is defined as
compensating another for a loss suffered due to a third party's act or
Default.\100\ In the NOPR, we proposed that the LGIA incorporate the
indemnity provision currently found in the OATT. Thus, the
indemnification provision in NOPR LGIA Section 18.1 would indemnify the
Transmission Provider and Interconnection Customer for legal costs due
to claims by third persons arising from performance of the Transmission
Provider's or Interconnection Customer's obligations under the LGIA on
behalf of the other contracting Party, and would not explicitly allow
indemnification for disputes arising over enforcement of this
provision. The Commission sought comments on this approach and the
relative merits of the alternative provisions in the Consensus LGIA and
ERCOT interconnection agreement. The Consensus LGIA does not extend
indemnity protection to cases of ordinary negligence or willful
misconduct, and the ERCOT provision does not extend indemnity
protection to cases of gross negligence or intentional wrongdoing.
Additionally, the Consensus LGIA, unlike the ERCOT interconnection
agreement, sets forth detailed procedures for pursuing an indemnity
claim and makes the recovery of legal costs available as part of an
indemnity claim.
---------------------------------------------------------------------------
\100\ Black's Law Dictionary 772 (7th ed. 1999).
---------------------------------------------------------------------------
Comments
631. Commenters generally support the inclusion of an
indemnification provision, but ask that the Final Rule cover other
charges, such as attorneys' fees, and explain the process for invoking
this protection.\101\ Several commenters, including Duke Energy,
Monongahela Power, PacifiCorp, and Sempra, point out a typographical
error that would have excepted negligence or intentional wrongdoing by
the indemnifying Party rather than the indemnified Party. Some
commenters recommend extending the protection to ordinary negligence by
the Transmission Provider, but denying
[[Page 49898]]
protection for gross negligence.\102\ NYTO and Cinergy request that the
provision cover an Interconnection Customer's performance of
construction activities. PSEG requests that the provision be revised to
offer specific limitations on the damages provision and a provision
limiting liability arising from an emergency. El Paso requests that the
Final rule specifically indemnify the Transmission Provider from
penalties incurred due to the actions or inactions of the
Interconnection Customer.
---------------------------------------------------------------------------
\101\ E.g., Central Maine, Dominion Resources, Exelon,
Monongahela Power, NYTO, and Progress Energy.
\102\ E.g., Central Maine, the Coalition for Contract Terms,
Midwest ISO TO, PSEG, Salt River Project, and Southern.
---------------------------------------------------------------------------
632. PJMTO argues that the OATT provision does not contain enough
specific provisions and inadequately constrains the potential financial
risk to each Party. Specifically, it argues that the provision should
limit damages and set forth the proper standard for assessing liability
(i.e., gross negligence and willful misconduct). It also expresses
concern that lending institutions would shy away from investing in new
generation without liability limits.
633. Southern proposes to require that each Party indemnify and
hold the other Party harmless from any liability resulting from
activities on the indemnifying Party's own side of the Point of Change
of Ownership, except in cases of gross negligence or intentional
misconduct. Each Party should also indemnify the other Party for
failure to adhere to operating requirements and Breaches of the LGIA.
SoCal PPA notes that it applies a more stringent ``willful action''
standard. It warns that if the Commission retains the proposed
standard, a Transmission Owner will have to procure insurance to cover
this exposure, for which the Interconnection Customer should pay.
634. NYTO takes issue with the provision's bilateral effect,
arguing that a Transmission Owner should not have to indemnify an
Interconnection Customer, since the Interconnection Customer requests
interconnection for its own benefit. Similarly, NYISO argues that the
provision should protect the active Parties to an agreement, here the
Transmission Owner or ISO, but not the Interconnection Customer.
635. Salt River Project notes that it is unclear whether the
Commission intends to preempt the appropriate tribunal's consideration
of whether liability should attach for injuries to third parties.\103\
It also argues that compliance with an Interconnection Customer's
request should not be required if it will result in violation of
statutory restrictions, bond covenants, creditor agreements or private
use restrictions.
---------------------------------------------------------------------------
\103\ Citing Avista Corp., 96 FERC ] 61,058 at 61,181 (2002).
---------------------------------------------------------------------------
Commission Conclusion
636. We are amending the proposed indemnity standard to match the
customary legal standard of conduct and better address the potential
for liability. Because risk exposure can increase interconnection
costs, we are revising the indemnity standard to provide protection for
acts of ordinary negligence, but not for acts of gross negligence or
intentional wrongdoing. Similarly, commenters have convinced us that
interconnection presents a greater risk of liability than exists for
the provision of transmission service and that, therefore, the OATT
indemnity provision is not suitable in the interconnection context.
While several commenters request a dollar limit on liability, we
conclude that the tightened standards serve as an acceptable limit on
liability and that a monetary limitation on damages is not necessary to
adequately protect the Parties.
637. Because construction of Interconnection Facilities may expose
both a Transmission Provider and an Interconnection Customer to
liability for acts taken on the other Party's behalf, we are retaining
the bilateral nature of the provision. In response to the concern of
some commenters, the indemnity provision of the Final Rule also
describes the process for pursuing and securing indemnity from claims
in more detail. Additionally, the Final Rule LGIA gives an indemnified
Party the right to collect the legal costs of defending an
indemnification claim if the indemnifying Party fails to adequately
defend the claim on its own. We also adopt El Paso's proposal that
indemnification be available because of action or inaction by the
Interconnection Customer, and modify the provision accordingly.
638. In response to NYTO's request that the provision cover an
Interconnection Customer's construction activities, the Final Rule
provision covers construction activities as well as all other
activities performed on behalf of the other Party. Where an
Interconnection Customer constructs the Transmission Provider's
Interconnection Facilities and Stand Alone Network Upgrades under the
Option to Build in Final Rule LGIA Article 5.1, a Transmission Provider
will be protected by the indemnification clause that appears in that
article. Indemnification applies to all work, regardless of the side of
the Point of Interconnection on which the work occurs.
639. With regard to cost allocation, we clarify that each Party is
responsible for paying its own insurance. This is equitable and helps
keep the costs of interconnection low, which should encourage the
construction of new generation resources. Additionally, we are
eliminating indemnification for gross negligence or intentional
wrongdoing, which will also reduce the Parties' risk exposure and cost
of insurance.
640. It is not our intent to preempt the ``appropriate tribunal's''
assignment of liability for injuries to third parties, as proposed by
Salt River Project. The indemnification provision is a common
contractual risk-sharing provision and does not strip any court or
other tribunal of jurisdiction. To the extent that this provision would
cause a specific Transmission Provider to violate statutory or other
restrictions, the issue should be raised on compliance in a filing
explaining the special circumstances.
641. Article 19--Assignment--Proposed LGIA Article 19 provided the
conditions for assigning the LGIA to another entity. It stated that any
assignment under the LGIA shall not relieve a Party of its obligations,
nor shall a Party's obligations be expanded.
642. Article 19.1--Assignment--Article 19.1 of the NOPR LGIA stated
that written consent ordinarily would be required to assign the LGIA,
but assignment may be secured without consent if the assignee is an
Affiliate that meets certain qualifications. Article 19 also provided
that no consent would be required if an Interconnection Customer
assigns the LGIA for collateral security purposes to aid in financing.
Comments
643. The Bureau of Reclamation argues that there are limitations on
its ability to comply with Article 19.1. It does not typically allow
assignments without approval by both entities and assurance that
assigns and successors are bound by the original terms of the
interconnection agreement. It states that there are standard articles
that it would be required to include that are not contained in the
NOPR, such as ``Officials Not to Benefit,'' ``Use of Convict Labor,''
``Prompt Payment Provisions,'' and ``Tort Claims.''
Commission Conclusion
644. The Bureau of Reclamation's concerns are addressed in the
reciprocity discussion at Article 14.1 (Regulatory Requirements) and
Article
[[Page 49899]]
14.2 (Governing Law and Applicable Tariffs).
645. Article 20--Severability--Article 20 of the NOPR LGIA
explained that if a court or Governmental Authority determines that any
provision of the LGIA is invalid, void, or unenforceable, such
determination would not invalidate any other provision in the LGIA. No
significant comments were submitted on this article. Accordingly, the
Commission adopts this article in the Final Rule LGIA as proposed.
646. Article 21--Comparability--Article 21 of the NOPR LGIA would
have required that the Parties comply with all applicable comparability
requirements and code of conduct laws, rules and regulations. No
significant comments were submitted on this article. Accordingly, the
Commission adopts this article in the Final Rule LGIA as proposed.
647. Article 22--Confidentiality--Article 22 of the NOPR LGIA
described what constitutes Confidential Information and the protection
proposed for such information when shared between Parties. It set forth
proposed procedures for the release of Confidential Information and
guidelines regarding how Confidential Information should be treated
when it is subject to a request from the Commission as part of an
investigation. The information of both Parties is protected by this
article as long as the information is identified as Confidential
Information in accordance with the article.
Comments
648. Cal ISO argues that an RTO or ISO should have access to
operational, performance and maintenance data.
649. The Bureau of Reclamation argues that it may not be able to
conform to the proposed confidentiality provisions because it must
adhere to the Freedom of Information Act (FOIA) \104\ when addressing
confidentiality. It further explains that FOIA requires federal
agencies to release most documents in their possession upon request,
except to the extent their contents meet certain exceptions. The Bureau
of Reclamation also notes that Article 22 should be revised to reflect
security concerns raised by the release of information.
---------------------------------------------------------------------------
\104\ 5 U.S.C. 552(a) (2000).
---------------------------------------------------------------------------
Commission Conclusion
650. In the Final Rule, the Commission adopts NOPR Article 22, with
minor modifications, as described below.
651. In response to Cal ISO, the Final Rule allows an RTO or ISO to
have access to certain data. Final Rule Article 22.1.11 permits a
Transmission Provider to make available information ``necessary to
fulfill its obligations * * * as a transmission service provider or a
Control Area operator including disclosing the Confidential Information
to the RTO/ISO.'' A Transmission Provider that is obliged to disclose
information to an RTO or ISO must notify the other Party in writing,
assert confidentiality, and cooperate in seeking to protect the
Confidential Information from public disclosure ``by confidentiality
agreement, protective order or other reasonable measures.'' Thus a
Transmission Provider may make available any required operational,
performance or maintenance data as long as it maintains the
confidentiality of the requested Confidential Information.
652. Regarding the Bureau of Reclamation's argument about its
obligations under FOIA, the Commission recognizes that Parties may be
subject to statutory or regulatory information restrictions, some of
which may address security concerns. If state or federal laws indeed
conflict with the Final Rule's confidentiality and information sharing
provisions, the Commission expects that public utilities will make
conforming changes to these provisions in their compliance filings and
explain the statutory basis for such changes. This also applies to non-
public utilities that plan to amend their safe harbor tariffs with a
conforming Final Rule LGIP and Final Rule LGIA.
653. The Commission is also making several minor changes to NOPR
LGIA Article 22.1.10 that addresses disclosure to the Commission or its
staff. A Party must provide requested information to the Commission or
its staff, even when the Party otherwise would be required by the LGIA
to maintain this information in confidence. The Party receiving the
request must ask the Commission to treat this information as
confidential and non-public, consistent with Section 388.112 of the
Commission's Regulations.\105\ A Party must notify the other Party when
it learns that the Commission has received a request that such
information be made public pursuant to Section 388.112. Commission
policy prohibits a contracting Party from revealing to a counter-Party
that it has received a request for information from the Commission,
when such request is made pursuant to an investigation or
otherwise.\106\ The Commission likewise prohibits a Party from
notifying the other Party prior to the release of the Confidential
Information to the Commission or its staff.\107\
---------------------------------------------------------------------------
\105\ 18 CFR 388.112 (2003).
\106\ American Electric Power Service Corp., 99 FERC ] 61,312 at
PP 22-24 (2002).
\107\ Id.
---------------------------------------------------------------------------
654. The Commission is also revising Article 22.1.10 in the Final
Rule LGIA to clarify that the Party receiving the request from the
Commission or its staff will not contact the other Party before
releasing the Confidential Information. In addition, because requests
for information may be made under the investigation rules in Section
1b.20 of the Commission's Regulations, the Final Rule article includes
this reference.
655. Article 23--Environmental Releases--Proposed LGIA Article 23
described the procedures that would be required for notifying the other
Party of the release or remediation of Hazardous Substances. No
significant comments were submitted on this article. Accordingly, the
Commission adopts this article in the Final Rule as proposed.
656. Article 24--Information Requirements--Proposed LGIA Article 24
described the proposed requirements for sharing information regarding
the electrical characteristics of the Parties' respective facilities,
including monthly status reports on construction and installation of
the Transmission Provider's Interconnection Facilities and Network
Upgrades.
657. Article 24.4--Information Supplementation--Proposed LGIA
Article 24.4 required the Parties, before the Commercial Operation Date
of the Interconnection Customer's Generating Facility, to provide
either updated test and other technical information or written
confirmation that the new technical data and the originally submitted
data are consistent. It also describes the types of voltage tests that
would be conducted by the Interconnection Customer and the type of
recordings it is required to provide to the Transmission Provider. It
provides that when there are multiple units at a Generating Facility,
the Interconnection Customer would be required to provide recordings
for only one generating unit if the other units have identical design
and response characteristics.
Comments
658. NERC recommends that Article 24.4 be revised to require that
tests conducted on the Generating Facility be consistent with Good
Utility Practice. It also recommends requiring the Interconnection
Customer to provide the Generating Facility's characteristics based on
validated test recordings, as opposed to raw test data. It asks that
the
[[Page 49900]]
Commission not permit the test results for one generating unit to be
allowed to represent the characteristics of all generating units, if
there is more than one unit at the Generating Facility with the same
design characteristics. NERC believes that it is necessary to verify
modeling characteristics of each generating unit for system planning
purposes and to verify the operational capabilities of each generating
unit for operations purposes. NERC states that the electrical
characteristics of each Generating Facility are unique.
Commission Conclusion
659. We concur with NERC's position and adopts its recommended
revisions.
660. Article 25--Information Access and Audit Rights--Proposed LGIA
Article 25 required that each Party make information available to the
other Party necessary to verify costs for which the other Party is
responsible under this LGIA and to carry out its obligations and
responsibilities under the LGIA. No significant comments were submitted
on this article. Accordingly, the Commission adopts this article in the
Final Rule as proposed.
661. Article 26--Subcontractors--Proposed LGIA Article 26 provided
that the Parties would be able to use subcontractors to perform
obligations under the LGIA if the subcontractors comply with the
applicable terms and conditions of the LGIA and each Party remains
liable to the other for the subcontractor's performance. The hiring
Party would retain all of its obligations under this article. No
significant comments were submitted on this article. Accordingly, the
Commission adopts this article in the Final Rule as proposed.
662. Article 27--Disputes--Proposed LGIA Article 27 explained the
Dispute Resolution and arbitration procedures that would apply to the
LGIA. No significant comments were submitted on this article.
Accordingly, the Commission adopts this article in the Final Rule as
proposed with one change to emphasize that Parties should consider
using informal dispute resolution as well as more formal options.
663. Article 28--Representations, Warranties and Covenants--
Proposed LGIA Article 28 would have required that each Party be
organized and qualified to do business in the relevant jurisdiction.
Each Party would be required to have the authority to enter into this
LGIA, and performance of its duties would not conflict with
organizational or formation documents. No significant comments were
submitted on this article. Accordingly, the Commission adopts this
article in the Final Rule as proposed.
664. Article 29--Joint Operating Committee (in the NOPR: Operating
Committee)--Proposed LGIA Article 29 provided that the Transmission
Provider shall set up: (1) An Operating Committee made up of a member
from the Interconnection Customer and a member from the Transmission
Provider, and (2) a Joint Operating Committee made up of members of all
of its Operating Committees, in order to coordinate operating and
technical considerations of Interconnection Service. The Operating
Committee would meet when necessary, but not less than once each
calendar year. The duties of the Operating Committee would include,
among other things, establishing and maintaining control and operating
procedures, data requirements and operating record requirements,
reviewing outage forecasts, and coordinating outage schedules.
Comments
665. Avista and FirstEnergy oppose this requirement as unduly
burdensome and unnecessary because it will impose additional costs on
them. Moreover, some of the tasks envisioned for the Operating
Committee are being performed either by NERC or an Applicable
Reliability Council. For example, Avista argues that NERC is
responsible for establishing standards for operating and control
procedures for generators. Dynegy, on the other hand, would keep the
Operating Committee and proposes some minor changes to the proposed
language of this provision.
666. PJM and Cal ISO argue that ISOs should be exempt from this
requirement because they already perform the tasks envisioned for
Operating Committee in the normal course of their business.
Commission Conclusion
667. The Final Rule LGIA eliminates the requirement that the
Transmission Provider constitute an Operating Committee for each
Interconnection Customer. However, we are requiring a Joint Operating
Committee because it provides Interconnection Customers and
Transmission Providers a forum in which to discuss and coordinate
operating and technical considerations of Interconnection Service. We
are revising Final Rule LGIA to eliminate tasks that are already being
performed by NERC, thereby responding to Avista's concern.
668. Finally, we agree with PJM and Cal ISO's proposal that the
Final Rule article exempt an RTO or ISO from this requirement because
an RTO or ISO performs Joint Operating Committee-type functions in
their normal course of business.
669. Article 30--Miscellaneous--Proposed LGIA Article 30 addressed
matters such as rules of interpretation, a prohibition on third party
beneficiaries, and the right to amend the LGIA by mutual agreement. No
significant comments were submitted on this article. Accordingly, the
Commission adopts this article in the Final Rule as proposed.
670. Article 30.11--Reservation of Rights--Proposed Article 30.11
would have reserved to each Party their rights to unilaterally seek
modification to the LGIA pursuant to sections 205 and 206 of the FPA,
except as restricted by the other provisions of the executed LGIA.
Comments
671. Dynegy and Mirant note that this clause is redundant because
another Reservation of Rights provision appears in Proposed Article
2.7.
Commission Conclusion
672. The Commission deletes proposed Article 2.7, and modifies
proposed Article 30.11 in this Final Rule. As proposed, Article 30.11
contains a redundancy. The Commission deletes the second paragraph of
this Article, because it repeats the reservation of rights set forth in
the first paragraph of the Article.
673. Appendices--The NOPR LGIA contained appendices for
Interconnection Facilities and Network Upgrades, time schedule,
interconnection details, standard LGIA, security arrangement details,
Commercial Operation Date, and interconnection guidelines. The
Commission adopts these appendices in the Final Rule LGIA, with the
exception of Appendix G (Interconnection Guidelines) since the Final
Rule LGIA captures the provisions of that Appendix elsewhere.
C. Other Significant Policy Issues
674. A number of issues such as interconnection pricing policy,
permitted variations in the terms of the Final Rule for independent
transmission entities, and legal issues such as consequential damages
and liquidated damages transcend individual sections in the Final Rule
LGIP or articles in the Final Rule LGIA. Accordingly, they are
addressed in the individual discussions that follow.
1. Interconnection Pricing Policy
675. In the NOPR, the Commission proposed to adopt its existing
interconnection pricing policy for a
[[Page 49901]]
Transmission Provider that is not independent of market participants,
and invited comments on whether it should depart from this policy for a
Transmission Provider that is independent.
676. Since the NOPR was written to reflect the Commission's current
pricing policy, NOPR LGIA Article 11 proposed that the Interconnection
Customer be solely responsible for the costs of Interconnection
Facilities, which are defined as all facilities and equipment between
the Generating Facility and the Point of Interconnection with the
Transmission System. Network Upgrades, which are defined as all
facilities and equipment constructed at or beyond the Point of
Interconnection for the purpose of accommodating the new Generating
Facility,\108\ would be funded initially by the Interconnection
Customer unless the Transmission Provider elects to fund them. The
Interconnection Customer would then be entitled to a cash equivalent
refund (i.e., credit) equal to the total amount paid for the Network
Upgrades, including any tax gross-up or other tax-related payments. The
refund would be paid to the Interconnection Customer on a dollar-for-
dollar basis, as credits against the Interconnection Customer's
payments for transmission services, with the full amount to be
refunded, with interest calculated in accordance with 18 CFR
35.19a(a)(2)(ii), within five years of the date the Network Upgrades
are placed in service, so long as the Transmission Provider continues
to receive payments for transmission service with respect to the
Generating Facility during this period. The NOPR proposed that the
Interconnection Customer may assign its refund rights to any person.
---------------------------------------------------------------------------
\108\ The proposed definition also states that the ``facilities
and equipment are used by and benefit all users of the transmission
grid, without distinction or regard as to the purpose of the upgrade
(e.g., to relieve overloads, to remedy stability and short circuit
problems, to maintain reliability, or to provide protection and
service restoration) including the fact that these facilities and
equipment are being replaced or upgraded to accommodate the
interconnection request.''
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677. Also, in the NOPR, the Commission asked for comments on
appropriate interconnection pricing consistent with the use of the
locational marginal pricing methodology. This method was proposed in
the Standard Market Design proceeding that the Commission had
previously announced.\109\ The Commission noted that in a region that
uses locational pricing, the RTO or ISO usually assigns to the
Interconnection Customer the cost of any new network facilities that
would not be in its transmission expansion plan but for the
interconnecting Generating Facility. The Interconnection Customer then
typically receives transmission rights in return for the capacity that
is created. The Commission explained that this pricing method has been
allowed only in regions where the Transmission Provider is independent
of market participants, because certain aspects of this method can be
subjective. These subjective aspects include the determination of
congestion prices, rules for deciding which Interconnection Customer in
the queue should be responsible for which facilities, the cost of the
facilities, and the assumptions underlying the power flow analysis
needed for system impact and facilities studies. The Commission noted
that a Transmission Provider that is not an independent entity would
have the ability and the incentive to exploit this subjectivity to its
own or its affiliates advantage if it is able to allocate the costs of
Network Upgrades between the Interconnection Customer and other
transmission customers, where the Transmission Provider may be the
principal other customer. The Commission invited comments on whether it
should accept an approach that departs from the current Commission
policy of providing transmission credits, and stated its willingness to
consider alternative proposals as long as the cost causation
determinations are made on an objective and non-discriminatory basis by
an independent entity such as an RTO.
---------------------------------------------------------------------------
\109\ Remedying Undue Discrimination Through Open Access
Transmission Service and Standard Electricity Market Design, Notice
of Proposed Rulemaking, 67 FR 55542 (Aug. 29, 2002), FERC Stats. &
Regs. ] 32,563 (2002).
---------------------------------------------------------------------------
678. The Commission has traditionally favored a ``rolled-in''
transmission pricing policy of the type that formed the basis for the
pricing proposal in the Interconnection NOPR. However, such a policy
may limit economic expansions that would remove congestion and allow
customers to reach more distant power supplies. This may occur at least
in part because state siting authorities may have little interest in
siting a transmission facility that benefits mainly a particular
Interconnection Customer or customers in another state if doing so
would require the retail sales customers on the constructing public
utility's system to pay for the new facilities.
679. The Standard Market Design NOPR proposed that a policy of
participant funding, where those who benefit from a particular project
pay for it, may help to solve this problem. The Commission then
reiterated its concern that certain functions that the Transmission
Provider must perform to implement participant funding can be
subjective. Also in this docket, the Commission encouraged the
formation of Regional State Committees, which would allow states to
work together to identify beneficiaries of expansion projects and make
recommendations on pricing proposals and cost recovery that may include
rolling in, assignment to beneficiaries, or some combination of the
two.
680. Finally, the Commission also addressed in the NOPR the
question of the appropriate rate treatment for the cost of
Interconnection Facilities that the Transmission Provider constructs
for its own Generating Facilities. The Commission noted that, in
Southern Company Services, Inc. (Southern), the company proposed to
continue to treat the cost of Interconnection Facilities for its own
Generating Facilities as part of the network while directly assigning
the cost of the same type of facilities to its competitors' Generating
Facilities. Southern raised the issue of how to ensure consistency
between interconnection and transmission pricing. Recognizing the need
to address this issue on a generic basis, the Commission made Southern
subject to the outcome of this rulemaking. The Commission proposed in
the NOPR to require all transmission rates to be designed in a manner
that is consistent with whatever interconnection pricing policy is
approved in the Final Rule. Thus, the Commission proposed that, to the
extent its current interconnection pricing policy is adopted, each
Transmission Provider must remove from its transmission rates the costs
of all Interconnection Facilities, not just generator step-up
transformers, constructed for the Transmission Provider's own
Generating Facilities. The Commission proposed that the costs of these
sole use facilities be directly assigned as generation-related costs.
The Commission explained that this would be consistent with its current
pricing of generator step-up transformers, and it would send a more
accurate price signal by assigning the cost of Interconnection
Facilities to the generation customers using them.
Comments
681. A large number of commenters argue that the Commission's
proposed crediting policy provides an undesirable subsidy to the
Interconnection Customer and thereby creates incentives for the
Interconnection Customer to make poor siting and investment decisions.
Many commenters express concerns about the relationship between this
policy and the Commission's Standard Market Design
[[Page 49902]]
proposal, and several provide recommendations on how the two rules
could be made compatible. In addition, many commenters object to
specific features of the proposed crediting policy. For example,
several transmission owners cite problems (e.g., regulatory lag, retail
rate freezes) related to their ability to recover in transmission rates
the costs of interconnections, including the credits that they pay to
an Interconnection Customer. Many commenters object to the five year
``sunset'' date for refunding all amounts paid by the Interconnection
Customer. They are concerned that transmission customers could be left
with the financial burden and no offsetting benefits if the
Interconnection Customer's Generating Facility ceases to operate. Some
commenters argue that the Interconnection Customer's receipt of credits
should not be limited to those occasions when the Interconnection
Customer takes transmission service with respect to the output of the
Generating Facility. Others argue that the payment of interest on
unpaid credits is not appropriate or that the rate prescribed is either
too high or too low.
682. The following is a summary of the comments received, organized
according to the issues addressed. After each issue summary, the
Commission presents its conclusions for that issue.\110\
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\110\ Issues regarding the pricing of Network Resource
Interconnection Service are addressed in part II.C.2
(Interconnection Products and Scope of Service).
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Concerns About the Fairness and Efficiency of the Commission's
Crediting Policy
683. Transmission Owners, such as Entergy, and others argue that
the Commission's current crediting policy requires all transmission
customers to subsidize the cost of facilities that would be unnecessary
``but for'' a particular Interconnection Customer's Generating Facility
and that provide no benefits to the other transmission customers on the
Transmission System. They also argue that this policy encourages
inefficient siting decisions because the Interconnection Customer has
no incentive to consider the full impact of its decision regarding
where to locate its Generating Facility on the Transmission System.
They claim that, when selecting a site, an Interconnection Customer
will pay more attention to fuel supply and water availability than to
its impact on the Transmission System.
684. The Alabama PSC argues that a pricing policy that spreads the
costs of all interconnection-related facilities situated ``at and
beyond'' the Point of Interconnection to all transmission customers
results in a subsidy to the Interconnection Customer, causes
inefficiencies in siting, and is inconsistent with longstanding cost
causation principles. The Coalition for Pricing claims that the policy
of assigning cost responsibility simply based on the physical location
of the facilities (i.e., relative to the Point of Interconnection) is
contrary to the Commission's ``system-wide benefit test'' and violates
the Energy Policy Act of 1992. It argues that certain facilities
installed at and beyond the Point of Interconnection may not provide a
system-wide benefit and, as such, should be directly assigned to the
Interconnection Customer. Entergy argues that grave consequences can be
avoided through the interim use of the system-wide benefit test, and
the assignment of costs to those who benefit, prior to the
establishment of participant funded expansion regimes in RTOs.
685. PSEG notes that in PJM the cost of any Network Upgrades that
would not be required ``but for'' the interconnection of a Generating
Facility to the Transmission System is assigned to the Interconnection
Customer, and the Interconnection Customer receives financial
transmission rights associated with the Network Upgrades that it pays
for. PJM and others argue that an established RTO or ISO should be
allowed to continue to use this policy, as the NOPR proposes. PJM
states that its experience under its interconnection rules confirms
that such pricing promotes economic efficiency including efficient use
of the Transmission System. However, KeySpan cautions that the ``but
for'' test can become meaningless if a fictitious transmission planning
study can be used to identify the Transmission System needs required to
meet load growth. It states that the independence of the Transmission
Provider completing the study is the key to this process.
686. The Maine PUC contends that the Commission's reasoning for
refusing to socialize system expansion costs in the natural gas
pipeline context applies with equal force in the generator
interconnection context. It states that, just as subsidization of gas
pipeline expansion costs could lead to non-optimal or unnecessary
capacity expansion, so too will subsidization of Network Upgrades
associated with new generation projects. The Maine PUC also states
that, just as rolled-in pricing gives an existing gas pipeline an
unfair economic advantage over potential new entrants, subsidization of
Network Upgrades for Generating Facility interconnections could
interfere with price signals for alternatives to traditional congestion
solutions, such as load response from customers or merchant
transmission.
687. Many other commenters, including state commissions, are
especially concerned about an Interconnection Customer that intends to
sell its output off-system or out of state. These commenters claim that
the current policy requires transmission customers of the local
Transmission Provider to subsidize the cost of Network Upgrades that
would, in the latter case, provide them with no benefits. NRECA-APPA
recommends that, without a commitment by the Interconnection Customer
to serve power customers within the Transmission Provider's footprint,
the Commission should require the Interconnection Customer to pay for
the Network Upgrades. Some commenters, such as the Midwest ISO, further
claim that the law in some states may not allow Network Upgrade costs
to be rolled into the base rates of the local customers that are not
the beneficiaries of the upgrades.
688. Other commenters, including EPSA, voice strong support for the
crediting approach. EPSA states that the crediting mechanism works well
at this time and should not be adjusted until the Commission has put in
place a specific market design that would require such an adjustment.
American Transmission and SoCal Edison also support the crediting
approach. Indeed, American Transmission supports the crediting approach
even if the Transmission Provider is an independent entity. American
Transmission states that it discounts the argument advanced by critics
of this policy that the Interconnection Customer must receive stronger
price signals through direct assignment of the costs of Network
Upgrades to bring about efficient location of new generation. It
believes that requiring participant funding for Network Upgrades is
akin to moving backward to the vertically integrated industry structure
that existed prior to open access.
689. Cleco supports participant funding that would eliminate the
need for the costs of Network Upgrades being refunded through
transmission crediting. In the absence of such an approach, Cleco
recommends that an Interconnection Customer should be credited for only
half of the transmission service it has subscribed to for the first
five years. Under Cleco's
[[Page 49903]]
proposal, there would be no interest paid, and after five years no
additional payment to the Interconnection Customer would be made.
Western also recommends that the Commission adopt a method to recover
the costs of the Network Upgrades from the benefitting entities. It
believes that current transmission customers should be held harmless
from the cost impact of Network Upgrades that is not mitigated by
increased transmission usage and associated revenues.
690. The North Carolina Commission recommends that the Commission
modify its proposed rule to explicitly adopt the ``but for'' pricing
policy for interconnection and transmission service in those states
that have not yet unbundled retail electric service or implemented
retail competition.
691. Several commenters, including National Grid, propose that the
pricing issue can be resolved by analogy to the process of cost
allocation for public roads. According to this analogy, the
Interconnection Customer will have virtually sole use of the leads to
the substation, just like the homeowner has sole use of his or her
driveway. Thus, the cost of Interconnection Facilities, which are for
the sole use of the Interconnection Customer, should be the
responsibility of the Interconnection Customer. Next, the substation
facilities needed to connect the sole-use facilities of the
Interconnection Customer to the general delivery system are shared-use
facilities, much like a local street. National Grid states that the
cost of such facilities could be allocated partially to load and
partially to the new Interconnection Customer. It explains that Network
Upgrades that are remote from the Generating Facility typically allow
movement of aggregate generation to aggregate load. National Grid
contends that the benefits and use of such Network Upgrades are spread
much more broadly and, like the highway system, could be rolled in and
allocated to aggregate load within the market, or throughout an RTO if
one exists. Finally, it argues that it may be appropriate to maintain
an incremental charge for market-to-market transactions, but only where
Network Upgrades in one market are needed by another market.
692. Peabody asserts that the NOPR contains certain provisions that
are unjust and unreasonable as applied to large-scale base-load
generation projects, especially coal-based projects. It urges the
Commission to modify its interconnection pricing policy in such cases
to require the Transmission Provider to roll the costs of Network
Upgrades into its transmission rate base without requiring the
Interconnection Customer to fund the costs in advance.
Commission Conclusion
693. For Transmission Providers that are not independent entities,
the Commission will continue to apply its current interconnection
pricing policy, with certain revisions that are discussed below.
694. The Commission recognizes that its policy of requiring refunds
to be paid to an Interconnection Customer for the cost of Network
Upgrades constructed on its behalf is a controversial one. However, the
Commission instituted this policy to achieve a number of important
goals. First, consistent with the Commission's long-held policy of
prohibiting ``and'' pricing \111\ for transmission service, the
crediting policy ensures that the Interconnection Customer will not be
charged twice for the use of the Transmission System. The Commission
determined that it is appropriate for the Interconnection Customer to
pay initially the full cost of Interconnection Facilities and Network
Upgrades that would not be needed but for the interconnection, but once
the Generating Facility commences operation and delivery service
begins, it must receive transmission service credits for the cost of
the Network Upgrades. This ensures that the Interconnection Customer
will not ultimately have to pay both incremental costs and an average
embedded cost rate for the use of the Transmission System. Second, the
Commission's crediting policy helps to ensure that the Interconnection
Customer's interconnection is treated comparably to the
interconnections that a non-independent Transmission Provider completes
for its own Generating Facilities. The Transmission Provider has
traditionally rolled into its transmission rates the cost of Network
Upgrades required for its own interconnections, and the Commission's
crediting policy ensures that Network Upgrades constructed for others
are treated the same way. Finally, the policy is intended to enhance
competition in bulk power markets by promoting the construction of new
generation, particularly in areas where entry barriers due to unduly
discriminatory transmission practices may still be significant. The
policy is therefore consistent with the Commission's long-held view
that competitive wholesale markets provide the best means by which to
meet its statutory responsibility to assure adequate and reliable
supplies of electric energy at just and reasonable prices.\112\
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\111\ When a Transmission Provider must construct Network
Upgrades to provide new or expanded transmission service, the
Commission generally allows the Transmission Provider to charge the
higher of the embedded costs of the Transmission System with
expansion costs rolled in, or incremental expansion costs, but not
the sum of the two. Hence, ``and'' pricing is not permitted.
\112\ The Commission's crediting policy has also withstood
judicial review. In an opinion issued February 18, 2003, the DC
Circuit Court of Appeals affirmed Commission orders requiring a
Transmission Provider to provide credits to Interconnection
Customers for the cost of short-circuit and stability Network
Upgrades. Entergy Services, Inc. v. FERC, 319 F.3d 536 (DC Cir.
2003). The court stated that ``[t]he Commission's rationale for
crediting network upgrades, based on a less cramped view of what
constitutes a 'benefit,' reflects its policy determination that a
competitive transmission system, with barriers to entry removed or
reduced, is in the public interest.'' Id. at 543-44. The court
concluded that ``the Commission has reasonably explained that its
crediting pricing policy avoids both gold plating and less favorable
price signals such that the enlarged transmission system, which it
views as a public good, can function reliably and continue to
expand.'' Id. at 544.
---------------------------------------------------------------------------
695. While the Commission still finds these to be appropriate goals
for an interconnection pricing policy, the commenters that object to
the Commission's crediting policy make a number of valid points. Most
importantly, as many point out, providing transmission service credits
to an Interconnection Customer for the cost of Network Upgrades that
would not be needed but for the interconnection of the new Generating
Facility mutes somewhat the Interconnection Customer's incentive to
make an efficient siting decision that takes new transmission costs
into account, and it provides the Interconnection Customer with what
many view as an improper subsidy, particularly when the Interconnection
Customer chooses to sell its output off-system. In this regard, the
Commission believes that, under the right circumstances, a well-
designed and independently administered participant funding policy for
Network Upgrades offers the potential to provide more efficient price
signals and a more equitable allocation of costs than the crediting
approach. The Commission notes that the transmission pricing policies
that the Commission has permitted for an RTO or ISO with locational
pricing, in which the Interconnection Customer bears the cost of all
facilities and upgrades that would not be needed but for the
interconnection of the new Generating Facility and receives valuable
transmission rights in return, are acceptable forms of participant
funding.
696. However, the Commission remains concerned that, when the
Transmission Provider is not
[[Page 49904]]
independent and has an interest in frustrating rival generators, the
implementation of participant funding, including the ``but for''
pricing approach, creates opportunities for undue discrimination. As
the Commission stated in the NOPR, a number of aspects of the ``but
for'' approach are subjective, and a Transmission Provider that is not
an independent entity has the ability and the incentive to exploit this
subjectivity to its own advantage. For example, such a Transmission
Provider has an incentive to find that a disproportionate share of the
costs of expansions needed to serve its own power customers is
attributable to competing Interconnection Customers. The Commission
would find any policy that creates opportunities for such
discriminatory behavior to be unacceptable. Furthermore, none of the
commenters in this proceeding has convinced the Commission that, in the
absence of independence, it is possible to implement a ``but for''
pricing approach that avoids this inherent subjectivity. Therefore, the
Commission continues in this Final Rule its current policy, as modified
below, of requiring a Transmission Provider that is not an independent
entity to provide transmission credits for the cost of Network Upgrades
needed for a Generating Facility interconnection.
697. The Commission notes, however, that the current pricing policy
does not explicitly address instances where the Generating Facility
interconnects with a Transmission Provider's jurisdictional
distribution facility and, as a result, upgrades are needed on the
Distribution System to accommodate the interconnection. The Commission
clarifies here that, if any such interconnection is jurisdictional, the
cost of such upgrades must be directly assigned to the Interconnection
Customer. This is because an upgrade to the Distribution System
generally does not benefit all transmission customers. Distribution
facilities typically deliver electricity to particular localities, and
do not serve a bulk delivery service for the entire system as is the
case for transmission facilities. Accordingly, it is not appropriate
that all transmission customers share the cost of Distribution
Upgrades.
698. For a Transmission Provider, such as an RTO or ISO, that is an
independent entity, the Commission continues to allow flexibility
regarding the interconnection pricing policy that each independent
entity chooses to adopt, subject to Commission approval. We invite a
Regional State Committee to establish criteria that an independent
entity would use to determine which Transmission System upgrades,
including those required for generator interconnections, should be
participant funded and which should not.
699. The Commission will permit, for a period of transition to the
start of RTO or ISO operations, not to exceed a year, participant
funding to be used for Network Upgrades for generator interconnections
as soon as an independent administrator has been approved by the
Commission and the affected states. Allowing participant funding, i.e.,
direct assignment of the cost of Network Upgrades is reasonable, if an
independent administrator performs transmission planning and related
cost allocation, as a transitional approach that may be used in
anticipation of an RTO or ISO assuming operational control of the
regional transmission grid within a year.\113\ Based on the comments in
this interconnection rulemaking, we find this approach to be
appropriate here. Therefore, the Commission adopts this policy in this
Final Rule.
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\113\ See Cleco Power LLC, et al., 103 FERC ] 61,272 (2003);
Southern Company Services, Inc., 103 FERC ] 61,279 (2003), reh'g
pending.
---------------------------------------------------------------------------
700. However, the Commission wishes to emphasize that, by allowing
an independent Transmission Provider to adopt a pricing policy, such as
the ``but for'' approach, that differs from the crediting approach that
the Commission is requiring for non-independent entities, the
Commission is not abandoning the goals that the Commission has
established for interconnection pricing, as described above. First,
even though the ``but for'' approach allows the cost of certain Network
Upgrades to be assigned to the Interconnection Customer, it is not
``and'' pricing if, for example, the Interconnection Customer is
allowed to receive well-defined capacity rights that are created by the
upgrades. For example, PJM, which uses locational pricing, gives Firm
Transmission Rights (FTRs) and Capacity Interconnection Rights (CIRs)
to the Interconnection Customer in exchange for a ``but for'' cost
payment. These are rights that are created by the Network Upgrades for
which the Interconnection Customer pays, and they are well-defined,
long-term and tradeable. Moreover, the Commission concludes that, even
if the Interconnection Customer (or its power sales customer) is also
required to pay an embedded cost-based charge for transmission service,
this is not ``and'' pricing. This is because the Interconnection
Customer pays separate charges for separate services. It pays an access
charge for transmission service that may involve an obligation to pay
congestion charges, and in exchange for its ``but for'' payment, it
receives these well-defined capacity rights, which provide some
protection from having to actually pay the congestion charges.
701. Second, when the Transmission Provider is an independent
entity, the Commission is much less concerned that all generation
owners will not be treated comparably because independence ensures that
the Transmission Provider has no incentive to treat Interconnection
Customers differently.
702. Third, in this context, ``but for'' pricing is consistent with
the Commission's policy of promoting competitive wholesale markets
because it causes the Interconnection Customer to face the same
marginal cost price signal that it would face in an efficient,
competitive market. This means that, in a competitive market
environment, market forces could act freely to achieve the desirable
level of entry of new generating capacity.
703. Finally, participant funding of transmission upgrades may
provide the pricing framework needed to overcome the reluctance of
incumbent Transmission Owners in many parts of the country to build
transmission, with the result that badly needed transmission
infrastructure could be put in place quickly.
Interconnection Pricing and the Transition to Standard Market Design
704. Several commenters assert that certain proposed Standard
Market Design policies, such as locational marginal pricing, congestion
revenue rights, transmission expansion pricing, and transmission
planning, could affect interconnection pricing, but that the full
effect cannot be determined until the Standard Market Design Final Rule
is issued. Nevertheless, many of these commenters propose that, until
Standard Market Design is implemented, the Commission should continue
to require the Interconnection Customer to pay for Network Upgrades in
exchange for future transmission service credits. Duke Energy proposes
that after Standard Market Design is implemented, the crediting policy
could be replaced with one that provides the Interconnection Customer
with financial transmission rights in exchange for funding Network
Upgrades.
705. Exelon and Sithe recommend that, for the Transmission Provider
that is not yet part of an RTO, and for an RTO that has not yet
implemented LMP-based congestion pricing, the Commission continue its
current policy
[[Page 49905]]
of requiring the Transmission Provider to provide an Interconnection
Customer that funds Network Upgrades with credits against future
transmission service. As a transition plan, Exelon and Sithe recommend
that an Interconnection Customer that is receiving credits when
Standard Market Design is implemented be awarded financial transmission
rights in an amount based on the Interconnection Customer's remaining
credits as a proportion of its total credits. Some commenters, such as
Cleco Power and Monongahela Power, emphasize that a Transmission
Provider should not be required to provide both transmission credits
and congestion rights to the same Interconnection Customer. Mirant
believes that the two practices can coexist and that the
Interconnection Customer should have the option to elect either
transmission credits or the equivalent firm transmission rights as
comparable compensation for Network Upgrades.
706. Other commenters believe that attempting to resolve pricing
issues in this rulemaking presents significant problems. New York
Transmission Owners declares that the ``Commission's [Standard Market
Design and LMP] policies and this NOPR are regulatory ships traveling
in the night on a collision course, each completely unaware of the
other's existence.'' They propose that the Commission limit the
interconnection rulemaking to non-price issues. EPSA proposes that the
Commission need not resolve in this proceeding what, if any, changes in
the crediting mechanism might be necessary to implement Standard Market
Design and the formation of RTOs. Calpine submits that the transmission
credit policy should not be abandoned in the transition to Standard
Market Design. It states that relying on recovery of the costs of
Network Upgrades solely through assignment of FTRs under Standard
Market Design would ignore the network access aspect of Standard Market
Design and would not provide a practical means of recovering all costs
of Network Upgrades. Although a change in policy may be appropriate
after the Standard Market Design is in place, Calpine recommends that
such a change not be made in this proceeding.
Commission Conclusion
707. The timing and content of any Final Rule in the Standard
Market Design proceeding will not be determined in this proceeding. In
the meantime, it is important to include interconnection pricing rules
in this Final Rule, based on the record of this proceeding.
The Inability of a Transmission Owner To Recover the Costs of Network
Upgrades
708. A number of Transmission Owners express concern that they may
not be able to recover in a timely fashion the costs that they will
incur under the proposed pricing policy. Monongahela Power states that
a Transmission Owner faces three problems in this regard. First, it
notes that a Transmission Owner faces the expense, delay, and
uncertainty of a full transmission rate case before the Commission to
roll in the costs of system upgrades associated with new generation
projects. Second, it claims that even if the Commission grants full
cost recovery, costs may be ``trapped'' by an inability to pass them
through to the majority of customers due to a state retail rate freeze.
Third, a Transmission Owner may face lost revenues associated with a
new generating project once transmission service begins because of the
requirement to provide a financial credit to the Interconnection
Customer. Monongahela Power asks that the Commission permit a
Transmission Owner to make a limited Section 205 filing for the
immediate roll in of these costs, and that it work with the States to
accommodate the flow-through of these costs to retail customers. At a
minimum, both Monongahela Power and Dominion Resources ask that the
Commission provide for deferred accounting treatment with assurances of
future cost recovery when the Transmission Owner must record a
transmission revenue credit with no income to offset it.
Commission Conclusion
709. The Commission concludes that it is not necessary to provide
for the Transmission Provider to make a limited Section 205 filing as
proposed by Monongahela Power for the immediate roll in of the costs it
will incur under the crediting policy. In the ordinary course of
business, a public utility frequently incurs costs for which it has no
immediate revenue offset, just as it routinely experiences revenue
increases that are not accompanied by commensurate increases in costs.
When a public utility believes that its revenues are not adequate, it
is permitted by Section 205 of the FPA to make a rate filing. The
commenters have provided no evidence to convince the Commission that
the burden created by its crediting policy is so great that the
Commission should change its regulations to permit a limited Section
205 transmission rate filing that addresses only credit-related cost
increases, or deferred accounting treatment for transmission credits,
as sought by Monongahela Power and Dominion Resources.
Responsibility for Line Outage Costs Resulting From Interconnection
710. The NOPR did not address the allocation of costs that may be
incurred when a transmission line must be taken off-line in order to
complete an interconnection. In an order issued November 20, 2001,\114\
however, the Commission stated that it would consider in this
rulemaking the question of who should bear these costs.
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\114\ American Electric Power Service Corporation, 97 FERC ]
61,200 (2001) (AEP).
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711. Commenters express a variety of views on this issue. The
Coalition for Pricing states that these costs should be a component of
the costs paid by generators for interconnection service under the
Final Rule IA. It asserts that any other policy would result in all
transmission customers unfairly subsidizing Generating Facility
interconnections. The Coalition for Pricing proposes that the Parties
to individual interconnection agreements be allowed to agree on the
specific line outage costs for which the Interconnection Customer
should be responsible. The Coalition for Pricing argues that, since the
Parties' agreement would necessarily be filed with the Commission, it
would retain its regulatory control over line outage cost allocations.
However, Reliant states that the Commission has had a policy of not
requiring that the Interconnection Customer pay for outage-related
costs, and argues that the Coalition for Pricing has provided no
justification for departing from this policy. Reliant recommends
rejecting the modifications that the Coalition for Pricing proposes.
712. AEP recommends that the Interconnection Customer be required
to reimburse all affected generation owners for outage-related costs
that they incur, whether or not such generation owners are affiliated
with the Transmission Provider. AEP believes that this can be done in a
manner that properly identifies the costs, minimizes the Transmission
Provider's discretion, and allows for adequate regulatory scrutiny. It
recommends a method of compensation that it claims avoids the exercise
of discretion. That is, the Interconnection Customer should replace the
energy that would otherwise have been generated by the affected
Generating Facility. AEP states that if the Interconnection Customer is
unwilling to replace the lost energy, it would be up to the affected
generation
[[Page 49906]]
owner to file with the Commission a proposal to recover its costs.
Further, AEP believes that the Interconnection Customer, the existing
generation owner and the Transmission Provider should be obligated to
use Reasonable Efforts to minimize the impact of any outage.
713. ATC states that dividing the costs between the Interconnection
Customer and the Transmission Provider may provide the most equitable
results. It believes that a reasonable approach might be to allocate up
to the full costs of the line outage to the Interconnection Customer so
long as the timing is primarily under the Interconnection Customer's
control. However, if the Transmission Provider has substantial
influence over the timing and engineering aspects of the outage, ATC
recommends that all or a large percentage of the new facility costs may
be appropriate for rolling into transmission rates.
Commission Conclusion
714. The Final Rule does not permit the Transmission Provider to
allocate interconnection-related outage costs to the Interconnection
Customer. The Commission recognizes that the Transmission Provider and
the owners of other generators may incur costs as a result of having to
take a transmission line out of service in order to complete an
interconnection. Such costs may include generator shut-down and restart
costs, redispatch and purchased power costs, lost opportunity costs on
sales not made, costs of power to compensate for additional line
losses, and possibly other costs. In prior orders,\115\ the Commission
has generally rejected, without prejudice, proposals by a Transmission
Provider to allocate these costs to the Interconnection Customer. Among
other things, the Commission has found that the proposals are vague,
leave too much discretion to the Transmission Provider, and do not
provide for adequate regulatory oversight by the Commission. For
example, in NSTAR, the Commission stated that ``determining how much
cost responsibility to assign to an interconnecting generator, when
other factors also may contribute to the need to redispatch
contemporaneously, would be unacceptably arbitrary: for example, higher
redispatch costs may be the result of a planned or unplanned outage,
maintenance that requires a line to be taken out of service
temporarily, or an unexpected shift in load.'' \116\ Furthermore, while
the Transmission Provider may be able to propose an objective method
for determining its own outage-related costs, estimating the outage-
related costs of unaffiliated generation owners could pose a
significant problem. The Commission does not believe that AEP's
proposal to have the Interconnection Customer replace the energy that
would otherwise have been generated by the affected Generating Facility
solves this problem in part because the value of the replacement energy
may bear no relationship to the actual outage-related costs.
---------------------------------------------------------------------------
\115\ See, e.g., id.; ISO New England, Inc., 91 FERC ] 61,311
(2000).
\116\ Cambridge Electric Light Co., et al., (NSTAR), 95 FERC ]
61,339 (2001).
---------------------------------------------------------------------------
715. As the Commission concluded above, when the Transmission
Provider asks the Interconnection Customer to reschedule a planned
maintenance outage of the Generating Facility (per Article 9.7--
Outages, Interruptions, and Disconnection), the Interconnection
Customer should be compensated for only the direct costs that the
Interconnection Customer incurs. It should not be compensated, for
example, for lost opportunity costs. One reason is that outages of
transmission and generation facilities for maintenance and other
purposes are a routine part of electric system operations and, in
fairness, these costs also should be considered a normal part of doing
business. Moreover, the determination of the appropriate level of costs
to be allocated involves a process that is inevitably arbitrary and
contentious, particularly when the determination is made by a
Transmission Provider that is not an independent entity. Therefore, in
the Final Rule we are codifying our policy of not allowing
interconnection-related outage costs to be allocated to the
Interconnection Customer.
Issues Concerning the Five Year Refund Period and the Payment of
Interest
716. Many commenters object to the proposal to require the
Interconnection Customer to be reimbursed for the costs of Network
Upgrades within a five year period. Several also object to the payment
of interest on outstanding balances or to the formula for determining
the rate of interest.
717. Duke Energy generally supports the provisions as proposed but,
to be consistent with the Commission's policy of allowing the
Transmission Provider to collect the higher of incremental or embedded
costs for transmission service, it recommends elimination of the five
year ``sunset'' provision in Section 11.4.1 of the NOPR LGIA. Cleco is
concerned that a Transmission Provider may be liable for payment of
refunds after a five year period has elapsed because the
Interconnection Customer has not taken enough transmission service to
be credited the full amount for upgrades originally paid for.
Westconnect RTO submits that arbitrarily setting a five year term is
unjustified and unreasonable. It proposes that a more appropriate
approach would be to allow unused transmission credits to expire after
a set term. However, Mirant argues that once the Network Upgrades are
placed in service, every network customer receives some benefit from
those facilities. Therefore, it sees no reason to limit the refund to
the requirement in proposed LGIA Article 11.4.1 that the Transmission
Provider continue to receive payment for transmission service from the
Generating Facility.
718. Western states that if it has to return monies to an
Interconnection Customer in less time than the service life of an
upgrade, rates may have to be increased to ensure the timely repayment
of other federal investments. It believes such a rate increase would be
inequitable to existing customers. BPA states that the Interconnection
Customer should not be entitled to a refund over an arbitrary five year
period and argues that other customers should not have to bear the risk
that the Interconnection Customer will cease taking transmission
service. LADWP states that the five year requirement imposes an undue
burden on public power customers. It requests that, if the Commission's
generation interconnection pricing policy is applied to a non-
jurisdictional transmission owner, that owner should have the
flexibility to provide such refunds over the same period that it would
use to amortize such facilities if constructed for the benefit of its
own customers. WEPCO states that the Commission should recognize that
sometimes both the Interconnection Customer and the Transmission
Provider may desire a payback period of less than five years.
Accordingly, it recommends that the Commission revise Article 11.4.1 of
the NOPR LGIA to provide for repayment at such earlier time as the
Parties may agree.
719. Mirant argues that, at a minimum, the Commission should
require that interest on any Network Upgrades be calculated using the
Transmission Provider's most recent Commission-approved rate of return
in the Transmission Provider's OATT. For a non-public utility that does
not have a rate of return, Mirant proposes that the Commission use the
rate of return set forth in the most recent Commission order as a proxy
for such entity. Peabody recommends that the Commission modify the
proposed LGIA
[[Page 49907]]
to provide for a more flexible, incentive-based rate of interest for
transmission credits. Also, if a Transmission Provider files for
incentive pricing for transmission service, Peabody recommends that it
be required to file simultaneously to amend the interest rate in LGIA
Article 11.4.1 to match such incentive mechanism. Progress Energy
disagrees with the requirement to pay an Interconnection Customer
interest, arguing that the Transmission Provider cannot use the funds
advanced by the Interconnection Customer for purposes other than
constructing the Network Upgrades and that it should not be put in the
position of being a bank for the Interconnection Customer. If interest
must be paid, Progress Energy proposes using the Federal Fund
Commercial Rate or a similar rate to ensure that the payment of
interest is not a source of profit for the Interconnection Customer.
Commission Conclusion
720. Regarding the specific rules for the payment of credits, the
Commission clarifies that the Interconnection Customer is entitled to a
full refund of the payments it makes toward the cost of Network
Upgrades within five years after the Commercial Operation Date, as long
as the Generating Facility remains in operation through the five year
period.\117\ During the five year period, credits must be awarded on a
dollar-for-dollar basis as payments are made for transmission services.
However, the Commission is also permitting the payments to be made on
any other basis that is mutually agreeable to the Interconnection
Customer and the Transmission Provider. For example, if the Parties
agree to a stream of uniform monthly payments designed to fully
reimburse the Interconnection Customer over the five year period, that
would be acceptable. In addition, as stated in Article 11.3 of the
Final Rule LGIA, the Transmission Provider may elect to fund the
Network Upgrades itself, with no advance payment by the Interconnection
Customer, and thus no need for subsequent credits.
---------------------------------------------------------------------------
\117\ Although Article 11.4.1 of the NOPR LGIA proposed to begin
the five year period on the date that the Network Upgrades are
placed in service, as the Commission explains below, the Commission
concludes that the Interconnection Customer should not be entitled
to receive a refund unless the Generating Facility achieves
commercial operation. Therefore, the Commission is modifying Article
11.4.1 to specify that the five year period begins with the
Generating Facility's Commercial Operation Date.
---------------------------------------------------------------------------
721. With regard to Cleco's concern about the Transmission
Provider's liability at the end of the five year crediting period, the
Commission clarifies that the Transmission Provider must make a lump-
sum payment to the Interconnection Customer for any balance owed to the
Interconnection Customer five years after the Interconnection Customer
has begun commercial operation.
722. The Commission recognizes that the choice of the length of the
repayment period is somewhat arbitrary. However, specifying five years
as the maximum repayment period will promote the development of new
generation by reducing the Interconnection Customer's risk, thereby
facilitating project financing. Contrary to the views of LADWP and
others, it would not be appropriate to extend repayment over a period
that corresponds to the Transmission Provider's amortization period for
similar facilities. As explained above, the Commission's policy for a
non-independent Transmission Provider is to roll the costs of
interconnection-related Network Upgrades into the Transmission
Provider's transmission rate base. However, rather than require
immediate roll-in, we have chosen a five year repayment period, in part
to provide the Interconnection Customer with an incentive to make good
faith requests for Network Upgrades.
723. With regard to the payment of interest on unpaid credits, the
Commission adopts the policy proposed in the NOPR. The Commission
continues to believe that the Interconnection Customer is entitled to a
refund for all of the costs of the Network Upgrades for which it has
paid, including a reasonable estimate of the carrying costs that it
incurs in making the advance payments. The determination of an interest
rate that accurately reflects this carrying cost cannot be reduced to a
completely objective calculation. Interest calculated in accordance
with 18 CFR Sec. 35.19a(a)(2)(ii) provides a reasonable proxy for this
carrying cost, and because it offers an objective calculation, the
Commission retains this provision in Article 11.4.1 of the Final Rule
LGIA.
Rules Governing the Payment of Credits
724. With regard to the payment of credits, Interconnection
Customers generally are in favor of a flexible policy that allows
credits to be paid under a wide range of circumstances, while
Transmission Providers advocate a policy that places strict limits on
when and how an Interconnection Customer may receive credits.
725. For example, Dynegy states that the Final Rule must ensure
that the credits do not limit the Interconnection Customer to
purchasing the delivery component of transmission service on the
Transmission Provider's system with the Interconnection Customer's
Generating Facility as the Point of Receipt. Instead, Dynegy believes
that the credits should apply to transmission at any location on the
Transmission Provider's system. Duke Energy believes that an
Interconnection Customer's flexibility in obtaining refunds should be
similar to the flexibility a Transmission Customer has to reassign
transmission service under the OATT. Accordingly, it proposes to allow
credits not only for the charges for transmitting power from the
Generating Facility, but also for the charges for transmitting power
from an Affiliated Generating Facility. Similarly, Peabody states that
the Interconnection Customer should be allowed to receive credits for
any transmission service that it purchases on the Transmission
Provider's Transmission System. Both Calpine and EPSA offer modified
language for Article 11 of the NOPR LGIA that would implement these
recommendations. Cal Cogen and the Energy Producers and Users Coalition
claims that a term-based credit mechanism (i.e., one where the credits
are paid out according to a fixed schedule) is preferable to the NOPR's
proposed transmission-based mechanism.
726. Edison Mission states that Articles 2 and 11 of the NOPR LGIA
should be modified so that if an Interconnection Customer pays for
Network Upgrades but the interconnection agreement is then terminated
or the Generating Facility not constructed, the Interconnection
Customer nonetheless receives payments for the upgrades it paid for,
with the payments coming from other users of the Transmission System.
727. Other commenters propose limiting the availability of credits.
Dominion Resources argues that, if Network Upgrades funded by the
Interconnection Customer are not used for output from the Generating
Facility, a refund for such upgrades is inappropriate. Similarly, the
Coalition for Pricing claims that proposed LGIP Section 11.4.2 can be
read to suggest that the Interconnection Customer has some right to
transmission credits as transmission service is taken anywhere on the
Transmission Provider's system. It asks the Commission to clarify that
this is not the case. The Alabama PSC argues that providing
transmission credits only when transmission service is taken from an
Interconnection Customer's Generating Facility would prevent the
socialization of upgrade costs that do not benefit the network.
[[Page 49908]]
728. Westconnect RTO and others argue that the Transmission
Provider should credit the Interconnection Customer only for the
``demand'' or ``return'' component of the otherwise applicable
transmission charges, and not apply the credit to such costs as
operations and maintenance, administrative and general, taxes, line
losses, etc. Also, Westconnect RTO and BPA oppose the proposal in
Section 12.3 of the NOPR LGIP that the Interconnection Customer receive
transmission credits for expediting costs associated with constructing
Network Upgrades out of sequence. TAPS states that the Interconnection
Customer should receive a credit against its network transmission
service bill based on the capacity of the Generating Facility, not the
energy output of the unit. It argues that an energy output-based method
of calculating the credit unfairly penalizes network customers and
sends the wrong price signal, discouraging the construction of peaking
units and the designation of such units as Network Resources.
729. WEPCO states that the Commission must continue to mandate, as
proposed in Article 11.4 of the NOPR LGIA, that rights to receive
credits are fully assignable. It believes that this is crucial because
in many instances the Interconnection Customer is not the transmission
customer.
Commission Conclusion
730. The Commission agrees with Dynegy and others that the
Interconnection Customer should receive credits for transmission
(delivery) service taken anywhere on the Transmission Provider's
Transmission System and that credits should not be limited to service
taken with respect to the Generating Facility at the point of receipt,
as long as certain conditions are met. That is, as long as the
Generating Facility has achieved commercial operation, continues to
operate and there are unpaid credits outstanding, the Interconnection
Customer should receive credits for all of the transmission charges
that it pays, including charges for ``through'' transmission service.
This is appropriate because it provides an additional vehicle by which
the Transmission Provider can meet the requirement that the
Interconnection Customer must receive a full refund of all amounts due
within five years of the Commercial Operation Date. Accordingly, the
Commission is removing from Article 11.4.1 of the Final Rule LGIA the
following language: ``so long as Transmission Provider continues to
receive payments for transmission service with respect to the
Generating Facility during such period.''
731. Edison Mission asks that Articles 2 and 11 of the NOPR LGIA be
modified to allow the Interconnection Customer to receive credits for
Network Upgrades that it has paid for if the interconnection agreement
is terminated or the Generating Facility is not constructed. The
Commission disagrees. In order to achieve an appropriate balance
between the Interconnection Customer's risks and incentives, the
Commission believes that the Interconnection Customer should receive a
refund of the costs of Network Upgrades only if the Generating Facility
has achieved commercial operation. Allowing the Interconnection
Customer to avoid any responsibility for the cost of Network Upgrades
needed for a Generating Facility that is never completed would
improperly shift all risk of cost recovery to the Transmission Provider
and its other customers. In addition, it would greatly reduce the
Interconnection Customer's incentives to make good faith requests for
Network Upgrades. Therefore, the Commission concludes that the
Transmission Provider must provide a refund to the Interconnection
Customer only after commercial operation of the Generating Facility has
been demonstrated. However, if the Generating Facility fails to achieve
commercial operation, but it or another Generating Facility is later
constructed and makes use of the Network Upgrades, the Interconnection
Customer would at that time be entitled to a refund of the investment
that it made in the Network Upgrades.
732. Westconnect RTO and others argue that the Transmission
Provider should credit the Interconnection Customer only for the non-
usage sensitive ``demand'' or ``return'' component of the applicable
transmission charges, presumably on the basis that this is the
component that relates most directly to the cost of the investment for
which the Interconnection Customer is to receive credits. The
Commission clarifies that the Transmission Provider may decline to
award credits for those transmission charges that are designed to
recover out-of-pocket costs, such as the cost of line losses,
associated with the delivery of the Generating Facility's output. The
Commission notes, however, that all amounts paid by the Interconnection
Customer toward Network Upgrades must be refunded within five years of
the Commercial Operation Date. Thus, any reduction in the level of
credit payments will only increase the cost of interest and the
magnitude of the final cash payment that may be required.
733. Westconnect RTO and BPA oppose the proposal in Section 12.3 of
the NOPR LGIP that would provide the Interconnection Customer with a
refund of the costs of expediting construction of Network Upgrades so
that they can be placed in service out of sequence. The Commission is
not changing this provision in the Final Rule LGIP. The sequence in
which Network Upgrades would normally be constructed is based on the
order in which requests are received. Although changing the order may
increase or decrease the level of costs, the new level of costs is no
less legitimate than the first. Thus, the Transmission Provider must
refund to the Interconnection Customer the cost of constructing Network
Upgrades regardless of the construction sequence.
734. In response to WEPCO's concern about the assignability of
refund rights, the Commission confirms that Final Rule LGIA Article
11.4 provides that refund rights are fully assignable.
735. Finally, the Commission clarifies how the crediting policy
will work when the Interconnection Customer elects to build and retain
ownership of Stand-Alone Network Upgrades. In such case, the
Interconnection Customer is not entitled to a refund of its investment
in any facilities in which it elects to retain ownership. If the
Interconnection Customer constructs Stand-Alone Network Upgrades, and
chooses not to transfer ownership to the Transmission Provider, it will
not receive a refund but may enter into a cost-based lease agreement
with the Transmission Provider that places the upgrades under the
Transmission Provider's operation and control. The rates, terms and
conditions of any such lease agreement are subject to the approval of
the Commission.
Responsibility for the Costs Incurred by Affected Systems
736. A number of commenters argue that the Final Rule should
address directly the assignment of costs that may be incurred by
Affected Systems when an Interconnection Customer obtains an
interconnection.\118\ Entergy contends that, even if the Final Rule
LGIA could bind an Affected System, the Commission's current
interconnection pricing policies fail to establish the allocation of
the costs of Network Upgrades among the Interconnection Customer, the
interconnecting Transmission Provider, and the Affected System.
Dominion
[[Page 49909]]
Resources recommends that Section 3.5 of the NOPR LGIP require the
Interconnection Customer to be responsible for all costs incurred by
the Transmission Provider in coordinating the interconnection request
with the affected party, including all study costs. Reliant states that
there is presently no mechanism that provides the Interconnection
Customer with transmission credits for a contribution to the
construction of Network Upgrades on third party systems. Reliant
recommends that the Commission add to Section 3.5 of the NOPR LGIP
language proposed by EPSA that addresses this omission. Mirant
recommends that the Commission require the Transmission Provider to
coordinate the provision of transmission credits associated with
funding Network Upgrades on affected third party systems.
---------------------------------------------------------------------------
\118\ As discussed above, an Affected System is a system other
than that of the Transmission Provider that may be affected by the
proposed interconnection.
---------------------------------------------------------------------------
737. LADWP is concerned that the NOPR did not address how the
Commission intends the financing and crediting to be implemented if the
Interconnection Customer does not purchase transmission service on the
Affected System.
Commission Conclusion
738. The NOPR LGIP and NOPR LGIA included no pricing provisions
that specifically address situations where Network Upgrades must be
constructed on Affected Systems to protect the reliability of those
systems. However, the Commission concurs with the commenters that state
that the NOPR LGIA should be modified to expressly allow for refunds to
be provided to the Interconnection Customer when such Network Upgrades
must be constructed and the Interconnection Customer is required to pay
for them. Therefore, the Commission modifies Article 11.4 of the Final
Rule LGIA to make it applicable to all jurisdictional Affected System
Operators on whose systems Network Upgrades are constructed to
accommodate the Interconnection Customer's Interconnection Request.
This means that, prior to the Commercial Operation Date, an Affected
System Operator may require the Interconnection Customer to pay for all
Interconnection Facilities and Network Upgrades constructed to
accommodate the Interconnection Customer's Interconnection Request.
Then, upon commencement of commercial operation, any Affected System
Operator that has received payments from the Interconnection Customer
must begin to refund to the Interconnection Customer the costs of
Network Upgrades that the Interconnection Customer has paid.
Furthermore, refunds are to be provided without regard to whether the
Interconnection Customer has contracted for delivery service on the
Affected System Operator's Transmission System. If the Interconnection
Customer has not contracted for delivery service, and in the absence of
another mutually agreeable payment schedule, refunds shall be provided
by means of a uniform stream of monthly payments designed to fully
reimburse the Interconnection Customer, with interest, over a five year
period commencing with the Generating Facility's Commercial Operation
Date.
739. When the Interconnection Customer is required to pay for
Network Upgrades on an Affected System, it must enter into an agreement
with the Affected System Operator unless the payments are incorporated
in the interconnection agreement that the Interconnection Customer
signs with the Transmission Provider. Any agreement with an Affected
System Operator must specify the terms governing payments to be made by
the Interconnection Customer as well as the payment of refunds by the
Affected System Operator. The Commission is revising proposed Article
11.4.1 to incorporate this new requirement.
Policies Regarding Previously Approved Cost Allocations and Pricing
Arrangements
740. A number of commenters express their views regarding the
NOPR's proposal to require that all Transmission Providers remove from
their transmission rates the costs of Interconnection Facilities
constructed for the Transmission Provider's own Generating Facilities,
and to treat them as directly assigned, generation-related costs.
Commenters also address the possible retroactive application of the
pricing policy adopted in the Final Rule. Calpine and Mirant request
that the Commission require that all Transmission Owners make
compliance filings to remove the costs of Interconnection Facilities
from existing transmission rates. The Arkansas PSC states that it does
not object in principle to the proposal to remove such costs from
transmission rates, but notes that this could shift additional costs
onto the retail customers of regulated generation-owning utilities. It
proposes that, if the cost-shifting burden is judged to be significant,
a phase-in or modification may be appropriate. PSNM believes that the
Commission's proposal to require all Transmission Providers to remove
sole use facilities from their transmission rates currently in place
resolves the lack of pricing comparability alleged by Interconnection
Customers.
741. PJMTO generally agrees with the NOPR's proposal to assign to
the generator the costs of Interconnection Facilities, but requests
that the Commission clarify that, to the extent this policy alters
existing practices, it will apply prospectively and only affect
interconnections that post-date the Final Rule. PJMTO states that,
historically, transmission providers have used a variety of approaches
to assign cost responsibility for Interconnection Facilities, claiming
that some have rolled these costs into transmission rates while others
have directly assigned the costs to the Interconnection Customer. PJMTO
urges the Commission not to undercut the business assumptions of
existing project sponsors or to require the Transmission Provider to
refile transmission rates to remove any non-network costs that have
been rolled in, and invoice Interconnection Customers for such removed
costs. Exelon and Sithe express similar views and state that, since
Order No. 888, numerous vertically integrated utilities have spun off
their Generation Facilities to non-affiliated third parties. Exelon and
Sithe believe that those parties would likely claim that their
interconnection arrangements have been effectively grandfathered and
that no interconnection costs that may have been rolled into base
transmission rates are now recoverable from them. Exelon and Sithe
argue this could lead to costly and time-consuming litigation.
742. Calpine requests that the Commission find here that any policy
that requires the Interconnection Customer to pay for Network Upgrades
is unjust and unreasonable, and unless otherwise barred by explicit
contract language, any Interconnection Customer should be permitted to
have the facility cost allocation provisions of any existing agreement
modified pursuant to Section 206 of the FPA to reflect the current
interconnection pricing policies. However, Exelon and Sithe, using
arguments similar to those above, recommend that any historical
allocation of the costs of Network Upgrades that was agreed to by the
parties and accepted by the Commission should not be disturbed now.
Exelon and Sithe recommend that those costs be rolled into the
transmission rate base only for new Interconnection Requests.
Commission Conclusion
743. The Commission believes that, to ensure fully comparable
treatment of all Generating Facilities, transmission rates should not
include the costs of Interconnection Facilities. As stated in the NOPR,
this policy is consistent with the Commission's current treatment of
[[Page 49910]]
generation step-up transformers, appropriately assigns the costs of
Interconnection Facilities to the generation customers using them, and
ensures that the Transmission Provider's own Generating Facilities and
those of its competitors are treated comparably.
744. However, the Commission is sympathetic to the concern of PJMTO
and Exelon and Sithe that the Transmission Provider may have difficulty
recovering the costs associated with Generating Facilities that it does
not own, including those that it once owned but has since divested.
Also, the Commission is concerned that the Transmission Provider may
have difficulty identifying the interconnection-related costs of older
Generating Facilities given that, historically, the Transmission
Provider may have had no reason to segregate these costs from other
transmission costs in its books of account. Therefore, the Commission
is not adopting the NOPR's proposal to require the Transmission
Provider to remove from its existing transmission rates the costs of
all Interconnection Facilities constructed for its own Generating
Facilities and to directly assign them as generation-related costs.
Rather, the Commission here is imposing a more limited requirement. The
Commission is requiring that the Transmission Provider remove from
transmission rates only the costs of Interconnection Facilities
constructed by the Transmission Provider after a certain date to
interconnect Generating Facilities owned by the Transmission Provider
on the effective date of this Final Rule. That date certain is March
15, 2000, the date on which the Commission issued its order in
Tennessee clarifying that interconnection is a separate component of
transmission service, and that an Interconnection Customer may request
interconnection separately from the delivery component of transmission
service. That order effectively placed Transmission Providers on notice
that the costs of Interconnection Facilities cannot be recovered in
rates for transmission service. Thus, the Commission presumes that
after March 15, 2000, any Interconnection Agreement signed by the
Transmission Provider provides for the direct assignment of
Interconnection Facility costs to the Interconnection Customer. The
Commission also presumes that the Transmission Provider can identify
the costs of any Interconnection Facilities constructed for its own
Generating Facilities after March 15, 2000. In this Final Rule, the
Commission is requiring the Transmission Provider, in its next filed
transmission rate case, to remove such costs from transmission rates.
745. With regard to the Arkansas PSC's concern about the impact of
any cost shifting that may result from the reallocation of
Interconnection Facility costs, we do not believe that the impact will
be so great as to warrant a phase-in. Because the requirement that we
are adopting here applies only to costs incurred after March 15, 2000,
we expect the cost impact, if any, to be small. Furthermore, any cost
impact will not occur until the Transmission Provider's next filed rate
case.
746. Finally, in response to Calpine, the Commission is not
requiring in this Final Rule any changes to previously accepted
interconnection agreements.
Miscellaneous Pricing Issues
747. Dynegy argues that Article 4.6 of the NOPR LGIA should be
clarified to include a more comprehensive listing of the possible
services that the Interconnection Customer might be called upon to
provide to the Transmission Provider under the express provisions of
the LGIA. Dynegy submits that the Interconnection Customer would be
required to have a Tariff on file with the Commission pursuant to
Section 205 of the Federal Power Act for any service for which it seeks
to charge the Transmission Provider. In the alternative, it recommends
that the Commission clarify that this provision does not require the
Interconnection Customer to forego the right to seek compensation for
any services beyond the two listed.
748. ACEEE states that it agrees with the Commission's general
proposal on pricing, but identifies pricing issues faced by the
Interconnection Customer that it believes can pose major barriers to
interconnection. It claims that excessive standby charges, backup power
rates, and insurance requirements have frequently been used to try to
block an Interconnection Customer from interconnecting a new Generating
Facility and competing on a comparable basis. It states that the
Commission and others must address these pricing issues if electricity
markets are to be fully accessible.
Commission Conclusion
749. In response to Dynegy, the Commission clarifies that, while
Articles 4.6 and 11.6 of the Final Rule LGIA provide that the
Transmission Provider must compensate the Interconnection Customer for
certain specific services that the latter provides, no provision of the
Final Rule LGIA limits the right of the Interconnection Customer to
seek compensation for any other services that the Transmission Provider
may from time to time request from the Interconnection Customer.
750. With regard to ACEEE's concerns about the rates for standby
charges and backup power rates provided by the Transmission Provider to
the Interconnection Customer, the rates for these services are a state
jurisdictional retail rate issue. The Commission discusses insurance
requirements in part II.C.8.a of this Preamble.
2. Interconnection Products and Scope of Service
751. Scope of service, including in particular the definition and
study requirements for the two Interconnection Service products
proposed to be made available to Interconnection Customers, was perhaps
the most heavily debated topic during the ANOPR phase of this
proceeding. In addition, the controversial nature of this topic is
reflected in the many pages that commenters devoted to it. These
comments are addressed below.
Definition of Interconnection Products
752. The LGIA NOPR provided for two Interconnection Service
products from which the Interconnection Customer would have to choose:
Energy Resource Interconnection Service, which is a basic or minimal
interconnection service, and Network Resource Interconnection Service,
which is a more flexible and comprehensive interconnection
service.\119\ Neither is a transmission delivery service. Article 4
(Scope of Service) of the NOPR LGIA defines these products and sets
forth specific Interconnection Study requirements for each. This
article also describes the relationship between delivery service and
the Interconnection Services, as well as the rights and
responsibilities that each Interconnection Service entails. In
addition, Section 3.2 of the NOPR LGIP sets forth the procedure that
the Interconnection Customer must use to select an Interconnection
Service.
---------------------------------------------------------------------------
\119\ During the ANOPR negotiating sessions EPSA and other
Interconnection Customers negotiated to secure these two forms of
service.
---------------------------------------------------------------------------
753. As proposed, Energy Resource Interconnection Service would
allow the Interconnection Customer to connect its Generating Facility
to the Transmission System and be eligible to deliver its output using
the existing firm or non-firm capacity of the Transmission System on an
``as available'' basis. In an area with a bid-based energy market
(e.g., ISO New
[[Page 49911]]
England, NYISO, or PJM), Energy Resource Interconnection Service would
allow the Interconnection Customer to place a bid to sell into the
market and the Generating Facility would be dispatched if the bid is
accepted. In all other areas, no transmission delivery service would be
assured, but the Interconnection Customer may obtain point-to-point
transmission service or gain access to secondary network transmission
service, pursuant to the Transmission Provider's Tariff. The
Interconnection Studies to be performed for Energy Resource
Interconnection Service would identify the Interconnection Facilities
required as well as the Network Upgrades needed to allow the proposed
Generating Facility to operate at full output. In addition, the
Interconnection Studies would identify the maximum allowed output of
the Generating Facility without Network Upgrades.
754. In contrast, Network Resource Interconnection Service would
require the Transmission Provider to undertake the Interconnection
Studies and Network Upgrades needed to integrate the Generating
Facility into the Transmission System in a manner comparable to that in
which the Transmission Provider integrates its own generators to serve
native load customers. If the Transmission Provider is an RTO or ISO
with market-based congestion management, it would have to integrate the
Generating Facility in the same manner as all other Network Resources.
755. The Transmission Provider would study the Transmission System
at peak load, under a variety of severely stressed conditions, to
determine whether, with the Generating Facility at full output, the
aggregate of generation in the local area can be delivered to the
aggregate of load, consistent with the Transmission Provider's
reliability criteria and procedures. Under this approach, the
Transmission Provider would assume that some portion of the capacity of
existing Network Resources is displaced by the output of the new
Generating Facility.
756. Network Resource Interconnection Service provides for all of
the Network Upgrades that would be needed to allow the Interconnection
Customer to designate its Generating Facility as a Network Resource and
obtain Network Integration Transmission Service. Thus, once an
Interconnection Customer has obtained Network Resource Interconnection
Service, any future transmission service request for delivery from the
Generating Facility would not require additional studies or Network
Upgrades. However, Network Resource Interconnection Service itself does
not convey any delivery service and the Interconnection Customer would
not be required to identify a specific buyer (or sink). If the
Interconnection Customer wishes to obtain the delivery component of
transmission service, it would have to do so pursuant to the
Transmission Provider's Tariff.
757. Requests for long-term transmission service for deliveries
outside the Transmission Provider's system may require additional
Interconnection Studies and Network Upgrades. Network Resource
Interconnection Service would allow the Generating Facility to be used
to provide Ancillary Services and, should the Transmission System
become congested, the Generating Facility would be subject to the same
congestion management procedures that apply to all other Network
Resources. Article 4.1.2.3 of the NOPR LGIA states that ``[d]epending
on how the cost allocation issue is resolved, the [Interconnection
Customer] may be allocated congestion rights based on the construction
of upgrades.''
758. Proposed LGIA Article 4.3 also provides for generator
balancing service arrangements and refers to other articles that
address payment for certain services provided by the Interconnection
Customer.
Comments
759. Several commenters, primarily Transmission Providers, object
to the proposed requirement that Interconnection Customers be allowed
to request Network Resource Interconnection Service. NRECA-APPA and
others argue that, contrary to the Commission's assertion, Network
Resource Interconnection Service would convey transmission delivery
rights to the Interconnection Customer in the form of a permanent right
to the future use of the Transmission System's delivery capacity. APS
contends that Network Resource Interconnection Service would provide
delivery service rights that are greater than any available under Order
No. 888, and claims that Network Resource Interconnection Service may
require a Transmission Provider to expand transmission capacity beyond
any foreseeable needs of network load and to hold that capacity
indefinitely. LG&E Energy believes that Network Resource
Interconnection Service could result in substantial overbuilding of the
Transmission System as a result of the requirement that transmission be
upgraded to accommodate any Interconnection Customer taking Network
Resource Interconnection Service to serve any load on the system.
However, TAPS is concerned that Network Resource Interconnection
Service does not provide for the capacity expansions that may be needed
to allow network customers to access their Network Resources without
congestion. It claims that the NOPR's treatment of Network Resource
designation and network service is inconsistent with the OATT Network
Integration Transmission Service, which requires a demonstration of
load-specific deliverability from designated Network Resources. TAPS
states that Network Resource Interconnection Service lacks such a
deliverability test and, as a result, would be a service under which
the Network Resource designation is meaningless from a load serving
entity's point of view. It claims that while Network Resource
Interconnection Service would grant some rights to the Interconnection
Customer, it leaves the load serving entity to bear all the risk of
congestion between its Network Resources and its load.
760. PSNM notes that for an Interconnection Customer to secure
delivery rights using Network Integration Transmission Service under
the OATT, the Generating Facility must be designated as a Network
Resource. The Interconnection Customer also must pay separately for
point-to-point service when not providing service as a Network
Resource. PSNM claims that the language in the NOPR LGIA would undo
that requirement. Western objects to the fact that Network Resource
Interconnection Service would impose no obligation on an
Interconnection Customer to serve network load or to meet network
operating obligations, such as providing Ancillary Services, and would
not require an Interconnection Customer to participate in regional
planning processes. Dairyland Power states that Article 4.1.2 of the
NOPR LGIA seems to presuppose that Network Resource Interconnection
Service may be used only in conjunction with Network Integration
Transmission Service under the OATT, but the LGIA is not explicit. It
asks the Commission to clarify the purpose of Network Resource
Interconnection Service and how it may actually be used.
761. Central Maine claims that the exact products or services
required to be offered are not clearly defined. Industrial Energy
asserts that the acknowledgment of potential congestion in the Network
Resource Interconnection Service description seems to contradict the
further
[[Page 49912]]
specifications in proposed LGIA Article 4.1.2.3, which appears to
contemplate delivery from the Generating Facility within the
Transmission Provider's Transmission System of any amount of capacity
and/or energy up to the amount initially studied without additional
studies or Network Upgrades. TANC recommends that the Commission
replace the study provision requiring displacement of existing
generation (NOPR LGIA Article 4.1.2.2) with appropriate technical
guidelines and procedures for identifying resource displacement.
762. LG&E Energy claims that the proposal is inconsistent with the
Commission's proposed approach to Standard Market Design. It notes that
the market designs of certain ISOs permit customers to designate any
resource as a Network Resource, but do not require the Transmission
System to be upgraded to ensure physical delivery of all generation
resources to all loads. Rather, according to LG&E Energy, the effect of
transmission congestion is reflected in locational energy prices. Also,
the Midwest ISO states that it is not clear how Network Resource
Interconnection Service would evolve as Standard Market Design is
implemented. It believes that Network Resource Interconnection Service
is more appropriate for an Interconnection Customer that wishes to
designate its Generating Facility as a capacity resource in a market
design where there is a capacity market. If there is not such a market,
the Midwest ISO would support Energy Resource Interconnection Service
alone as sufficient to provide for reliable interconnections, and allow
for market-based mechanisms to support expansion of the Transmission
System beyond minimum reliability needs. Both the Wisconsin PSC and
American Wind Energy advise the Commission to defer consideration of
Network Resource Interconnection Service until it can be evaluated in
the context of Standard Market Design. Dairyland Power states that it
is not clear how Network Resource Interconnection Service would fit
with the new Network Access Service contemplated in the Commission's
Standard Market Design rulemaking.
763. Some commenters argue that there should be only one
interconnection product and that product should define a minimum level
of service. For example, ISO New England believes that its Minimum
Interconnection Standard has resulted in equal treatment of new and
incumbent generation owners and has resulted in a substantial number of
new generators being interconnected onto the bulk power Transmission
System in New England. It also states that the Minimum Interconnection
Standard allows every generator owner, new and incumbent alike, the
opportunity to participate in all markets.
764. PG&E notes that, while Network Resource Interconnection
Service requires the Transmission Provider to interconnect new plants
in a manner comparable with that of other Network Resources, in
California there are no Network Resources. PG&E asks the Commission to
explain how this Interconnection Service would apply in areas where no
network transmission service is available. Central Maine argues that
the definition of products and services should be left to regional
practices.
765. Xcel states that the description of Network Resource
Interconnection Service appears to assume the Transmission Provider's
system is the same as its Control Area. However, with the development
of large transmission networks subject to an RTO's OATT, it may not be
possible to actually deliver the capacity and energy of any individual
generator to a network load on a huge regional network. The Midwest ISO
recommends that, if Network Resource Interconnection Service is
retained as part of the Final Rule, an Interconnection Customer within
a large footprint RTO like the Midwest ISO should be allowed to select
specific zones (or Control Areas) in which it would be eligible to be a
designated Network Resource.
Commission Conclusion
766. Article 4 of the NOPR LGIA did not adequately convey the
Commission's intent, particularly with regard to the characteristics
that distinguish the two proposed interconnection products and the
rights and responsibilities that each entails. Many of the commenters'
concerns can be addressed by improving the clarity and accuracy in the
Final Rule provisions concerning scope of services and interconnection
products. Therefore, as described below, the Commission modifies the
text of proposed LGIA Article 4 and provides the following
clarifications.
767. Both Energy Resource Interconnection Service and Network
Resource Interconnection Service provide for the construction of
Network Upgrades that would allow the Interconnection Customer to flow
the output of its Generating Facility onto the Transmission Provider's
Transmission System in a safe and reliable manner. However, contrary to
the assertions of several commenters, neither Energy Resource
Interconnection Service nor Network Resource Interconnection Service in
and of itself conveys the right to do so. Moreover, neither type of
Interconnection Service constitutes a reservation of transmission
capacity. The Interconnection Customer, load or other market
participant would have to request either point-to-point or Network
Integration Transmission Service under the Transmission Provider's OATT
in order to receive the delivery service that is a prerequisite to
flowing power onto the system. When an Interconnection Customer that
has chosen either Energy Resource Interconnection Service or Network
Resource Interconnection Service later requests firm point-to-point
delivery service, additional Network Upgrades may be required,
depending on the availability of transmission capacity to deliver power
to the delivery point.
768. Network Resource Interconnection Service is intended to
provide the Interconnection Customer with an interconnection of
sufficient quality to allow the Generating Facility to qualify as a
designated Network Resource on the Transmission Provider's system
without additional Network Upgrades. This means that Network Resource
Interconnection Service entitles the Generating Facility to be treated
in the same manner as the Transmission Provider's own resources for
purposes of assessing whether aggregate supply is sufficient to meet
aggregate load within the Transmission Provider's Control Area, or
other area customarily used for generation capacity planning. Thus,
with Network Resource Interconnection Service, the Interconnection
Customer would be eligible to obtain Network Service under the
Transmission Provider's OATT, or network access service under the
Tariff of an RTO or ISO, without the need for additional Network
Upgrades.
769. However, contrary to the views of some commenters, Network
Resource Interconnection Service does not necessarily provide the
Interconnection Customer with the capability to physically deliver the
output of its Generating Facility to any particular load on the system
without incurring congestion costs. Depending on the location of the
load for which the Generating Facility serves as a designated Network
Resource, it may be required to participate in a redispatch procedure,
or other non-discriminatory congestion management process, such as
locational marginal pricing. Network Upgrades required under Network
Resource Interconnection Service integrate the Generating Facility into
the
[[Page 49913]]
Transmission System in a manner that ensures that aggregate generation
can meet aggregate load while satisfying regional reliability criteria
and generation capacity planning requirements. However, these upgrades
do not necessarily eliminate congestion.
770. In response to ISO New England and the Midwest ISO, the
Commission is not limiting the Interconnection Customer's
interconnection alternatives to a single option that meets only a
minimum interconnection standard. In general, such a policy would not
provide an interconnection that meets the standard that the
Transmission Provider uses to interconnect its own generators. The
Commission notes, however, that in regions where the Transmission
System is operated by an independent entity, the Commission allows
flexibility, as discussed in part II.C.1 (Interconnection Pricing
Policy). For example, an independent entity may determine, subject to
Commission approval, that the designation of Network Resources is not
necessary (which, PG&E points out, is the case in California).
771. The Commission recognizes that the Transmission Provider's
Transmission System may not comprise a single Control Area, as several
commenters point out. If the Transmission Provider operates more than
one Control Area, it may limit the network service that is available to
an Interconnection Customer taking Network Resource Interconnection
Service to the Control Area where the Generating Facility is located.
If the Interconnection Customer wishes to serve load in another Control
Area, it must submit a separate request for transmission service to
that other area, and it would be subject to the pricing provisions of
the Transmission Provider's OATT for that service.
772. The Commission further clarifies that, if the Generating
Facility of an Interconnection Customer taking Network Resource
Interconnection Service is selected by a load as a designated Network
Resource, it will be required to meet all network operating obligations
that the OATT imposes upon Network Resources generally. If an
Interconnection Customer's Generating Facility has not been designated
as a Network Resource by any load, it cannot be required to provide
Ancillary Services except to the extent such requirements extend to all
generators that are similarly situated.
773. Finally, in response to Dairyland Power and others, the
Commission notes that an RTO or ISO may propose in its tariff filing to
modify the definition and scope of the available interconnection
products to accommodate its market.
Pricing of Network Resource Interconnection Service
774. Some commenters express concern over the application of the
proposed interconnection pricing policy to Network Resource
Interconnection Service. For example, Progress Energy and the Alabama
PSC believe that an Interconnection Customer taking Network Resource
Interconnection Service should pay a reservation charge for reserved
but unused transmission capacity on the Transmission Provider's
Transmission System. Progress Energy believes that such an approach
would properly allocate the cost of the transmission capacity being
reserved for the Interconnection Customer until a customer actually
begins paying for transmission service for output from the
Interconnection Customer's Generating Facility.
775. Entergy states that the requirement that a Transmission
Provider offer Network Resource Interconnection Service should not be
included in the Final Rule until the Commission has thoroughly analyzed
the effects of providing such service. If this service is required,
however, Entergy recommends that a Transmission Provider be compensated
by any Interconnection Customer electing this service, as the service
prevents a Transmission Provider from achieving the maximum use of its
Transmission System due to the standing transmission reservation that
it claims is granted to an Interconnection Customer under this service.
The Coalition for Pricing recommends that the Interconnection Customer
be required to commit to pay for Network Resource Interconnection
Service for a specific term long enough to protect other customers from
economic harm. It further recommends that, if the Interconnection
Customer is not required to commit to a specific term of Network
Resource Interconnection Service, it should at a minimum be required to
pay some amount up front to cover ongoing expenses associated with the
upgrades constructed if service is cancelled after a short time.
776. NRECA-APPA states that coupling Network Resource
Interconnection Service with the Commission's current interconnection
pricing policy will cause customers to bear much of the cost of Network
Upgrades while having no right to use the resulting transmission
delivery capability.
777. However, American Transmission opposes any special charges for
Network Resource Interconnection Service and believes that commenters'
criticisms that this service confers too great an advantage on the new
Interconnection Customer are overstated. It believes the provision
should be designed to put the independent generation owner on a
competitive footing equal to that of incumbent owners. If the
Commission is persuaded that the proposed policy provides an undue
advantage to the new Interconnection Customer, the solution lies in
adjusting the service description, not in imposing a surcharge.
Commission Conclusion
778. The Commission is not requiring the Interconnection Customer
to pay a reservation fee for the delivery component of transmission
service as a condition for receiving Network Resource Interconnection
Service. As explained above, Network Resource Interconnection Service
does not convey to the Interconnection Customer a reservation of
transmission capacity or the right to begin taking firm or non-firm
transmission service on the Transmission Provider's system. Rather, its
purpose, as stated in proposed LGIA Article 4.1.2.1, is to provide the
Network Upgrades needed to integrate the Interconnection Customer's
Generating Facility into the Transmission System in a manner that is
comparable to that in which the Transmission Provider integrates its
own resources or other Network Resources. When the Interconnection
Customer does take transmission service, it (or its power sales
customer) will be required to pay appropriate rates, subject to the
crediting provisions of Article 11.4 of the Final Rule LGIA. To charge
the Interconnection Customer an additional reservation fee, as several
commenters propose, would violate the Commission's prohibition against
``and'' pricing. Nevertheless, Network Resource Interconnection Service
does not guarantee that the Interconnection Customer can physically
deliver its output to any load. This means that, depending on the
location of its power sales customer, the Interconnection Customer may
be required to pay congestion or redispatch costs.
779. Finally, in response to NRECA-APPA, the Commission emphasizes
that any capacity created by the Network Upgrades constructed on the
Interconnection Customer's behalf is available for use by all customers
on an equal basis. The Final Rule only requires that, once the
Interconnection Customer has paid for the Network Upgrades needed to
integrate its Generating Facility, it cannot be charged
[[Page 49914]]
again for any additional upgrades that may be needed to continue to
qualify as a Network Resource.
Study Requirements for Network Resource Interconnection Service
780. Article 4.1.2.2 of the NOPR LGIA described the Interconnection
Study procedures for Network Resource Interconnection Service. Among
other things, they would require the Transmission Provider to study the
Transmission System at peak load, under a variety of severely stressed
conditions, to determine whether, with the Generating Facility at full
output, the aggregate of generation in the local area can be delivered
to the aggregate of load, consistent with the Transmission Provider's
reliability criteria and procedures.
Comments
781. PG&E states that it does not understand the difference between
the study requirements for Energy Resource Interconnection Service and
Network Resource Interconnection Service. For Network Resource
Interconnection Service, the NOPR LGIA says that the study must be done
with the system at peak load and under a variety of severely stressed
conditions, but PG&E claims that it is not clear that any lesser study
would be necessary for Energy Resource Interconnection Service.
782. Cal ISO states that it is essential that all studies consider
off-peak operating periods with the Generating Facility at full output.
It argues that, during light load periods, the energy generated is not
consumed locally and has to be transmitted over longer distances,
possibly causing overloads that would not be revealed by studying only
on-peak periods. Therefore, Cal ISO recommends replacing ``at peak
load, under a variety'' with ``at peak load and under a variety.'' NERC
recommends several changes in NOPR LGIA Article 4.1.2.2, including
replacing ``at peak load, under a variety of severely stressed
conditions'' with ``under a set of reasonably expected limiting
conditions.'' It states that studying interconnection impacts only
under conditions of system peak load and the Generating Facility's peak
output may overlook the study of other conditions that could be unsafe.
NERC asserts that use of the term ``limiting conditions'' provides the
flexibility to incorporate studies that are necessary to ensure
reliability.
Commission Conclusion
783. The study requirements for Energy Resource Interconnection
Service and Network Resource Interconnection Service are set forth in
Sections 3.2.1 and 3.2.2 of the Final Rule LGIP.
784. In response to PG&E, the principal difference between the
study requirements for Energy Resource Interconnection Service and
Network Resource Interconnection Service is that the study for Network
Resource Interconnection Service identifies the Network Upgrades that
are needed to allow the Generating Facility to contribute to meeting
the overall capacity needs of the Control Area or planning region
whereas the study for Energy Resource Interconnection Service does not.
The study for Energy Resource Interconnection Service includes short
circuit/fault duty, steady state (thermal and voltage) and stability
analyses to identify the Network Upgrades needed to allow the output of
the Generating Facility to be injected into the Transmission System
using capacity on an ``as available'' basis. By contrast, the study for
Network Resource Interconnection Service includes similar analyses but
also assumes that the output of the Generating Facility may displace
the output of certain other Network Resources on the Transmission
System. The study then identifies the Network Upgrades that would be
required to allow the Generating Facility to be counted toward system
capacity needs in the same manner as the displaced resources. However,
the Interconnection Customer may request that Optional Studies be
performed, and Section 3.2 of the Final Rule LGIP allows the
Interconnection Customer then to proceed with Network Resource
Interconnection Service or to request a lower level of interconnection
service whereby only certain upgrades will be completed.
785. With regard to the changes to Article 4.1.2.2 of the LGIA
recommended by NERC and Cal ISO, we note that this provision is
intended to serve two purposes. First, it establishes the standards for
conducting necessary studies to provide the requested service while
ensuring that the reliability of the system is maintained. Second, it
deters a Transmission Provider from delaying an interconnection by
imposing on competing Interconnection Customers, in the name of
reliability, more stringent Interconnection Study requirements than it
would require of its own interconnections or those of its Affiliates.
Because NERC's and Cal ISO's proposals satisfy only the reliability
purpose, the Commission does not adopt them. Our requirement that the
interconnection be studied with the Transmission Provider's
Transmission System at peak load, under a variety of severely stressed
conditions, is comparable, we believe, to the study requirement that
the Transmission Provider applies to its own generation. However, we
are sympathetic to NERC's and Cal ISO's concerns. Therefore, the
Commission would entertain a request, in a non-independent Transmission
Provider's compliance filing required by this Final Rule, to adopt a
different requirement (e.g., off-peak load in addition to peak load) if
the non-independent Transmission Provider can demonstrate that the
proposed requirement is consistent with or superior to the requirement
of the Final Rule LGIP. At a minimum, the Transmission Provider must
demonstrate that it consistently applies the proposed requirement in
the studies it conducts for itself and its Affiliates. As discussed
below in Part II.C.5 (Variations from the Final Rule), we will allow an
RTO or ISO to seek an ``independent entity variation'' from the Final
Rule LGIP if it wants to adopt a different study requirement.
Identification of Types of Interconnection Services To Be Studied
786. According to Section 3.2 of the NOPR LGIP, when the
Interconnection Customer submits its Interconnection Request, it would
be required to identify the type of Interconnection Service it wants.
However, an Interconnection Customer requesting Network Resource
Interconnection Service would have the option of requesting that its
Interconnection Request also be studied for the less comprehensive
Energy Resource Interconnection Service up to the point when an
Interconnection Facilities Study Agreement is executed.
Comments
787. Several commenters state that allowing the Interconnection
Customer to request that its Interconnection Request be studied for
both Network Resource Interconnection Service and Energy Resource
Interconnection Service concurrently will unnecessarily tax the
Transmission Provider's resources and increase the burden of performing
the studies. Entergy and BPA believe that this option will
unnecessarily delay the conduct of studies for third party
interconnections unless the Interconnection Customer is required to
select the particular service under which it will interconnect prior to
the execution of an Interconnection System Impact Study Agreement.
Entergy states that such a limitation would not unduly disadvantage the
Interconnection Customer, but would further ensure that a Transmission
[[Page 49915]]
Provider's limited transmission planning resources are used to perform
studies for interconnections that are likely to be completed. NYTO
believes that the additional study work required to conduct concurrent
studies is not accounted for in the Interconnection Feasibility, System
Impact or Facilities Study sections of the NOPR LGIP. It states that
additional time would be required to conduct the concurrent studies if
the Transmission Provider is required to offer this option. Also, Cal
ISO asks whether two deposits will be required if an Interconnection
Customer requests that the Interconnection Request be studied as both
Network Resource Interconnection Service and Energy Resource
Interconnection Service.
788. BPA observes that the NOPR LGIP included very strict timelines
for completion of various studies and provided for no meaningful
milestones or other means by which the Transmission Provider can ensure
that only bonafide Interconnection Requests remain in the queue. It
states that this places a Transmission Provider with a large number of
Interconnection Requests in a very difficult position, and the more
concurrent studies the Interconnection Customer can require the
Transmission Provider to perform on a single request, the more
difficult this position becomes. BPA believes that requiring concurrent
studies is purely for the convenience of the Interconnection Customer,
and that it is not unreasonable to require the Interconnection Customer
to choose early in the process what kind of resource it intends to
develop.
789. Georgia Transmission believes that it is appropriate to allow
the Interconnection Customer to request concurrent studies throughout
the Interconnection Feasibility Study stage, but allowing the parallel
studies to continue beyond that point simply gives the Interconnection
Customer more time to decide what type of Interconnection Service
product to contract for, while greatly increasing the study burden on
the Transmission Provider. Georgia Transmission claims that the
Interconnection System Impact Study is a much more complex and involved
study than the Interconnection Feasibility Study. Further, to
accommodate the Interconnection Customer's desire to study multiple
Interconnection Service products, Georgia Transmission claims that the
Transmission Provider must conduct multiple studies not only for the
first Interconnection Customer, but for all other Interconnection
Customers proceeding through the interconnection process to reflect the
multiple service characteristics of the first Interconnection Customer.
If these other Interconnection Customers also request the Transmission
Provider to concurrently study multiple service options, the
Transmission Provider study burden ``quickly snowballs out of
control.'' \120\ At this stage of the Interconnection Study process,
the cost of studying the multiple service options greatly outweighs the
benefits to the Interconnection Customer.
---------------------------------------------------------------------------
\120\ Comments of Georgia Transmission at 18.
---------------------------------------------------------------------------
790. TVA argues that allowing an Interconnection Customer to
request that the Transmission Provider study both types of
Interconnection Services may double the work of the Transmission
Provider at each stage up to the Interconnection Facilities Study
stage. It finds this troubling in light of the NOPR's proposed
milestones frames and the possibility of the Transmission Provider
having to pay liquidated damages for failure to meet the deadlines.
791. Interconnection Customers, however, express very different
views. For example, Tenaska states that the choice between Network
Resource Interconnection Service and Energy Resource Interconnection
Service will be dictated by the Interconnection Customer's wholesale
power customer. It argues that marketing efforts for new generation
projects are not completed until late in the development process,
making it impossible for the Interconnection Customer to know with
certainty which service it requires. Tenaska asks that the
Interconnection Customer be afforded maximum flexibility to choose
between the two interconnection Services and recommends that, instead
of making the Interconnection Customer choose prior to executing the
Interconnection Facilities Study Agreement, the Final Rule LGIP should
allow the Interconnection Customer to defer its choice until the
execution of the interconnection agreement.
Commission Conclusion
792. While conducting complex Interconnection Studies can be
burdensome for the Transmission Provider, the Commission is not
amending NOPR LGIP Section 3.2 to eliminate the Interconnection
Customer's option to have its request studied as Energy Resource
Interconnection Service as long as it has also requested to be studied
as Network Resource Interconnection Service. This is a valuable option
for the Interconnection Customer because it provides key information to
support its investment decisions, and thus helps to meet the
Commission's goal of encouraging the development of a new generation.
793. The Commission also recognizes that the Interconnection System
Impact Study is more complex than the Interconnection Feasibility
Study. However, the Commission does not believe that it would be
reasonable to require the Interconnection Customer to choose between
the two services prior to executing the Interconnection System Impact
Study Agreement, as several commenters propose. Once the
Interconnection Customer has asked to be studied for Network Resource
Interconnection Service, a service that is far more comprehensive than
Energy Resource Interconnection Service, the incremental burden created
by also having to conduct an Interconnection System Impact Study for
the simpler Energy Resource Interconnection Service should not be
great. It is for this reason that the Commission disagrees with Georgia
Transmission's contention that having to study multiple options will
have a significant snowball effect on the overall study burden.
Moreover, the Transmission Provider will be fully compensated for all
of the costs that it incurs in conducting a more expansive study. As
for the risk that the Transmission Provider faces by allowing the
Interconnection Customer to make this choice, such risk is mitigated by
the fact that the Commission is not making the Transmission Provider
subject to liquidated damages under the Final Rule LGIP.\121\
---------------------------------------------------------------------------
\121\ Liquidated damages in the LGIP are further discussed in
part II.C.8.b(4).
---------------------------------------------------------------------------
Revisions to the Final Rule LGIP and Final Rule LGIA
794. In the Final Rule, the Commission is modifying various
provisions of the NOPR LGIP and NOPR LGIA to provide greater clarity
and to make other minor changes with respect to scope of service and
interconnection products, as discussed above. In addition, the
Commission is incorporating in the Final Rule LGIP certain provisions
concerning product definitions and study requirements that were
included in the NOPR LGIA but not the NOPR LGIP. These provisions are
being added to the Final Rule LGIP because they directly relate to the
process of obtaining an interconnection. They appear as new Sections
3.2.1 and 3.2.2 in the Final Rule LGIP.
[[Page 49916]]
3. ``Distribution'' Interconnections
795. We proposed in the NOPR \122\ that we would assert authority
to order interconnection when the Interconnection Customer wants to
interconnect its Generating Facility with a jurisdictional transmission
facility, or when it will make a wholesale sale of electric energy in
interstate commerce using a public utility's ``distribution''
facilities.
---------------------------------------------------------------------------
\122\ See Large Generator Interconnection NOPR, FERC Stats. &
Regs. ] 32,560 at 34,178 & n.22 (2002).
---------------------------------------------------------------------------
Comments
796. Commenters objecting to the Commission's jurisdictional
statement--chiefly Transmission Providers, public power providers, and
state public utility commissions \123\--argue that ``distribution''
interconnection raises complex jurisdictional issues and that the
Commission should leave this issue to the States, in part because they
have experience regulating these kinds of interconnections. EEI notes
that it is unclear if the Commission has authority over sales of power
for resale using ``distribution'' facilities when the energy neither
crosses state lines nor enters the interstate transmission system. The
Public Power Council asks the Commission to recognize the jurisdiction
of state commissions and local governing boards over the
``distribution'' systems of investor-owned and publicly owned
utilities. SoCal Edison and PG&E ask the Commission to clarify that
when a retail customer installs a generating facility that will never
send energy over the Transmission System (i.e., the energy will be
consumed on site), this is a retail service arrangement beyond
Commission jurisdiction.
---------------------------------------------------------------------------
\123\ E.g., Consumers, EEI, LADWP, National Grid, the North
Carolina Commission, NRECA-APPA, the Public Power Council, and the
Wisconsin PSC.
---------------------------------------------------------------------------
797. The North Carolina Commission argues that, because it has not
restructured its electric industry, any generating facility in North
Carolina not owned by a vertically integrated utility would be required
to sell its output at wholesale (because it cannot sell directly to
retail consumers). As a result, the NOPR effectively eliminates state
jurisdiction over the interconnection of generators involved in
programs such as net metering or green power, which rely on simpler and
less expensive interconnection procedures and agreements than those
proposed by the Commission. These interconnection decisions are best
left to the States.
798. APS notes that the NOPR does not address how Transmission
Providers will handle their responsibilities over transmission
facilities jointly owned by jurisdictional and non-jurisdictional
entities. This is a particular concern in the Western United States.
APS warns that the failure to examine this issue in a separate NOPR
will result in a patchwork of transmission terms and conditions that
the Commission sought to avoid in Order No. 888.\124\
---------------------------------------------------------------------------
\124\ Citing Order No. 888, FERC Stats. & Regs ] 31,036 at
31,673.
---------------------------------------------------------------------------
799. EEI raises other objections, noting that Commission regulation
of ``distribution'' interconnections may create new layers of
regulatory costs that will not be recoverable in retail rates. It also
warns that competing and possibly conflicting state and federal
interconnection requirements may encourage forum-shopping by
Interconnection Customers and create problems for ``distribution''
providers. To discourage this, National Grid proposes that an
Interconnection Customer should state whether it will make sales for
resale before the Scoping Meeting provided for in Section 3.3.4 of the
proposed LGIP; this will determine how the Interconnection Studies will
be performed. Once established, the designation could not be changed
unilaterally by the Interconnection Customer.
800. NRECA-APPA argues that, because ``distribution'' systems do
not operate like Transmission Systems, ``distribution''
interconnections will require provisions not in the NOPR LGIP and NOPR
LGIA, including different Interconnection Study requirements. It argues
that the physical differences and economic differences between
interconnection at ``distribution'' and transmission levels--
distribution is typically ``low voltage'' and transmission typically is
``high voltage,'' and ``distribution'' providers may lack engineering
personnel necessary to evaluate Interconnection Requests--would make a
single rule completely inappropriate. WEPCO argues that the NOPR LGIP
and NOPR LGIA are unworkable for interconnections to the
``distribution'' system because ``distribution'' companies serve load
and ``distribution'' systems are not designed to accommodate large
generation facilities seeking to move energy off the ``distribution''
system. Accordingly, the Commission should clarify that the principles
underlying the Final Rule LGIP and Final Rule LGIA, i.e.,
nondiscriminatory access and comparable treatment, will be applicable
to both ``distribution'' and transmission, but that the documents will
apply only to transmission level interconnections. State-approved
tariffs should govern ``distribution''-level interconnections.
Nevertheless, an Interconnection Customer interconnecting to a
``distribution'' system still would be entitled to petition the
Commission if it encountered undue discrimination.
801. Consumers see a useful analogy in the Commission's natural gas
regulations. It argues that the Commission should consider adopting an
approach like the blanket certificate program applied to natural gas
pipelines for incidental jurisdictional uses of non-jurisdictional
transportation facilities. The goal of the Commission's blanket
certificate program \125\ is to remove restraints on the flow of gas
between the interstate and the intrastate market. It allows entities
that are otherwise state-jurisdictional to perform incidental
Commission-jurisdictional activities without subjecting them, or their
incidental interstate activities, to full Commission regulation.
---------------------------------------------------------------------------
\125\ 18 CFR 284.224 (2003).
---------------------------------------------------------------------------
802. NARUC states that it ``supports the Commission's statement
that the NOPR [LG]IA and [LG]IP `will apply only when a generator
interconnects to the Transmission Provider's transmission system or
makes wholesale sales in interstate commerce at either the transmission
or distribution voltage level,' '' but argues that the States ``are
best situated to ensure the efficient, reliable and safe
interconnection of small generators to local distribution systems and
should continue to have that authority, as the NOPR recognizes.''\126\
TAPS supports Commission jurisdiction over the interconnection of
generators used for wholesale sales, whether the interconnection is
made to transmission or ``distribution,'' because such application is
essential to prevent evasion of the intent of the NOPR to provide non-
discriminatory interconnection service, and should encompass wholesale
interconnections to the Distribution Systems of large jurisdictional
utilities that have divested their transmission facilities to an
independent transmission company or the like.
---------------------------------------------------------------------------
\126\ NARUC comments at 5 (citation omitted) (emphasis added by
NARUC).
---------------------------------------------------------------------------
Commission Conclusion
803. At the outset, it is important to clarify several terms when
discussing the question of jurisdiction. ``Local distribution'' is a
legal term; under FPA Section 201(b)(1), the Commission lacks
[[Page 49917]]
jurisdiction over local distribution facilities.\127\ ``Distribution''
is an unfortunately vague term, but it is usually used to refer to
lower-voltage lines that are not networked and that carry power in one
direction. Some lower-voltage facilities are ``local distribution''
facilities not under our jurisdiction, but some are used for
jurisdictional service such as carrying power to a wholesale power
customer for resale and are included in a public utility's OATT
(although in some instances, there is a separate OATT rate for using
them, sometimes called a Wholesale Distribution Rate).
---------------------------------------------------------------------------
\127\ 16 U.S.C. 824(b)(1) (2000).
---------------------------------------------------------------------------
804. This Final Rule applies to interconnections to the facilities
of a public utility's Transmission System that, at the time the
interconnection is requested, may be used either to transmit electric
energy in interstate commerce or to sell electric energy at wholesale
in interstate commerce pursuant to a Commission-filed OATT.\128\ In
other words, the standard interconnection procedures and contract terms
adopted in this Final Rule apply when an Interconnection Customer that
plans to engage in a sale for resale in interstate commerce or to
transmit electric energy in interstate commerce requests
interconnection to facilities owned, controlled, or operated by the
Transmission Provider or the Transmission Owner, or both, that are used
to provide transmission service under an OATT that is on file at the
Commission at the time the Interconnection Request is made. Therefore,
the Final Rule applies to a request to interconnect to a public
utility's facilities used for transmission in interstate commerce. It
also applies to a request to interconnect to a public utility's
``distribution'' facilities used to transmit electric energy in
interstate commerce on behalf of a wholesale purchaser pursuant to a
Commission-filed OATT. But where the ``distribution'' facilities have a
dual use, i.e., the facilities are used for both wholesale sales and
retail sales, the Final Rule applies to interconnections to these
facilities only for the purpose of making sales of electric energy for
resale in interstate commerce.\129\
805. In response to SoCal Edison and PG&E, we clarify that we are
not asserting jurisdiction over a hook-up between a retail customer and
a Transmission Provider when a retail customer installs a generator
that will produce electric energy to be consumed only on site.
---------------------------------------------------------------------------
\128\ For purposes of this paragraph, the term ``Commission-
filed OATT'' means a tariff that is on file at, and has been
approved by, the Commission.
\129\ The Commission will exercise exclusive jurisdiction only
over the Commission-jurisdictional service. See Laguna Irrigation
District, 95 FERC ] 61,305 at 62,039 (2001) aff'd sub nom. Pacific
Gas & Electric Co. v. FERC, 44 Fed. Appx. 170 (9th Cir. 2002); Tex-
La Electric Cooperative of Texas, Inc., 67 FERC ] 61,019 at 61,055-
56, final order, 69 FERC ] 61,269 (1994) (both noting that the
Commission asserts jurisdiction over the service when the facilities
are not purely ``transmission'' facilities). Accordingly, the
Commission will continue to exercise exclusive jurisdiction over the
rates, terms, and conditions of the Commission-jurisdictional
service provided over the dual use ``distribution'' facility, but
the Commission will not assert jurisdiction over all uses of that
facility, because the regulation of ``local distribution'' of
electricity to end users is reserved to the States.
---------------------------------------------------------------------------
806. Regarding the arguments that the NOPR LGIP and NOPR LGIA are
designed for interconnection to a transmission system and not a
``distribution'' system, we expect that the majority of
interconnections to jurisdictional ``distribution'' or other
jurisdictional low-voltage facilities will be made by generators no
larger than 20 MW. These Small Generators will be interconnected using
the standard procedures and agreement adopted in the Small Generator
rulemaking. We are proposing rules in that proceeding to accommodate
the interconnection of Small Generators, mostly to jurisdictional
``distribution'' (not ``local distribution'') and low-voltage
facilities. However, in response to WEPCO's argument, we conclude that
under some circumstances (e.g., interconnection to facilities below 69
kV) the Interconnection Studies in the Final Rule LGIP may be
inappropriate to analyze some Large Generator Interconnection Requests.
In such a case, we will allow the Transmission Provider to use modified
Interconnection Studies, subject to Commission approval. The Commission
expects that interconnection requests of this kind will be rare and, as
a result, we do not at this time incorporate a standard study
specifically designed for interconnections to low-voltage or
``distribution'' facilities into the Final Rule LGIP. Accordingly, a
Transmission Provider may use the studies it deems appropriate to
properly study the Interconnection Request, subject to Commission
approval. The Commission therefore requires that a Transmission
Provider, upon receipt of a request for jurisdictional interconnection
to a jurisdictional ``distribution'' or low-voltage facility, file with
the Commission an amendment to the LGIP in its OATT that describes the
Interconnection Studies applicable to such requests.
807. APS raises concerns regarding joint ownership of transmission
by jurisdictional and non-jurisdictional entities. In Order No. 888,
the Commission required each public utility that owns an interstate
transmission facility jointly with a non-jurisdictional entity to offer
service over its share of the joint facility, even if the joint
ownership contract prohibits service to third parties.\130\ Applying
the same principle here, joint ownership does not affect the
Commission's authority to regulate the public utility. Accordingly, the
Final Rule LGIP and Final Rule LGIA would apply to Interconnection
Service provided by the public utility on its portion of a jointly
owned facility.
---------------------------------------------------------------------------
\130\ See Order No. 888, FERC Stats. & Regs ] 31,036 at 31,692;
Order No. 888-A, FERC Stats. & Regs ] 31,048 at 30,219 (urging such
public utilities to seek mutually agreeable revisions to their
agreements with non-jurisdictional entities to permit third-party
access to all, or at least the public utility share, of the
facilities, and to file proposed revisions to such contracts with
the Commission).
---------------------------------------------------------------------------
808. Regarding EEI's comment about the Commission's authority over
an interconnection for the purpose of making sales of electric energy
for resale using ``distribution'' facilities when the energy neither
crosses state lines nor enters the interstate transmission system, this
question is moot because the Commission is not here extending its
jurisdiction to any facility that is not already under its
jurisdiction, pursuant to a Commission-filed OATT at the time the
interconnection request is made.
809. Finally, regarding EEI's objection that Commission regulation
of ``distribution'' interconnections may create new layers of
regulatory costs not recoverable in retail rates, our jurisdiction
discussion above clarifies that because this Final Rule applies only
where the Commission already has jurisdiction at the time
interconnection is requested, this should not result in any new
unrecoverable regulatory costs to a Transmission Provider.
4. Issues Relating to Qualifying Facilities
810. The NOPR did not address interconnection issues related to
qualifying facilities (QFs) under the Public Utility Regulatory
Policies Act of 1978 (PURPA).\131\ Nevertheless, several commenters
bring QF-related issues to our attention.
---------------------------------------------------------------------------
\131\ See 16 U.S.C. 2601 et seq.(2000).
---------------------------------------------------------------------------
Comments
811. Cal Cogen and ELCON recommend that the Commission allow a QF
to request interconnection under state authority when it either sells
the majority of its output under a PURPA-based power sales agreement,
or does not sell power to the wholesale market.
[[Page 49918]]
If the QF primarily generates electricity for sale in wholesale markets
under non-PURPA agreements, they argue, the Final Rule should apply.
Cal Cogen argues that this approach is in keeping with the Commission's
Regulations, which give the States the responsibility for QF
interconnections,\132\ and Commission precedent, which holds that an
interconnection agreement in which an interconnected utility purchases
a QF's total output falls under state authority.\133\
---------------------------------------------------------------------------
\132\ Citing 18 CFR 292.306, 292.308 (2003).
\133\ Citing Western Massachusetts Electric Co., 61 FERC ]
61,182 (1992), aff'd sub nom. Western Massachusetts Electric Co. v.
FERC, 165 F.3d 922 (D.C. Cir. 1999).
---------------------------------------------------------------------------
812. Similarly, SoCal Edison and PG&E request that the Commission
clarify that the Final Rule LGIP and Final Rule LGIA will not apply to
a QF selling to the interconnected utility or to on-site customers.
Calpine requests that generating facilities currently interconnected to
the Transmission System under non-FERC-jurisdictional arrangements,
such as QFs, that subsequently become FERC-jurisdictional by
terminating their QF status or deciding to sell power in the wholesale
market, not be treated as ``new'' generating facilities or ``new''
Interconnection Customers under the interconnection procedures. While
only the contractual arrangements have changed, the physical
interconnection requirements remain unchanged, and as long as the
Generating Facility's output will be substantially the same after
conversion, no Interconnection Studies are necessary and the
Interconnection Customer should not be placed in the Transmission
Provider's interconnection queue with new Generation Facilities.
Rather, the Interconnection Customer should only have to execute the
Commission-jurisdictional interconnection agreement to become effective
upon termination of the state-jurisdictional agreement. Independent
Producers, which makes a similar argument, notes that treating a newly
jurisdictional former QF as a new interconnection would be
discriminatory since this would essentially require that facilities be
interconnected twice. If an existing QF is already in the ``base case''
used to determine impacts of new generators, and this same base case is
used to analyze the interconnection of the existing QF, there will be
no effect.
Commission Conclusion
813. The Commission's Regulations govern a QF's interconnection
with most electric utilities in the United States,\134\ including
normally nonjurisdictional utilities.\135\ When an electric utility is
obligated to interconnect under Section 292.303 of the Commission's
Regulations, that is, when it purchases the QF's total output, the
relevant state authority exercises authority over the interconnection
and the allocation of interconnection costs.\136\ But when an electric
utility interconnecting with a QF does not purchase all of the QF's
output and instead transmits the QF power in interstate commerce, the
Commission exercises jurisdiction over the rates, terms, and conditions
affecting or related to such service, such as interconnections.\137\
---------------------------------------------------------------------------
\134\ 18 CFR 292.303, 292.306 (2003).
\135\ The absence of interstate commerce in Alaska, Hawaii,
portions of Texas and Maine, and Puerto Rico is not germane to the
Commission's jurisdiction over QF matters under PURPA. See 16 U.S.C.
2602 (2000).
\136\ See Western Massachusetts Electric Co., 61 FERC ] 61,182
at 61,661-62 (1992) (Western Massachusetts), aff'd sub nom. Western
Massachusetts Electric Co. v. FERC, 165 F.3d. 922, 926 (D.C. Cir.
1999).
\137\ See id. at 61,661-62. The Commission further clarified
that the use of facilities for non-jurisdictional services is not
dispositive when determining jurisdiction: ``The fact that the
facilities used to support the jurisdictional service might also be
used to provide various nonjurisdictional services, such as back-up
and maintenance power for a QF, does not vest state regulatory
authorities with authority to regulate matters subject to the
Commission's exclusive jurisdiction.'' Id. at 61,662.
---------------------------------------------------------------------------
814. Thus, the Commission has jurisdiction over a QF's
interconnection to a Transmission System if the QF's owner sells any of
the QF's output to an entity other than the electric utility directly
interconnected to the QF. Because the presence of any output sold to a
third party determines Commission jurisdiction, we reject Cal Cogen and
ELCON's requests that we establish jurisdiction over QF
interconnections based on the amount of energy sold to a third party.
Accordingly, this Final Rule applies when the owner of the QF seeks
interconnection to a Transmission System to sell any of the output of
the QF to a third party. This jurisdiction applies to a new QF that
plans to sell its output to a third party, and to an existing QF
interconnected to a Transmission System that historically sold its
total output to an interconnected utility or on-site customer and now
plans to sell output to a third party. Nevertheless, consistent with
the Commission's Regulations, states will continue to exercise
authority over QF interconnections when the owner of the QF sells the
output of the QF only to an interconnected utility or to on-site
customers.
815. Finally, regarding a former QF interconnected to a
Transmission System that sells electric energy at wholesale in
interstate commerce, we conclude that the owner of the QF need not
submit an Interconnection Request if it represents that the output of
the generating facility will be substantially the same as before. A QF,
under the Commission's Regulations,\138\ must provide electric energy
to its interconnecting utility much like the interconnecting utility's
other Network Resources, since the utility must purchase the QF's power
to displace its own generation. When the owner of a QF that was
formerly interconnected to a Transmission System seeks to sell energy
at wholesale and represents that the output of its generator will be
substantially the same after conversion, it would be unreasonable for a
Transmission Provider to require the former QF to join the
interconnection queue.
---------------------------------------------------------------------------
\138\ 18 CFR 292.303 (2003).
---------------------------------------------------------------------------
5. Variations From the Final Rule
816. In the NOPR, we proposed to allow a Transmission Provider to
justify variations from the non-price terms and conditions of the
interconnection provisions of the Final Rule using the approach taken
in Order No. 888. Order No. 888 allows two types of variations. First,
public utilities may seek to use regional differences to justify
proposed changes to certain specifically identified OATT provisions
when the proposed alternative provision is ``reasonable, generally
accepted in the region, and consistently adhered to by the
[T]ransmission [P]rovider.''\139\ Second, public utilities may argue
that proposed changes to any OATT provision are ``consistent with or
superior to'' the terms of the OATT. In the NOPR, we also stated that
if a legitimate need for regional variations in specific provisions in
the Final Rule LGIP and Final Rule LGIA were identified, we would
consider adopting specific provisions that permit regional variations.
---------------------------------------------------------------------------
\139\ See Order No. 888, FERC Stats. & Regs ] 31,036 at 31,770.
---------------------------------------------------------------------------
Comments
817. While a few commenters, including Cinergy, Dynegy, and SoCal
Edison, support the proposed provision, others seek greater flexibility
to propose changes based on regional differences for provisions other
than those the Commission identified as specific eligible provisions.
For example, several commenters argue that the Commission should allow
variations for regional
[[Page 49919]]
differences based on the reliability needs of a particular region,
which may be unique because of system configuration or generation
prevalent in the region.\140\
---------------------------------------------------------------------------
\140\ E.g., Florida RCC, NARUC, the North Carolina Commission,
the Public Power Council, and WEPCO.
---------------------------------------------------------------------------
818. Several commenters, including APS, the Connecticut PUC, and
WestConnect RTO, request that the Commission allow specific regional
interconnection standards or reliability requirements to be treated as
regional differences. The Florida RCC proposes that the Commission
require that the Parties comply with any standards and guidelines of
the Applicable Reliability Council. It offers several specific
provisions that should be revised to account for the requirements
established by the Florida RCC and other regional reliability councils.
819. MidAmerican argues that the Final Rule should recognize
regional differences particular to the Midwest. As an example, it
offers the high potential for wind farms in the Midwest, and the
resulting need to study voltage flicker, harmonics, dynamic voltage
stability, stray voltage, and small signal stability. According to
MidAmerican, these additional study options, which were not expressly
proposed in the NOPR, should be included in the Final Rule to recognize
regional differences. Entergy requests that the Commission consider
extending the dates for completing Interconnection Studies in a region
when there is a large number of Interconnection Requests.
820. Dairyland Power requests that during the compliance phase of
this rulemaking the Commission allow a Transmission Provider greater
flexibility to make changes using a regional differences rationale.
Monongahela Power argues that regional differences should be
accommodated, but only on a case-by-case basis through application for
exemption rather than through changes to the Final Rule. In this way,
the Final Rule serves as a baseline national standard. In contrast,
Mirant requests that the Commission restrict the availability of
variations based on regional differences to large, established ISOs
that can show that the variations are consistent with or superior to
what appears in the Final Rule.
821. NYISO recommends that the Commission revise the definition of
Good Utility Practice, which was proposed to include ``practices,
methods or acts generally accepted in a region,'' and which is used
repeatedly in the NOPR LGIP and NOPR LGIA to describe the standards
that will be applied to certain obligations. It urges that the
definition should include among eligible regions those administered by
an RTO or ISO.
Commission Conclusion
822. We will apply a regional differences rationale to accommodate
variations from the Final Rule during compliance, but with certain
restrictions. We conclude that a non-independent transmission provider
(such as a Transmission Provider that owns generators or has Affiliates
that own generators) and an RTO or ISO should be treated differently
because an independent RTO or ISO does not raise the same level of
concern regarding undue discrimination. Accordingly, we will allow an
RTO or ISO greater flexibility than that allowed under the regional
differences rationale to propose variations from the Final Rule
provisions, as further discussed below.
823. Although commenters generally did not identify provisions in
the NOPR LGIP or NOPR LGIA that should be subject to variations based
on ``regional differences,'' when a commenter did provide specific
provisions, the revisions were based on the reliability requirements of
a given region. Because we intend to supplement rather than supplant
the work that regional reliability groups already have undertaken
regarding interconnection, we are permitting a Transmission Provider,
on compliance, to offer variations based on existing regional
reliability requirements. Accordingly, regional flexibility is included
in the Final Rule definition of Good Utility Practice, which includes
practices established by relevant reliability councils and local laws
and regulations. We accommodate NYISO's proposal that the definition of
Good Utility Practice be revised as requested by instead defining it to
include ``acceptable practices, methods, or acts generally accepted in
the region.'' Thus, this definition includes by implication the
Commission-approved practices of those regions administered by an RTO
or ISO.
824. Nevertheless, there may be Final Rule provisions that do not
include reference to Good Utility Practice that may be subject to or
affected by regional reliability restrictions. Rather than identify all
such provisions in the Final Rule, as the Florida RCC proposes, we
leave it to the Transmission Provider to justify variations based on
regional requirements. With this approach, we are permitting public
utilities the flexibility necessary to ensure that reliability needs
are met. Because we seek greater standardization of interconnection
terms and conditions, we are not permitting a non-independent
Transmission Provider to use the regional differences justification in
the absence of established regional reliability standards.
825. For other proposed deviations from the Final Rule LGIP and
Final Rule LGIA not made in response to established regional
reliability requirements, we are requiring non-independent transmission
providers to justify variations in non-price terms and conditions of
the Final Rule LGIP and Final Rule LGIA using the approach taken in
Order No. 888, which allows them to propose variations on compliance
that are ``consistent with or superior to'' the OATT.
826. To clarify, if on compliance a non-RTO or ISO Transmission
Provider offers a variation from the Final Rule LGIP and Final Rule
LGIA and the variation is in response to established (i.e., approved by
the Applicable Reliability Council) reliability requirements, then it
may seek to justify its variation using the regional difference
rationale. If the variation is for any other reason, the non-RTO or ISO
Transmission Provider must present its justification for the variation
using the ``consistent with or superior to'' rationale that the
Commission applies to variations from the OATT in Order No. 888.
827. With respect to an RTO or ISO, at the time its compliance
filing is made, as discussed above, we will allow it to seek
``independent entity variations'' from the Final Rule pricing and non-
pricing provisions. This is a balanced approach that recognizes that an
RTO or ISO has different operating characteristics depending on its
size and location and is less likely to act in an unduly discriminatory
manner than a Transmission Provider that is a market participant. The
RTO or ISO shall therefore have greater flexibility to customize its
interconnection procedures and agreements to fit regional needs.
6. Waiver Availability for Small Entities
828. In the NOPR, we did not address whether special provisions are
needed for small Transmission Providers for whom providing
Interconnection Services might be overly burdensome.
Comments
829. Maine PSC asks the Commission to provide flexibility and
waiver of the full requirements of the Final Rule LGIP and Final Rule
LGIA for small transmission owners. Southwest Transmission requests
that the current ``small utility'' exception for Order Nos. 888 and 889
should not only be
[[Page 49920]]
retained, but it should be expanded to apply to cooperatives with total
electric energy dispositions that exceed four million MWh annually and
with outside sales that do not exceed one million MWh annually. SoCal
Water District also asks for a waiver for utilities with annual sales
of less than four million MWh.
Commission Conclusion
830. We are sympathetic to the array of concerns raised by small
Transmission Providers. Order Nos. 888 and 889 established guidelines
for the granting of waivers to small entities, and this Final Rule
adopts that approach and makes conforming changes to the regulatory
text in Part 35 of the Commission's regulations.\141\ We recognize, for
example, that it might be a financial burden on a small Transmission
Provider to perform Interconnection Studies or manage the construction
of Interconnection Facilities in the same manner as a larger
Transmission Provider. The small Transmission Provider may simply not
have the staff or expertise to efficiently accommodate all
Interconnection Requests.
---------------------------------------------------------------------------
\141\ See 18 CFR 35.28(d) (2003); Reg. Text 35.28(f)(3), infra.
---------------------------------------------------------------------------
831. Because the possible scenarios under which small entities may
seek waivers from the Final Rule are diverse, they are not susceptible
to resolution on a generic basis and we will require applications and
fact-specific determinations in each instance. If the circumstances
that give rise to the exemption change, the waiver may no longer be
appropriate. In addition, we will apply the same standards to any
entity seeking a waiver, including public utilities seeking waiver of
some or all of the requirements of the Final Rule, as well as non-
public utilities seeking waiver of the reciprocity provision. Each
entity, however, will have to apply for this waiver and demonstrate
that it qualifies for the waiver as required in Order No. 888.
7. OATT Reciprocity Requirements Applied to the Final Rule LGIP and
Final Rule LGIA
832. In the NOPR, we proposed that the Final Rule LGIP and Final
Rule LGIA be subject to the reciprocity provision of Order No. 888, as
incorporated into the OATTs adopted by public utilities.\142\ The
reciprocity provision allows any public utility that provides open
access transmission to a non-public utility to receive as a condition
of service non-discriminatory access in return.\143\ With the addition
of the Final Rule LGIP and Final Rule LGIA to the OATT, in order to
meet its reciprocity obligation, a non-public utility would have to
provide Interconnection Service to the Transmission Provider and the
Transmission Provider's Affiliates under the same terms and conditions
under which it receives service.
---------------------------------------------------------------------------
\142\ Large Generator Interconnection NOPR, FERC Stats. & Regs ]
32,560 at 34,184-185. See also Order No. 888, FERC Stats. & Regs. ]
31,036 at 31,755.
\143\ See Order No. 888, FERC Stats. & Regs. ] 31,036 at 31,760.
---------------------------------------------------------------------------
Comments
833. Several public power commenters, including Lakeland, LPPC,
Nebraska PPD, NRECA-APPA, and the Public Power Council, request that
the Commission clarify that it indeed intends to apply, without
modification, the reciprocity policy as expressed in Order No. 888 to
the Final Rule LGIP and Final Rule LGIA. Other commenters such as LADWP
and LIPA warn that any attempt to expand the reciprocity policy to
allow a generator unaffiliated with a Commission-jurisdictional
Transmission Provider to require a non-public utility to comply with
the reciprocity condition would be an impermissible extension of
Commission jurisdiction.
834. Mirant argues that the Commission should add additional
reciprocity language to every Transmission Provider's OATT that
conditions the continued provision of transmission service on a non-
public utility Interconnection Customer offering comparable
Interconnection Service on its own transmission facilities.
835. Nebraska PPD objects to any reciprocity with respect to the
Final Rule LGIP and Final Rule LGIA. In the alternative, it seeks
clarification that the jurisdictional Transmission Provider may waive
reciprocity. It also joins LPPC in requesting that only terms and
conditions, and not the rate provisions, be subject to the reciprocity
condition.
836. Pinnacle West argues that the Commission should state that the
reciprocity requirement cannot be satisfied if a non-public utility
fails to provide credits against transmission service bills for Network
Upgrades. Otherwise, Pinnacle West continues, the non-public utilities
would be engaging in prohibited ``and'' pricing that charges customers
twice for transmission service. It states that Commission precedent has
made clear that to satisfy reciprocity, a non-public utility must
charge rates comparable to the rates it charges itself.\144\
---------------------------------------------------------------------------
\144\ Citing Missouri Basin Municipal Power Authority, 99 FERC ]
61,062 at 61,296 (2002).
---------------------------------------------------------------------------
837. TAPS explains that the reciprocity condition should impose an
obligation to interconnect on a basis that is reasonable under the
circumstances and comparable to the way the non-public utility treats
its own interconnections. It supports the availability of a Commission
waiver of the reciprocity requirement for small transmission owners.
838. Certain public power entities, including the Bureau of
Reclamation, LIPA, NYTO, Southwest Transmission, and TAPS, ask the
Commission to consider the statutory or regulatory restrictions
applicable to public power and other non-public utilities when the
Commission evaluates their reciprocity compliance filings. They request
that non-public utilities be afforded sufficient flexibility to include
or modify certain provisions as required by law.
839. SoCal Edison expresses concern that an interconnection with a
non-public utility may require Network Upgrades to a neighboring public
utility's transmission facilities, and that the neighboring public
utility would have no recourse should the owner of the generator and
the non-public utility proceed with the interconnection without paying
the neighboring public utility's upgrade costs. It proposes that the
Commission, as part of the reciprocity provision, allow a
jurisdictional utility to disconnect from its non-jurisdictional
neighbor unless the neighbor ensures that the interconnecting generator
mitigates the effects on the jurisdictional utility's system.
Commission Conclusion
840. Some commenters may have misunderstood our reciprocity
statement in the NOPR as extending reciprocity rights to public
utilities that do not own, control, or operate transmission either
directly or through an Affiliate. The owners of many generators are
public utilities that do not own, and are not affiliated with a public
utility that owns, transmission. They are thus incapable of offering
reciprocity service. We wish to make it clear that this Final Rule in
no way alters the applicability of the reciprocity provision in the
OATT and the reciprocity policy articulated in Order No. 888 and its
progeny. The point of the reciprocity requirement is to permit a public
utility that provides open access transmission service to require a
[[Page 49921]]
non-public utility that owns, controls, or operates transmission
facilities to have available reciprocal transmission service from that
non-public utility. The concept of reciprocity is simply irrelevant if
the non-public utility does not own, control, or operate transmission
facilities, as is the case with many Interconnection Customers. Because
the Final Rule LGIP and Final Rule LGIA are to become a part of the
OATT, the reciprocity provision in the OATT applies to interconnection
as well. EEI--Alliance of Energy Suppliers, MidAmerican, and Nevada
Power, among others, filed comments supporting this approach.
841. Under the reciprocity provision in Section 6 of the OATT, if
the public utility seeks transmission service from a non-public utility
to which it provides open access transmission service, the non-public
utility that owns, controls, or operates transmission facilities must
provide comparable transmission service that it is capable of providing
on its own system. Under the OATT, a public utility may refuse to
provide open access transmission service to a non-public utility if the
non-public utility refuses to reciprocate. A non-public utility may
satisfy the reciprocity condition in one of three ways: first, it may
provide service under a Tariff that has been approved by the Commission
under the voluntary ``safe harbor'' provision. A non-public utility
using this alternative submits a reciprocity Tariff to the Commission
seeking a declaratory order that the proposed reciprocity Tariff
substantially conforms to or is superior to the OATT. The non-public
utility then must offer service under its reciprocity Tariff to any
public utility whose transmission service the non-public utility seeks
to use. Second, the non-public utility may provide service to a public
utility under a bilateral agreement that satisfies its reciprocity
obligation. Finally, the non-public utility may seek a waiver of the
reciprocity condition from the public utility.\145\
---------------------------------------------------------------------------
\145\ See Order No. 888-A, FERC Stats. & Regs ] 31,048 at
30,285-86.
---------------------------------------------------------------------------
842. A non-public utility that has a ``safe harbor'' Tariff may add
to its Tariff an interconnection agreement and interconnection
procedures that substantially conform or are superior to the Final Rule
LGIP and Final Rule LGIA if it wishes to continue to qualify for safe
harbor treatment. A non-public utility that owns, controls, or operates
transmission and that has not filed with the Commission a safe harbor
Tariff and seeks transmission service from a public utility must either
satisfy its reciprocity obligation under a bilateral agreement or seek
a waiver of the OATT reciprocity condition from the public utility.
843. We do not require, as Pinnacle West proposes, that a non-
public utility also provide transmission credits for Network Upgrade
costs, to satisfy the Commission's reciprocity condition. With respect
to a tariff filed under the ``safe harbor'' provision, our reciprocity
policy requires that it contain rates comparable to the rates the non-
public utility charges itself.\146\ As for rates contained in a
bilateral agreement, they are a fact-specific matter that will be
subject to a case-by-case analysis.\147\
---------------------------------------------------------------------------
\146\ See generally Order No. 888, FERC Stats. & Regs ] 31,036
at 31,761; see also Long Island Power Authority, 84 FERC ] 61,280 at
62,333 (1998).
\147\ Order No. 888-A, FERC Stats. & Regs ] 31,048 at 30,289.
---------------------------------------------------------------------------
844. Regarding the applicability of the reciprocity requirement to
public power and other nonjurisdictional entities, we shall limit
reciprocity compliance to those services a nonjurisdictional entity is
capable of providing on its system.\148\ We likewise will consider the
legal and regulatory restrictions on nonjurisdictional entities'
contractual rights and tax-exempt status when we evaluate any ``safe
harbor'' reciprocity filings.
---------------------------------------------------------------------------
\148\ Id. at 30,286.
---------------------------------------------------------------------------
845. Finally, since we did not propose to change the reciprocity
condition articulated in the OATT in this Final Rule, SoCal Edison's
concerns are more appropriately addressed in the discussion of effects
on third party systems.
8. General Comments/Clarifications
a. Insurance
846. In the NOPR, we omitted the insurance requirements originally
filed in the ANOPR Consensus LGIA. Those insurance requirements would
have set out the minimum coverage types and amounts that each Party to
the LGIA must maintain. The NOPR did not propose insurance requirements
because insurance requirements are not contained in the OATT.
Comments
847. Many commenters, primarily Transmission Providers, ask the
Commission to reconsider its proposal to omit the insurance
requirements.\149\ They argue that insurance provisions are common in
individually negotiated interconnection agreements and are important
for managing risks and containing liability costs. The magnitude of the
costs and potential liability at issue necessitate the inclusion of
insurance provisions, they claim. Entergy explains that since the
indemnification provision in NOPR LGIA Article 18 likely will be
inadequate to make the Transmission Provider whole, insurance is
necessary to ensure that damaged Parties are made whole for a
disturbance caused by a Generating Facility.
---------------------------------------------------------------------------
\149\ E.g., American Transmission, APS, Dominion Resources,
Dynegy, Entergy, FP&L, National Grid, NiSource, NYTO, Oklahoma G&E,
PSNM, and Tucson Electric.
---------------------------------------------------------------------------
848. Several commenters, including PSNM, Southern, and Tenaska,
argue that the Commission should not follow the OATT on this issue
because Interconnection Service is different from transmission service
in that the operation of generators poses safety and operational risks.
PJMTO and PSEG note that a generation project is unlikely to obtain
financing without appropriate insurance provisions within the Final
Rule LGIA.
849. Some commenters, including Avista, Dynegy, FP&L, and National
Grid, argue that the Commission should restore the insurance provision
that appeared in the ANOPR LGIA, which included mandatory insurance
types and coverage amounts. Others, including Dominion Resources, NYTO,
and Progress Energy, argue that while state laws and local business
practices should dictate the actual amount of coverage, the Final Rule
LGIA should describe the types of insurance coverage each Party must
carry. Some commenters including EEI--Alliance of Energy Suppliers
state that while it is infeasible on a generic basis to stipulate the
appropriate levels of insurance for all facilities, the Interconnection
Customer and Transmission Provider should be required to maintain
certain minimum levels of insurance as agreed by the Parties.
Commission Conclusion
850. We conclude that requiring certain minimum insurance in the
Final Rule will benefit both the Transmission Provider and the
Interconnection Customer and will help the Transmission Provider to
avoid undue financial risk. Accordingly, we are restoring the insurance
requirement in the Final Rule LGIA. The addition of this provision
should help the Transmission Provider and the Interconnection Customer
to manage the risks arising from Interconnection Service. The Final
Rule requires that each Party, at its own expense, maintain certain
minimum insurance coverages throughout the period of their
interconnection agreement. These coverages include Employers' Liability
and Workers' Compensation Insurance, Commercial General Liability
Insurance,
[[Page 49922]]
Comprehensive Automobile Liability Insurance, and Excess Public
Liability Insurance.
b. Liquidated Damages
851. Two liquidated damages provisions appeared in the NOPR, one in
Article 5.1 of the LGIA and the other in Section 13.5 of the LGIP.
852. The liquidated damages provision in the NOPR LGIA would be
applicable if an Interconnection Customer chooses the option described
in Article 5.1.B. Under this option, if a Transmission Provider fails
to complete construction of the Interconnection Facilities by the In-
Service Date or the Network Upgrades by the Commercial Operation Date,
the Transmission Provider would pay the Interconnection Customer
liquidated damages. Liquidated damages would be limited to 0.5 percent
per Calendar Day of the actual aggregate costs of the Interconnection
Facilities or Network Upgrades for which the Transmission Provider
remains responsible, not to exceed 20 percent of such costs.
853. The liquidated damages provision in Section 13.5 in the NOPR
LGIP would have the Transmission Provider pay liquidated damages if it
fails to meet its obligations in the LGIP and does not remedy the
failure within 15 Business Days. Liquidated damages would be one
percent of the actual costs of the applicable study cost per Calendar
Day, with a cap at 50 percent. Also, upon expiration of the remedy
period, the Transmission Provider would refund any deposit amount for
the applicable study that the Interconnection Customer had paid beyond
the actual reasonably incurred study costs.
Comments
854. Many commenters make similar arguments about these provisions,
and since the provisions serve different functions, there may be
different responses to the same argument. Nevertheless, there are a few
issues that the Commission will address collectively; namely, legal
authority to allow liquidated damages, and the applicability of
liquidated damages to public power organizations and RTOs.
(1) Legal Authority To Require Liquidated Damages
855. Some commenters argue that liquidated damages are beyond the
Commission's statutory authority inasmuch as they are penalties that
are not fact-specific because they are not designed to remedy the
actual damages experienced,\150\ or are damages beyond the statutory
authority of the Commission.\151\ Others, including El Paso and
WestConnect RTO, argue that liquidated damages are inconsistent with
just and reasonable rates under the Federal Power Act. Southern
questions whether the Commission has authority to require liquidated
damage in private contracts. Idaho Power argues that the liquidated
damages provisions violate the Federal Power Act by preventing a
Transmission Provider from recovering costs prudently incurred in
providing service to an Interconnection Customer. Maine PSC notes that
the imposition of liquidated damages is at odds with the Commission's
precedent on liability, which states that there should be no liability
without fault and that liability should be unavoidable if caused by
one's own gross negligence or intentional actions.\152\ Other
commenters, including Idaho Power and WestConnect RTO, argue that an
Interconnection Customer should file a complaint if it believes that
the rates, terms, and conditions of Interconnection Service are unjust
or unreasonable.
---------------------------------------------------------------------------
\150\ E.g., El Paso, Idaho Power, PacifiCorp, and WestConnect
RTO.
\151\ E.g., Entergy and SoCal PPA.
\152\ See, e.g., ANR Pipeline Co., 98 FERC ] 61,128 at 61,862
(2002).
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Commission Conclusion
856. We are deleting the liquidated damages provisions from the
Final Rule LGIP and retaining them, with modifications, in the Final
Rule LGIA.
857. Liquidated damages provisions are within our statutory
authority because, although we do not assess or award damages, we have
jurisdiction under Section 205 over agreements from which damages may
arise. Liquidated damages can help manage risk within a jurisdictional
agreement.
858. In response to the comments questioning the imposition of
liquidated damages by regulatory fiat, we clarify that the Final Rule,
like the NOPR, does not require liquidated damages. A Transmission
Provider has the option to agree to a liquidated damages provision
after agreeing to the dates for designing, procuring and constructing
the Interconnection Facilities and Network Upgrades designated by the
Interconnection Customer.\153\ If the Parties are unable to agree on an
acceptable schedule, they may negotiate terms and conditions--including
revisions to the liquidated damages provision--under the Negotiated
Option in Article 5.1.4 of the Final Rule LGIA. So, rather than impose
liquidated damages, the Final Rule LGIA provides liquidated damages as
an option that may become a provision in the interconnection agreement
signed by the Parties.
---------------------------------------------------------------------------
\153\ LGIA Articles 5.1.2 and 5.1.3.
---------------------------------------------------------------------------
859. Because we are not including a liquidated damages provision in
the Final Rule LGIP, we are not discussing that proposed provision
here.
(2) Applicability of Liquidated Damages to Public Power, Cooperatives,
and RTOs
860. Georgia Transmission argues that liquidated damages are
particularly burdensome for cooperatives because of their inability to
recover these costs except directly from the cooperative customers. For
similar reasons, liquidated damages may make it financially prohibitive
for some public power providers to handle Interconnection Requests from
third party Interconnection Customers.\154\ Western warns that it
cannot agree to a contractual provision that would result in open-ended
financial exposure when funds have not been appropriated for this
purpose.
---------------------------------------------------------------------------
\154\ E.g., Imperial Irrigation, Lakeland, and LPPC.
---------------------------------------------------------------------------
861. Midwest ISO TO argues that the liquidated damages provisions
will not work in the RTO context, especially when the RTO is non-
profit, for several reasons: (1) A Transmission Owner in an RTO should
not be subject to liquidated damages because it will not be in charge
of the interconnection process--the RTO will be, (2) an RTO should not
pay liquidated damages since the costs will end up being spread over
all customers who will pay the Interconnection Customer for the RTO's
failure to meet the schedule, and (3) in an RTO context, with a
neutral, non-profit RTO, there should be much less of a need for
liquidated damages.
862. Cal ISO argues that since a Transmission Owner, rather than an
RTO or ISO, will undertake many of these functions, the RTO or ISO
should not be a guarantor for the Transmission Owner. For the RTO's
responsibilities, Cal ISO continues, an Interconnection Customer is
afforded recourse via Section 210 of the Federal Power Act.
863. PSEG and PJMTO similarly argue that the Final Rule should
treat liquidated damages as a last resort remedy that would not apply
where either the Interconnection Customer has an effective alternative
backstop to protect itself against discriminatory conduct by the
Transmission Provider or Transmission Owner, or the interconnection
process is under the control of an independent third party
[[Page 49923]]
unaffiliated with any market participant.
864. The Midwest ISO also argues that if an RTO or the Transmission
Owner must pay liquidated damages, the Commission should limit their
exposure by imposing liability only in cases of gross negligence and
should require a Party to pay liquidated damages only if its action or
inaction alone caused the damages.
Commission Conclusion
865. In response to commenters that question their ability to pay
or recover liquidated damages, the Final Rule LGIA does not require
that all executed interconnection agreements contain liquidated damages
provision. As noted above in the discussion of proposed LGIA Article
5.1 (Options), a Transmission Provider may reject liquidated damages
when the schedule proffered by the Interconnection Customer exposes it
to too much risk.
866. Therefore, public power entities that have met a reciprocity
obligation by filing a safe harbor Tariff will have the same
opportunity to negotiate the liquidated damages provision as any other
non-public power Transmission Provider. Entities with safe harbor
tariffs that face unusual limitations, such as cooperatives financed by
the Rural Utilities Service or federal power entities subject to
contracting restrictions set by statute or regulation, may request
waiver of the liquidated damages provision of the Final Rule LGIA when
they comply with their reciprocity condition.
867. We agree with the Midwest ISO that liquidated damages may be
unnecessary when an RTO or ISO administers the interconnection
agreement and oversees the interconnection process. As noted above in
part II.C.5 (Variations from the Final Rule), we will permit RTOs and
ISOs to use an independent entity variation standard to justify
variations from the Final Rule provisions. Accordingly, we will
consider proposals to eliminate liquidated damages from the compliance
filings of RTOs and ISOs.
(3) General Comments on the LGIA Liquidated Damages Provision
868. Many commenters, most of them Transmission Providers, ask the
Commission to either eliminate \155\ or modify \156\ the liquidated
damage provision in the NOPR LGIA. They argue that liquidated damages
are inappropriate because the Transmission Owner recognizes no profit
from the interconnection and has no means of recouping such costs.\157\
---------------------------------------------------------------------------
\155\ E.g., APS, Bridger Valley, Cinergy, El Paso, FP&L,
Entergy, Idaho Power, LADWP, Monongahela Power, PacifiCorp, PG&E,
Tucson Electric, and Western.
\156\ E.g., Ameren, American Transmission, Cal ISO, the
Construction Issues Coalition, MidAmerican, Mirant, National Grid,
NSTAR, NYTO, PSNM, Sempra, and SoCal Edison.
\157\ E.g., APS, Cinergy, Exelon, and Oklahoma G&E.
---------------------------------------------------------------------------
869. PG&E argues that the Commission should eliminate the
liquidated damage clause and instead provide a rapid method for
addressing Interconnection Customer complaints. PacifiCorp contends
that this is not an appropriate context for liquidated damages because
the Parties are not negotiating the terms. The Louisiana PSC argues
that liquidated damages should be unavailable without a demonstration
that harm was caused and that the Transmission Provider caused the
harm. While FP&L argues that liquidated damages should not apply unless
a Transmission Provider can recover these costs in rates, including
retail rates, the Louisiana PSC argues that liquidated damages should
not be recoverable in transmission charges.
870. Some commenters contend that, if the Parties agree to
liquidated damages and liquidated damages are recoverable, it should be
the exclusive remedy for failure to complete construction on time.\158\
SoCal Edison argues that operating dates must be agreed upon between
the Transmission Provider and the Interconnection Customer in order for
liquidated damages to apply. Southern contends that liquidated damages
should be available only for facilities that are not completed on time.
If a Transmission Provider is subject to liquidated damages for failure
to complete Interconnection Facilities being built by another
Interconnection Customer, Dominion Resources argues, the
Interconnection Customer constructing the Interconnection Facilities
should indemnify the Transmission Owner for any liquidated damages
resulting from the Interconnection Customer's failure to meet the
designated date.
---------------------------------------------------------------------------
\158\ E.g., American Transmission, Construction Issues
Coalition, NYTO, NSTAR, SoCal Edison, and WestConnect RTO.
---------------------------------------------------------------------------
871. Others commenters, including Georgia Transmission and NRECA-
APPA, argue that, in lieu of liquidated damages, the Commission should
include a Good Utility Practice and best efforts standard that holds
the Transmission Provider liable for actual damages. Several commenters
ask the Commission to adopt a provision that would protect a
Transmission Provider from liquidated damages if it meets a certain
standard, such as a best efforts or Reasonable Efforts standard.\159\
Some commenters, including Cleco and FP&L, argue that liquidated
damages should be available only in cases of intentional wrongdoing or
negligence.
---------------------------------------------------------------------------
\159\ E.g., Ameren, Cal ISO, Central Maine, El Paso, Exelon, and
WestConnect RTO.
---------------------------------------------------------------------------
872. Several Transmission Providers also argue alternatively that,
if the liquidated damages provision remains in the Final Rule LGIA, it
should be modified. Recommended modifications include not holding the
Transmission Provider liable for Force Majeure events and circumstances
beyond its control, such as permitting and regulatory delays, delays
due to third parties, and delays due to the requesting Interconnection
Customer or other Interconnection Customers.\160\ Ameren argues that
proposed LGIA Article 5.1.B(ii) might result in confusion, appeals, and
litigation.
---------------------------------------------------------------------------
\160\ E.g., Ameren, the Construction Issues Coalition, Dominion
Resources, FP&L, NE Utilities, NSTAR, PG&E, Sempra, SoCal PPA, and
Southern.
---------------------------------------------------------------------------
873. FP&L comments that the liquidated damages provision penalizes
the Transmission Provider without a symmetrical opportunity for it to
make a profit or recoup its costs and requests that the Transmission
Provider have the opportunity to receive a financial benefit above its
costs if a study is completed on time. Other commenters, including
American Transmission, Cleco, MidAmerican, PG&E, and SoCal Edison, ask
that the Commission make liquidated damages bilateral, thereby
subjecting an Interconnection Customer to liquidated damages for
missing its milestones. American Transmission further argues that an
Interconnection Customer should be responsible for liquidated damages
payable to the Transmission Provider at two levels of liability--a
higher level when Generating Facilities lower in the queue are
dependent on the Interconnection Customer's timely performance and a
lower level when no third parties are harmed by the delay but the
Transmission Provider deserves compensation.
874. Ameren argues that the NOPR LGIA does not address a situation
in which multiple Interconnection Customers rely on the same
Transmission Provider Interconnection Facilities and Network Upgrades.
American Transmission proposes that total liability for a particular
project should be the same regardless of the number of Interconnection
Customers requesting the component. The Construction Issues Coalition
[[Page 49924]]
recommends that the Commission modify proposed LGIA Article 5.1.B(ii)
to specify a maximum of 20 percent of the project costs for all
Interconnection Customers relying on the upgrade.
875. National Grid argues that the ERCOT LGIA provision, which has
a compensatory approach, was better than the NOPR LGIA provision, which
takes a punitive approach. The asymmetry between risk and reward may
cause a Transmission Provider to avoid any obligation to perform
Interconnection Services, says National Grid. Since a Transmission
Provider can opt out of the liquidated damages provision in the
interconnection agreement, an Interconnection Customer will likely be
forced to find another builder.
876. PG&E requests that the Commission adopt a 15 month period for
completing the work, which was in the ERCOT liquidated damages
provision.
877. Cal ISO argues that damages must track the entity performing
the work. In cases where there is an RTO or ISO, the Transmission Owner
should be liable, and the RTO or ISO should not be a guarantor for the
Transmission Owner.
878. Western argues that it is inequitable to allow the
Interconnection Customer to extend the In-Service Date without penalty
(Article 5.5) without also giving the Transmission Provider this
option. Also, the Transmission Provider should be allowed to provide
justification for not meeting unreasonable deadlines.
879. The Construction Issues Coalition argues that proposed LGIA
Article 5.1.B.1.a should be modified to allow a Transmission Provider
or a Transmission Owner not to enter into an interconnection agreement
that includes liquidated damages for any reason, not just because of
unacceptable dates. Because the limits on liquidated damages recovery
may not be appropriate for every Interconnection Customer, Mirant
argues, the proposed LGIA liquidated damages provision should be
optional and left to the election of the Interconnection Customer.
880. American Forest expresses concern that the liquidated damages
cap could be used by the Transmission Provider to delay or deny
completion of Interconnection Studies or construction of facilities or
upgrades simply by paying liquidated damages. The Commission should
clarify that the cap should not be used by the Transmission Provider to
impede the development of new generation. It proposes either deleting
the cap or adding language to specify that the cap does not apply if
the Transmission Provider intentionally delays or denies service. Also,
Cal ISO notes that the penalty of 0.5 percent of the upgrade cost in
proposed LGIA Article 5.1.A(ii) for each day the Transmission Provider
fails to meet an agreed upon deadline for completing any portion of the
Transmission Provider Interconnection Facilities or Network Upgrades
does not really work as an incentive because there may be no incentive
to meet a deadline if the cost of the upgrade is small because the
penalty would be so low.
881. Several commenters, including Duke Energy, EPSA, and NE
Utilities, support the liquidated damages provision in the NOPR LGIA
but none provide detailed arguments explaining their support.
Commission Conclusion
882. As noted above, the proposed LGIA liquidated damages provision
allows a Transmission Provider to refuse the Interconnection Customer's
proffered construction schedule and perhaps even negotiate to revise
the liquidated damages provision if the Parties end up negotiating over
construction terms.\161\ We are concerned that Transmission Providers
will always negotiate to eliminate liquidated damages liability unless
the provision is revised to further protect the Transmission Provider.
For this reason, we are adopting the recommendations of several
commenters to revise this provision.
---------------------------------------------------------------------------
\161\ In Final Rule LGIA Article 5.1.4, the Parties may
negotiate terms under the Negotiated Option.
---------------------------------------------------------------------------
883. In the Final Rule LGIA, liquidated damages would be
recoverable if an Interconnection Customer chooses the Alternate Option
in Final Rule LGIA Article 5.1.2. Under this option, if a Transmission
Provider fails to complete the Interconnection Facility or the Network
Upgrades by the dates designated by the Interconnection Customer and
accepted by the Transmission Provider, the Transmission Provider would
pay the Interconnection Customer liquidated damages. Liquidated damages
would be limited to 0.5 percent per Calendar Day of the actual
aggregate costs of the Interconnection Facilities or Network Upgrades
for which the Transmission Provider remains responsible, and not to
exceed 20 percent of the Transmission Provider's actual costs. They
would not be recoverable under certain circumstances, such as when the
Interconnection Customer is not ready to commence use of the
Transmission Provider's Interconnection Facilities or Network Upgrades
by the date specified (unless the Interconnection Customer was not
ready due to delay on the part of the Transmission Provider) or if the
delay is due to a cause beyond the reasonable control of the
Transmission Provider.
884. Liquidated damages should not be payable if the delay is due
to circumstances beyond the control of the Transmission Provider. As a
result, liquidated damages will be available only due to the action or
inaction of a Transmission Provider, and not when the delays are due to
third parties or other circumstances beyond the Transmission Provider's
control. For the purposes of this provision, the Transmission
Provider's subcontractors will not be considered third parties, but
delays due to the action or inaction of Interconnection Customers
earlier in the queue will be considered delays due to third parties.
This provision also will sufficiently protect a Transmission Provider
that seeks to interconnect multiple Generating Facilities to the same
interconnection, since liability to each of the Interconnection
Customers for liquidated damages may be avoidable as long as the delay
is not attributable to the Transmission Provider or its subcontractors.
This will also counterbalance the Interconnection Customer's ability to
adjust the schedule under Final Rule Article 5.7, since the
Transmission Provider can avoid liability for the acts of third
parties. Finally, because liquidated damages liability will not have to
be paid unless the Transmission Provider is at fault, we conclude that
these damages will not be considered just and reasonable costs of
service and will not be recoverable in transmission rates.
885. Finally, if the Parties agree to liquidated damages and
liquidated damages are payable, this will be the exclusive remedy for
failure to complete construction on time. We are not making the
liquidated damages provision bilateral, however, because the Final Rule
LGIA provides a Transmission Provider the necessary protection from
liquidated damages liability, as well as the ability to negotiate
provisions of the interconnection agreement to better match its chosen
level of risk.
(4) General Comments on the LGIP Liquidated Damages Provision
886. Many commenters, most of them Transmission Providers, ask the
Commission to either eliminate \162\ or
[[Page 49925]]
modify \163\ the liquidated damages provision in the LGIP.
---------------------------------------------------------------------------
\162\ E.g., APS, Bridger Valley, El Paso, Entergy, FP&L, LADWP,
LPPC, NYISO, PacifiCorp, PG&E, PGE, PJMTO, PSNM, Southern,
WestConnect RTO, and Western.
\163\ E.g., AEP, American Forest, American Transmission, Cal
ISO, Central Maine, Cleco, Duke Energy, National Grid, NE Utilities,
NYTO, and Salt River Project.
---------------------------------------------------------------------------
887. Those opposed to the liquidated damages provision in the LGIP
argue, among other things, that liquidated damages are inappropriate
because the Transmission Owner recognizes no profit and has no means
for recouping costs.\164\ Entergy notes that liquidated damages are
improper because the Commission traditionally rejected these payments
in favor of the payments of identifiable and direct costs incurred.
PacifiCorp contends that this is not an appropriate context for
liquidated damages because the Parties are not bargaining on the terms.
Southern complains that the liquidated damages are improper because the
LGIP provides for an uncontrolled and lengthy process due to the many
opportunities for the Interconnection Customer to change data and
Generating Facility configuration.
---------------------------------------------------------------------------
\164\ E.g., APS, PG&E, and PGE.
---------------------------------------------------------------------------
888. The NYISO and PSNM argue that instead of liquidated damages,
the Commission should use the OATT Section 19.4 study requirement,
which requires due diligence to perform within a specified time period.
Under this approach, if a Transmission Provider is unable to meet the
deadline, it must notify the customer and provide an estimate of the
additional time needed and explain why more time is necessary.
889. Among those commenters requesting modification, several
Transmission Providers propose that liquidated damages be made
bilateral, thereby subjecting Interconnection Customers to liquidated
damages for failure to meet deadlines.\165\ American Transmission
argues that there should be separate levels of liability facing the
Interconnection Customer depending on third party harm caused by the
Interconnection Customer's delay. Some commenters, including National
Grid and NE Utilities, recommend a reciprocal financial incentive to
earn for superior performance to offset the risk of liquidated damages.
---------------------------------------------------------------------------
\165\ E.g., American Transmission, Joint Consumer Advocates, and
the Midwest ISO.
---------------------------------------------------------------------------
890. Several Transmission Providers, including AEP, Ameren, Idaho
Power, LG&E Energy, and NE Utilities, recommend modifying the proposed
LGIP to exempt the Transmission Provider from circumstances beyond its
control, such as the action or inaction of third parties, the failure
of the Interconnection Customer to provide all relevant data, failure
of a third party contracted by the Interconnection Customer to provide
timely studies, or permitting or other state regulatory prerequisites.
891. The Salt River Project contends that a Transmission Provider
should be able to avoid liquidated damages in the LGIP as it can in the
LGIA. NSTAR recommends that the LGIP adopt NEPOOL language that allows
the Parties to agree upon a schedule with deadlines if money damages
are at stake for non-completion.
892. Several commenters, including Dominion Resources, FP&L, and
Progress Energy, argue that the liquidated damages provision should be
revised so that it does not apply unless the failure to meet a deadline
results from negligence or intentional wrongdoing by the Transmission
Provider.
893. Duke Energy asks the Commission to clarify that the Reasonable
Efforts standard also applies to restudies, and that liquidated damages
apply only to the study obligations under the LGIP, and not all of the
LGIP obligations. NE Utilities recommends that, to avoid overlap and
ambiguity, the first sentence of proposed LGIP Section 13.5 should be
revised to apply to ``study-related'' obligations.
894. American Transmission argues that the 50 percent cap on
liquidated damages in the LGIP is excessive and it should be reduced to
25 percent.
895. American Forest proposes either deleting the cap or adding
language to specify that the cap does not apply if the Transmission
Provider intentionally delays or denies service.
896. Mirant argues that the liquidated damages provision in the
LGIP should provide for liquidated damages of one percent per day
starting on the date the Transmission Provider misses a deadline for
completing the study, but after 30 days, the Transmission Provider
should pay the Interconnection Customer liquidated damages equal to the
remaining difference between the study cost and the amount already paid
in liquidated damages. Also, the Transmission Provider should refund
with interest any deposit amount in excess of the actual reasonably
incurred study costs immediately upon expiration of the 15 day remedy
period. These modifications provide a better incentive for Transmission
Provider compliance.
897. Some commenters, including Calpine, EPSA, and KeySpan, argue
in favor of the incentive that this proposed liquidated damages
provision provides.
Commission Conclusion
898. We are eliminating liquidated damages from the Final Rule
LGIP. While we understand the value of providing an incentive to
complete Interconnection Studies, we are concerned that the
availability of such a provision may undermine the Transmission
Provider's ability to economically administer its study process.
899. Moreover, we question whether liquidated damages are
appropriate during the study phase, since at that time it will be
unclear whether a prospective Interconnection Customer intends to
pursue its Interconnection Request. Because at this stage the
prospective Interconnection Customer does not face a substantial risk
of damages, we are not standardizing liquidated damages for
Transmission Providers during the study phase (i.e., in the Final Rule
LGIP). Rather, we are requiring that a Transmission Provider use due
diligence to perform within a specified time period. This approach,
which has been applied to facilities studies in OATT Section 19.4,
gives the Transmission Provider a deadline, and requires that the
Interconnection Customer be kept apprised in writing of any
difficulties encountered in meeting the deadline. In order to ensure
that a Transmission Provider complies with its obligations, we urge the
Interconnection Customer to bring any disputes to the Commission's
Dispute Resolution Service, or if necessary, pursue claims of unduly
discriminatory treatment under Section 206 of the Federal Power Act.
c. Consequential Damages
900. Consequential damages are losses that flow indirectly--rather
than directly and immediately--from an injurious act.\166\ In the NOPR,
the Commission chose to maintain consistency with the OATT, and the
NOPR LGIA did not limit liability for losses or costs for consequential
damages. Instead, it relied on the statement in Order No. 888-A that
Transmission Providers and customers can rely on any statutes or other
laws to protect Parties from consequential or indirect damages.\167\
The NOPR also stated that the OATT protects a Transmission Provider
from consequential damages and indirect damages claims by third parties
though indemnification except in cases of negligence or intentional
wrongdoing by the Transmission Provider. The
[[Page 49926]]
Commission sought comments on this approach and the relative merits of
the alternative provisions in the consensus and ERCOT interconnection
agreements.
---------------------------------------------------------------------------
\166\ Black's Law Dictionary 394 (7th ed. 1999).
\167\ Order No. 888-A, FERC Stats. & Regs ] 31,048 at 30,302.
---------------------------------------------------------------------------
Comments
901. Many commenters, mostly Transmission Providers, recommend that
the Final Rule LGIA limit exposure to consequential damages, such as
incidental, exemplary or indirect damages, lost profits, and other
business interruption damages.\168\ Without a provision limiting
exposure, the Mississippi PSC explains, a Transmission Provider will be
unable to contractually protect itself from these claims. The risk of
exposure will impose significant additional costs, which will then be
charged to all transmission customers. In this way, clauses that
exclude liability for consequential damages reduce rates.
---------------------------------------------------------------------------
\168\ E.g., Ameren, American Transmission, APS, Avista, Central
Maine, the Coalition for Contract Terms, Dominion Resources, Duke
Energy, FP&L, Mississippi PSC, NYTO, PacifiCorp, Progress Energy,
PSNM, RTO West Utilities, Tucson Electric, and WestConnect RTO.
---------------------------------------------------------------------------
902. APS explains that, because statutes for liability vary from
state to state, the LGIA must recognize these differences, and
dictating specific terms should be avoided. FP&L notes that, contrary
to the Commission's reliance on state statutes, not all states provide
consequential damages protection. As an example, FP&L points to
Florida, which allows exclusion of consequential damages, but the
provision must be included in a contract. Progress Energy warns that a
reliance on statutes or other laws dealing with consequential damages,
as the Commission proposed in the NOPR, will only invite future
disagreements and litigation.
903. Some commenters, including Duke Energy and Dynegy, request
that, if language limiting liability for consequential damages is not
inserted, the Commission should, at a minimum, provide Parties the
option of mutually agreeing to include a limitation on liability,
consistent with existing Commission policy.
904. Westconnect RTO notes that if liquidated damages are not
available under the option in proposed LGIA Article 5.1B(i)(b), an
Interconnection Customer may still sue the Transmission Provider for
failing to meet the In-Service Date if there is no limitation of
liability clause. It notes that without a clause limiting liability for
consequential damages, an Interconnection Customer may still be able to
secure damages akin to liquidated damages, even if the Parties do not
expressly agree to liquidated damages in their executed interconnection
agreement.
905. Central Maine takes issue with the NOPR position that a
Transmission Provider is protected from consequential and indirect
damage liability to third parties through indemnification. A
Transmission Provider's obligation to indemnify the Interconnection
Customer for third party claims against the Interconnection Customer
may be viewed as a payment of consequential damages by the Transmission
Provider.
Commission Conclusion
906. There are several factors that convince us that a provision
limiting consequential damages should be added to the Final Rule LGIA.
First, by standardizing the liability protection, rather than leaving
the issue to state law, it should offer greater certainty to
Transmission Providers and Interconnection Customers alike. Contrary to
APS's argument, it is precisely because state liability statutes vary
that we are prescribing a specific liability provision. Second,
liability limitation provisions protect against excessive utility rates
by capping damage awards.\169\ Finally, a goal of this rulemaking is to
reduce litigation arising from interconnection, and an express
provision in the LGIA limiting liability will have this effect. For
these reasons, we are including a provision limiting consequential
damages. Final Rule LGIA Article 18.2 protects either Party from
liability for any special, indirect, incidental, consequential, or
punitive damages, including profit or revenue. The Parties remain
liable for any liquidated damages payable, and any damages for which a
Party may be liable to the other Party under another agreement.
---------------------------------------------------------------------------
\169\ See Richard J. Pierce, Regional Transmission
Organizations: Federal Limitations Needed for Tort Liability, 23
Energy L.J. 63, 67-72 (2002).
---------------------------------------------------------------------------
d. Two vs. Three Party Agreements
907. In the NOPR, the Commission proposed that, along with the
Interconnection Customer, the Transmission Provider, and, to the extent
necessary, the Transmission Owner, must become signatories to the
interconnection agreement. The intent was to require the Transmission
Provider to sign the agreement, and if the Transmission Owner is a
separate entity, to require it to sign as well. We reasoned that the
Transmission Provider should sign the agreement because the
Interconnection Service would be provided under the Transmission
Provider's OATT. However, we noted that no one disputes that the
Transmission Owner must also enter into an agreement with the
Interconnection Customer, and it would be inefficient to require the
Interconnection Customer to enter into separate agreements with the
Transmission Owner and the Transmission Provider.
Comments
908. Interconnection Customers, such as Calpine, Dairyland Power,
and PSEG, generally prefer a three party agreement because it
facilitates ``one-stop shopping.'' RTOs, ISOs, and some Transmission
Owners, including Cal ISO, PJM, and PG&E believe that, when the
Transmission Provider is not the Transmission Owner, the former's
responsibilities can be fully addressed in the Tariff and it need not
be a Party to the interconnection agreement. They argue that the main
purpose of the agreement is to establish a property-based relationship
between the Interconnection Customer and the Transmission Owner. Also,
PJM states that the NOPR LGIA is not structured to accommodate its use
as a three party agreement, and should be changed to clearly define the
roles of Transmission Owners and Transmission Providers.
Commission Conclusion
909. We are replacing the proposed words ``to the extent
necessary'' with the words ``if the Transmission Owner is not the
Transmission Provider'' in the Final Rule provision. Thus, both must
sign the interconnection agreement when the Transmission Owner is not
also the Transmission Provider. We believe that this better defines the
relationship among the Parties in one document, protects the
Interconnection Customer and, therefore, facilitates the development of
new generation resources. In an RTO or ISO where the Transmission
Provider is not the Transmission Owner, the RTO or ISO's compliance
filing may propose a modified interconnection agreement that provides
different respective rights and obligations in the region. In other
cases, we do not believe that the three party agreement should create
an undue burden for either entity.
D. Compliance Issues
1. Amendments to Transmission Providers' OATTs
910. The Commission is requiring all public utilities that own,
control, or operate interstate transmission facilities to adopt the
Final Rule LGIP and Final Rule LGIA as an amendment to their
[[Page 49927]]
OATTs within 60 days after the publication of the Final Rule in the
Federal Register. RTOs and ISOs are required to make a compliance
filing by this same deadline, but their compliance filings will be
assessed using the independent entity variation standard as described
in Part II.C.5 of this preamble.
2. Grandfathering of Existing Interconnection Agreements (ISOs and Non-
ISOs)
911. The Commission is not requiring retroactive changes to
individual interconnection agreements filed with the Commission prior
to the effective date of this Final Rule.\170\ Non-generic agreements
submitted for approval by the Commission before the effective date of
the Final Rule are grandfathered and will not be rejected outright for
failing to conform to the Final Rule LGIA. Generic interconnection
procedures submitted for approval or approved by the Commission before
the effective date of the Final Rule must be resubmitted after being
revised to conform to this Final Rule. For previously accepted
individual interconnection agreements, the Commission's interconnection
case law and policies govern.
---------------------------------------------------------------------------
\170\ Section 5 of the Final Rule LGIP governs the treatment of
Queue Positions established prior to the effective date of the Final
Rule. It also provides a transition process for Transmission
Providers with Interconnection Requests outstanding when the Final
Rule takes effect.
---------------------------------------------------------------------------
912. As for requests for interconnection pending when the Final
Rule takes effect, Final Rule LGIP Section 5.1 ensures that an
Interconnection Customer that has been assigned a Queue Position before
the issuance of the Final Rule retains that Queue Position. If an
Interconnection Customer has signed any Interconnection Study agreement
as of the effective date of the Final Rule, it has the option to either
continue with the remaining Interconnection Studies under the
Transmission Provider's existing study process or complete the
remaining studies for which it does not have a signed Interconnection
Study agreement under the provisions of the Final Rule LGIP.
3. Order No. 2001 and the Filing of Interconnection Agreements
913. Order No. 2001\171\ revised the format through which
traditional public utilities and power marketers must satisfy their
obligation, pursuant to Section 205 of the Federal Power Act and part
35 of the Commission's Regulations, to file agreements with the
Commission.\172\ Public utilities that have standard forms of agreement
in their transmission tariffs, cost-based power sales tariffs, or
tariffs for other generally applicable services no longer need to file
conforming service agreements with the Commission. The filing
requirement for conforming agreements is now satisfied by filing the
standard form of agreement and an Electronic Quarterly Report.\173\
Order No. 2001 also lifts the requirement that parties to an expiring
conforming agreement file a notice of cancellation or a cancellation
tariff sheet with the Commission. The public utility may simply remove
the agreement from its Electric Quarterly Report in the quarter after
it terminates.\174\
---------------------------------------------------------------------------
\171\ Revised Public Utility Filing Requirements, Order No.
2001, 67 FR 31043 (May 8, 2002), FERC Stats. & Regs. ] 31,127
(2002); reh'g denied, Order 2001-A, 100 FERC ] 61,074 (2002);
reconsideration and clarification denied, Order No. 2001-B, 100 FERC
] 61,342 (2002); further order, Order No. 2001-C, 101 FERC ] 61,314
(2002).
\172\ See Order No. 2001 at P 12.
\173\ See id. at P 18.
\174\ See id. at P 249.
---------------------------------------------------------------------------
914. Non-conforming agreements, which are agreements for
transmission, cost-based power sales and other generally applicable
services that do not conform to an applicable standard form of
agreement in a public utility's tariff, must continue to be filed with
the Commission for approval before going into effect.\175\ This
category includes unexecuted agreements and agreements that do not
precisely match the applicable standard form of service agreement.\176\
---------------------------------------------------------------------------
\175\ See id. at P 19.
\176\ See id. at P 196.
---------------------------------------------------------------------------
915. With respect to interconnection agreements, Order No. 2001
found that part 35 of the Commission's Regulations does not make a
distinction between an interconnection agreement and other agreements
for service that must be filed in conformance with this part of the
Commission's Regulations.\177\ Order No. 2001 therefore found that if
an interconnection agreement conforms with a Commission-approved
standard form of interconnection agreement, the utility does not have
to file it but must report it in the Electric Quarterly Reports. Order
No. 2001 also states that the requirement to file contract data and
transaction data begins with the first Electric Quarterly Report filed
after service commences under an agreement, and continues until the
Electric Quarterly Report filed after it expires or by order of the
Commission. However, an Interconnection Agreement that does not
precisely match the Transmission Provider's approved standard LGIA or
that is unexecuted must be filed in its entirety. The Transmission
Provider should clearly indicate where the agreement does not conform
to its standard Interconnection Agreement, preferably through red-
lining and strike-out.
---------------------------------------------------------------------------
\177\ See id. at P 200.
---------------------------------------------------------------------------
III. Information Collection Statement
916. The Office of Management and Budget (OMB) regulations require
that OMB approve certain reporting and record keeping (collections of
information) imposed by an agency.\178\ The information collection
requirements in this Final Rule are identified under the Commission
data collection, FERC-516 ``Electric Rate Schedule Filings.'' In
accordance with Section 3507(d) of the Paperwork Reduction Act of
1995,\179\ the proposed reporting requirements in the subject
rulemaking will be submitted to OMB for review. Interested persons may
obtain information on the reporting requirements by contacting the
Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426 (Attention: Michael Miller, Office of the
Executive Director, 202-502-8415) or from the Office of Management and
Budget (Attention: Desk Officer for the Federal Energy Regulatory
Commission, fax: 202-395-7285, e-mail [email protected]).
---------------------------------------------------------------------------
\178\ 5 CFR 1320.11 (2003).
\179\ 44 U.S.C. 3507(d) (2000).
---------------------------------------------------------------------------
917. The regulated entities shall not be penalized for failure to
respond to this collection of information unless the collection of
information displays a valid OMB control number.
918. Public Reporting Burden: The Commission did not receive
specific comments concerning its burden estimates and uses the same
estimates here in the Final Rule. Comments on the substantive issues
raised in the NOPR are addressed elsewhere in the Final Rule.
----------------------------------------------------------------------------------------------------------------
Number of Number of Hours per Total annual
Data collection respondents responses response hours
----------------------------------------------------------------------------------------------------------------
FERC-516:
LGIPs & LGIAs............................... 95 1 4 380
[[Page 49928]]
LGIPs & LGIAs to be developed............... 81 1 6 486
81 1 25 2,205
Recordkeeping............................... 176 1 6 1,056
-----------------
Totals.................................. .............. .............. .............. 3,947
----------------------------------------------------------------------------------------------------------------
Total Annual Hours for Collection: (reporting (2,891) +
recordkeeping (1,056) = 3,947 hours.
Information Collection Costs: The Commission sought comments about
the time to comply with these requirements. No comments were received.
Staffing requirements to review and modify existing LGIPs & LGIAs =
$19,000 (95 respondents x $200 (4 hours @ $50 hourly rate)). To be
added to this cost are the costs for review and preparation of new
LGIPs and LGIAs or $125,550 (81 respondents x $1,550 (31 hours @ $50
hourly rate)) = $144,550. There are also the annualized costs for
processing (operations) and maintenance (recordkeeping) of these
documents = $70,752 (176 respondents x $402 ((6 hours @ $50 hourly
rate) (for processing these documents) (operations) + (6 hours @$17
hourly rate) (recordkeeping/maintenance)). The Commission believes
there will be a one-time start up costs to comply with these
requirements for the procedures and agreements and then an additional
$70,752 to maintain them. Total annualized costs = $215,302.
Titles: FERC-516 ``Electric Rate Schedule Filings.''
Action: Revision of Currently Approved Collection of Information.
OMB Control Nos.: 1902-0096.
Respondents: Business or other for profit.
Frequency of Responses: One-time implementation.
Necessity of Information: The final rule revises the reporting
requirements contained in 18 CFR part 35. The Commission promulgates a
standard LGIP and standard LGIA that public utilities must adopt. As
noted in the Final Rule, the adoption of these procedures and agreement
will (1) reduce interconnection costs and time for generators and
Transmission Providers alike; (2) limit opportunities for Transmission
Providers to favor their own generation; (3) facilitate market entry
for generation competitors; and (4) encourage needed investment in
generator and transmission infrastructure.
919. Interconnection plays a growing crucial role in bringing much
needed generation into the market to meet the needs of electricity
customers. However, requests for interconnection frequently result in
complex technical disputes about interconnection feasibility, cost and
cost responsibility. The Commission expects that a standard LGIP and
standard LGIA will reduce interconnection costs and time for
Interconnection Customers and Transmission Providers, resolve most
interconnection disputes, minimize opportunities for undue
discrimination, foster increased development of economic generation,
and improve system reliability.
920. For information on the requirements, submitting comments on
the collection of information and the associated burden estimates
including suggestions for reducing this burden, please send your
comments to the Federal Energy Regulatory Commission, 888 First Street,
NE., Washington, DC 20426 (Attention: Michael Miller, Office of the
Executive Director, 202-502-8415) or send comments to the Office of
Management and Budget (Attention: Desk Officer for the Federal Energy
Regulatory Commission, fax: 202-395-7285, e-mail [email protected]).
IV. Environmental Impact Statement
921. Commission Regulations require that an environmental
assessment or an environmental impact statement be prepared for any
Commission action that may have a significant adverse effect on the
human environment.\180\ No environmental consideration is necessary for
the promulgation of a rule that is clarifying, corrective, or
procedural or does not substantially change the effect of legislation
or regulations being amended,\181\ and also for information gathering,
analysis, and dissemination.\182\ The Final Rule updates part 35 of the
Commission's Regulations and does not substantially change the effect
of the underlying legislation or the regulations being revised or
eliminated. In addition, the Final Rule involves information gathering,
analysis and dissemination. Therefore, this Final Rule falls within
categorical exemptions provided in the Commission's Regulations.
Consequently, neither an environmental impact statement nor an
environmental assessment is required.
---------------------------------------------------------------------------
\180\ Regulations Implementing National Environmental Policy
Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs.
] 30,783 (1987).
\181\ 18 CFR 380.4(a)(2)(ii) (2003).
\182\ 18 CFR 380.4(a)(5) (2003).
---------------------------------------------------------------------------
V. Regulatory Flexibility Act
922. The Regulatory Flexibility Act (RFA)\183\ requires that a
rulemaking contain either a description and analysis of the effect that
the proposed rule will have on small entities or a certification that
the rule will not have a significant economic impact on a substantial
number of small entities. In the NOPR, the Commission stated that the
proposed regulations would impose requirements only on interstate
transmission providers, which are not small businesses. The Commission
certified that the proposed regulations would not have a significant
adverse impact on a substantial number of small entities.
---------------------------------------------------------------------------
\183\ 5 U.S.C. 601-612 (2000).
---------------------------------------------------------------------------
Comments
923. NRECA-APPA argues that the Commission failed to adequately
account for the limited resources of small service providers when
drafting the NOPR's RFA compliance statement. According to NRECA-APPA,
the NOPR inconsistently suggests that it would apply to wholesale sales
through Distribution Systems, but the RFA compliance language states
that the regulations impose requirements only on interstate
Transmission Providers.
Commission Conclusion
924. As explained above, only facilities owned by public utilities
that own, control, or operate interstate transmission facilities
(Transmission Providers) are subject to the Final Rule. Thus the Final
Rule applies to the same class of entities subject to Order No. 888. In
Order No. 888, the Commission concluded that the number of affected
small entities did not constitute a ``substantial number'' under the
RFA and noted that small entities would be eligible for a waiver.\184\
The Commission adopts the same reasoning here. The waiver available for
[[Page 49929]]
compliance with the Commission's Order No. 888\185\ is also available
for this Final Rule.
---------------------------------------------------------------------------
\184\ Order No. 888, FERC Stats. & Regs ] 31,036 at 31,897.
\185\ See 18 CFR 35.28(d) (2003).
---------------------------------------------------------------------------
The Regulatory Flexibility Act of 1980 (RFA)\186\ generally
requires a description and analysis of the effect of proposed or Final
Rules that will have significant economic impact on a substantial
number of small entities or a certification that the rule will not have
such an economic effect. In this Final Rule, the Commission is
requiring public utilities that own, control, or operate facilities
used for transmitting electric energy in interstate commerce to modify
their OATTs, first established under Order No. 888, to include a
standard LGIP and standard LGIA. In Order Numbers 888 and 889, the
Commission certified that its rules would not impose a significant
economic impact on a substantial number of small entities.\187\ In
Order No. 888, the Commission found that just over one-tenth of the
total number of public utilities constitute small entities.\188\ And of
that number, several had already filed OATTs, reducing this number even
further. As the Commission noted in Order No. 888 and reemphasizes
here, waiver provisions are applicable here.\189\ This waiver policy
follows the provisions of the Small Business Act (SBA) by acknowledging
the definition of a small electric utility. The Small Business Size
Standards component of the North American Industry Classification
System defines a small electric utility as one that, including its
affiliates, is primarily engaged in the generation, transmission, and/
or distribution of electric energy for sale and whose total electric
output for the preceding fiscal year did not exceed 4 million MWh.\190\
Continuing to make the waiver process available should address the
concerns of those entities that ask the Commission to extend the
``small utility'' exception.\191\ This Final Rule will promote
consistent reporting practices for all reporting companies. It will not
be a significant burden to industry, since several Transmission
Providers have already filed interconnection procedures as part of
their OATTs and much of the information is already being supplied under
interconnection agreements throughout the industry. Accordingly, the
Commission certifies that this Final Rule will not have a significant
economic impact on a substantial number of small entities.
---------------------------------------------------------------------------
\186\ 5 U.S.C. 601-612 (2000).
\187\ Order No. 888, FERC Stats. & Regs. ] 31,036, at 31,898.
\188\ 5 U.S.C. 601(3) (2000), citing to Section 3 of the Small
Business Act, 15 U.S.C. 632 (2000). Section 3 of the Small Business
Act defines a ``small-business concern'' as a business which is
independently owned and operated and which is not dominate in its
field of operation.
\189\ See 18 CFR 35.28(d) (2003).
\190\ 13 CFR 121.61 (Sector 22, Utilities, North American
Industry Classification System, NAICS) (2003).
\191\ Maine PSC, Southwest Transmission, and SoCal Water
District.
---------------------------------------------------------------------------
VI. Document Availability
925. In addition to publishing the full text of this document in
the Federal Register, the Commission also provides all interested
persons an opportunity to view and/or print the contents of this
document via the Internet through the Commission's Home Page ( http://www.ferc.gov ) and in the Commission's Public Reference Room during
normal business hours (8:30 a.m. to 5 p.m. Eastern time) at 888 First
Street, NE., Room 2A, Washington, DC 20426.
926. From the Commission's Home Page on the Internet, this
information is available in the Federal Energy Regulatory Records
Information System (FERRIS). The full text of this document is
available on FERRIS in PDF and WordPerfect format for viewing,
printing, and/or downloading. To access this document in FERRIS, type
the docket number excluding the last three digits of this document in
the docket number field.
927. User assistance is available for FERRIS and the Commission's
Website during normal business hours from FERC Online Support (by phone
at 1-866-208-3676 (toll free) or 202-502-6652, or by e-mail at
[email protected]) or the Public Reference Room at (202) 502-
8371, for TTY (202) 502-8659. E-Mail the Public Reference Room at
[email protected]).
VII. Effective Date and Congressional Notification
928. This Final Rule will take effect on October 20, 2003. The
Commission has determined, with the concurrence of the Administrator of
the Office of Information and Regulatory Affairs of the Office of
Management and Budget, that this rule is not a ``major rule'' within
the meaning of Section 251 of the Small Business Regulatory Enforcement
Fairness Act of 1996.\192\ The Commission will submit the Final Rule to
both houses of Congress and the General Accounting Office.\193\
---------------------------------------------------------------------------
\192\ 5 U.S.C. 804(2) (2000).
\193\ 5 U.S.C. 801(a)(1)(A) (2000).
---------------------------------------------------------------------------
List of Subjects in 18 CFR Part 35
Electric power rates, Electric utilities, Reporting and
recordkeeping requirements.
By the Commission.
Magalie R. Salas,
Secretary.
0
In consideration of the foregoing, the Commission amends part 35,
Chapter I, Title 18 of the Code of Federal Regulations, as follows.
PART 35--FILING OF RATE SCHEDULES AND TARIFFS
0
1. The authority citation for part 35 continues to read as follows:
Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42
U.S.C. 7101-7352.
0
2. In Sec. 35.28, the last sentence in the paragraph (d) introductory
text is revised, and paragraph (f) is added to read as follows:
Sec. 35.28 Non-discriminatory open access transmission tariff.
* * * * *
(d) Waivers. * * * Except as provided in paragraph (f) of this
section, an application for waiver must be filed either:
* * * * *
(f) Standard generator interconnection procedures and agreement.
(1) Every public utility that is required to have on file a non-
discriminatory open access transmission tariff under this section must
amend such tariff by adding the standard interconnection procedures and
agreement contained in Order No. 2003, FERC Stats. & Regs. ] 31,146
(Final Rule on Generator Interconnection) or such other interconnection
procedures and agreement as may be approved by the Commission
consistent with Order No. 2003, FERC Stats. & Regs. ] 31,146 (Final
Rule on Generator Interconnection).
(i) The amendment required by paragraph (f)(1) of this section must
be filed no later than October 20, 2003.
(ii) Any public utility that seeks a deviation from the standard
interconnection procedures and agreement contained in Order No. 2003,
FERC Stats. & Regs. ] 31,146 (Final Rule on Generator Interconnection),
must demonstrate that the deviation is consistent with the principles
of Order No. 2003, FERC Stats. & Regs. ] 31,146 (Final Rule on
Generator Interconnection ).
(2) The non-public utility procedures for tariff reciprocity
compliance described in paragraph (e) of this section are applicable to
the standard
[[Page 49930]]
interconnection procedures and agreement.
(3) A public utility subject to the requirements of this paragraph
may file a request for waiver of all or part of the requirements of
this paragraph (f), for good cause shown. An application for waiver
must be filed either:
(i) No later than October 20, 2003, or
(ii) No later than 60 days prior to the time the public utility
would otherwise have to comply with the requirements of this paragraph
(f).
Note: The following Appendices will not be published in the Code
of Federal Regulations.
BILLING CODE 6717-01-P
[[Page 49931]]
[GRAPHIC] [TIFF OMITTED] TR19AU03.000
BILLING CODE 6717-01-C
[[Page 49932]]
Appendix B--Commenter Acronyms
ACEEE--American Council for an Energy Efficient Economy
AEP--American Electric Power System
Alabama MEA--Alabama Municipal Electric Authority
Alabama PSC--Alabama Public Service Commission
Ameren--Ameren Services Company
American Boiler--American Boiler Manufacturers Association
American Forest--American Forest & Paper Association
American National--American National Power, Inc.
American Superconductor--American Superconductor Corporation
American Transmission--American Transmission Company, LLC
American Wind Energy--American Wind Energy Association
APS--Arizona Public Service Company
Arkansas Coops--Arkansas Electric Cooperative Corporation
Arkansas PSC--Arkansas Public Service Commission
Avista--Avista Corporation
Baker & McKenzie--Baker & McKenzie
Basin Electric--Basin Electric Power Cooperative
Bergey Windpower--Bergey Windpower Company
BP Solar--BP Solar
BPA--Bonneville Power Administration
Bridger Valley--Bridger Valley Electric Association, Inc.
Bruder--Bruder, Gentile & Marcoux, L.L.P.
Bureau of Reclamation--Bureau of Reclamation, U.S. Department of
Interior
Cal EOB--California Electricity Oversight Board
Cal Cogen--Cogeneration Association of California
Cal DWR--California Department of Water Resources
Cal ISO--California ISO
Calpine--Calpine Corporation
Central Maine--Central Maine Power Company, New York State Electric
& Gas Corporation, and Rochester Gas & Electric Corporation
Central Vermont PSC--Central Vermont Public Service Corporation
Cinergy--Cinergy Services, Inc.
Cleco--Cleco Power, LLC
Coalition for Contract Terms--Coalition in Support of Retaining and/
or Modifying Certain Commercial Contract Terms for the Standard
Interconnection Agreement
Coalition for Pricing--Coalition for Equitable Transmission Pricing
Coalition for Services--Coalition for Appropriate Interconnection
Services
Combined Heat & Power--U.S. Combined Heat and Power Association
Connecticut PUC--Connecticut Department of Public Utility Control
Construction Issues Coalition--Transmission Owner/Provider
Construction Issues Coalition
Consumers--Consumers Energy Company
CPUC--California Public Utilities Commission
Cummins--Cummins, Inc.
Dairyland Power--Dairyland Power Cooperative
DG Alliance--Distributed Generation Alliance
Dominion Resources--Dominion Resources Services, Inc.
Duke Energy--Duke Energy Corporation
Dynegy--Dynegy Power Corporation
E3--The E Cubed Company, LLC
Edison Mission--Edison Mission Energy
EEI--Edison Electric Institute, Alliance of Energy Suppliers, EEI
Transmission Group, EEI Distributed Generation Task Force and Tax
Analysis Research Subcommittee
El Paso--El Paso Electric Company
ELCON--Electricity Consumers Resource Council
Encorp--Encorp, Inc.
Enercon--Enercon Engineering, Inc.
Energy Consortium--The Energy Consortium
Entergy--Entergy Services, Inc.
EPSA--The Electric Power Supply Association
EPUC--The Energy Producers and Users Coalition
Exelon--Exelon Corporation
Financial Security Issues Coalition--Transmission Owner/Provider
Financial Security Issues Coalition
FirstEnergy--FirstEnergy Corporation
Florida PSC--Florida Public Service Commission
Florida RCC--Florida Reliability Coordinating Council
FP&L--Florida Power & Light Company
Georgia Transmission--Georgia Transmission Corporation
GE Power--GE Power Systems
Great Northern--Great Northern Power Development
Great River--Great River Energy
H Power--H Power
Idaho Power--Idaho Power Company
Ida Tech--Ida Tech
Imperial Irrigation--Imperial Irrigation District
Independent Market Operator--Independent Electricity Market Operator
Independent Producers--Independent Energy Producers Association
Industrial Energy--Industrial Energy Consumer Group
Interconnection Services Coalition--Transmission Owners Coalition
for Appropriate Interconnection Services
International Paper--International Paper Company
ISO New England--ISO New England
Joint Consumer Advocates--Joint Consumer Advocates
Kentucky PSC--Public Service Commission of the Commonwealth of
Kentucky
KeySpan--KeySpan-Glenwood Energy Center LLC, KeySpan-Port Jefferson
Energy Center, LLC, and KeySpan-Ravenswood, Inc.
LADWP--Los Angeles Department of Water and Power
Lakeland--Lakeland Electric, Kissimmee Utility Authority,
Gainesville Regional Utilities, and The City of Tallahassee, Florida
LPPC--Large Public Power Council
LG&E Energy--LG&E Energy Corp., Louisville Gas and Electric Company,
and Kentucky Utilities Company
LIPA--Long Island Power Authority
Louisiana PSC--Louisiana Public Service Commission
Maine PSC--Maine Public Service Company
Maine Public Advocate--Maine Office of the Public Advocate
Maine PUC--Maine Public Utilities Commission
Maryland PSC--Public Service Commissions of Maryland, Delaware, and
the District of Columbia
Memphis LG&W--Memphis Light, Gas and Water Division
MidAmerican--MidAmerican Energy Company
Midwest ISO--Midwest ISO
Midwest ISO TO--Midwest ISO Transmission Owners
Mirant--Mirant Americas, Inc.
Mississippi PSC--Mississippi Public Service Commission
Monongahela Power--Monongahela Power Company, The Potomac Edison
Company, West Penn Power Company, and Allegheny Energy Supply
Company, LLC
NARUC--National Association of Regulatory Utility Commissioners
National Energy Marketers--National Energy Marketers Association
National Grid--National Grid USA
Nebraska PPD--Nebraska Public Power District
NEMA--National Electrical Manufacturers Association
NE PCC--Northeast Power Coordinating Council
NERC--North America Electric Reliability Council
NE Utilities--Northeast Utilities Service Company
Nevada Power--Nevada Power Company
New York PSC--New York State Public Service Commission
NiSource--NiSource, Inc.
NMA--National Mining Association
North Carolina Commission--North Carolina Utilities Commission
Norton Energy--Norton Energy Storage, L.L.C.
NRECA-APPA--National Rural Electric Cooperative Association and the
American Public Power Association
NRG--NRG Energy, Inc.
NSTAR--NSTAR Electric and Gas Corporation
NTTRC--National Transmission Technical Research Center
NYISO--New York ISO
NYTO--New York Transmission Owners
Ohio PUC--Public Utilities Commission of Ohio
Oklahoma G&E--Oklahoma Gas and Electric Company
Old Dominion--Old Dominion Electric Cooperative
ONEOK--ONEOK Power Marketing Company
PacifiCorp--PacifiCorp
Peabody--Peabody Energy Corporation
PGE--Portland General Electric Company
PG&E--Pacific Gas and Electric Company
Pinnacle West--Pinnacle West Energy Company
PJM--PJM International LLC
PJMTO--PJM Transmissions Owners Group
Plug Power--Plug Power
[[Page 49933]]
Progress Energy--Progress Energy, Inc.
PSEG--The PSEG Companies
PSNM--Public Service Company of New Mexico
Public Interest Organizations--Public Interest Organizations
Public Power Council--Public Power Council
RealEnergy--RealEnergy, Inc.
Reliant--Reliant Resources, Inc.
Rhode Island Consortium--The Energy Consortium of Rhode Island
RTO West Utilities--Certain RTO West Filing Utilities
Salt River Project--Salt River Project Agricultural Improvement and
Power District
Schott--Schott Applied Power Corporation
Seminole Electric--Seminole Electric Cooperative
Sempra--Sempra Energy
Sithe--Sithe Energies, Inc.
SMUD--Sacramento Municipal Utility District
SoCal Edison--Southern California Edison Company
SoCal Water District--The Metropolitan Water District of Southern
California
SoCal PPA--Southern California Public Power Authority
Solar Energy--Solar Energy Industries Association
Solar Turbines--Solar Turbines, Inc.
South Carolina PSA--South Carolina Public Service Authority
Southern--Southern Company Services, Inc.
Southwest Transmission--Southwest Transmission Cooperative
Sunflower Electric--Sunflower Electric Power Corporation
TANC--Transmission Agency of Northern California
TAPS--Transmission Access Policy Study Group
TECO Energy--TECO Energy, Inc.
Tenaska--Tenaska, Inc.
Tennessee Valley PPA--Tennessee Valley Public Power Association
Third Party Issues Coalition--Transmission Owner/Provider Third
Party Issues Coalition
TI--Texas Instruments
TransEnergie--TransEnergie U.S. Ltd.
Tucson Electric--Tucson Electric Power Company
TVA--Tennessee Valley Authority
TXU--TXU Operating Companies
United Technologies--United Technologies Corporation
Vermont DPS--Vermont Department of Public Service
Western--Western Area Power Administration
WEPCO--Wisconsin Electric Power Company, Madison Gas and Electric
Company, and Alliant Energy Corporate Services, Inc.
Westar--Westar Energy, Inc.
Westconnect RTO--Westconnect RTO, LLC
Williams Energy--Williams Energy Marketing and Trading Company
Wisconsin PSC--Wisconsin Public Service Commission
Xcel--XCEL Energy Services, Inc.
Appendix C--Standard Large Generator Interconnection Procedures (LGIP)
Including Standard Large Generator Interconnection Agreement (LGIA)
Standard Large Generator Interconnection Procedures (LGIP)
(Applicable to Generating Facilities That Exceed 20 MWs)
Table of Contents
Section 1. Definitions
Section 2. Scope and Application
2.1 Application of Standard Large Generator Interconnection
Procedures
2.2 Comparability
2.3 Base Case Data
2.4 No Applicability to Transmission Service
Section 3. Interconnection Requests
3.1 General
3.2 Identification of Types of Interconnection Services
3.2.1 Energy Resource Interconnection Service (ER
Interconnection Service)
3.2.1.1 The Product
3.2.1.2 The Study
3.2.2 Network Interconnection Service (NR Interconnection
Service)
3.2.2.1 The Product
3.2.2.2 The Study
3.3 Valid Interconnection Request
3.3.1 Initiating an Interconnection Request
3.3.2 Acknowledgment of Interconnection Request
3.3.3 Deficiencies in Interconnection Request
3.3.4 Scoping Meeting
3.4 OASIS Posting
3.5 Coordination with Affected Systems
3.6 Withdrawal
Section 4. Queue Position
4.1 General
4.2 Clustering
4.3 Transferability of Queue Position
4.4 Modifications
4.4.1
4.4.2
4.4.3
4.4.4
4.4.5
Section 5. Procedures for Interconnection Requests Submitted Prior
to Effective Date of Standard Large Generator Interconnection
Procedures
5.1 Queue Position for Pending Requests
5.1.1
5.1.1.1
5.1.1.2
5.1.1.3
5.1.2 Transition Period
5.2 New Transmission Provider
Section 6. Interconnection Feasibility Study
6.1 Interconnection Feasibility Study Agreement
6.2 Scope of Interconnection Feasibility Study
6.3 Interconnection Feasibility Study Procedures
6.3.1 Meeting with Transmission Provider
6.4 Re-Study
Section 7. Interconnection System Impact Study
7.1 Interconnection System Impact Study Agreement
7.2 Execution of Interconnection System Impact Study Agreement
7.3 Scope of Interconnection System Impact Study
7.4 Interconnection System Impact Study Procedures
7.5 Meeting with Transmission Provider
7.6 Re-Study
Section 8. Interconnection Facilities Study
8.1 Interconnection Facilities Study Agreement
8.1.1
8.2 Scope of Interconnection Facilities Study
8.3 Interconnection Facilities Study Procedures
8.4 Meeting with Transmission Provider
8.5 Re-Study
Section 9. Engineering & Procurement (``E&P'') Agreement
Section 10. Optional Interconnection Study
10.1 Optional Interconnection Study Agreement
10.2 Scope of Optional Interconnection Study
10.3 Optional Interconnection Study Procedures
Section 11. Standard Large Generator Interconnection Agreement
11.1 Tender
11.2 Negotiation
11.3 Execution and Filing
11.4 Commencement of Interconnection Activities
Section 12. Construction of Transmission Provider's
Interconnection Facilities and Network Upgrades
12.1 Schedule
12.2 Construction Sequencing
12.2.1 General
12.2.2 Advance Construction of Network Upgrades that are an
Obligation of an Entity other than the Interconnection Customer
12.2.3 Advancing Construction of Network Upgrades that are part
of an Expansion Plan of the Transmission Provider
12.2.4 Amended Interconnection System Impact Study
Section 13. Miscellaneous
13.1 Confidentiality
13.1.1 Scope
13.1.2 Release of Confidential Information
13.1.3 Rights
13.1.4 No Warranties
13.1.5 Standard of Care
13.1.6 Order of Disclosure
13.1.7 Remedies
13.1.8 Disclosure to FERC or Its Staff
13.1.9
13.1.10
13.1.11
13.2 Delegation of Responsibility
13.3 Obligation for Study Costs
13.4 Third Parties Conducting Studies
13.5 Disputes
13.5.1 Submission
13.5.2 External Arbitration Procedures
13.5.3 Arbitration Decisions
13.5.4 Costs
Appendices
Appendix 1--Interconnection Request
Appendix 2--Interconnection Feasibility Study Agreement
[[Page 49934]]
Appendix 3--Interconnection System Impact Study Agreement
Appendix 4--Interconnection Facilities Study Agreement
Appendix 5--Optional Interconnection Study Agreement
Appendix 6--Standard Large Generator Interconnection Agreement
Section 1. Definitions
Adverse System Impact shall mean the negative effects due to
technical or operational limits on conductors or equipment being
exceeded that may compromise the safety and reliability of the
electric system.
Affected System shall mean an electric system other than the
Transmission Provider's Transmission System that may be affected by
the proposed interconnection.
Affected System Operator shall mean the entity that operates an
Affected System.
Affiliate shall mean, with respect to a corporation, partnership
or other entity, each such other corporation, partnership or other
entity that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common
control with, such corporation, partnership or other entity.
Ancillary Services shall mean those services that are necessary
to support the transmission of capacity and energy from resources to
loads while maintaining reliable operation of the Transmission
Provider's Transmission System in accordance with Good Utility
Practice.
Applicable Laws and Regulations shall mean all duly promulgated
applicable federal, state and local laws, regulations, rules,
ordinances, codes, decrees, judgments, directives, or judicial or
administrative orders, permits and other duly authorized actions of
any Governmental Authority.
Applicable Reliability Council shall mean the reliability
council applicable to the Transmission System to which the
Generating Facility is directly interconnected.
Applicable Reliability Standards shall mean the requirements and
guidelines of NERC, the Applicable Reliability Council, and the
Control Area of the Transmission System to which the Generating
Facility is directly interconnected.
Base Case shall mean the base case power flow, short circuit,
and stability data bases used for the Interconnection Studies by the
Transmission Provider or Interconnection Customer.
Breach shall mean the failure of a Party to perform or observe
any material term or condition of the Standard Large Generator
Interconnection Agreement.
Breaching Party shall mean a Party that is in Breach of the
Standard Large Generator Interconnection Agreement.
Business Day shall mean Monday through Friday, excluding Federal
Holidays.
Calendar Day shall mean any day including Saturday, Sunday or a
Federal Holiday.
Clustering shall mean the process whereby a group of
Interconnection Requests is studied together, instead of serially,
for the purpose of conducting the Interconnection System Impact
Study.
Commercial Operation Date of a unit shall mean the date on which
Interconnection Customer commences commercial operation of the unit
at the Generating Facility after Trial Operation of such unit has
been completed as confirmed in writing substantially in the form
shown in Appendix E to the Standard Large Generator Interconnection
Agreement.
Confidential Information shall mean any confidential,
proprietary or trade secret information of a plan, specification,
pattern, procedure, design, device, list, concept, policy or
compilation relating to the present or planned business of a Party,
which is designated as confidential by the Party supplying the
information, whether conveyed orally, electronically, in writing,
through inspection, or otherwise.
Control Area shall mean an electrical system or systems bounded
by interconnection metering and telemetry, capable of controlling
generation to maintain its interchange schedule with other Control
Areas and contributing to frequency regulation of the
interconnection. A Control Area must be certified by NERC.
Default shall mean the failure of a Breaching Party to cure its
Breach in accordance with Article 17 of the Standard Large Generator
Interconnection Agreement.
Dispute Resolution shall mean the procedure for resolution of a
dispute between the Parties in which they will first attempt to
resolve the dispute on an informal basis.
Distribution System shall mean the Transmission Provider's
facilities and equipment used to transmit electricity to ultimate
usage points such as homes and industries directly from nearby
generators or from interchanges with higher voltage transmission
networks which transport bulk power over longer distances. The
voltage levels at which distribution systems operate differ among
areas.
Distribution Upgrades shall mean the additions, modifications,
and upgrades to the Transmission Provider's Distribution System at
or beyond the Point of Interconnection to facilitate interconnection
of the Generating Facility and render the transmission service
necessary to effect Interconnection Customer's wholesale sale of
electricity in interstate commerce. Distribution Upgrades do not
include Interconnection Facilities.
Effective Date shall mean the date on which the Standard Large
Generator Interconnection Agreement becomes effective upon execution
by the Parties subject to acceptance by the Commission, or if filed
unexecuted, upon the date specified by the Commission.
Emergency Condition shall mean a condition or situation: (1)
That in the judgement of the Party making the claim is imminently
likely to endanger life or property; or (2) that, in the case of a
Transmission Provider, is imminently likely (as determined in a non-
discriminatory manner) to cause a material adverse effect on the
security of, or damage to Transmission Provider's Transmission
System, Transmission Provider's Interconnection Facilities or the
electric systems of others to which the Transmission Provider's
Transmission System is directly connected; or (3) that, in the case
of Interconnection Customer, is imminently likely (as determined in
a non-discriminatory manner) to cause a material adverse effect on
the security of, or damage to, the Generating Facility or
Interconnection Customer's Interconnection Facilities. System
restoration and black start shall be considered Emergency
Conditions; provided that Interconnection Customer is not obligated
by the Standard Large Generator Interconnection Agreement to possess
black start capability.
Energy Resource Interconnection Service (ER Interconnection
Service) shall mean an Interconnection Service that allows the
Interconnection Customer to connect its Generating Facility to the
Transmission Provider's Transmission System to be eligible to
deliver the Generating Facility's electric output using the existing
firm or nonfirm capacity of the Transmission Provider's Transmission
System on an as available basis. Energy Resource Interconnection
Service in and of itself does not convey transmission service.
Engineering & Procurement (E&P) Agreement shall mean an
agreement that authorizes the Transmission Provider to begin
engineering and procurement of long lead-time items necessary for
the establishment of the interconnection in order to advance the
implementation of the Interconnection Request.
Environmental Law shall mean Applicable Laws or Regulations
relating to pollution or protection of the environment or natural
resources.
Federal Power Act shall mean the Federal Power Act, as amended,
16 U.S.C. 791a et seq.
FERC shall mean the Federal Energy Regulatory Commission
(Commission) or its successor.
Force Majeure shall mean any act of God, labor disturbance, act
of the public enemy, war, insurrection, riot, fire, storm or flood,
explosion, breakage or accident to machinery or equipment, any
order, regulation or restriction imposed by governmental, military
or lawfully established civilian authorities, or any other cause
beyond a Party's control. A Force Majeure event does not include an
act of negligence or intentional wrongdoing.
Generating Facility shall mean Interconnection Customer's device
for the production of electricity identified in the Interconnection
Request, but shall not include the Interconnection Customer's
Interconnection Facilities.
Generating Facility Capacity shall mean the net capacity of the
Generating Facility and the aggregate net capacity of the Generating
Facility where it includes multiple energy production devices.
Good Utility Practice shall mean any of the practices, methods
and acts engaged in or approved by a significant portion of the
electric industry during the relevant time period, or any of the
practices, methods and acts which, in the exercise of reasonable
judgment in light of the facts known at the time the decision was
made, could have been expected to accomplish the desired result at a
reasonable cost consistent with good business practices,
reliability, safety and
[[Page 49935]]
expedition. Good Utility Practice is not intended to be limited to
the optimum practice, method, or act to the exclusion of all others,
but rather to be acceptable practices, methods, or acts generally
accepted in the region.
Governmental Authority shall mean any federal, state, local or
other governmental regulatory or administrative agency, court,
commission, department, board, or other governmental subdivision,
legislature, rulemaking board, tribunal, or other governmental
authority having jurisdiction over the Parties, their respective
facilities, or the respective services they provide, and exercising
or entitled to exercise any administrative, executive, police, or
taxing authority or power; provided, however, that such term does
not include Interconnection Customer, Transmission Provider, or any
Affiliate thereof.
Hazardous Substances shall mean any chemicals, materials or
substances defined as or included in the definition of ``hazardous
substances,'' ``hazardous wastes,'' ``hazardous materials,''
``hazardous constituents,'' ``restricted hazardous materials,''
``extremely hazardous substances,'' ``toxic substances,''
``radioactive substances,'' ``contaminants,'' ``pollutants,''
``toxic pollutants'' or words of similar meaning and regulatory
effect under any applicable Environmental Law, or any other
chemical, material or substance, exposure to which is prohibited,
limited or regulated by any applicable Environmental Law.
Initial Synchronization Date shall mean the date upon which the
Generating Facility is initially synchronized and upon which Trial
Operation begins.
In-Service Date shall mean the date upon which the
Interconnection Customer reasonably expects it will be ready to
begin use of the Transmission Provider's Interconnection Facilities
to obtain back feed power.
Interconnection Customer shall mean any entity, including the
Transmission Provider, Transmission Owner or any of the Affiliates
or subsidiaries of either, that proposes to interconnect its
Generating Facility with the Transmission Provider's Transmission
System.
Interconnection Customer's Interconnection Facilities shall mean
all facilities and equipment, as identified in Appendix A of the
Standard Large Generator Interconnection Agreement, that are located
between the Generating Facility and the Point of Change of
Ownership, including any modification, addition, or upgrades to such
facilities and equipment necessary to physically and electrically
interconnect the Generating Facility to the Transmission Provider's
Transmission System. Interconnection Customer's Interconnection
Facilities are sole use facilities.
Interconnection Facilities shall mean the Transmission
Provider's Interconnection Facilities and the Interconnection
Customer's Interconnection Facilities. Collectively, Interconnection
Facilities include all facilities and equipment between the
Generating Facility and the Point of Interconnection, including any
modification, additions or upgrades that are necessary to physically
and electrically interconnect the Generating Facility to the
Transmission Provider's Transmission System. Interconnection
Facilities are sole use facilities and shall not include
Distribution Upgrades, Stand Alone Network Upgrades or Network
Upgrades.
Interconnection Facilities Study shall mean a study conducted by
the Transmission Provider or a third party consultant for the
Interconnection Customer to determine a list of facilities
(including Transmission Provider's Interconnection Facilities and
Network Upgrades as identified in the Interconnection System Impact
Study), the cost of those facilities, and the time required to
interconnect the Generating Facility with the Transmission
Provider's Transmission System. The scope of the study is defined in
Section 8 of the Standard Large Generator Interconnection
Procedures.
Interconnection Facilities Study Agreement shall mean the form
of agreement contained in Appendix 4 of the Standard Large Generator
Interconnection Procedures for conducting the Interconnection
Facilities Study.
Interconnection Feasibility Study shall mean a preliminary
evaluation of the system impact and cost of interconnecting the
Generating Facility to the Transmission Provider's Transmission
System, the scope of which is described in Section 6 of the Standard
Large Generator Interconnection Procedures.
Interconnection Feasibility Study Agreement shall mean the form
of agreement contained in Appendix 2 of the Standard Large Generator
Interconnection Procedures for conducting the Interconnection
Feasibility Study.
Interconnection Request shall mean an Interconnection Customer's
request, in the form of Appendix 1 to the Standard Large Generator
Interconnection Procedures, in accordance with the Tariff, to
interconnect a new Generating Facility, or to increase the capacity
of, or make a Material Modification to the operating characteristics
of, an existing Generating Facility that is interconnected with the
Transmission Provider's Transmission System.
Interconnection Service shall mean the service provided by the
Transmission Provider associated with interconnecting the
Interconnection Customer's Generating Facility to the Transmission
Provider's Transmission System and enabling it to receive electric
energy and capacity from the Generating Facility at the Point of
Interconnection, pursuant to the terms of the Standard Large
Generator Interconnection Agreement and, if applicable, the
Transmission Provider's Tariff.
Interconnection Study shall mean any of the following studies:
The Interconnection Feasibility Study, the Interconnection System
Impact Study, and the Interconnection Facilities Study described in
the Standard Large Generator Interconnection Procedures.
Interconnection System Impact Study shall mean an engineering
study that evaluates the impact of the proposed interconnection on
the safety and reliability of Transmission Provider's Transmission
System and, if applicable, an Affected System. The study shall
identify and detail the system impacts that would result if the
Generating Facility were interconnected without project
modifications or system modifications, focusing on the Adverse
System Impacts identified in the Interconnection Feasibility Study,
or to study potential impacts, including but not limited to those
identified in the Scoping Meeting as described in the Standard Large
Generator Interconnection Procedures.
Interconnection System Impact Study Agreement shall mean the
form of agreement contained in Appendix 3 of the Standard Large
Generator Interconnection Procedures for conducting the
Interconnection System Impact Study.
IRS shall mean the Internal Revenue Service.
Joint Operating Committee shall be a group made up of
representatives from Interconnection Customers and the Transmission
Provider to coordinate operating and technical considerations of
Interconnection Service.
Large Generating Facility shall mean a Generating Facility
having a Generating Facility Capacity of more than 20 MW.
Loss shall mean any and all losses relating to injury to or
death of any person or damage to property, demand, suits,
recoveries, costs and expenses, court costs, attorney fees, and all
other obligations by or to third parties, arising out of or
resulting from the other Party's performance, or non-performance of
its obligations under the Standard Large Generator Interconnection
Agreement on behalf of the indemnifying Party, except in cases of
gross negligence or intentional wrongdoing by the indemnifying
Party.
Material Modification shall mean those modifications that have a
material impact on the cost or timing of any Interconnection Request
with a later queue priority date.
Metering Equipment shall mean all metering equipment installed
or to be installed at the Generating Facility pursuant to the
Standard Large Geneator Interconnection Agreement at the metering
points, including but not limited to instrument transformers, MWh-
meters, data acquisition equipment, transducers, remote terminal
unit, communications equipment, phone lines, and fiber optics.
NERC shall mean the North American Electric Reliability Council
or its successor organization.
Network Resource shall mean that portion of a Generating
Facility that is integrated with the Transmission Provider's
Transmission System, designated as a Network Resource pursuant to
the terms of the Tariff, and subjected to redispatch directives as
ordered by the Transmission Provider in accordance with the Tariff.
Network Resource Interconnection Service (NR Interconnection
Service) shall mean an Interconnection Service that allows the
Interconnection Customer to integrate its Large Generating Facility
with the Transmission Provider's Transmission System (1) in a manner
comparable to that in which the Transmission Provider integrates its
generating facilities to serve native load customers; or (2) in an
RTO or ISO with market based congestion management, in the
[[Page 49936]]
same manner as all other Network Resources. Network Resource
Interconnection Service in and of itself does not convey
transmission service.
Network Upgrades shall mean the additions, modifications, and
upgrades to the Transmission Provider's Transmission System required
at or beyond the point at which the Interconnection Customer
interconnects to the Transmission Provider's Transmission System to
accommodate the interconnection of the Large Generating Facility to
the Transmission Provider's Transmission System.
Notice of Dispute shall mean a written notice of a dispute or
claim that arises out of or in connection with the Standard Large
Generator Interconnection Agreement or its performance.
Optional Interconnection Study shall mean a sensitivity analysis
based on assumptions specified by the Interconnection Customer in
the Optional Interconnection Study Agreement.
Optional Interconnection Study Agreement shall mean the form of
agreement contained in Appendix 5 of the Standard Large Generator
Interconnection Procedures for conducting the Optional
Interconnection Study.
Party or Parties shall mean Transmission Provider, Transmission
Owner, Interconnection Customer or any combination of the above.
Point of Change of Ownership shall mean the point, as set forth
in Appendix A to the Standard Large Generator Interconnection
Agreement, where the Interconnection Customer's Interconnection
Facilities connect to the Transmission Provider's Interconnection
Facilities.
Point of Interconnection shall mean the point, as set forth in
Appendix A to the Standard Large Generator Interconnection
Agreement, where the Interconnection Facilities connect to the
Transmission Provider's Transmission System.
Queue Position shall mean the order of a valid Interconnection
Request, relative to all other pending valid Interconnection
Requests, that is established based upon the date and time of
receipt of the valid Interconnection Request by the Transmission
Provider.
Reasonable Efforts shall mean, with respect to an action
required to be attempted or taken by a Party under the Standard
Large Generator Interconnection Agreement, efforts that are timely
and consistent with Good Utility Practice and are otherwise
substantially equivalent to those a Party would use to protect its
own interests.
Scoping Meeting shall mean the meeting between representatives
of the Interconnection Customer and Transmission Provider conducted
for the purpose of discussing alternative interconnection options,
to exchange information including any transmission data and earlier
study evaluations that would be reasonably expected to impact such
interconnection options, to analyze such information, and to
determine the potential feasible Points of Interconnection.
Site Control shall mean documentation reasonably demonstrating:
(1) Ownership of, a leasehold interest in, or a right to develop a
site for the purpose of constructing the Generating Facility; (2) an
option to purchase or acquire a leasehold site for such purpose; or
(3) an exclusivity or other business relationship between
Interconnection Customer and the entity having the right to sell,
lease or grant Interconnection Customer the right to possess or
occupy a site for such purpose.
Small Generating Facility shall mean a Generating Facility that
has a Generating Facility Capacity of no more than 20 MW.
Stand Alone Network Upgrades shall mean Network Upgrades that an
Interconnection Customer may construct without affecting day-to-day
operations of the Transmission System during their construction.
Both the Transmission Provider and the Interconnection Customer must
agree as to what constitutes Stand Alone Network Upgrades and
identify them in Appendix A to the Standard Large Generator
Interconnection Agreement.
Standard Large Generator Interconnection Agreement (LGIA) shall
mean the form of interconnection agreement applicable to an
Interconnection Request pertaining to a Large Generating Facility,
that is included in the Transmission Provider's Tariff.
Standard Large Generator Interconnection Procedures (LGIP) shall
mean the interconnection procedures applicable to an Interconnection
Request pertaining to a Large Generating Facility that are included
in the Transmission Provider's Tariff.
System Protection Facilities shall mean the equipment, including
necessary protection signal communications equipment, required to
protect (1) the Transmission Provider's Transmission System from
faults or other electrical disturbances occurring at the Generating
Facility and (2) the Generating Facility from faults or other
electrical system disturbances occurring on the Transmission
Provider's Transmission System or on other delivery systems or other
generating systems to which the Transmission Provider's Transmission
System is directly connected.
Tariff shall mean the Transmission Provider's Tariff through
which open access transmission service and Interconnection Service
are offered, as filed with the Commission, and as amended or
supplemented from time to time, or any successor tariff.
Transmission Owner shall mean an entity that owns, leases or
otherwise possesses an interest in the portion of the Transmission
System at the Point of Interconnection and may be a Party to the
Standard Large Generator Interconnection Agreement to the extent
necessary.
Transmission Provider shall mean the public utility (or its
designated agent) that owns, controls, or operates transmission or
distribution facilities used for the transmission of electricity in
interstate commerce and provides transmission service under the
Tariff. The term Transmission Provider should be read to include the
Transmission Owner when the Transmission Owner is separate from the
Transmission Provider.
Transmission Provider's Interconnection Facilities shall mean
all facilities and equipment owned, controlled, or operated by the
Transmission Provider from the Point of Change of Ownership to the
Point of Interconnection as identified in Appendix A to the Standard
Large Generator Interconnection Agreement, including any
modifications, additions or upgrades to such facilities and
equipment. Transmission Provider's Interconnection Facilities are
sole use facilities and shall not include Distribution Upgrades,
Stand Alone Network Upgrades or Network Upgrades.
Transmission System shall mean the facilities owned, controlled
or operated by the Transmission Provider or Transmission Owner that
are used to provide transmission service under the Tariff.
Trial Operation shall mean the period during which
Interconnection Customer is engaged in on-site test operations and
commissioning of the Generating Facility prior to commercial
operation.
Section 2. Scope and Application
2.1 Application of Standard Large Generator Interconnection
Procedures
Sections 2 through 13 apply to processing an Interconnection
Request pertaining to a Large Generating Facility.
2.2 Comparability
The Transmission Provider shall receive, process and analyze all
Interconnection Requests in a timely manner as set forth in this
LGIP. The Transmission Provider will use the same Reasonable Efforts
in processing and analyzing Interconnection Requests from all
Interconnection Customers, whether the Generating Facilities are
owned by Transmission Provider, its subsidiaries or Affiliates or
others.
2.3 Base Case Data
Transmission Provider shall provide base power flow, short
circuit and stability databases, including all underlying
assumptions, and contingency list upon request subject to
confidentiality provisions. Such databases and lists, hereinafter
referred to as Base Cases, shall include all (1) generation projects
and (ii) transmission projects, including merchant transmission
projects that are proposed for the Transmission System for which a
transmission expansion plan has been submitted and approved by the
applicable authority.
2.4 No Applicability to Transmission Service
Nothing in this LGIP shall constitute a request for transmission
service or confer upon an Interconnection Customer any right to
receive transmission service.
Section 3. Interconnection Requests
3.1 General
An Interconnection Customer shall submit to the Transmission
Provider an Interconnection Request in the form of Appendix 1 to
this LGIP and a refundable deposit of $10,000. The Transmission
Provider shall apply the deposit toward the cost of an
Interconnection Feasibility Study. The Interconnection Customer
shall submit a separate Interconnection Request for each
[[Page 49937]]
site and may submit multiple Interconnection Requests for a single
site. The Interconnection Customer must submit a deposit with each
Interconnection Request even when more than one request is submitted
for a single site. An Interconnection Request to evaluate one site
at two different voltage levels shall be treated as two
Interconnection Requests.
At Interconnection Customer's option, Transmission Provider and
Interconnection Customer will identify alternative Point(s) of
Interconnection and configurations at the Scoping Meeting to
evaluate in this process and attempt to eliminate alternatives in a
reasonable fashion given resources and information available.
Interconnection Customer will select the definitive Point(s) of
Interconnection to be studied no later than the execution of the
Interconnection Feasibility Study Agreement.
3.2 Identification of Types of Interconnection Services
At the time the Interconnection Request is submitted,
Interconnection Customer must request either ER Interconnection
Service or NR Interconnection Service, as described; provided,
however, any Interconnection Customer requesting NR Interconnection
Service may also request that it be concurrently studied as an ER
Interconnection Service, up to the point when an Interconnection
Facility Study Agreement is executed. Interconnection Customer may
then elect to proceed with NR Interconnection Service or to proceed
under a lower level of interconnection service to the extent that
only certain upgrades will be completed.
3.2.1 Energy Resource Interconnection Service (ER Interconnection
Service)
3.2.1.1 The Product. ER Interconnection Service allows
Interconnection Customer to connect the Large Generating Facility to
the Transmission System and be eligible to deliver the Large
Generating Facility's output using the existing firm or non-firm
capacity of the Transmission System on an ``as available'' basis. ER
Interconnection Service does not in and of itself convey any
transmission service.
3.2.1.2 The Study. The study consists of short circuit/fault
duty, steady state (thermal and voltage) and stability analyses. The
short circuit/fault duty analysis would identify direct
Interconnection Facilities required and the Network Upgrades
necessary to address short circuit issues associated with the
Interconnection Facilities. The stability and steady state studies
would identify necessary upgrades to allow full output of the
proposed Large Generating Facility and would also identify the
maximum allowed output, at the time the study is performed, of the
interconnecting Large Generating Facility without requiring
additional Network Upgrades.
3.2.2 Network Resource Interconnection Service (NR Interconnection
Service)
3.2.2.1 The Product. The Transmission Provider must conduct the
necessary studies and construct the Network Upgrades needed to
integrate the Large Generating Facility (1) in a manner comparable
to that in which the Transmission Provider integrates its Generating
Facilities to serve native load customers; or (2) in an ISO or RTO
with market based congestion management, in the same manner as all
other Network Resources. NR Interconnection Service Allows the
Interconnection Customer 's Large Generating Facility to be
designated as a Network Resource, up to the Large Generating
Facility's full output, on the same basis as all other existing
Network Resources interconnected to the Transmission Provider's
Transmission System, and to be studied as a Network Resource on the
assumption that such a designation will occur.
3.2.2.2 The Study. The Interconnection Study for NR
Interconnection Service shall assure that the Interconnection
Customer's Large Generating Facility meets the requirements for NR
Interconnection Service and as a general matter, that such Large
Generating Facility's interconnection is also studied with the
Transmission Provider's Transmission System at peak load, under a
variety of severely stressed conditions, to determine whether, with
the Large Generating Facility at full output, the aggregate of
generation in the local area can be delivered to the aggregate of
load on the Transmission Provider's Transmission System, consistent
with the Transmission Provider's reliability criteria and
procedures. This approach assumes that some portion of existing
Network Resources are displaced by the output of the Interconnection
Customer's Large Generating Facility. NR Interconnection Service in
and of itself does not convey any transmission service.
3.3 Valid Interconnection Request
3.3.1 Initiating an Interconnection Request
To initiate an Interconnection Request, Interconnection Customer
must submit all of the following: (i) A $10,000 deposit, (ii) a
completed application in the form of Appendix 1, and (iii)
demonstration of Site Control or a posting of an additional deposit
of $10,000. Such deposits shall be applied toward any
Interconnection Studies pursuant to the Interconnection Request. If
Interconnection Customer demonstrates Site Control within the cure
period specified in Section 3.3.3 after submitting its
Interconnection Request, the additional deposit shall be refundable;
otherwise, all such deposit(s), additional and initial, become non-
refundable.
The expected In-Service Date of the new Large Generating
Facility or increase in capacity of the existing Generating Facility
shall be no more than the process window for the regional expansion
planning period (or in the absence of a regional planning process,
the process window for the Transmission Provider's expansion
planning period) not to exceed seven years from the date the
Interconnection Request is received by the Transmission Provider,
unless the Interconnection Customer demonstrates that engineering,
permitting and construction of the new Large Generating Facility or
increase in capacity of the existing Generating Facility will take
longer than the regional expansion planning period. The In-Service
Date may succeed the date the Interconnection Request is received by
the Transmission Provider by a period up to ten years, or longer
where the Interconnection Customer and Transmission Provider agree,
such agreement not to be unreasonably withheld.
3.3.2 Acknowledgment of Interconnection Request
Transmission Provider shall acknowledge receipt of the
Interconnection Request within five (5) Business Days of receipt of
the request and attach a copy of the received Interconnection
Request to the acknowledgement.
3.3.3 Deficiencies in Interconnection Request
An Interconnection Request will not be considered to be a valid
request until all items in Section 3.3.1 have been received by the
Transmission Provider. If an Interconnection Request fails to meet
the requirements set forth in Section 3.3.1, the Transmission
Provider shall notify the Interconnection Customer within five (5)
Business Days of receipt of the initial Interconnection Request of
the reasons for such failure and that the Interconnection Request
does not constitute a valid request. Interconnection Customer shall
provide the Transmission Provider the additional requested
information needed to constitute a valid request within ten (10)
Business Days after receipt of such notice. Failure by
Interconnection Customer to comply with this Section 3.3.3 shall be
treated in accordance with Section 3.6.
3.3.4 Scoping Meeting
Within ten (10) Business Days after receipt of a valid
Interconnection Request, Transmission Provider shall establish a
date agreeable to Interconnection Customer for the Scoping Meeting,
and such date shall be no later than thirty (30) Calendar Days from
receipt of the valid Interconnection Request, unless otherwise
mutually agreed upon by the Parties.
The purpose of the Scoping Meeting shall be to discuss
alternative interconnection options, to exchange information
including any transmission data that would reasonably be expected to
impact such interconnection options, to analyze such information and
to determine the potential feasible Points of Interconnection.
Transmission Provider and Interconnection Customer will bring to the
meeting such technical data, including, but not limited to: (i)
General facility loadings, (ii) general instability issues, (iii)
general short circuit issues, (iv) general voltage issues, and (v)
general reliability issues as may be reasonably required to
accomplish the purpose of the meeting. Transmission Provider and
Interconnection Customer will also bring to the meeting personnel
and other resources as may be reasonably required to accomplish the
purpose of the meeting in the time allocated for the meeting. On the
basis of the meeting, Interconnection Customer shall designate its
Point of Interconnection, pursuant to Section 6.1, and one or more
available alternative Point(s) of Interconnection. The duration of
the meeting shall be sufficient to accomplish its purpose.
3.4 OASIS Posting
The Transmission Provider will maintain on its OASIS a list of
all Interconnection
[[Page 49938]]
Requests. The list will identify, for each Interconnection Request:
(i) The maximum summer and winter megawatt electrical output; (ii)
the location by county and state; (iii) the station or transmission
line or lines where the interconnection will be made; (iv) the
projected In-Service Date; (v) the status of the Interconnection
Request, including Queue Position; (vi) the type of Interconnection
Service being requested; and (vii) the availability of any studies
related to the Interconnection Request; (viii) the date of the
Interconnection Request; (ix) the type of Generating Facility to be
constructed (combined cycle, base load or combustion turbine and
fuel type); and (x) for Interconnection Requests that have not
resulted in a completed interconnection, an explanation as to why it
was not completed. The list will not disclose the identity of the
Interconnection Customer until the Interconnection Customer executes
an LGIA or requests that the Transmission Provider file an
unexecuted LGIA with FERC. The Transmission Provider shall post to
its OASIS site any deviations from the study timelines set forth
herein. Interconnection Study reports and Optional Interconnection
Study reports shall be posted to the Transmission Provider's OASIS
site subsequent to the meeting between the Interconnection Customer
and the Transmission Provider to discuss the applicable study
results. The Transmission Provider shall also post any known
deviations in the Large Generating Facility's In-Service Date.
3.5 Coordination with Affected Systems
The Transmission Provider will coordinate the conduct of any
studies required to determine the impact of the Interconnection
Request on Affected Systems with Affected System Operators and, if
possible, include those results in its applicable Interconnection
Study within the time frame specified in this LGIP. The Transmission
Provider will include such Affected System Operators in all meetings
held with the Interconnection Customer as required by this LGIP. The
Interconnection Customer will cooperate with the Transmission
Provider in all matters related to the conduct of studies and the
determination of modifications to Affected Systems. A Transmission
Provider which may be an Affected System shall cooperate with the
Transmission Provider with whom interconnection has been requested
in all matters related to the conduct of studies and the
determination of modifications to Affected Systems.
3.6 Withdrawal
The Interconnection Customer may withdraw its Interconnection
Request at any time by written notice of such withdrawal to the
Transmission Provider. In addition, if the Interconnection Customer
fails to adhere to all requirements of this LGIP, except as provided
in Section 13.5 (Disputes), the Transmission Provider shall deem the
Interconnection Request to be withdrawn and shall provide written
notice to the Interconnection Customer of the deemed withdrawal and
an explanation of the reasons for such deemed withdrawal. Upon
receipt of such written notice, the Interconnection Customer shall
have fifteen (15) Business Days in which to either respond with
information or actions that cures the deficiency or to notify the
Transmission Provider of its intent to pursue Dispute Resolution.
Withdrawal shall result in the loss of the Interconnection
Customer's Queue Position. If an Interconnection Customer disputes
the withdrawal and loss of its Queue Position, then during Dispute
Resolution, the Interconnection Customer's Interconnection Request
is eliminated from the queue until such time that the outcome of
Dispute Resolution would restore its Queue Position. An
Interconnection Customer that withdraws or is deemed to have
withdrawn its Interconnection Request shall pay to the Transmission
Provider all costs that the Transmission Provider prudently incurs
with respect to that Interconnection Request prior to the
Transmission Provider's receipt of notice described above. The
Interconnection Customer must pay all monies due to the Transmission
Provider before it is allowed to obtain any Interconnection Study
data or results.
The Transmission Provider shall (i) update the OASIS Queue
Position posting and (ii) refund to the Interconnection Customer any
portion of the Interconnection Customer's's deposit or study
payments that exceeds the costs that the Transmission Provider has
incurred, including interest calculated in accordance with section
35.19a(a)(2) of FERC's regulations. In the event of such withdrawal,
the Transmission Provider, subject to the confidentiality provisions
of Section 13.1, shall provide, at Interconnection Customer's
request, all information that the Transmission Provider developed
for any completed study conducted up to the date of withdrawal of
the Interconnection Request.
Section 4. Queue Position
4.1 General
The Transmission Provider shall assign a Queue Position based
upon the date and time of receipt of the valid Interconnection
Request; provided that, if the sole reason an Interconnection
Request is not valid is the lack of required information on the
application form, and the Interconnection Customer provides such
information in accordance with Section 3.3.3, then the Transmission
Provider shall assign the Interconnection Customer a Queue Position
based on the date the application form was originally filed. Moving
a Point of Interconnection shall result in a lowering of Queue
Position if it is deemed a Material Modification under Section
4.4.3.
The Queue Position of each Interconnection Request will be used
to determine the order of performing the Interconnection Studies and
determination of cost responsibility for the facilities necessary to
accommodate the Interconnection Request. A higher queued
Interconnection Request is one that has been placed ``earlier'' in
the queue in relation to another Interconnection Request that is
lower queued.
4.2 Clustering
At Transmission Provider's option, Interconnection Requests may
be studied serially or in clusters for the purpose of the
Interconnection System Impact Study.
Clustering shall be implemented on the basis of Queue Position.
If Transmission Provider elects to study Interconnection Requests
using Clustering, all Interconnection Requests received within a
period not to exceed one hundred and eighty (180) Calendar Days,
hereinafter referred to as the ``Queue Cluster Window'' shall be
studied together without regard to the nature of the underlying
Interconnection Service, whether ER Interconnection Service or NR
Interconnection Service. Deadline for completing all Interconnection
System Impact Studies for which an Interconnection System Impact
Study Agreement has been executed during a Queue Cluster Window
shall be in accordance with Section 7.4, for all Interconnection
Requests assigned to the same Queue Cluster Window. Transmission
Provider may study an Interconnection Request separately to the
extent warranted by Good Utility Practice based upon the electrical
remoteness of the proposed Large Generating Facility.
Clustering Interconnection System Impact Studies shall be
conducted in such a manner to ensure the efficient implementation of
the applicable regional transmission expansion plan in light of the
Transmission System's capabilities at the time of each study.
The Queue Cluster Window shall have a fixed time interval based
on fixed annual opening and closing dates. Any changes to the
established Queue Cluster Window interval and opening or closing
dates shall be announced with a posting on the Transmission
Provider's OASIS beginning at least one hundred and eighty (180)
Calendar Days in advance of the change and continuing thereafter
through the end date of the first Queue Cluster Window that is to be
modified.
4.3 Transferability of Queue Position
An Interconnection Customer may transfer its Queue Position to
another entity only if such entity acquires the specific Generating
Facility identified in the Interconnection Request and the Point of
Interconnection does not change.
4.4 Modifications
The Interconnection Customer shall submit to the Transmission
Provider, in writing, modifications to any information provided in
the Interconnection Request. The Interconnection Customer shall
retain its Queue Position if the modifications are in accordance
with Sections 4.4.1, 4.4.2 or 4.4.5, or are determined not to be
Material Modifications pursuant to Section 4.4.3.
Notwithstanding the above, during the course of the
Interconnection Studies, either the Interconnection Customer or
Transmission Provider may identify changes to the planned
interconnection that may improve the costs and benefits (including
reliability) of the interconnection, and the ability of the proposed
change to accommodate the Interconnection Request. To the extent the
identified changes are
[[Page 49939]]
acceptable to the Transmission Provider and Interconnection
Customer, such acceptance not to be unreasonably withheld,
Transmission Provider shall modify the Point of Interconnection and/
or configuration in accordance with such changes and proceed with
any re-studies necessary to do so in accordance with Section 6.4,
Section 7.6 and Section 8.5 as applicable and Interconnection
Customer shall retain its Queue Position.
4.4.1 Prior to the return of the executed Interconnection System
Impact Study Agreement to the Transmission Provider, modifications
permitted under this Section shall include specifically: (a) A
reduction up to 60 percent (MW) of electrical output of the proposed
project; (b) modifying the technical parameters associated with the
Large Generating Facility technology or the Large Generating
Facility step-up transformer impedance characteristics; and (c)
modifying the interconnection configuration. For plant increases,
the incremental increase in plant output will go to the end of the
queue for the purposes of cost allocation and study analysis.
4.4.2 Prior to the return of the executed Interconnection
Facility Study Agreement to the Transmission Provider, the
modifications permitted under this Section shall include
specifically: (a) additional 15 percent decrease in plant size (MW),
and (b) Large Generating Facility technical parameters associated
with modifications to Large Generating Facility technology and
transformer impedances; provided, however, the incremental costs
associated with those modifications are the responsibility of the
requesting Interconnection Customer.
4.4.3 Prior to making any modification other than those
specifically permitted by Sections 4.4.1, 4.4.2, and 4.4.5,
Interconnection Customer may first request that the Transmission
Provider evaluate whether such modification is a Material
Modification. In response to Interconnection Customer's request, the
Transmission Provider shall evaluate the proposed modifications
prior to making them and inform the Interconnection Customer in
writing of whether the modifications would constitute a Material
Modification. Any change to the Point of Interconnection shall
constitute a Material Modification. The Interconnection Customer may
then withdraw the proposed modification or proceed with a new
Interconnection Request for such modification.
4.4.4 Upon receipt of Interconnection Customer's request for
modification permitted under this Section 4.4, the Transmission
Provider shall commence and perform any necessary additional studies
as soon as practicable, but in no event shall the Transmission
Provider commence such studies later than thirty (30) Calendar Days
after receiving notice of Interconnection Customer's request. Any
additional studies resulting from such modification shall be done at
Interconnection Customer's cost.
4.4.5 Extensions of less than three (3) cumulative years in the
Commercial Operation Date of the Large Generating Facility to which
the Interconnection Request relates are not material and should be
handled through construction sequencing.
Section 5. Procedures for Interconnection Requests Submitted Prior to
Effective Date of Standard Large Generator Interconnection Procedures
5.1 Queue Position for Pending Requests
5.1.1 Any Interconnection Customer assigned a Queue Position
prior to the effective date of this LGIP shall retain that Queue
Position
5.1.1.1 If an Interconnection Study Agreement has not been
executed as of the effective date of this LGIP, then such
Interconnection Study, and any subsequent Interconnection Studies,
shall be processed in accordance with this LGIP.
5.1.1.2 If an Interconnection Study Agreement has been executed
prior to the effective date of this LGIP, such Interconnection Study
shall be completed in accordance with the terms of such agreement.
With respect to any remaining studies for which an Interconnection
Customer has not signed an Interconnection Study Agreement prior to
the effective date of the LGIP, the Transmission Provider must offer
the Interconnection Customer the option of either continuing under
the Transmission Provider's existing interconnection study process
or going forward with the completion of the necessary
Interconnection Studies (for which it does not have a signed
Interconnection Studies Agreement) in accordance with this LGIP.
5.1.1.3 If an LGIA has been submitted to the Commission for
approval before the effective date of the LGIP, then the LGIA would
be grandfathered.
5.1.2 Transition Period
To the extent necessary, the Transmission Provider and
Interconnection Customers with an outstanding request (i.e., an
Interconnection Request for which an LGIA has not been submitted to
the Commission for approval as of the effective date of this LGIP)
shall transition to this LGIP within a reasonable period of time not
to exceed sixty (60) Calendar Days. The use of the term
``outstanding request'' herein shall mean any Interconnection
Request, on the effective date of this LGIP: (i) That has been
submitted but not yet accepted by the Transmission Provider; (ii)
where the related interconnection agreement has not yet been
submitted to the Commission for approval in executed or unexecuted
form, (iii) where the relevant Interconnection Study Agreements have
not yet been executed, or (iv) where any of the relevant
Interconnection Studies are in process but not yet completed. Any
Interconnection Customer with an outstanding request as of the
effective date of this LGIP may request a reasonable extension of
any deadline, otherwise applicable, if necessary to avoid undue
hardship or prejudice to its Interconnection Request. A reasonable
extension shall be granted by the Transmission Provider to the
extent consistent with the intent and process provided for under
this LGIP.
5.2 New Transmission Provider
If the Transmission Provider transfers control of its
Transmission System to a successor Transmission Provider during the
period when an Interconnection Request is pending, the original
Transmission Provider shall transfer to the successor Transmission
Provider any amount of the deposit or payment with interest thereon
that exceeds the cost that it incurred to evaluate the request for
interconnection. Any difference between such net amount and the
deposit or payment required by this LGIP shall be paid by or
refunded to the Interconnection, as appropriate. The original
Transmission Provider shall coordinate with the successor
Transmission Provider to complete any Interconnection Study, as
appropriate, that the original Transmission Provider has begun but
has not completed. If the Transmission Provider has tendered a draft
LGIA to the Interconnection Customer but the Interconnection
Customer has not either executed the LGIA or requested the filing of
an unexecuted LGIA with FERC, unless otherwise provided, the
Interconnection Customer may elect to complete negotiations with the
Transmission Provider or the successor Transmission Provider.
Section 6. Interconnection Feasibility Study
6.1 Interconnection Feasibility Study Agreement
Simultaneously with the acknowledgement of a valid
Interconnection Request the Transmission Provider shall provide to
Interconnection Customer an Interconnection Feasibility Study
Agreement in the form of Appendix 2. The Interconnection Feasibility
Study Agreement shall specify that Interconnection Customer is
responsible for the actual cost of the Interconnection Feasibility
Study. Within five (5) Business Days following the Scoping Meeting
Interconnection Customer shall specify for inclusion in the
attachment to the Interconnection Feasibility Study Agreement the
Point(s) of Interconnection and any reasonable alternative Point(s)
of Interconnection. Within five (5) Business Days following the
Transmission Provider's receipt of such designation, Transmission
Provider shall tender to Interconnection Customer the
Interconnection Feasibility Study Agreement signed by Transmission
Provider, which includes a good faith estimate of the cost for
completing the Interconnection Feasibility Study. The
Interconnection Customer shall execute and deliver to the
Transmission Provider the Interconnection Feasibility Study
Agreement along with a $10,000 deposit no later than thirty (30)
Calendar Days after its receipt.
On or before the return of the executed Interconnection
Feasibility Study Agreement to the Transmission Provider, the
Interconnection Customer shall provide the technical data called for
in Appendix 1, Attachment A.
If the Interconnection Feasibility Study uncovers any unexpected
result(s) not contemplated during the Scoping Meeting, a substitute
Point of Interconnection identified by either Interconnection
Customer or Transmission Provider, and acceptable to the other, such
acceptance not to be unreasonably withheld, will be substituted for
the designated Point of Interconnection specified above without loss
of Queue Position, and Re-studies shall be completed pursuant to
Section 6.4 as applicable. For the
[[Page 49940]]
purpose of this Section 6.1, if the Transmission Provider and
Interconnection Customer cannot agree on the substituted Point of
Interconnection, then Interconnection Customer may direct that one
of the alternatives as specified in the Interconnection Feasibility
Study Agreement, as specified pursuant to Section 3.3.4, shall be
the substitute.
6.2 Scope of Interconnection Feasibility Study
The Interconnection Feasibility Study shall preliminarily
evaluate the feasibility of the proposed interconnection to the
Transmission System.
The Interconnection Feasibility Study will consider the Base
Case as well as all Generating Facilities (and with respect to
(iii), any identified Network Upgrades) that, on the date the
Interconnection Feasibility Study is commenced: (i) Are directly
interconnected to the Transmission System; (ii) are interconnected
to Affected Systems and may have an impact on the Interconnection
Request; (iii) have a pending higher queued Interconnection Request
to interconnect to the Transmission System; and (iv) have no Queue
Position but have executed an LGIA or requested that an unexecuted
LGIA be filed with FERC. The Interconnection Feasibility Study will
consist of a power flow and short circuit analysis. The
Interconnection Feasibility Study will provide a list of facilities
and a non-binding good faith estimate of cost responsibility and a
non-binding good faith estimated time to construct.
6.3 Interconnection Feasibility Study Procedures
The Transmission Provider shall utilize existing studies to the
extent practicable when it performs the study. The Transmission
Provider shall use Reasonable Efforts to complete the
Interconnection Feasibility Study no later than forty-five (45)
Calendar Days after the Transmission Provider receives the fully
executed Interconnection Feasibility Study Agreement. At the request
of the Interconnection Customer or at any time the Transmission
Provider determines that it will not meet the required time frame
for completing the Interconnection Feasibility Study, Transmission
Provider shall notify the Interconnection Customer as to the
schedule status of the Interconnection Feasibility Study. If the
Transmission Provider is unable to complete the Interconnection
Feasibility Study within that time period, it shall notify the
Interconnection Customer and provide an estimated completion date
with an explanation of the reasons why additional time is required.
Upon request, the Transmission Provider shall provide the
Interconnection Customer supporting documentation, workpapers and
relevant power flow, short circuit and stability databases for the
Interconnection Feasibility Study, subject to confidentiality
arrangements consistent with Section 13.1.
6.3.1 Meeting With Transmission Provider
Within ten (10) Business Days of providing an Interconnection
Feasibility Study report to Interconnection Customer, Transmission
Provider and Interconnection Customer shall meet to discuss the
results of the Interconnection Feasibility Study.
6.4 Re-Study
If Re-Study of the Interconnection Feasibility Study is required
due to a higher queued project dropping out of the queue, or a
modification of a higher queued project subject to Section 4.4, or
re-designation of the Point of Interconnection pursuant to Section
6.1 Transmission Provider shall notify Interconnection Customer in
writing. Such Re-Study shall take not longer than forty-five (45)
Calendar Days from the date of the notice. Any cost of Re-Study
shall be borne by the Interconnection Customer being re-studied.
Section 7. Interconnection System Impact Study
7.1 Interconnection System Impact Study Agreement
Unless otherwise agreed, pursuant to the Scoping Meeting
provided in Section 3.3.4, simultaneously with the delivery of the
Interconnection Feasibility Study to the Interconnection Customer,
the Transmission Provider shall provide to the Interconnection
Customer an Interconnection System Impact Study Agreement in the
form of Appendix 3 to this LGIP. The Interconnection System Impact
Study Agreement shall provide that the Interconnection Customer
shall compensate the Transmission Provider for the actual cost of
the Interconnection System Impact Study. Within three (3) Business
Days following the Interconnection Feasibility Study results
meeting, the Transmission Provider shall provide to Interconnection
Customer a non-binding good faith estimate of the cost and timeframe
for completing the Interconnection System Impact Study.
7.2 Execution of Interconnection System Impact Study Agreement
The Interconnection Customer shall execute the Interconnection
System Impact Study Agreement and deliver the executed
Interconnection System Impact Study Agreement to the Transmission
Provider no later than thirty (30) Calendar Days after its receipt
along with demonstration of Site Control, and a $50,000 deposit.
If the Interconnection Customer does not provide all such
technical data when it delivers the Interconnection System Impact
Study Agreement, the Transmission Provider shall notify the
Interconnection Customer of the deficiency within five (5) Business
Days of the receipt of the executed Interconnection System Impact
Study Agreement and the Interconnection Customer shall cure the
deficiency within ten (10) Business Days of receipt of the notice,
provided, however, such deficiency does not include failure to
deliver the executed Interconnection System Impact Study Agreement
or deposit.
If the Interconnection System Impact Study uncovers any
unexpected result(s) not contemplated during the Scoping Meeting and
the Interconnection Feasibility Study, a substitute Point of
Interconnection identified by either Interconnection Customer or
Transmission Provider, and acceptable to the other, such acceptance
not to be unreasonably withheld, will be substituted for the
designated Point of Interconnection specified above without loss of
Queue Position, and restudies shall be completed pursuant to Section
7.6 as applicable. For the purpose of this Section 7.6, if the
Transmission Provider and Interconnection Customer cannot agree on
the substituted Point of Interconnection, then Interconnection
Customer may direct that one of the alternatives as specified in the
Interconnection Feasibility Study Agreement, as specified pursuant
to Section 3.3.4, shall be the substitute.
7.3 Scope of Interconnection System Impact Study
The Interconnection System Impact Study shall evaluate the
impact of the proposed interconnection on the reliability of the
Transmission System. The Interconnection System Impact Study will
consider the Base Case as well as all Generating Facilities (and
with respect to (iii) below, any identified Network Upgrades
associated with such higher queued interconnection) that, on the
date the Interconnection System Impact Study is commenced: (i) Are
directly interconnected to the Transmission System; (ii) are
interconnected to Affected Systems and may have an impact on the
Interconnection Request; (iii) have a pending higher queued
Interconnection Request to interconnect to the Transmission System;
and (iv) have no Queue Position but have executed an LGIA or
requested that an unexecuted LGIA be filed with FERC.
The Interconnection System Impact Study will consist of a short
circuit analysis, a stability analysis, and a power flow analysis.
The Interconnection System Impact Study will state the assumptions
upon which it is based; state the results of the analyses; and
provide the requirements or potential impediments to providing the
requested interconnection service, including a preliminary
indication of the cost and length of time that would be necessary to
correct any problems identified in those analyses and implement the
interconnection. The Interconnection System Impact Study will
provide a list of facilities that are required as a result of the
Interconnection Request and a non-binding good faith estimate of
cost responsibility and a non-binding good faith estimated time to
construct.
7.4 Interconnection System Impact Study Procedures
The Transmission Provider shall coordinate the Interconnection
System Impact Study with any Affected System that is affected by the
Interconnection Request pursuant to Section 3.5 above. The
Transmission Provider shall utilize existing studies to the extent
practicable when it performs the study. The Transmission Provider
shall use Reasonable Efforts to complete the Interconnection System
Impact Study within ninety (90) Calendar Days after the receipt of
the Interconnection System Impact Study Agreement or notification to
proceed, study payment, and technical data. If Transmission Provider
uses Clustering, the Transmission Provider shall use Reasonable
Efforts to deliver a completed
[[Page 49941]]
Interconnection System Impact Study within ninety (90) Calendar Days
after the close of the Queue Cluster Window.
At the request of the Interconnection Customer or at any time
the Transmission Provider determines that it will not meet the
required time frame for completing the Interconnection System Impact
Study, Transmission Provider shall notify the Interconnection
Customer as to the schedule status of the Interconnection System
Impact Study. If the Transmission Provider is unable to complete the
Interconnection System Impact Study within the time period, it shall
notify the Interconnection Customer and provide an estimated
completion date with an explanation of the reasons why additional
time is required. Upon request, the Transmission Provider shall
provide the Interconnection Customer all supporting documentation,
workpapers and relevant pre-Interconnection Request and post-
Interconnection Request power flow, short circuit and stability
databases for the Interconnection System Impact Study, subject to
confidentiality arrangements consistent with Section 13.1.
7.5 Meeting with Transmission Provider
Within ten (10) Business Days of providing an Interconnection
System Impact Study report to Interconnection Customer, Transmission
Provider and Interconnection Customer shall meet to discuss the
results of the Interconnection System Impact Study.
7.6 Re-Study
If Re-Study of the Interconnection System Impact Study is
required due to a higher queued project dropping out of the queue, a
modification of a higher queued project subject to 4.4, or re-
designation of the Point of Interconnection pursuant to Section 6.1
Transmission Provider shall notify Interconnection Customer in
writing. Such Re-Study shall take no longer than sixty (60) Calendar
Days from the date of notice. Any cost of Re-Study shall be borne by
the Interconnection Customer being re-studied.
Section 8. Interconnection Facilities Study
8.1 Interconnection Facilities Study Agreement
Simultaneously with the delivery of the Interconnection System
Impact Study to the Interconnection Customer, the Transmission
Provider shall provide to the Interconnection Customer an
Interconnection Facilities Study Agreement in the form of Appendix 4
to this LGIP. The Interconnection Facilities Study Agreement shall
provide that the Interconnection Customer shall compensate the
Transmission Provider for the actual cost of the Interconnection
Facilities Study. Within three (3) Business Days following the
Interconnection System Impact Study results meeting, the
Transmission Provider shall provide to Interconnection Customer a
non-binding good faith estimate of the cost and timeframe for
completing the Interconnection Facilities Study. The Interconnection
Customer shall execute the Interconnection Facilities Study
Agreement and deliver the executed Interconnection Facilities Study
Agreement to the Transmission Provider within thirty (30) Calendar
Days after its receipt, together with the required technical data
and the greater of $100,000 or Interconnection Customer's portion of
the estimated monthly cost of conducting the Interconnection
Facilities Study.
8.1.1 Transmission Provider shall invoice Interconnection
Customer on a monthly basis for the work to be conducted on the
Interconnection Facilities Study each month. Interconnection
Customer shall pay invoiced amounts within thirty (30) Calendar Days
of receipt of invoice. Transmission Provider shall continue to hold
the amounts on deposit until settlement of the final invoice.
8.2 Scope of Interconnection Facilities Study
The Interconnection Facilities Study shall specify and estimate
the cost of the equipment, engineering, procurement and construction
work needed to implement the conclusions of the Interconnection
System Impact Study in accordance with Good Utility Practice to
physically and electrically connect the Interconnection Facility to
the Transmission System. The Interconnection Facilities Study shall
also identify the electrical switching configuration of the
connection equipment, including, without limitation: the
transformer, switchgear, meters, and other station equipment; the
nature and estimated cost of any Transmission Provider's
Interconnection Facilities and Network Upgrades necessary to
accomplish the interconnection; and an estimate of the time required
to complete the construction and installation of such facilities.
8.3 Interconnection Facilities Study Procedures
The Transmission Provider shall coordinate the Interconnection
Facilities Study with any Affected System pursuant to Section 3.5
above. The Transmission Provider shall utilize existing studies to
the extent practicable in performing the Interconnection Facilities
Study. The Transmission Provider shall use Reasonable Efforts to
complete the study and issue a draft Interconnection Facilities
Study report to the Interconnection Customer within the following
number of days after receipt of an executed Interconnection
Facilities Study Agreement: ninety (90) Calendar Days, with no more
than a +/-20 percent cost estimate contained in the report; or one
hundred eighty (180) Calendar Days, if the Interconnection Customer
requests a +/-10 percent cost estimate.
At the request of the Interconnection Customer or at any time
the Transmission Provider determines that it will not meet the
required time frame for completing the Interconnection Facilities
Study, Transmission Provider shall notify the Interconnection
Customer as to the schedule status of the Interconnection Facilities
Study. If the Transmission Provider is unable to complete the
Interconnection Facilities Study and issue a draft Interconnection
Facilities Study report within the time required, it shall notify
the Interconnection Customer and provide an estimated completion
date and an explanation of the reasons why additional time is
required.
The Interconnection Customer may, within thirty (30) Calendar
Days after receipt of the draft report, provide written comments to
the Transmission Provider, which the Transmission Provider shall
include in the final report. The Transmission Provider shall issue
the final Interconnection Facilities Study report within fifteen
(15) Business Days of receiving the Interconnection Customer's
comments or promptly upon receiving Interconnection Customer's
statement that it will not provide comments. The Transmission
Provider may reasonably extend such fifteen-day period upon notice
to the Interconnection Customer if the Interconnection Customer's
comments require the Transmission Provider to perform additional
analyses or make other significant modifications prior to the
issuance of the final Interconnection Facilities Report. Upon
request, the Transmission Provider shall provide the Interconnection
Customer supporting documentation, workpapers, and databases or data
developed in the preparation of the Interconnection Facilities
Study, subject to confidentiality arrangements consistent with
Section 13.1.
8.4 Meeting with Transmission Provider
Within ten (10) Business Days of providing a draft
Interconnection Facilities Study report to Interconnection Customer,
Transmission Provider and Interconnection Customer shall meet to
discuss the results of the Interconnection Facilities Study.
8.5 Re-Study
If Re-Study of the Interconnection Facilities Study is required
due to a higher queued project dropping out of the queue or a
modification of a higher queued project pursuant to Section 4.4,
Transmission Provider shall so notify Interconnection Customer in
writing. Such Re-Study shall take no longer than sixty (60) Calendar
Days from the date of notice. Any cost of Re-Study shall be borne by
the Interconnection Customer being re-studied.
Section 9. Engineering & Procurement (``E&P'') Agreement
Prior to executing an LGIA, an Interconnection Customer may, in
order to advance the implementation of its interconnection, request
and Transmission Provider shall offer the Interconnection Customer,
an E&P Agreement that authorizes the Transmission Provider to begin
engineering and procurement of long lead-time items necessary for
the establishment of the interconnection. However, the Transmission
Provider shall not be obligated to offer an E&P Agreement if
Interconnection Customer is in Dispute Resolution as a result of an
allegation that Interconnection Customer has failed to meet any
milestones or comply with any prerequisites specified in other parts
of the LGIP. The E&P Agreement is an optional procedure and it will
not alter the Interconnection Customer's Queue Position or In-
Service Date. The E&P Agreement shall provide for the
Interconnection Customer to pay the cost of all activities
authorized by the Interconnection Customer and to make advance
payments or provide other satisfactory security for such costs.
[[Page 49942]]
The Interconnection Customer shall pay the cost of such
authorized activities and any cancellation costs for equipment that
is already ordered for its interconnection, which cannot be
mitigated as hereafter described, whether or not such items or
equipment later become unnecessary. If Interconnection Customer
withdraws its application for interconnection or either party
terminates the E&P Agreement, to the extent the equipment ordered
can be canceled under reasonable terms, Interconnection Customer
shall be obligated to pay the associated cancellation costs. To the
extent that the equipment cannot be reasonably canceled,
Transmission Provider may elect: (i) To take title to the equipment,
in which event Transmission Provider shall refund Interconnection
Customer any amounts paid by Interconnection Customer for such
equipment and shall pay the cost of delivery of such equipment, or
(ii) to transfer title to and deliver such equipment to
Interconnection Customer, in which event Interconnection Customer
shall pay any unpaid balance and cost of delivery of such equipment.
Section 10. Optional Interconnection Study
10.1 Optional Interconnection Study Agreement
On or after the date when the Interconnection Customer receives
Interconnection System Impact Study results, the Interconnection
Customer may request, and the Transmission Provider shall perform a
reasonable number of Optional Studies. The request shall describe
the assumptions that the Interconnection Customer wishes the
Transmission Provider to study within the scope described in Section
10.2. Within five (5) Business Days after receipt of a request for
an Optional Interconnection Study, the Transmission Provider shall
provide to the Interconnection Customer an Optional Interconnection
Study Agreement in the form of Appendix 5.
The Optional Interconnection Study Agreement shall: (i) Specify
the technical data that the Interconnection Customer must provide
for each phase of the Optional Interconnection Study, (ii) specify
Interconnection Customer's assumptions as to which Interconnection
Requests with earlier queue priority dates will be excluded from the
Optional Interconnection Study case and assumptions as to the type
of interconnection service for Interconnection Requests remaining in
the Optional Interconnection Study case, and (iii) the Transmission
Provider's estimate of the cost of the Optional Interconnection
Study. To the extent known by the Transmission Provider, such
estimate shall include any costs expected to be incurred by any
Affected System whose participation is necessary to complete the
Optional Interconnection Study. Notwithstanding the above, the
Transmission Provider shall not be required as a result of an
Optional Interconnection Study request to conduct any additional
Interconnection Studies with respect to any other Interconnection
Request.
The Interconnection Customer shall execute the Optional
Interconnection Study Agreement within ten (10) Business Days of
receipt and deliver the Optional Interconnection Study Agreement,
the technical data and a $10,000 deposit to the Transmission
Provider.
10.2 Scope of Optional Interconnection Study
The Optional Interconnection Study will consist of a sensitivity
analysis based on the assumptions specified by the Interconnection
Customer in the Optional Interconnection Study Agreement. The
Optional Interconnection Study will also identify the Transmission
Provider's Interconnection Facilities and the Network Upgrades, and
the estimated cost thereof, that may be required to provide
transmission service or Interconnection Service based upon the
results of the Optional Interconnection Study. The Optional
Interconnection Study shall be performed solely for informational
purposes. The Transmission Provider shall use Reasonable Efforts to
coordinate the study with any Affected Systems that may be affected
by the types of Interconnection Services that are being studied. The
Transmission Provider shall utilize existing studies to the extent
practicable in conducting the Optional Interconnection Study.
10.3 Optional Interconnection Study Procedures
The executed Optional Interconnection Study Agreement, the
prepayment, and technical and other data called for therein must be
provided to the Transmission Provider within ten (10) Business Days
of Interconnection Customer receipt of the Optional Interconnection
Study Agreement. The Transmission Provider shall use Reasonable
Efforts to complete the Optional Interconnection Study within a
mutually agreed upon time period specified within the Optional
Interconnection Study Agreement. If the Transmission Provider is
unable to complete the Optional Interconnection Study within such
time period, it shall notify the Interconnection Customer and
provide an estimated completion date and an explanation of the
reasons why additional time is required. Any difference between the
study payment and the actual cost of the study shall be paid to the
Transmission Provider or refunded to the Interconnection Customer,
as appropriate. Upon request, the Transmission Provider shall
provide the Interconnection Customer supporting documentation and
workpapers and databases or data developed in the preparation of the
Optional Interconnection Study, subject to confidentiality
arrangements consistent with Section 13.1.
Section 11. Standard Large Generator Interconnection Agreement (LGIA)
11.1 Tender
Simultaneously with the issuance of the draft Interconnection
Facilities Study report to the Interconnection Customer, the
Transmission Provider shall tender to the Generator a draft LGIA
together with draft appendices completed to the extent practicable.
The draft LGIA shall be in the form of the Transmission Provider's
Commission-approved standard form LGIA, which is in Appendix 6.
Within thirty (30) Calendar Days after the issuance of the draft
Interconnection Facilities Study Report, the Transmission Provider
shall tender the completed draft LGIA appendices.
11.2 Negotiation
Notwithstanding Section 11.1, at the request of the
Interconnection Customer the Transmission Provider shall begin
negotiations with the Interconnection Customer concerning the
appendices to the LGIA at any time after the Interconnection
Customer executes the Interconnection Facilities Study Agreement.
The Transmission Provider and the Interconnection Customer shall
negotiate concerning any disputed provisions of the appendices to
the draft LGIA for not more than sixty (60) Calendar Days after
tender of the final Interconnection Facilities Study Report. If the
Interconnection Customer determines that negotiations are at an
impasse, it may request termination of the negotiations at any time
after tender of the LGIA pursuant to Section 11.1 and request
submission of the unexecuted LGIA with FERC or initiate Dispute
Resolution procedures pursuant to Section 13.5. If the
Interconnection Customer requests termination of the negotiations,
but within sixty (60) Calendar Days thereafter fails to request
either the filing of the unexecuted LGIA or initiate Dispute
Resolution, it shall be deemed to have withdrawn its Interconnection
Request. Unless otherwise agreed by the Parties, if the
Interconnection Customer has not executed the LGIA, requested filing
of an unexecuted LGIA, or initiated Dispute Resolution procedures
pursuant to Section 13.5 within sixty days of tender of completed
draft of the LGIA appendices, it shall be deemed to have withdrawn
its Interconnection Request. The Transmission Provider shall provide
to the Interconnection Customer a final LGIA within fifteen (15)
Business Days after the completion of the negotiation process.
11.3 Execution and Filing
Within fifteen (15) Business Days after receipt of the final
LGIA, the Interconnection Customer shall provide the Transmission
Provider (A) reasonable evidence that continued Site Control or (B)
posting of $250,000, non-refundable additional security, which shall
be applied toward future construction costs. At the same time,
Interconnection Customer also shall provide reasonable evidence that
one or more of the following milestones in the development of the
Large Generating Facility, at the Interconnection Customer election,
has been achieved: (i) The execution of a contract for the supply or
transportation of fuel to the Large Generating Facility; (ii) the
execution of a contract for the supply of cooling water to the Large
Generating Facility; (iii) execution of a contract for the
engineering for, procurement of major equipment for, or construction
of, the Large Generating Facility; (iv) execution of a contract for
the sale of electric energy or capacity from the Large Generating
Facility; or (v) application for an air, water, or land use permit.
The Interconnection Customer shall either: (i) Execute two
originals of the tendered
[[Page 49943]]
LGIA and return them to the Transmission Provider; or (ii) request
in writing that the Transmission Provider file with FERC an LGIA in
unexecuted form. As soon as practicable, but not later than ten (10)
Business Days after receiving either the two executed originals of
the tendered LGIA (if it does not conform with a Commission-approved
standard form of interconnection agreement) or the request to file
an unexecuted LGIA, the Transmission Provider shall file the LGIA
with FERC, together with its explanation of any matters as to which
the Interconnection Customer and the Transmission Provider disagree
and support for the costs that the Transmission Provider proposes to
charge to the Interconnection Customer under the LGIA. An unexecuted
LGIA should contain terms and conditions deemed appropriate by the
Transmission Provider for the Interconnection Request. If the
Parties agree to proceed with design, procurement, and construction
of facilities and upgrades under the agreed-upon terms of the
unexecuted LGIA, they may proceed pending Commission action.
11.4 Commencement of Interconnection Activities
If the Interconnection Customer executes the final LGIA, the
Transmission Provider and the Interconnection Customer shall perform
their respective obligations in accordance with the terms of the
LGIA, subject to modification by FERC. Upon submission of an
unexecuted LGIA, both Interconnection Customer and Transmission
Provider shall promptly comply with the unexecuted LGIA, subject to
modification by FERC.
Section 12. Construction of Transmission Provider's Interconnection
Facilities and Network Upgrades
12.1 Schedule
The Transmission Provider and the Interconnection Customer shall
negotiate in good faith concerning a schedule for the construction
of the Transmission Provider's Interconnection Facilities and the
Network Upgrades.
12.2 Construction Sequencing
12.2.1 General
In general, the In-Service Date of an Interconnection Customers
seeking interconnection to the Transmission System will determine
the sequence of construction of Network Upgrades.
12.2.2 Advance Construction of Network Upgrades That Are an Obligation
of an Entity Other Than the Interconnection Customer
An Interconnection Customer with an LGIA, in order to maintain
its In-Service Date, may request that the Transmission Provider
advance to the extent necessary the completion of Network Upgrades
that: (i) Were assumed in the Interconnection Studies for such
Interconnection Customer, (ii) are necessary to support such In-
Service Date, and (iii) would otherwise not be completed, pursuant
to a contractual obligation of an entity other than the
Interconnection Customer that is seeking interconnection to the
Transmission System, in time to support such In-Service Date. Upon
such request, Transmission Provider will use Reasonable Efforts to
advance the construction of such Network Upgrades to accommodate
such request; provided that the Interconnection Customer commits to
pay Transmission Provider: (i) Any associated expediting costs and
(ii) the cost of such Network Upgrades.
The Transmission Provider will refund to the Interconnection
Customer both the expediting costs and the cost of Network Upgrades,
in accordance with Article 11.4 of the LGIA. Consequently, the
entity with a contractual obligation to construct such Network
Upgrades shall be obligated to pay only that portion of the costs of
the Network Upgrades that Transmission Provider has not refunded to
the Interconnection Customer. Payment by that entity shall be due on
the date that it would have been due had there been no request for
advance construction. The Transmission Provider shall forward to the
Interconnection Customer the amount paid by the entity with a
contractual obligation to construct the Network Upgrades as payment
in full for the outstanding balance owed to the Interconnection
Customer. The Transmission Provider then shall refund to that entity
the amount that it paid for the Network Upgrades, in accordance with
Article 11.4 of the LGIA
12.2.3 Advancing Construction of Network Upgrades That Are Part of an
Expansion Plan of the Transmission Provider
An Interconnection Customer with an LGIA, in order to maintain
its In-Service Date, may request that the Transmission Provider
advance to the extent necessary the completion of Network Upgrades
that: (i) Are necessary to support such In-Service Date and (ii)
would otherwise not be completed, pursuant to an expansion plan of
the Transmission Provider, in time to support such In-Service Date.
Upon such request, Transmission Provider will use Reasonable Efforts
to advance the construction of such Network Upgrades to accommodate
such request; provided that the Interconnection Customer commits to
pay Transmission Provider any associated expediting costs. The
Interconnection Customer shall be entitled to transmission credits,
if any, for any expediting costs paid.
12.2.4 Amended Interconnection System Impact Study
An Interconnection System Impact Study will be amended to
determine the facilities necessary to support the requested In-
Service Date. This amended study will include those transmission and
Large Generating Facilities that are expected to be in service on or
before the requested In-Service Date.
Section 13. Miscellaneous
13.1 Confidentiality
Confidential Information shall include, without limitation, all
information relating to a Party's technology, research and
development, business affairs, and pricing, and any information
supplied by either of the Parties to the other prior to the
execution of an LGIA.
Information is Confidential Information only if it is clearly
designated or marked in writing as confidential on the face of the
document, or, if the information is conveyed orally or by
inspection, if the Party providing the information orally informs
the Party receiving the information that the information is
confidential.
If requested by either Party, the other Party shall provide in
writing, the basis for asserting that the information referred to in
this Article warrants confidential treatment, and the requesting
Party may disclose such writing to the appropriate Governmental
Authority. Each Party shall be responsible for the costs associated
with affording confidential treatment to its information.
13.1.1 Scope
Confidential Information shall not include information that the
receiving Party can demonstrate: (1) Is generally available to the
public other than as a result of a disclosure by the receiving
Party; (2) was in the lawful possession of the receiving Party on a
non-confidential basis before receiving it from the disclosing
Party; (3) was supplied to the receiving Party without restriction
by a third party, who, to the knowledge of the receiving Party after
due inquiry, was under no obligation to the disclosing Party to keep
such information confidential; (4) was independently developed by
the receiving Party without reference to Confidential Information of
the disclosing Party; (5) is, or becomes, publicly known, through no
wrongful act or omission of the receiving Party or Breach of the
LGIA; or (6) is required, in accordance with Section 13.1.6, Order
of Disclosure, to be disclosed by any Governmental Authority or is
otherwise required to be disclosed by law or subpoena, or is
necessary in any legal proceeding establishing rights and
obligations under the LGIA. Information designated as Confidential
Information will no longer be deemed confidential if the Party that
designated the information as confidential notifies the other Party
that it no longer is confidential.
13.1.2 Release of Confidential Information
Neither Party shall release or disclose Confidential Information
to any other person, except to its employees, consultants, or to
parties who may be or considering providing financing to or equity
participation with Interconnection Customer, or to potential
purchasers or assignees of Interconnection Customer, on a need-to-
know basis in connection with these procedures, unless such person
has first been advised of the confidentiality provisions of this
Section 13.1 and has agreed to comply with such provisions.
Notwithstanding the foregoing, a Party providing Confidential
Information to any person shall remain primarily responsible for any
release of Confidential Information in contravention of this Section
13.1.
13.1.3 Rights
Each Party retains all rights, title, and interest in the
Confidential Information that each Party discloses to the other
Party. The disclosure by each Party to the other Party of
Confidential Information shall not be deemed a waiver by either
Party or any other person or entity of the right to protect the
Confidential Information from public disclosure.
[[Page 49944]]
13.1.4 No Warranties
By providing Confidential Information, neither Party makes any
warranties or representations as to its accuracy or completeness. In
addition, by supplying Confidential Information, neither Party
obligates itself to provide any particular information or
Confidential Information to the other Party nor to enter into any
further agreements or proceed with any other relationship or joint
venture.
13.1.5 Standard of Care
Each Party shall use at least the same standard of care to
protect Confidential Information it receives as it uses to protect
its own Confidential Information from unauthorized disclosure,
publication or dissemination. Each Party may use Confidential
Information solely to fulfill its obligations to the other Party
under these procedures or its regulatory requirements.
13.1.6 Order of Disclosure
If a court or a Government Authority or entity with the right,
power, and apparent authority to do so requests or requires either
Party, by subpoena, oral deposition, interrogatories, requests for
production of documents, administrative order, or otherwise, to
disclose Confidential Information, that Party shall provide the
other Party with prompt notice of such request(s) or requirement(s)
so that the other Party may seek an appropriate protective order or
waive compliance with the terms of the LGIA. Notwithstanding the
absence of a protective order or waiver, the Party may disclose such
Confidential Information which, in the opinion of its counsel, the
Party is legally compelled to disclose. Each Party will use
Reasonable Efforts to obtain reliable assurance that confidential
treatment will be accorded any Confidential Information so
furnished.
13.1.7 Remedies
The Parties agree that monetary damages would be inadequate to
compensate a Party for the other Party's Breach of its obligations
under this Section 13.1. Each Party accordingly agrees that the
other Party shall be entitled to equitable relief, by way of
injunction or otherwise, if the first Party Breaches or threatens to
Breach its obligations under this Section 13.1, which equitable
relief shall be granted without bond or proof of damages, and the
receiving Party shall not plead in defense that there would be an
adequate remedy at law. Such remedy shall not be deemed an exclusive
remedy for the Breach of this Section 13.1, but shall be in addition
to all other remedies available at law or in equity. The Parties
further acknowledge and agree that the covenants contained herein
are necessary for the protection of legitimate business interests
and are reasonable in scope. No Party, however, shall be liable for
indirect, incidental, or consequential or punitive damages of any
nature or kind resulting from or arising in connection with this
Section 13.1.
13.1.8 Disclosure to FERC or Its Staff
Notwithstanding anything in this Section 13.1 to the contrary,
and pursuant to 18 CFR 1b.20, if FERC or its staff, during the
course of an investigation or otherwise, requests information from
one of the Parties that is otherwise required to be maintained in
confidence pursuant to the LGIP, the Party shall provide the
requested information to FERC or its staff, within the time provided
for in the request for information. In providing the information to
FERC or its staff, the Party must, consistent with 18 CFR 388.112,
request that the information be treated as confidential and non-
public by FERC and its staff and that the information be withheld
from public disclosure. Parties are prohibited from notifying the
other Party prior to the release of the Confidential Information to
the Commission or its staff. The Party shall notify the other Party
to the LGIA when its is notified by FERC or its staff that a request
to release Confidential Information has been received by FERC, at
which time either of the Parties may respond before such information
would be made public, pursuant to 18 CFR 388.112.
13.1.9 Subject to the exception in Section 13.1.8, any
information that a Party claims is competitively sensitive,
commercial or financial information (``Confidential Information'')
shall not be disclosed by the other Party to any person not employed
or retained by the other Party, except to the extent disclosure is
(i) required by law; (ii) reasonably deemed by the disclosing Party
to be required to be disclosed in connection with a dispute between
or among the Parties, or the defense of litigation or dispute; (iii)
otherwise permitted by consent of the other Party, such consent not
to be unreasonably withheld; or (iv) necessary to fulfill its
obligations under this LGIP or as a transmission service provider or
a Control Area operator including disclosing the Confidential
Information to an RTO or ISO or to a subregional, regional or
national reliability organization or planning group. The Party
asserting confidentiality shall notify the other Party in writing of
the information it claims is confidential. Prior to any disclosures
of the other Party's Confidential Information under this
subparagraph, or if any third party or Governmental Authority makes
any request or demand for any of the information described in this
subparagraph, the disclosing Party agrees to promptly notify the
other Party in writing and agrees to assert confidentiality and
cooperate with the other Party in seeking to protect the
Confidential Information from public disclosure by confidentiality
agreement, protective order or other reasonable measures.
13.1.10 This provision shall not apply to any information that
was or is hereafter in the public domain (except as a result of a
Breach of this provision).
13.1.11 The Transmission Provider shall, at Interconnection
Customer's election, destroy, in a confidential manner, or return
the Confidential Information provided at the time of Confidential
Information is no longer needed.
13.2 Delegation of Responsibility
The Transmission Provider may use the services of subcontractors
as it deems appropriate to perform its obligations under this LGIP.
Transmission Provider shall remain primarily liable to the
Interconnection Customer for the performance of such subcontractors
and compliance with its obligations of this LGIP. The subcontractor
shall keep all information provided confidential and shall use such
information solely for the performance of such obligation for which
it was provided and no other purpose.
13.3 Obligation for Study Costs
Transmission Provider shall charge and Interconnection Customer
shall pay the actual costs of the Interconnection Studies. Any
difference between the study deposit and the actual cost of the
applicable Interconnection Study shall be paid by or refunded,
except as otherwise provided herein, to Interconnection Customer or
offset against the cost of any future Interconnection Studies
associated with the applicable Interconnection Request prior to
beginning of any such future Interconnection Studies. Any invoices
for Interconnection Studies shall include a detailed and itemized
accounting of the cost of each Interconnection Study.
Interconnection Customer shall pay any such undisputed costs within
thirty (30) Calendar Days of receipt of an invoice therefor. The
Transmission Provider shall not be obligated to perform or continue
to perform any studies unless Interconnection Customer has paid all
undisputed amounts in compliance herewith.
13.4 Third Parties Conducting Studies
If (i) at the time of the signing of an Interconnection Study
Agreement there is disagreement as to the estimated time to complete
an Interconnection Study, (ii) the Interconnection Customer receives
notice pursuant to Sections 6.3, 7.4 or 8.3 that the Transmission
Provider will not complete an Interconnection Study within the
applicable timeframe for such Interconnection Study, or (iii) the
Interconnection Customer receives neither the Interconnection Study
nor a notice under Sections 6.3, 7.4 or 8.3 within the applicable
timeframe for such Interconnection Study, then the Interconnection
Customer may require the Transmission Provider to utilize a third
party consultant reasonably acceptable to Interconnection Customer
and Transmission Provider to perform such Interconnection Study
under the direction of the Transmission Provider. At other times,
Transmission Provider may also utilize a third party consultant to
perform such Interconnection Study, either in response to a general
request of the Interconnection Customer, or on its own volition.
In all cases, use of a third party consultant shall be in accord
with Article 26 of the LGIA (Subcontractors) and limited to
situations where the Transmission Provider determines that doing so
will help maintain or accelerate the study process for the
Interconnection Customer's pending Interconnection Request and not
interfere with the Transmission Provider's progress on
Interconnection Studies for other pending Interconnection Requests.
In cases where the Interconnection Customer requests use of a third
party consultant to perform such Interconnection Study,
Interconnection Customer and Transmission Provider shall negotiate
all of the pertinent terms and conditions, including
[[Page 49945]]
reimbursement arrangements and the estimated study completion date
and study review deadline. Transmission Provider shall convey all
workpapers, data bases, study results and all other supporting
documentation prepared to date with respect to the Interconnection
Request as soon as practicable upon Interconnection Customer's
request subject to the confidentiality provision in Section 13.1. In
any case, such third party contract may be entered into with either
the Interconnection Customer or the Transmission Provider at the
Transmission Provider's discretion. In the case of (iii) the
Interconnection Customer maintains its right to submit a claim to
Dispute Resolution to recover the costs of such third party study.
Such third party consultant shall be required to comply with this
LGIP, Article 26 of the LGIA (Subcontractors), and the relevant OATT
procedures and protocols as would apply if the Transmission Provider
were to conduct the Interconnection Study and shall use the
information provided to it solely for purposes of performing such
services and for no other purposes. The Transmission Provider shall
cooperate with such third party consultant and Interconnection
Customer to complete and issue the Interconnection Study in the
shortest reasonable time.
13.5 Disputes
13.5.1 Submission
In the event either Party has a dispute, or asserts a claim,
that arises out of or in connection with the LGIA, the LGIP, or
their performance, such Party (the ``disputing Party'') shall
provide the other Party with written notice of the dispute or claim
(``Notice of Dispute''). Such dispute or claim shall be referred to
a designated senior representative of each Party for resolution on
an informal basis as promptly as practicable after receipt of the
Notice of Dispute by the other Party. In the event the designated
representatives are unable to resolve the claim or dispute through
unassisted or assisted negotiations within thirty (30) Calendar Days
of the other Party's receipt of the Notice of Dispute, such claim or
dispute may, upon mutual agreement of the Parties, be submitted to
arbitration and resolved in accordance with the arbitration
procedures set forth below. In the event the Parties do not agree to
submit such claim or dispute to arbitration, each Party may exercise
whatever rights and remedies it may have in equity or at law
consistent with the terms of this LGIA.
13.5.2 External Arbitration Procedures
Any arbitration initiated under these procedures shall be
conducted before a single neutral arbitrator appointed by the
Parties. If the Parties fail to agree upon a single arbitrator
within ten (10) Calendar Days of the submission of the dispute to
arbitration, each Party shall choose one arbitrator who shall sit on
a three-member arbitration panel. The two arbitrators so chosen
shall within twenty (20) Calendar Days select a third arbitrator to
chair the arbitration panel. In either case, the arbitrators shall
be knowledgeable in electric utility matters, including electric
transmission and bulk power issues, and shall not have any current
or past substantial business or financial relationships with any
party to the arbitration (except prior arbitration). The
arbitrator(s) shall provide each of the Parties an opportunity to be
heard and, except as otherwise provided herein, shall conduct the
arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association (``Arbitration Rules'') and any
applicable FERC regulations or RTO rules; provided, however, in the
event of a conflict between the Arbitration Rules and the terms of
this Section 13, the terms of this Section 13 shall prevail.
13.5.3 Arbitration Decisions
Unless otherwise agreed by the Parties, the arbitrator(s) shall
render a decision within ninety (90) Calendar Days of appointment
and shall notify the Parties in writing of such decision and the
reasons therefor. The arbitrator(s) shall be authorized only to
interpret and apply the provisions of the LGIA and LGIP and shall
have no power to modify or change any provision of the LGIA and LGIP
in any manner. The decision of the arbitrator(s) shall be final and
binding upon the Parties, and judgment on the award may be entered
in any court having jurisdiction. The decision of the arbitrator(s)
may be appealed solely on the grounds that the conduct of the
arbitrator(s), or the decision itself, violated the standards set
forth in the Federal Arbitration Act or the Administrative Dispute
Resolution Act. The final decision of the arbitrator must also be
filed with FERC if it affects jurisdictional rates, terms and
conditions of service, Interconnection Facilities, or Network
Upgrades.
13.5.4 Costs
Each Party shall be responsible for its own costs incurred
during the arbitration process and for the following costs, if
applicable: (1) The cost of the arbitrator chosen by the Party to
sit on the three member panel and one half of the cost of the third
arbitrator chosen; or (2) one half the cost of the single arbitrator
jointly chosen by the Parties.
Appendices to LGIP
Appendix 1--Interconnection Request
Appendix 2--Interconnection Feasibility Study Agreement
Appendix 3--Interconnection System Impact Study Agreement
Appendix 4--Interconnection Facilities Study Agreement
Appendix 5--Optional Interconnection Study Agreement
Appendix 6--Standard Large Generator Interconnection Agreement
Appendix 1 to LGIP--Interconnection Request
1. The undersigned Interconnection Customer submits this request
to interconnect its Large Generating Facility with the Transmission
Provider's Transmission System pursuant to a Tariff.
2. This Interconnection Request is for (check one):
--A proposed new Large Generating Facility.
--An increase in the generating capacity or a Material Modification
of an existing Generating Facility.
3. The type of interconnection service requested (check one or
both as appropriate):
--[It is intended that the types of interconnection services
specified in Article 4 of the LGIA be placed here.]
4. The Interconnection Customer provides the following
information:
a. Address or location or the proposed new Large Generating
Facility site (to the extent known) or, in the case of an existing
Generating Facility, the name and specific location of the existing
Generating Facility;
b. Maximum summer at -- degrees C and winter at -- degrees C
megawatt electrical output of the proposed new Large Generating
Facility or the amount of megawatt increase in the generating
capacity of an existing Generating Facility;
c. General description of the equipment configuration;
d. Commercial Operation Date by day, month, and year;
e. Name, address, telephone number, and e-mail address of the
Interconnection Customer's contact person;
f. Approximate location of the proposed Point of Interconnection
(optional); and
g. Interconnection Customer Data (set forth in Attachment A).
5. Applicable deposit amount as specified in the LGIP.
6. Evidence of Site Control as specified in the LGIP (check
one):
--Is attached to this Interconnection Request.
--Will be provided at a later date in accordance with this LGIP.
7. This Interconnection Request shall be submitted to the
representative indicated below:
[To be completed by Transmission Provider]
8. Representative of the Interconnection Customer to contact:
[To be completed by Interconnection Customer]
9. This Interconnection Request is submitted by:
Name of Interconnection Customer:
-----------------------------------------------------------------------
By (signature):--------------------------------------------------------
Name (type or print):--------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------
Large Generating Facility Data Unit Ratings
kVA ------ [deg]F ------ Voltage ------
Power Factor ------
Speed (RPM) ------ Connection (e.g. Wye) ------
Short Circuit Ratio ------ Frequency, Hertz ------
Stator Amperes at Rated kVA ------ Field Volts ------
Max Turbine MW ------[deg]F ------
Combined Turbine-Generator-Exciter Inertia Data
Inertia Constant, H= -------- kW sec/kVA
Moment-of-Inertia, WR2 = -------- lb. ft.2
[[Page 49946]]
------------------------------------------------------------------------
Direct axis Quadrature axis
------------------------------------------------------------------------
Reactance Data (Per Unit-
Rated KVA):
Synchronous--saturated.. Xdv ______ Xqv ______
Synchronous--unsaturated Xdi ______ Xqi ______
Transient--saturated.... X'dv ______ X'qv ______
Transient--unsaturated.. X'di ______ X'qi ______
Subtransient--saturated. X'dv ______ X'qv ______
Subtransient--unsaturate X'di ______ X'qi ______
d.
Negative Sequence-- X2v ______
saturated.
Negative Sequence-- X2i ______
unsaturated.
Zero Sequence--saturated X0v ______
Zero Sequence-- X0i ______
unsaturated.
Leakage Reactance....... Xlm ______
Field Time Constant Data
(Sec):
Open Circuit............ T'do ______ T'qo ______
Three-Phase Short T'd3 ______ T'q ______
Circuit Transient.
Line to Line Short T'd2 ______
Circuit Transient.
Line to Neutral Short T'd1 ______
Circuit Transient.
Short Circuit T'd ______ T'q ______
Subtransient.
Open Circuit T'do ______ T'qo ______
Subtransient.
Armature Time Constant Data
(Sec):
Three Phase Short Ta3 ______
Circuit.
Line to Line Short Ta2 ______
Circuit.
Line to Neutral Short Ta1 ______
Circuit.
------------------------------------------------------------------------
Note: If requested information is not applicable, indicate by
marking ``N/A.''
MW Capability and Plant Configuration Large Generating Facility Data
Armature Winding Resistance Data (Per Unit)
Positive R1--------
Negative R2--------
Zero R0--------
Rotor Short Time Thermal Capacity I22t = --------
Field Current at Rated kVA, Armature Voltage and PF = -------- amps
Field Current at Rated kVA and Armature Voltage, 0 PF = --------
amps
Three Phase Armature Winding Capacitance = -------- microfarad
Field Winding Resistance = --------ohms ------ [deg]C
Armature Winding Resistance (Per Phase) = -------- ohms ------[deg]C
Curves
Provide Saturation, Vee, Reactive Capability, Capacity
Temperature Correction curves. Designate normal and emergency
Hydrogen Pressure operating range for multiple curves.
Generator Step-Up Transformer Data
Ratings
Capacity Self-cooled/maximum nameplate
------------kVA
Voltage Ratio Generator side/System side
------------kV
Winding Connections Low V/High V (Delta or Wye)
------------
Fixed Taps Available---------------------------------------------------
Present Tap Setting----------------------------------------------------
Impedance
Positive Z1 (on self-cooled kVA rating)-------- % ------ X/R
Zero Z0 (on self-cooled kVA rating)-------- % ------ X/R
Excitation System Data
Identify appropriate IEEE model block diagram of excitation
system and power system stabilizer (PSS) for computer representation
in power system stability simulations and the corresponding
excitation system and PSS constants for use in the model.
Governor System Data
Identify appropriate IEEE model block diagram of governor system
for computer representation in power system stability simulations
and the corresponding governor system constants for use in the
model.
Wind Generators
Number of generators to be interconnected pursuant to this
Interconnection Request: ----
Elevation: ----
----Single Phase
----Three Phase
Inverter manufacturer, model name, number, and version:
-----------------------------------------------------------------------
List of adjustable setpoints for the protective equipment or
software:
-----------------------------------------------------------------------
Note: A completed General Electric Company Power Systems Load
Flow (PSLF) data sheet must be supplied with the Interconnection
Request. If other data sheets are more appropriate to the proposed
device then they shall be provided and discussed at Scoping Meeting.
Induction Generators
(*) Field Volts:-------------------------------------------------------
(*) Field Amperes:-----------------------------------------------------
(*) Motoring Power (kW):-----------------------------------------------
(*) Neutral Grounding Resistor (If Applicable):------------------------
(*) I2\2\t or K (Heating Time Constant):--------------------
(*) Rotor Resistance:--------------------------------------------------
(*) Stator Resistance:-------------------------------------------------
(*) Stator Reactance:--------------------------------------------------
(*) Rotor Reactance:---------------------------------------------------
(*) Magnetizing Reactance:---------------------------------------------
(*) Short Circuit Reactance:-------------------------------------------
(*) Exciting Current:--------------------------------------------------
(*) Temperature Rise:--------------------------------------------------
(*) Frame Size:--------------------------------------------------------
(*) Design Letter:-----------------------------------------------------
(*) Reactive Power Required In Vars (No Load):-------------------------
(*) Reactive Power Required In Vars (Full Load):-----------------------
(*) Total Rotating Inertia, H: ------Per Unit on KVA Base--------------
Note: Please consult Transmission Provider prior to submitting
the Interconnection Request to determine if the information
designated by (*) is required.
Appendix 2 to LGIP--Interconnection Feasibility Study Agreement
This Agreement is made and entered into this----day of------,
20--by and between--------, a-------- organized and existing under
the laws of the State of--------, (``Interconnection Customer,'')
and -------- a -------- existing under the laws of the State of----
----, (``Transmission Provider''). Interconnection Customer and
Transmission Provider each may be referred to as a ``Party,'' or
collectively as the ``Parties.''
Recitals
Whereas, Interconnection Customer is proposing to develop a
Large Generating Facility or generating capacity addition to an
existing Generating Facility consistent with the Interconnection
Request submitted by the Interconnection Customer dated --------;
and
Whereas, Interconnection Customer desires to interconnect the
Large Generating Facility with the Transmission System; and
Whereas, Interconnection Customer has requested the Transmission
Provider to perform an Interconnection Feasibility Study to assess
the feasibility of interconnecting the proposed Large Generating
Facility to the
[[Page 49947]]
Transmission System, and of any Affected Systems;
Now, therefore, in consideration of and subject to the mutual
covenants contained herein the Parties agreed as follows:
1.0 When used in this Agreement, with initial capitalization,
the terms specified shall have the meanings indicated in the
Transmission Provider's Commission-approved LGIP.
2.0 Interconnection Customer elects and Transmission Provider
shall cause to be performed an Interconnection Feasibility Study
consistent with Section 6.0 of this LGIP in accordance with the
Tariff.
3.0 The scope of the Interconnection Feasibility Study shall be
subject to the assumptions set forth in Attachment A to this
Agreement.
4.0 The Interconnection Feasibility Study shall be based on the
technical information provided by Interconnection Customer in the
Interconnection Request, as may be modified as the result of the
Scoping Meeting. Transmission Provider reserves the right to request
additional technical information from Interconnection Customer as
may reasonably become necessary consistent with Good Utility
Practice during the course of the Interconnection Feasibility Study
and as designated in accordance with Section 3.3.4 of the LGIP. If,
after the designation of the Point of Interconnection pursuant to
Section 3.3.4 of the LGIP, Interconnection Customer modifies its
Interconnection Request pursuant to Section 4.4, the time to
complete the Interconnection Feasibility Study may be extended.
5.0 The Interconnection Feasibility Study report shall provide
the following information:
--Preliminary identification of any circuit breaker short circuit
capability limits exceeded as a result of the interconnection;
--Preliminary identification of any thermal overload or voltage
limit violations resulting from the interconnection; and
--Preliminary description and non-bonding estimated cost of
facilities required to interconnect the Large Generating Facility to
the Transmission System and to address the identified short circuit
and power flow issues.
6.0 The Interconnection Customer shall provide a deposit of
$10,000 for the performance of the Interconnection Feasibility
Study.
Upon receipt of the Interconnection Feasibility Study the
Transmission Provider shall charge and Interconnection Customer
shall pay the actual costs of the Interconnection Feasibility Study.
Any difference between the deposit and the actual cost of the
study shall be paid by or refunded to the Interconnection Customer,
as appropriate.
7.0 Miscellaneous. The Interconnection Feasibility Study
Agreement shall include standard miscellaneous terms including, but
not limited to, indemnities, representations, disclaimers,
warranties, governing law, amendment, execution, waiver,
enforceability and assignment, that reflect best practices in the
electric industry, and that are consistent with regional practices,
Applicable Laws and Regulations, and the organizational nature of
each Party. All of these provisions, to the extent practicable,
shall be consistent with the provisions of the LGIP and the LGIA.
In witness whereof, the Parties have caused this Agreement to be
duly executed by their duly authorized officers or agents on the day
and year first above written.
[Insert name of Transmission Provider or Transmission Owner, if
applicable]
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------
[Insert name of Interconnection Customer]
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------
Assumptions Used in Conducting the Interconnection Feasibility Study
The Interconnection Feasibility Study will be based upon the
information set forth in the Interconnection Request and agreed upon
in the Scoping Meeting held on--------:
Designation of Point of Interconnection and configuration to be
studied.
Designation of alternative Point(s) of Interconnection and
configuration.
[Above assumptions to be completed by Interconnection Customer
and other assumptions to be provided by Interconnection Customer and
Transmission Provider]
Appendix 3 to LGIP--Interconnection System Impact Study Agreement
This agreement is made and entered into this----day of------,
20-- by and between--------, a -------- organized and existing under
the laws of the State of --------, (``Interconnection Customer,'')
and -------- a --------existing under the laws of the State of------
-- , (``Transmission Provider''). Interconnection Customer and
Transmission Provider each may be referred to as a ``Party,'' or
collectively as the ``Parties.''
Recitals
Whereas, Interconnection Customer is proposing to develop a
Large Generating Facility or generating capacity addition to an
existing Generating Facility consistent with the Interconnection
Request submitted by the Interconnection Customer dated --------;
and
Whereas, Interconnection Customer desires to interconnect the
Large Generating Facility with the Transmission System;
Whereas, the Transmission Provider has completed an
Interconnection Feasibility Study (the ``Feasibility Study'') and
provided the results of said study to the Interconnection
Customer;\1\ and
---------------------------------------------------------------------------
\1\ This recital to be omitted if Interconnection Customer has
elected to forego the Interconnection Feasibility Study.
---------------------------------------------------------------------------
Whereas, Interconnection Customer has requested the Transmission
Provider to perform an Interconnection System Impact Study to assess
the impact of interconnecting the Large Generating Facility to the
Transmission System, and of any Affected Systems;
Now, therefore, in consideration of and subject to the mutual
covenants contained herein the Parties agreed as follows:
1.0 When used in this Agreement, with initial capitalization,
the terms specified shall have the meanings indicated in the
Transmission Provider's Commission-approved LGIP.
2.0 Interconnection Customer elects and Transmission Provider
shall cause to be performed an Interconnection System Impact Study
consistent with Section 7.0 of this LGIP in accordance with the
Tariff.
3.0 The scope of the Interconnection System Impact Study shall
be subject to the assumptions set forth in Attachment A to this
Agreement.
4.0 The Interconnection System Impact Study will be based upon
the results of the Interconnection Feasibility Study and the
technical information provided by Interconnection Customer in the
Interconnection Request, subject to any modifications in accordance
with Section 4.4 of the LGIP. Transmission Provider reserves the
right to request additional technical information from
Interconnection Customer as may reasonably become necessary
consistent with Good Utility Practice during the course of the
Interconnection Customer System Impact Study. If Interconnection
Customer modifies its designated Point of Interconnection,
Interconnection Request, or the technical information provided
therein is modified, the time to complete the Interconnection System
Impact Study may be extended.
5.0 The Interconnection System Impact Study report shall provide
the following information:
--Identification of any circuit breaker short circuit capability
limits exceeded as a result of the interconnection;
--Identification of any thermal overload or voltage limit violations
resulting from the interconnection;
--Identification of any instability or inadequately damped response
to system disturbances resulting from the interconnection and
--Description and non-binding, good faith estimated cost of
facilities required to interconnect the Large Generating Facility to
the Transmission System and to address the identified short circuit,
instability, and power flow issues.
6.0 The Interconnection Customer shall provide a deposit of
$50,000 for the performance of the Interconnection System Impact
Study. The Transmission Provider's good faith estimate for the time
of completion of the Interconnection System Impact Study is [insert
date].
Upon receipt of the Interconnection System Impact Study,
Transmission Provider shall charge and Interconnection Customer
shall pay the actual costs of the Interconnection System Impact
Study.
Any difference between the deposit and the actual cost of the
study shall be paid by or refunded to the Interconnection Customer,
as appropriate.
7.0 Miscellaneous. The Interconnection System Impact Study
Agreement shall
[[Page 49948]]
include standard miscellaneous terms including, but not limited to,
indemnities, representations, disclaimers, warranties, governing
law, amendment, execution, waiver, enforceability and assignment,
that reflect best practices in the electric industry, that are
consistent with regional practices, Applicable Laws and Regulations
and the organizational nature of each Party. All of these
provisions, to the extent practicable, shall be consistent with the
provisions of the LGIP and the LGIA.]
In witness thereof, the Parties have caused this Agreement to be
duly executed by their duly authorized officers or agents on the day
and year first above written.
[Insert name of Transmission Provider or Transmission Owner, if
applicable]
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------
[Insert name of Interconnection Customer]
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------
Assumptions Used in Conducting the Interconnection System Impact Study
The Interconnection System Impact Study will be based upon the
results of the Interconnection Feasibility Study, subject to any
modifications in accordance with Section 4.4 of the LGIP, and the
following assumptions:
Designation of Point of Interconnection and configuration to be
studied.
Designation of alternative Point(s) of Interconnection and
configuration.
[Above assumptions to be completed by Interconnection Customer and
other assumptions to be provided by Interconnection Customer and
Transmission Provider]
Appendix 4 to LGIP--Interconnection Facilities Study Agreement
This agreement is made and entered into this ---- day of ------,
20 -- by and between --------, a -------- organized and existing
under the laws of the State of --------, (``Interconnection
Customer,'') and -------- a -------- existing under the laws of the
State of --------, (``Transmission Provider''). Interconnection
Customer and Transmission Provider each may be referred to as a
``Party,'' or collectively as the ``Parties.''
Recitals
Whereas, Interconnection Customer is proposing to develop a
Large Generating Facility or generating capacity addition to an
existing Generating Facility consistent with the Interconnection
Request submitted by the Interconnection Customer dated --------;
and
Whereas, Interconnection Customer desires to interconnect the
Large Generating Facility with the Transmission System;
Whereas, the Transmission Provider has completed an
Interconnection System Impact Study (the ``System Impact Study'')
and provided the results of said study to the Interconnection
Customer; and
Whereas, Interconnection Customer has requested the Transmission
Provider to perform an Interconnection Facilities Study to specify
and estimate the cost of the equipment, engineering, procurement and
construction work needed to implement the conclusions of the
Interconnection System Impact Study in accordance with Good Utility
Practice to physically and electrically connect the Large Generating
Facility to the Transmission System.
Now, therefore, in consideration of and subject to the mutual
covenants contained herein the Parties agreed as follows:
1.0 When used in this Agreement, with initial capitalization,
the terms specified shall have the meanings indicated in the
Transmission Provider's Commission-approved LGIP.
2.0 Interconnection Customer elects and Transmission Provider
shall cause an Interconnection Facilities Study consistent with
Section 8.0 of this LGIP to be performed in accordance with the
Tariff.
3.0 The scope of the Interconnection Facilities Study shall be
subject to the assumptions set forth in Attachment A and the data
provided in Attachment B to this Agreement.
4.0 The Interconnection Facilities Study report (i) shall
provide a description, estimated cost of (consistent with Attachment
A), schedule for required facilities to interconnect the Large
Generating Facility to the Transmission System and (ii) shall
address the short circuit, instability, and power flow issues
identified in the Interconnection System Impact Study.
5.0 The Interconnection Customer shall provide a deposit of
$100,000 for the performance of the Interconnection Facilities
Study. The time for completion of the Interconnection Facilities
Study is specified in Attachment A.
Transmission Provider shall invoice Interconnection Customer on
a monthly basis for the work to be conducted on the Interconnection
Facilities Study each month. Interconnection Customer shall pay
invoiced amounts within thirty (30) Calendar Days of receipt of
invoice. Transmission Provider shall continue to hold the amounts on
deposit until settlement of the final invoice.
6.0 Miscellaneous. The Interconnection Facility Study Agreement
shall include standard miscellaneous terms including, but not
limited to, indemnities, representations, disclaimers, warranties,
governing law, amendment, execution, waiver, enforceability and
assignment, that reflect best practices in the electric industry,
and that are consistent with regional practices, Applicable Laws and
Regulations, and the organizational nature of each Party. All of
these provisions, to the extent practicable, shall be consistent
with the provisions of the LGIP and the LGIA.
In witness whereof, the Parties have caused this Agreement to be
duly executed by their duly authorized officers or agents on the day
and year first above written.
[Insert name of Transmission Provider or Transmission Owner, if
applicable]
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------
[Insert name of Interconnection Customer]
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------
Interconnection Customer Schedule Election for Conducting the
Interconnection Facilities Study
The Transmission Provider shall use Reasonable Efforts to
complete the study and issue a draft Interconnection Facilities
Study report to the Interconnection Customer within the following
number of days after of receipt of an executed copy of this
Interconnection Facilities Study Agreement:
--Ninety (90) Calendar Days with no more than a +/-20 percent cost
estimate contained in the report, or
--One hundred eighty (180) Calendar Days with no more than a +/-10
percent cost estimate contained in the report.
Data Form To Be Provided by Interconnection Customer With the
Interconnection Facilities Study Agreement
Provide location plan and simplified one-line diagram of the
plant and station facilities. For staged projects, please indicate
future generation, transmission circuits, etc.
One set of metering is required for each generation connection
to the new ring bus or existing Transmission Provider station.
Number of generation connections:
On the one line indicate the generation capacity attached at
each metering location. (Maximum load on CT/PT)
On the one line indicate the location of auxiliary power.
(Minimum load on CT/PT) Amps
Will an alternate source of auxiliary power be available during
CT/PT maintenance? --Yes --No
Will a transfer bus on the generation side of the metering
require that each meter set be designed for the total plant
generation?'' --Yes --No (Please indicate on one line).
What type of control system or PLC will be located at the
Interconnection Customer's Large Generating Facility?
-----------------------------------------------------------------------
What protocol does the control system or PLC use?
-----------------------------------------------------------------------
Please provide a 7.5-minute quadrangle of the site. Sketch the
plant, station, transmission line, and property line.
-----------------------------------------------------------------------
Physical dimensions of the proposed interconnection station:
-----------------------------------------------------------------------
Bus length from generation to interconnection station:
-----------------------------------------------------------------------
Line length from interconnection station to Transmission
Provider's transmission line.
-----------------------------------------------------------------------
Tower number observed in the field. (Painted on tower leg)*
-----------------------------------------------------------------------
Number of third party easements required for transmission
lines:*
-----------------------------------------------------------------------
* To be completed in coordination with Transmission Provider.
[[Page 49949]]
Is the Large Generating Facility in the Transmission Provider's
service area?
--Yes --No Local provider:
-----------------------------------------------------------------------
Please provide proposed schedule dates:
Begin Construction:
Date: --------------------
Generator step-up transformer: receives back feed power
Date: --------------------
Generation Testing:
Date: --------------------
Commercial Operation:
Date: --------------------
Appendix 5 to LGIP--Optional Interconnection Study Agreement
This agreement is made and entered into this ---- day of ------,
20 -- by and between --------, a -------- organized and existing
under the laws of the State of --------, (``Interconnection
Customer,'') and -------- a -------- existing under the laws of the
State of --------, (``Transmission Provider''). Interconnection
Customer and Transmission Provider each may be referred to as a
``Party,'' or collectively as the ``Parties.''
Recitals
Whereas, Interconnection Customer is proposing to develop a
Large Generating Facility or generating capacity addition to an
existing Generating Facility consistent with the Interconnection
Request submitted by the Interconnection Customer dated --------;
Whereas, Interconnection Customer is proposing to establish an
interconnection with the Transmission System; and
Whereas, Interconnection Customer has submitted to Transmission
Provider an Interconnection Request; and
Whereas, on or after the date when the Interconnection Customer
receives the Interconnection System Impact Study results,
Interconnection Customer has further requested that the Transmission
Provider prepare an Optional Interconnection Study;
Now, therefore, in consideration of and subject to the mutual
covenants contained herein the Parties agree as follows:
1.0 When used in this Agreement, with initial capitalization,
the terms specified shall have the meanings indicated in the
Transmission Provider's Commission-approved LGIP.
2.0 Interconnection Customer elects and Transmission Provider
shall cause an Optional Interconnection Study consistent with
Section 10.0 of this LGIP to be performed in accordance with the
Tariff.
3.0 The scope of the Optional Interconnection Study shall be
subject to the assumptions set forth in Attachment A to this
Agreement.
4.0 The Optional Interconnection Study shall be performed solely
for informational purposes.
5.0 The Optional Interconnection Study report shall provide a
sensitivity analysis based on the assumptions specified by the
Interconnection Customer in Attachment A to this Agreement. The
Optional Interconnection Study will identify the Transmission
Provider's Interconnection Facilities and the Network Upgrades, and
the estimated cost thereof, that may be required to provide
transmission service or interconnection service based upon the
assumptions specified by the Interconnection Customer in Attachment
A.
6.0 The Interconnection Customer shall provide a deposit of
$10,000 for the performance of the Optional Interconnection Study.
The Transmission Provider's good faith estimate for the time of
completion of the Optional Interconnection Study is [insert date].
Upon receipt of the Optional Interconnection Study, the
Transmission Provider shall charge and Interconnection Customer
shall pay the actual costs of the Optional Study.
Any difference between the initial payment and the actual cost
of the study shall be paid by or refunded to the Interconnection
Customer, as appropriate.
7.0 Miscellaneous. The Optional Interconnection Study Agreement
shall include standard miscellaneous terms including, but not
limited to, indemnities, representations, disclaimers, warranties,
governing law, amendment, execution, waiver, enforceability and
assignment, that reflect best practices in the electric industry,
and that are consistent with regional practices, Applicable Laws and
Regulations, and the organizational nature of each Party. All of
these provisions, to the extent practicable, shall be consistent
with the provisions of the LGIP and the LGIA.
In witness whereof, the Parties have caused this Agreement to be
duly executed by their duly authorized officers or agents on the day
and year first above written.
[Insert name of Transmission Provider or Transmission Owner, if
applicable]
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------
By:-------------------------------------------------------------------
Title:----------------------------------------------------------------
Date:-----------------------------------------------------------------
[Insert name of Interconnection Customer]
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------
Assumptions Used in Conducting the Optional Interconnection Study
[To be completed by Interconnection Customer consistent with Section
10 of the LGIP.]
Appendix 6 to LGIP--Standard Large Generator Interconnection Agreement
Standard Large Generator Interconnection Agreement (LGIA)
(Applicable to Generating Facilities That Exceed 20 MW)
Table of Contents
Article 1. Definitions
Article 2. Effective Date, Term and Termination
2.1 Effective Date
2.2 Term of Agreement
2.3 Termination Procedures
2.3.1 Written Notice
2.3.2 Default
2.4 Termination Costs
2.4.1
2.4.2
2.4.3
2.5 Disconnection
2.6 Survival
Article 3. Regulatory Filings
3.1 Filing
Article 4. Scope of Service
4.1 Interconnection Product Options
4.1.1 Energy Resource Interconnection Service
4.1.1.1 The Product
4.1.1.2 Transmission Delivery Service Implications
4.1.2 Network Resource Interconnection Service
4.1.2.1 The Product
4.1.2.2 Transmission Delivery Service Implications
4.2 Provision of Service
4.3 Generator Balancing Service Arrangements
4.3.1
4.4 Performance Standards
4.5 No Transmission Delivery Service
4.6 Interconnection Customer Provided Services
Article 5. Interconnection Facilities Engineering, Procurement, and
Construction
5.1 Options
5.1.1 Standard Option
5.1.2 Alternate Option
5.1.3 Option to Build
5.1.4 Negotiated Option
5.2 General Conditions Applicable to Option to Build
5.3 Liquidated Damages
5.4 Power System Stabilizers
5.5 Equipment Procurement
5.5.1
5.5.2
5.5.3
5.6 Construction Commencement
5.6.1
5.6.2
5.6.3
5.6.4
5.7 Work Progress
5.8 Information Exchange
5.9 Limited Operation
5.10 Interconnection Customer Interconnection Facilities
(``ICIF'')
5.10.1 Large Generating Facility Specifications
5.10.2 Transmission Provider's Review
5.10.3 ICIF Construction
5.11 Transmission Provider Interconnection Facilities
Construction
5.12 Access Rights
5.13 Lands of Other Property Owners
5.14 Permits
5.15 Early Construction of Base Case Facilities
5.16 Suspension
5.17 Taxes
5.17.1 Interconnection Customer Payments Not Taxable
5.17.2 Representations And Covenants
5.17.3 Indemnification for Taxes Imposed Upon Transmission
Provider
5.17.4 Tax Gross-Up Amount
5.17.5 Private Letter Ruling or Change or Clarification of Law
[[Page 49950]]
5.17.6 Subsequent Taxable Events
5.17.7 Contests
5.17.8 Refund
5.17.9 Taxes Other Than Income Taxes
5.17.10 Transmission Owners Who Are Not Transmission Providers
5.18 Tax Status
5.19 Modification
5.19.1 General
5.19.2 Standards
5.19.3 Modification Costs
Article 6. Testing and Inspection
6.1 Pre-Commercial Operation Date Testing and Modifications
6.2 Post-Commercial Operation Date Testing and Modifications
6.3 Right to Observe Testing
6.4 Right to Inspect Article
Article 7. Metering
7.1 General
7.2 Check Meters
7.3 Standards
7.4 Testing of Metering Equipment
7.5 Metering Data
Article 8. Communications
8.1 Interconnection Customer Obligations
8.2 Remote Terminal Unit
8.3 No Annexation
Article 9. Operations
9.1 General
9.2 Control Area Notification
9.3 Transmission Provider Obligations
9.4 Interconnection Customer Obligations
9.5 Start-Up and Synchronization
9.6 Reactive Power
9.6.1 Power Factor Design Criteria
9.6.2 Voltage Schedules
9.6.2.1 Governors and Regulators
9.6.3 Payment for Reactive Power
9.7 Outages and Interruptions
9.7.1 Outages
9.7.1.1 Outage Authority and Coordination
9.7.1.2 Outage Schedules
9.7.1.3 Outage Restoration
9.7.2 Interruption of Service
9.7.2.1
9.7.2.2
9.7.2.3
9.7.2.4
9.7.2.5
9.7.3 Under-Frequency and Over-Frequency Conditions
9.7.4 System Protection and Other Control Requirements
9.7.4.1 System Protection Facilities
9.7.4.2
9.7.4.3
9.7.4.4
9.7.4.5
9.7.4.6
9.7.5 Requirements for Protection
9.7.6 Power Quality
9.8 Switching and Tagging Rules
9.9 Use of Interconnection Facilities by Third Parties
9.9.1 Purpose of Interconnection Facilities
9.9.2 Third Party Users
9.10 Disturbance Analysis Data Exchange
Article 10. Maintenance
10.1 Transmission Provider Obligations
10.2 Interconnection Customer Obligations
10.3 Coordination
10.4 Secondary Systems
10.5 Operating and Maintenance Expenses
Article 11. Performance Obligation
11.1 Interconnection Customer Interconnection Facilities
11.2 Transmission Provider's Interconnection Facilities
11.3 Network Upgrades and Distribution Upgrades
11.4 Transmission Credits
11.4.1 Refund of Amounts Advanced for Network Upgrades
11.4.2 Special Provisions for Affected Systems
11.4.3
11.5 Provision of Security
11.5.1
11.5.2
11.5.3
11.6 Interconnection Customer Compensation
11.6.1 Interconnection Customer Compensation for Actions During
Emergency Condition
Article 12. Invoice
12.1 General
12.2 Final Invoice
12.3 Payment
12.4 Disputes
Article 13. Emergencies
13.1 Definition
13.2 Obligations
13.3 Notice
13.4 Immediate Action
13.5 Transmission Provider Authority
13.5.1 General
13.5.2 Reduction and Disconnection
13.6 Interconnection Customer Authority
13.7 Limited Liability
Article 14. Regulatory Requirements and Governing Laws
14.1 Regulatory Requirements
14.2 Governing Law
14.2.1
14.2.2
14.2.3
Article 15. Notices
15.1 General
15.2 Billings and Payments
15.3 Alternative Forms of Notice
15.4 Operations and Maintenance Notice
Article 16. Force Majeure
16.1
16.2
Article 17. Default
17.1 Default
17.1.1 General
17.1.2 Right to Terminate
Article 18. Indemnity, Consequential Damages, and Insurance
18.1 Indemnity
18.1.1 Indemnified Person
18.1.2 Indemnifying Party
18.1.3 Indemnity Procedures
18.2 Consequential Damages
18.3 Insurance
18.3.1
18.3.2
18.3.3
18.3.4
18.3.5
18.3.6
18.3.7
18.3.8
18.3.9
18.3.10
18.3.11
Article 19. Assignment
19.1 Assignment
Article 20. Severability
20.1 Severability
Article 21. Comparability
21.1 Comparability
Article 22. Confidentiality
22.1 Confidentiality
22.1.1 Term
22.1.2 Scope
22.1.3 Release of Confidential Information
22.1.4 Rights
22.1.5 No Warranties
22.1.6 Standard of Care
22.1.7 Order of Disclosure
22.1.8 Termination of Agreement
22.1.9 Remedies
22.1.10 Disclosure to FERC or its Staff
22.1.11
22.1.12
Article 23. Environmental Releases
23.1
Article 24. Information Requirements
24.1 Information Acquisition
24.2 Information Submission by Transmission Provider
24.3 Updated Information Submission by Interconnection Customer
24.4 Information Supplementation
Article 25. Information Access and Audit Rights
25.1 Information Access
25.2 Reporting of Non-Force Majeure Events
25.3 Audit Rights
25.4 Audit Rights Periods
25.4.1 Audit Rights Period for Construction-Related Accounts and
Records
25.4.2 Audit Rights Period for All Other Accounts and Records
25.5 Audit Results
Article 26. Subcontractors
26.1 General
26.2 Responsibility of Principal
26.3 No Limitation by Insurance
Article 27. Disputes
27.1 Submission
27.2 External Arbitration Procedures
27.3 Arbitration Decisions
27.4 Costs
Article 28. Representations, Warranties and Covenants
28.1 General
28.1.1 Good Standing
28.1.2 Authority
28.1.3 No Conflict
28.1.4 Consent and Approval
Article 29. Joint Operating Committee
29.1 Joint Operating Committee
29.1.1
29.1.2
29.1.3
29.1.4
29.1.5
29.1.6
Article 30. Miscellaneous
30.1 Binding Effect
30.2 Conflicts
30.3 Rules of Interpretation
30.4 Entire Agreement
30.5 No Third Party Beneficiaries
30.6 Waiver
30.7 Headings
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30.8 Multiple Counterparts
30.9 Amendment
30.10 Modification by the Parties
30.11 Reservation of Rights
30.12 No Partnership
Appendices
Appendix A--Interconnection Facilities, Network Upgrades and
Distribution Upgrades
Appendix B--Milestones
Appendix C--Interconnection Details
Appendix D--Security Arrangements Details
Appendix E--Commercial Operation Date
Appendix F--Addresses for Delivery of Notices and Billings
Standard Large Generator Interconnection Agreement
This standard large generator interconnection agreement
(``Agreement'') is made and entered into this ---- day of ------ 20,
-- by and between --------, a -------- organized and existing under
the laws of -------- the State/Commonwealth of (``Interconnection
Customer'' with a Large Generating Facility), and --------, a
[corporation] organized and existing under the laws of the State/
Commonwealth of -------- (``Transmission Provider and/or
Transmission Owner''). Interconnection Customer and Transmission
Provider each may be referred to as a ``Party'' or collectively as
the ``Parties.''
Recitals
Whereas, Transmission Provider operates the Transmission System;
and
Whereas, Interconnection Customer intends to own, lease and/or
control and operate the Generating Facility identified as a Large
Generating Facility in Appendix C to this Agreement; and,
Whereas, Interconnection Customer and Transmission Provider have
agreed to enter into this Agreement for the purpose of
interconnecting the Large Generating Facility with the Transmission
System;
Now, therefore, in consideration of and subject to the mutual
covenants contained herein, it is agreed:
When used in this Standard Large Generator Interconnection
Agreement, terms with initial capitalization that are not defined in
Article 1 shall have the meanings specified in the Article in which
they are used.
Article 1. Definitions
Adverse System Impact shall mean the negative effects due to
technical or operational limits on conductors or equipment being
exceeded that may compromise the safety and reliability of the
electric system.
Affected System shall mean an electric system other than the
Transmission Provider's Transmission System that may be affected by
the proposed interconnection.
Affected System Operator shall mean the entity that operates an
Affected System.
Affiliate shall mean, with respect to a corporation, partnership
or other entity, each such other corporation, partnership or other
entity that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common
control with, such corporation, partnership or other entity.
Ancillary Services shall mean those services that are necessary
to support the transmission of capacity and energy from resources to
loads while maintaining reliable operation of the Transmission
Provider's Transmission System in accordance with Good Utility
Practice.
Applicable Laws and Regulations shall mean all duly promulgated
applicable federal, state and local laws, regulations, rules,
ordinances, codes, decrees, judgments, directives, or judicial or
administrative orders, permits and other duly authorized actions of
any Governmental Authority.
Applicable Reliability Council shall mean the reliability
council applicable to the Transmission System to which the
Generating Facility is directly interconnected.
Applicable Reliability Standards shall mean the requirements and
guidelines of NERC, the Applicable Reliability Council, and the
Control Area of the Transmission System to which the Generating
Facility is directly interconnected.
Base Case shall mean the base case power flow, short circuit,
and stability data bases used for the Interconnection Studies by the
Transmission Provider or Interconnection Customer.
Breach shall mean the failure of a Party to perform or observe
any material term or condition of the Standard Large Generator
Interconnection Agreement.
Breaching Party shall mean a Party that is in Breach of the
Standard Large Generator Interconnection Agreement.
Business Day shall mean Monday through Friday, excluding Federal
Holidays.
Calendar Day shall mean any day including Saturday, Sunday or a
Federal Holiday.
Clustering shall mean the process whereby a group of
Interconnection Requests is studied together, instead of serially,
for the purpose of conducting the Interconnection System Impact
Study.
Commercial Operation Date of a unit shall mean the date on which
Interconnection Customer commences commercial operation of the unit
at the Generating Facility after Trial Operation of such unit has
been completed as confirmed in writing substantially in the form
shown in Appendix E to the Standard Large Generator Interconnection
Agreement.
Confidential Information shall mean any confidential,
proprietary or trade secret information of a plan, specification,
pattern, procedure, design, device, list, concept, policy or
compilation relating to the present or planned business of a Party,
which is designated as confidential by the Party supplying the
information, whether conveyed orally, electronically, in writing,
through inspection, or otherwise.
Control Area shall mean an electrical system or systems bounded
by interconnection metering and telemetry, capable of controlling
generation to maintain its interchange schedule with other Control
Areas and contributing to frequency regulation of the
interconnection. A Control Area must be certified by NERC.
Default shall mean the failure of a Breaching Party to cure its
Breach in accordance with Article 17 of the Standard Large Generator
Interconnection Agreement.
Dispute Resolution shall mean the procedure for resolution of a
dispute between the Parties in which they will first attempt to
resolve the dispute on an informal basis.
Distribution System shall mean the Transmission Provider's
facilities and equipment used to transmit electricity to ultimate
usage points such as homes and industries directly from nearby
generators or from interchanges with higher voltage transmission
networks which transport bulk power over longer distances. The
voltage levels at which distribution systems operate differ among
areas.
Distribution Upgrades shall mean the additions, modifications,
and upgrades to the Transmission Provider's Distribution System at
or beyond the Point of Interconnection to facilitate interconnection
of the Generating Facility and render the transmission service
necessary to effect Interconnection Customer's wholesale sale of
electricity in interstate commerce. Distribution Upgrades do not
include Interconnection Facilities.
Effective Date shall mean the date on which the Standard Large
Generator Interconnection Agreement becomes effective upon execution
by the Parties subject to acceptance by the Commission, or if filed
unexecuted, upon the date specified by the Commission.
Emergency Condition shall mean a condition or situation: (1)
That in the judgement of the Party making the claim is imminently
likely to endanger life or property; or (2) that, in the case of a
Transmission Provider, is imminently likely (as determined in a non-
discriminatory manner) to cause a material adverse effect on the
security of, or damage to Transmission Provider's Transmission
System, Transmission Provider's Interconnection Facilities or the
electric systems of others to which the Transmission Provider's
Transmission System is directly connected; or (3) that, in the case
of Interconnection Customer, is imminently likely (as determined in
a non-discriminatory manner) to cause a material adverse effect on
the security of, or damage to, the Generating Facility or
Interconnection Customer's Interconnection Facilities. System
restoration and black start shall be considered Emergency
Conditions; provided, that Interconnection Customer is not obligated
by the Standard Large Generator Interconnection Agreement to possess
black start capability.
Energy Resource Interconnection Service (ER Interconnection
Service) shall mean an Interconnection Service that allows the
Interconnection Customer to connect its Generating Facility to the
Transmission Provider's Transmission System to be eligible to
deliver the Generating Facility's electric output using the existing
firm or nonfirm capacity of the Transmission Provider's Transmission
System on an as available basis. Energy Resource Interconnection
Service in and of itself does not convey transmission service.
Engineering & Procurement (E&P) Agreement shall mean an
agreement that
[[Page 49952]]
authorizes the Transmission Provider to begin engineering and
procurement of long lead-time items necessary for the establishment
of the interconnection in order to advance the implementation of the
Interconnection Request.
Environmental Law shall mean Applicable Laws or Regulations
relating to pollution or protection of the environment or natural
resources.
Federal Power Act shall mean the Federal Power Act, as amended,
16 U.S.C. 791a et seq.
FERC shall mean the Federal Energy Regulatory Commission
(Commission) or its successor.
Force Majeure shall mean any act of God, labor disturbance, act
of the public enemy, war, insurrection, riot, fire, storm or flood,
explosion, breakage or accident to machinery or equipment, any
order, regulation or restriction imposed by governmental, military
or lawfully established civilian authorities, or any other cause
beyond a Party's control. A Force Majeure event does not include an
act of negligence or intentional wrongdoing.
Generating Facility shall mean Interconnection Customer's device
for the production of electricity identified in the Interconnection
Request, but shall not include the Interconnection Customer's
Interconnection Facilities.
Generating Facility Capacity shall mean the net capacity of the
Generating Facility and the aggregate net capacity of the Generating
Facility where it includes multiple energy production devices.
Good Utility Practice shall mean any of the practices, methods
and acts engaged in or approved by a significant portion of the
electric industry during the relevant time period, or any of the
practices, methods and acts which, in the exercise of reasonable
judgment in light of the facts known at the time the decision was
made, could have been expected to accomplish the desired result at a
reasonable cost consistent with good business practices,
reliability, safety and expedition. Good Utility Practice is not
intended to be limited to the optimum practice, method, or act to
the exclusion of all others, but rather to be acceptable practices,
methods, or acts generally accepted in the region.
Governmental Authority shall mean any federal, state, local or
other governmental regulatory or administrative agency, court,
commission, department, board, or other governmental subdivision,
legislature, rulemaking board, tribunal, or other governmental
authority having jurisdiction over the Parties, their respective
facilities, or the respective services they provide, and exercising
or entitled to exercise any administrative, executive, police, or
taxing authority or power; provided, however, that such term does
not include Interconnection Customer, Transmission Provider, or any
Affiliate thereof.
Hazardous Substances shall mean any chemicals, materials or
substances defined as or included in the definition of ``hazardous
substances,'' ``hazardous wastes,'' ``hazardous materials,''
``hazardous constituents,'' ``restricted hazardous materials,''
``extremely hazardous substances,'' ``toxic substances,''
``radioactive substances,'' ``contaminants,'' ``pollutants,''
``toxic pollutants'' or words of similar meaning and regulatory
effect under any applicable Environmental Law, or any other
chemical, material or substance, exposure to which is prohibited,
limited or regulated by any applicable Environmental Law.
Initial Synchronization Date shall mean the date upon which the
Generating Facility is initially synchronized and upon which Trial
Operation begins.
In-Service Date shall mean the date upon which the
Interconnection Customer reasonably expects it will be ready to
begin use of the Transmission Provider's Interconnection Facilities
to obtain back feed power.
Interconnection Customer shall mean any entity, including the
Transmission Provider, Transmission Owner or any of the Affiliates
or subsidiaries of either, that proposes to interconnect its
Generating Facility with the Transmission Provider's Transmission
System.
Interconnection Customer's Interconnection Facilities shall mean
all facilities and equipment, as identified in Appendix A of the
Standard Large Generator Interconnection Agreement, that are located
between the Generating Facility and the Point of Change of
Ownership, including any modification, addition, or upgrades to such
facilities and equipment necessary to physically and electrically
interconnect the Generating Facility to the Transmission Provider's
Transmission System. Interconnection Customer's Interconnection
Facilities are sole use facilities.
Interconnection Facilities shall mean the Transmission
Provider's Interconnection Facilities and the Interconnection
Customer's Interconnection Facilities. Collectively, Interconnection
Facilities include all facilities and equipment between the
Generating Facility and the Point of Interconnection, including any
modification, additions or upgrades that are necessary to physically
and electrically interconnect the Generating Facility to the
Transmission Provider's Transmission System. Interconnection
Facilities are sole use facilities and shall not include
Distribution Upgrades, Stand Alone Network Upgrades or Network
Upgrades.
Interconnection Facilities Study shall mean a study conducted by
the Transmission Provider or a third party consultant for the
Interconnection Customer to determine a list of facilities
(including Transmission Provider's Interconnection Facilities and
Network Upgrades as identified in the Interconnection System Impact
Study), the cost of those facilities, and the time required to
interconnect the Generating Facility with the Transmission
Provider's Transmission System. The scope of the study is defined in
Section 8 of the Standard Large Generator Interconnection
Procedures.
Interconnection Facilities Study Agreement shall mean the form
of agreement contained in Appendix 4 of the Standard Large Generator
Interconnection Procedures for conducting the Interconnection
Facilities Study.
Interconnection Feasibility Study shall mean a preliminary
evaluation of the system impact and cost of interconnecting the
Generating Facility to the Transmission Provider's Transmission
System, the scope of which is described in Section 6 of the Standard
Large Generator Interconnection Procedures.
Interconnection Feasibility Study Agreement shall mean the form
of agreement contained in Appendix 2 of the Standard Large Generator
Interconnection Procedures for conducting the Interconnection
Feasibility Study.
Interconnection Request shall mean an Interconnection Customer's
request, in the form of Appendix 1 to the Standard Large Generator
Interconnection Procedures, in accordance with the Tariff, to
interconnect a new Generating Facility, or to increase the capacity
of, or make a Material Modification to the operating characteristics
of, an existing Generating Facility that is interconnected with the
Transmission Provider's Transmission System.
Interconnection Service shall mean the service provided by the
Transmission Provider associated with interconnecting the
Interconnection Customer's Generating Facility to the Transmission
Provider's Transmission System and enabling it to receive electric
energy and capacity from the Generating Facility at the Point of
Interconnection, pursuant to the terms of the Standard Large
Generator Interconnection Agreement and, if applicable, the
Transmission Provider's Tariff.
Interconnection Study shall mean any of the following studies:
The Interconnection Feasibility Study, the Interconnection System
Impact Study, and the Interconnection Facilities Study described in
the Standard Large Generator Interconnection Procedures.
Interconnection System Impact Study shall mean an engineering
study that evaluates the impact of the proposed interconnection on
the safety and reliability of Transmission Provider's Transmission
System and, if applicable, an Affected System. The study shall
identify and detail the system impacts that would result if the
Generating Facility were interconnected without project
modifications or system modifications, focusing on the Adverse
System Impacts identified in the Interconnection Feasibility Study,
or to study potential impacts, including but not limited to those
identified in the Scoping Meeting as described in the Standard Large
Generator Interconnection Procedures.
Interconnection System Impact Study Agreement shall mean the
form of agreement contained in Appendix 3 of the Standard Large
Generator Interconnection Procedures for conducting the
Interconnection System Impact Study.
IRS shall mean the Internal Revenue Service.
Joint Operating Committee shall be a group made up of
representatives from Interconnection Customers and the Transmission
Provider to coordinate operating and technical considerations of
Interconnection Service.
Large Generating Facility shall mean a Generating Facility
having a Generating Facility Capacity of more than 20 MW.
[[Page 49953]]
Loss shall mean any and all losses relating to injury to or
death of any person or damage to property, demand, suits,
recoveries, costs and expenses, court costs, attorney fees, and all
other obligations by or to third parties, arising out of or
resulting from the other Party's performance, or non-performance of
its obligations under the Standard Large Generator Interconnection
Agreement on behalf of the indemnifying Party, except in cases of
gross negligence or intentional wrongdoing by the indemnifying
Party.
Material Modification shall mean those modifications that have a
material impact on the cost or timing of any Interconnection Request
with a later queue priority date.
Metering Equipment shall mean all metering equipment installed
or to be installed at the Generating Facility pursuant to the
Standard Large Generator Interconnection Agreement at the metering
points, including but not limited to instrument transformers, MWh-
meters, data acquisition equipment, transducers, remote terminal
unit, communications equipment, phone lines, and fiber optics.
NERC shall mean the North American Electric Reliability Council
or its successor organization.
Network Resource shall mean that portion of a Generating
Facility that is integrated with the Transmission Provider's
Transmission System, designated as a Network Resource pursuant to
the terms of the Tariff, and subjected to redispatch directives as
ordered by the Transmission Provider in accordance with the Tariff.
Network Resource Interconnection Service (NR Interconnection
Service) shall mean an Interconnection Service that allows the
Interconnection Customer to integrate its Large Generating Facility
with the Transmission Provider's Transmission System (1) in a manner
comparable to that in which the Transmission Provider integrates its
generating facilities to serve native load customers; or (2) in an
RTO or ISO with market based congestion management, in the same
manner as all other Network Resources. Network Resource
Interconnection Service in and of itself does not convey
transmission service.
Network Upgrades shall mean the additions, modifications, and
upgrades to the Transmission Provider's Transmission System required
at or beyond the point at which the Interconnection Customer
interconnects to the Transmission Provider's Transmission System to
accommodate the interconnection of the Large Generating Facility to
the Transmission Provider's Transmission System.
Notice of Dispute shall mean a written notice of a dispute or
claim that arises out of or in connection with the Standard Large
Generator Interconnection Agreement or its performance.
Optional Interconnection Study shall mean a sensitivity analysis
based on assumptions specified by the Interconnection Customer in
the Optional Interconnection Study Agreement.
Optional Interconnection Study Agreement shall mean the form of
agreement contained in Appendix 5 of the Standard Large Generator
Interconnection Procedures for conducting the Optional
Interconnection Study.
Party or Parties shall mean Transmission Provider, Transmission
Owner, Interconnection Customer or any combination of the above.
Point of Change of Ownership shall mean the point, as set forth
in Appendix A to the Standard Large Generator Interconnection
Agreement, where the Interconnection Customer's Interconnection
Facilities connect to the Transmission Provider's Interconnection
Facilities.
Point of Interconnection shall mean the point, as set forth in
Appendix A to the Standard Large Generator Interconnection
Agreement, where the Interconnection Facilities connect to the
Transmission Provider's Transmission System.
Queue Position shall mean the order of a valid Interconnection
Request, relative to all other pending valid Interconnection
Requests, that is established based upon the date and time of
receipt of the valid Interconnection Request by the Transmission
Provider.
Reasonable Efforts shall mean, with respect to an action
required to be attempted or taken by a Party under the Standard
Large Generator Interconnection Agreement, efforts that are timely
and consistent with Good Utility Practice and are otherwise
substantially equivalent to those a Party would use to protect its
own interests.
Scoping Meeting shall mean the meeting between representatives
of the Interconnection Customer and Transmission Provider conducted
for the purpose of discussing alternative interconnection options,
to exchange information including any transmission data and earlier
study evaluations that would be reasonably expected to impact such
interconnection options, to analyze such information, and to
determine the potential feasible Points of Interconnection.
Site Control shall mean documentation reasonably demonstrating:
(1) Ownership of, a leasehold interest in, or a right to develop a
site for the purpose of constructing the Generating Facility; (2) an
option to purchase or acquire a leasehold site for such purpose; or
(3) an exclusivity or other business relationship between
Interconnection Customer and the entity having the right to sell,
lease or grant Interconnection Customer the right to possess or
occupy a site for such purpose.
Small Generating Facility shall mean a Generating Facility that
has a Generating Facility Capacity of no more than 20 MW.
Stand Alone Network Upgrades shall mean Network Upgrades that an
Interconnection Customer may construct without affecting day-to-day
operations of the Transmission System during their construction.
Both the Transmission Provider and the Interconnection Customer must
agree as to what constitutes Stand Alone Network Upgrades and
identify them in Appendix A to the Standard Large Generator
Interconnection Agreement.
Standard Large Generator Interconnection Agreement (LGIA) shall
mean the form of interconnection agreement applicable to an
Interconnection Request pertaining to a Large Generating Facility,
that is included in the Transmission Provider's Tariff.
Standard Large Generator Interconnection Procedures (LGIP) shall
mean the interconnection procedures applicable to an Interconnection
Request pertaining to a Large Generating Facility that are included
in the Transmission Provider's Tariff.
System Protection Facilities shall mean the equipment, including
necessary protection signal communications equipment, required to
protect (1) the Transmission Provider's Transmission System from
faults or other electrical disturbances occurring at the Generating
Facility and (2) the Generating Facility from faults or other
electrical system disturbances occurring on the Transmission
Provider's Transmission System or on other delivery systems or other
generating systems to which the Transmission Provider's Transmission
System is directly connected.
Tariff shall mean the Transmission Provider's Tariff through
which open access transmission service and Interconnection Service
are offered, as filed with the Commission, and as amended or
supplemented from time to time, or any successor tariff.
Transmission Owner shall mean an entity that owns, leases or
otherwise possesses an interest in the portion of the Transmission
System at the Point of Interconnection and may be a Party to the
Standard Large Generator Interconnection Agreement to the extent
necessary.
Transmission Provider shall mean the public utility (or its
designated agent) that owns, controls, or operates transmission or
distribution facilities used for the transmission of electricity in
interstate commerce and provides transmission service under the
Tariff. The term Transmission Provider should be read to include the
Transmission Owner when the Transmission Owner is separate from the
Transmission Provider.
Transmission Provider's Interconnection Facilities shall mean
all facilities and equipment owned, controlled or operated by the
Transmission Provider from the Point of Change of Ownership to the
Point of Interconnection as identified in Appendix A to the Standard
Large Generator Interconnection Agreement, including any
modifications, additions or upgrades to such facilities and
equipment. Transmission Provider's Interconnection Facilities are
sole use facilities and shall not include Distribution Upgrades,
Stand Alone Network Upgrades or Network Upgrades.
Transmission System shall mean the facilities owned, controlled
or operated by the Transmission Provider or Transmission Owner that
are used to provide transmission service under the Tariff.
Trial Operation shall mean the period during which
Interconnection Customer is engaged in on-site test operations and
commissioning of the Generating Facility prior to commercial
operation.
Article 2. Effective Date, Term and Termination
2.1 Effective Date. This LGIA shall become effective upon
execution by the Parties subject to acceptance by FERC (if
[[Page 49954]]
applicable), or if filed unexecuted, upon the date specified by
FERC. Transmission Provider shall promptly file this LGIA with FERC
upon execution in accordance with Article 3.1, if required.
2.2 Term of Agreement. Subject to the provisions of Article 2.3,
this LGIA shall remain in effect for a period of ten (10) years from
the Effective Date or such other longer period as the
Interconnection Customer may request (Term to be Specified in
Individual Agreements) and shall be automatically renewed for each
successive one-year period thereafter.
2.3 Termination Procedures. This LGIA may be terminated as
follows:
2.3.1 Written Notice. The Interconnection Customer may terminate
this LGIA after giving the Transmission Provider ninety (90)
Calendar Days advance written notice; or
2.3.2 Default. Either Party may terminate this LGIA in
accordance with Article 17.
Notwithstanding the foregoing, no termination shall become
effective until the Parties have complied with all Applicable Laws
and Regulations applicable to such termination, including the filing
with FERC of a notice of termination of this LGIA, which notice has
been accepted for filing by FERC.
2.4 Termination Costs. If a Party elects to terminate this
Agreement pursuant to Article 2.3 above, each Party shall pay all
costs incurred (including any cancellation costs relating to orders
or contracts for Interconnection Facilities and equipment) or
charges assessed by the other Party, as of the date of the other
Party's receipt of such notice of termination, that are the
responsibility of the Terminating Party under this LGIA. In the
event of termination by either Party, both Parties shall use
commercially Reasonable Efforts to mitigate the costs, damages and
charges arising as a consequence of termination. Upon termination of
this LGIA, unless otherwise ordered or approved by FERC:
2.4.1 With respect to any portion of the Transmission Provider's
Interconnection Facilities that have not yet been constructed or
installed, the Transmission Provider shall to the extent possible
and with Interconnection Customer's authorization cancel any pending
orders of, or return, any materials or equipment for, or contracts
for construction of, such facilities; provided that in the event
Interconnection Customer elects not to authorize such cancellation,
Interconnection Customer shall assume all payment obligations with
respect to such materials, equipment, and contracts, and the
Transmission Provider shall deliver such material and equipment,
and, if necessary, assign such contracts, to Interconnection
Customer as soon as practicable, at Interconnection Customer's
expense. To the extent that Interconnection Customer has already
paid Transmission Provider for any or all such costs of materials or
equipment not taken by Interconnection Customer, Transmission
Provider shall promptly refund such amounts to Interconnection
Customer, less any costs, including penalties incurred by the
Transmission Provider to cancel any pending orders of or return such
materials, equipment, or contracts.
If an Interconnection Customer terminates this LGIA, it shall be
responsible for all costs incurred in association with that
Interconnection Customer's interconnection, including any
cancellation costs relating to orders or contracts for
Interconnection Facilities and equipment, and other expenses
including any Network Upgrades for which the Transmission Provider
has incurred expenses and has not been reimbursed by the
Interconnection Customer.
2.4.2 Transmission Provider may, at its option, retain any
portion of such materials, equipment, or facilities that
Interconnection Customer chooses not to accept delivery of, in which
case Transmission Provider shall be responsible for all costs
associated with procuring such materials, equipment, or facilities.
2.4.3 With respect to any portion of the Interconnection
Facilities, and any other facilities already installed or
constructed pursuant to the terms of this LGIA, Interconnection
Customer shall be responsible for all costs associated with the
removal, relocation or other disposition or retirement of such
materials, equipment, or facilities.
2.5 Disconnection. Upon termination of this LGIA, the Parties
will take all appropriate steps to disconnect the Large Generating
Facility from the Transmission System. All costs required to
effectuate such disconnection shall be borne by the terminating
Party, unless such termination resulted from the non-terminating
Party's Default of this LGIA or such non-terminating Party otherwise
is responsible for these costs under this LGIA.
2.6 Survival. This LGIA shall continue in effect after
termination to the extent necessary to provide for final billings
and payments and for costs incurred hereunder, including billings
and payments pursuant to this LGIA; to permit the determination and
enforcement of liability and indemnification obligations arising
from acts or events that occurred while this LGIA was in effect; and
to permit each Party to have access to the lands of the other Party
pursuant to this LGIA or other applicable agreements, to disconnect,
remove or salvage its own facilities and equipment.
Article 3. Regulatory Filings
3.1 Filing. The Transmission Provider shall file this LGIA (and
any amendment hereto) with the appropriate Governmental Authority,
if required. Any information related to studies for interconnection
asserted by Interconnection Customer to contain competitively
sensitive commercial or financial information shall be maintained by
the Transmission Provider and identified as ``confidential'' under
seal stating that Interconnection Customer asserts such information
is Confidential Information and has requested such information be
kept under seal. If requested by the Transmission Provider,
Interconnection Customer shall provide the Transmission Provider, in
writing, with the Interconnection Customer's basis for asserting
that the information referred to in this Article 3.1 is
competitively sensitive information, and the Transmission Provider
may disclose such writing to the appropriate Governmental Authority.
Interconnection Customer shall be responsible for the costs
associated with affording confidential treatment of such
information. If the Interconnection Customer has executed this LGIA,
or any amendment thereto, the Interconnection Customer shall
reasonably cooperate with Transmission Provider with respect to such
filing and to provide any information reasonably requested by
Transmission Provider needed to comply with applicable regulatory
requirements.
Article 4. Scope of Service
4.1 Interconnection Product Options. Interconnection Customer
has selected the following (checked) type of Interconnection
Service:
4.1.1 Energy Resource Interconnection Service (ER
Interconnection Service).
4.1.1.1 The Product. ER Interconnection Service allows
Interconnection Customer to connect the Large Generating Facility to
the Transmission System and be eligible to deliver the Large
Generating Facility's output using the existing firm or non-firm
capacity of the Transmission System on an ``as available'' basis. To
the extent Interconnection Customer wants to receive ER
Interconnection Service, the Transmission Provider shall construct
facilities consistent with the studies identified in Attachment A.
ER Interconnection Service does not in and of itself convey any
transmission delivery service.
4.1.1.2 Transmission Delivery Service Implications. Under ER
Interconnection Service, the Interconnection Customer will be able
to inject power from the Large Generating Facility into and deliver
power across the interconnecting Transmission Provider's
Transmission System on an ``as available'' basis up to the amount of
MW's identified in the applicable stability and steady state studies
to the extent the upgrades initially required to qualify for ER
Interconnection Service have been constructed. Where eligible to do
so (e.g., PJM, ISO-NE, NYISO), the Interconnection Customer may
place a bid to sell into the market up to the maximum identified
Large Generating Facility output, subject to any conditions
specified in the interconnection service approval, and the Large
Generating Facility will be dispatched to the extent the
Interconnection Customer's bid clears. In all other instances, no
transmission delivery service from the Large Generating Facility is
assured, but the Interconnection Customer may obtain point-to-point
transmission delivery service or be used for secondary network
transmission service, pursuant to the Transmission Provider's
Tariff, up to the maximum output identified in the stability and
steady state studies. In those instances, in order for the
Interconnection Customer to obtain the right to deliver or inject
energy beyond the Large Generating Facility Point of Interconnection
or to improve its ability to do so, transmission delivery service
must be obtained pursuant to the provisions of the Transmission
Provider's Tariff. The Interconnection Customer's ability to inject
its Large Generating Facility output beyond the Point of
Interconnection, therefore, will depend on the existing capacity of
the Transmission Provider's Transmission
[[Page 49955]]
System at such time as a transmission service request is made that
would accommodate such delivery. The provision of firm point-to-
point transmission service may require the construction of
additional Network Upgrades.
4.1.2 Network Resource Interconnection Service (NR
Interconnection Service).
4.1.2.1 The Product. The Transmission Provider must conduct the
necessary studies and construct the Network Upgrades needed to
integrate the Large Generating Facility (1) in a manner comparable
to that in which the Transmission Provider integrates its generating
facilities to serve native load customers; or (2) in an ISO or RTO
with market based congestion management, in the same manner as all
other Network Resources. NR Interconnection Service in and of itself
does not convey any transmission delivery service.
4.1.2.2 Transmission Delivery Service Implications. NR
Interconnection Service allows the Interconnection Customer's Large
Generating Facility to be designated by any Network Customer under
the Tariff on the Transmission Provider's Transmission System as a
Network Resource, up to the Large Generating Facility's full output,
on the same basis as all other existing Network Resources
interconnected to the Transmission Provider's Transmission System,
and to be studied as a Network Resource on the assumption that such
a designation will occur. Although NR Interconnection Service does
not convey a reservation of transmission service, any Network
Customer under the Tariff can utilize its network service under the
Tariff to obtain delivery of energy from the interconnected
Interconnection Customer's Large Generating Facility in the same
manner as it accesses other Network Resources. A Large Generating
Facility receiving NR Interconnection Service may also be used to
provide Ancillary Services after technical studies and/or periodic
analyses are performed with respect to the Large Generating
Facility's ability to provide any applicable Ancillary Services,
provided that such studies and analyses have been or would be
required in connection with the provision of such Ancillary Services
by any existing Network Resource. However, if an Interconnection
Customer's Large Generating Facility has not been designated as a
Network Resource by any load, it cannot be required to provide
Ancillary Services except to the extent such requirements extend to
all Generating Facilities that are similarly situated.
NR Interconnection Service does not necessarily provide the
Interconnection Customer with the capability to physically deliver
the output of its Large Generating Facility to any particular load
on the Transmission Provider's Transmission System without incurring
congestion costs. In the event of transmission constraints on the
Transmission Provider's Transmission System, the Interconnection
Customer's Large Generating Facility shall be subject to the
applicable congestion management procedures in the Transmission
Provider's Transmission System in the same manner as all other
Network Resources.
There is no requirement either at the time of study or
interconnection, or at any point in the future, that the
Interconnection Customer's Large Generating Facility be designated
as a Network Resource by a Network Service Customer under the Tariff
or that the Interconnection Customer identify a specific buyer (or
sink). To the extent a Network Customer does designate the Large
Generating Facility as a Network Resource, it must do so pursuant to
the Transmission Provider's Tariff.
Once an Interconnection Customer satisfies the requirements for
obtaining NR Interconnection Service, any future transmission
service request for delivery from the Large Generating Facility
within the Transmission Provider's Transmission System of any amount
of capacity and/or energy, up to the amount initially studied, will
not require that any additional studies be performed or that any
further upgrades associated with such Large Generating Facility be
undertaken, regardless of whether or not such Large Generating
Facility is ever designated by a Network Customer as a Network
Resource and regardless of changes in ownership of the Large
Generating Facility. To the extent the Interconnection Customer
enters into an arrangement for long term transmission service for
deliveries from the Large Generating Facility outside the
Transmission Provider's Transmission System, such request may
require additional studies and upgrades in order for the
Transmission Provider to grant such request.
4.2 Provision of Service. Transmission Provider shall provide
Interconnection Service for the Large Generating Facility at the
Point of Interconnection.
4.3 Generator Balancing Service Arrangements. Interconnection
Customer must demonstrate, to the Transmission Provider's reasonable
satisfaction, that it has satisfied the requirements of this Article
4.3 prior to the submission of any schedules for delivery service to
such Transmission Provider identifying the Large Generating Facility
as the Point of Receipt for such scheduled delivery.
4.3.1 Interconnection Customer is responsible for ensuring that
its actual Large Generating Facility output matches the scheduled
delivery from the Large Generating Facility to the Transmission
Provider's Transmission System, consistent with the scheduling
requirements of the Transmission Provider's FERC-approved market
structure, including ramping into and out of such scheduled
delivery, as measured at the Point of Interconnection, consistent
with the scheduling requirements of the Transmission Provider's
Tariff and any applicable FERC-approved market structure.
Interconnection Customer shall arrange for the supply of energy
when there is a difference between the actual Large Generating
Facility output and the scheduled delivery from the Large Generating
Facility (the ``Generator Balancing Service Arrangements'').
Interconnection Customer may satisfy its obligation for making
such Generator Balancing Service Arrangements by:
(a) Obtaining such service from another entity that (i) has
generating resources deliverable within the applicable Control Area,
(ii) agrees to assume responsibility for providing such Generator
Balancing Service Arrangement to the Interconnection Customer, and
(iii) has appropriate coordination service arrangements or
agreements with the applicable Control Area that addresses Generator
Balancing Service Arrangements for all generating resources for
which the entity is responsible within the applicable Control Area;
(b) Committing sufficient additional unscheduled generating
resources to the control of and dispatch by the applicable Control
Area operator that are capable of supplying energy not supplied by
the Interconnection Customer's scheduled Large Generating Facility,
and entering into an appropriate coordination services agreement
with the applicable Control Area that addresses Generator Balancing
Service Arrangements obligations for the Large Generating Facility;
(c) Entering into an arrangement with another Control Area to
dynamically schedule the Interconnection Customer's Large Generating
Facility out of the applicable Control Area and into such other
Control Area;
(d) Entering into a Generator Balancing Service Arrangements
with the applicable Control Area; or
(e) In the event the load/generation balancing function of the
applicable Control Area is accomplished through the function of its
market structures approved by FERC, by entering into an arrangement
consistent with such FERC-approved market structure.
In the event Interconnection Customer fails to demonstrate to
the Transmission Provider that it has otherwise complied with this
Article 4.3, the Interconnection Customer shall be deemed to have
elected to enter into a Generator Balancing Service Arrangements
with the applicable Control Area.
Nothing in this provision shall prejudice either Party from
obtaining a FERC-approved tariff addressing its obligations and
rights with respect to Generator Balancing Service Arrangements.
4.4 Performance Standards. Each Party shall perform all of its
obligations under this LGIA in accordance with Applicable Laws and
Regulations, Applicable Reliability Standards, and Good Utility
Practice, and to the extent a Party is required or prevented or
limited in taking any action by such regulations and standards, such
Party shall not be deemed to be in Breach of this LGIA for its
compliance therewith. If such Party is the Transmission Provider or
Transmission Owner, then that Party shall amend the LGIA and submit
the amendment to the Commission for approval.
4.5 No Transmission Delivery Service. The execution of this LGIA
does not constitute a request for, nor the provision of, any
transmission delivery service under the Transmission Provider's
Tariff.
4.6 Interconnection Customer Provided Services. The services
provided by Interconnection Customer under this LGIA are set forth
in Article 9.6 and Article 13.5.1. Interconnection Customer shall be
paid for such services in accordance with Article 11.6.
[[Page 49956]]
Article 5. Interconnection Facilities Engineering, Procurement, and
Construction
5.1 Options. Unless otherwise mutually agreed to between the
Parties, Interconnection Customer shall select the In-Service Date,
Initial Synchronization Date, and Commercial Operation Date; and
either Standard Option or Alternate Option set forth below for
completion of the Transmission Provider's Interconnection Facilities
and Network Upgrades as set forth in Appendix A, Interconnection
Facilities and Network Upgrades, and such dates and selected option
shall be set forth in Appendix B, Milestones.
5.1.1 Standard Option. The Transmission Provider shall design,
procure, and construct the Transmission Provider's Interconnection
Facilities and Network Upgrades, using Reasonable Efforts to
complete the Transmission Provider's Interconnection Facilities and
Network Upgrades by the dates set forth in Appendix B, Milestones.
The Transmission Provider shall not be required to undertake any
action which is inconsistent with its standard safety practices, its
material and equipment specifications, its design criteria and
construction procedures, its labor agreements, and Applicable Laws
and Regulations. In the event the Transmission Provider reasonably
expects that it will not be able to complete the Transmission
Provider's Interconnection Facilities and Network Upgrades by the
specified dates, the Transmission Provider shall promptly provide
written notice to the Interconnection Customer and shall undertake
Reasonable Efforts to meet the earliest dates thereafter.
5.1.2 Alternate Option. If the dates designated by
Interconnection Customer are acceptable to Transmission Provider,
the Transmission Provider shall so notify Interconnection Customer
within thirty (30) Calendar Days, and shall assume responsibility
for the design, procurement and construction of the Transmission
Provider's Interconnection Facilities by the designated dates.
If Transmission Provider subsequently fails to complete
Transmission Provider's Interconnection Facilities by the In-Service
Date, to the extent necessary to provide back feed power; or fails
to complete Network Upgrades by the Initial Synchronization Date to
the extent necessary to allow for Trial Operation at full power
output, unless other arrangements are made by the Parties for such
Trial Operation; or fails to complete the Network Upgrades by the
Commercial Operation Date, as such dates are reflected in Appendix
B, Milestones; Transmission Provider shall pay Interconnection
Customer liquidated damages in accordance with Article 5.3,
Liquidated Damages, provided, however, the dates designated by
Interconnection Customer shall be extended day for day for each day
that the applicable RTO or ISO refuses to grant clearances to
install equipment.
5.1.3 Option to Build. If the dates designated by
Interconnection Customer are not acceptable to Transmission
Provider, the Transmission Provider shall so notify the
Interconnection Customer within thirty (30) Calendar Days, and
unless the Parties agree otherwise, Interconnection Customer shall
have the option to assume responsibility for the design, procurement
and construction of Transmission Provider's Interconnection
Facilities and Stand Alone Network Upgrades. Both Transmission
Provider and Interconnection Customer must agree as to what
constitutes Stand Alone Network Upgrades and identify such Stand
Alone Network Upgrades in Appendix A to the LGIA. Except for Stand
Alone Upgrades, Interconnection Customer shall have no right to
construct Network Upgrades under this option.
5.1.4 Negotiated Option. If the Interconnection Customer elects
not to exercise its option under Article 5.1.3, Option to Build,
Interconnection Customer shall so notify Transmission Provider
within thirty (30) Calendar Days, and the Parties shall in good
faith attempt to negotiate terms and conditions (including revision
of the specified dates and liquidated damages, the provision of
incentives or the procurement and construction of a portion of the
Transmission Provider's Interconnection Facilities and Stand Alone
Network Upgrades by Interconnection Customer) pursuant to which
Transmission Provider is responsible for the design, procurement and
construction of the Transmission Provider's Interconnection
Facilities and Network Upgrades. If the Parties are unable to reach
agreement on such terms and conditions, Transmission Provider shall
assume responsibility for the design, procurement and construction
of the Transmission Provider's Interconnection Facilities and
Network Upgrades pursuant to 5.1.1, Standard Option.
5.2 General Conditions Applicable to Option to Build. If
Interconnection Customer assumes responsibility for the design,
procurement and construction of the Transmission Provider's
Interconnection Facilities and Stand Alone Network Upgrades,
(1) The Interconnection Customer shall engineer, procure
equipment, and construct the Transmission Provider's Interconnection
Facilities and Stand Alone Network Upgrades (or portions thereof)
using Good Utility Practice and using standards and specifications
provided in advance by the Transmission Provider;
(2) Interconnection Customer's engineering, procurement and
construction of the Transmission Provider's Interconnection
Facilities and Stand Alone Network Upgrades shall comply with all
requirements of law to which Transmission Provider would be subject
in the engineering, procurement or construction of the Transmission
Provider's Interconnection Facilities and Stand Alone Network
Upgrades;
(3) Transmission Provider shall review and approve the
engineering design, equipment acceptance tests, and the construction
of the Transmission Provider's Interconnection Facilities and Stand
Alone Network Upgrades;
(4) Prior to commencement of construction, Interconnection
Customer shall provide to Transmission Provider a schedule for
construction of the Transmission Provider's Interconnection
Facilities and Stand Alone Network Upgrades, and shall promptly
respond to requests for information from Transmission Provider;
(5) At any time during construction, Transmission Provider shall
have the right to gain unrestricted access to the Transmission
Provider's Interconnection Facilities and Stand Alone Network
Upgrades and to conduct inspections of the same;
(6) At any time during construction, should any phase of the
engineering, equipment procurement, or construction of the
Transmission Provider's Interconnection Facilities and Stand Alone
Network Upgrades not meet the standards and specifications provided
by Transmission Provider, the Interconnection Customer shall be
obligated to remedy deficiencies in that portion of the Transmission
Provider's Interconnection Facilities and Stand Alone Network
Upgrades;
(7) The Interconnection Customer shall indemnify the
Transmission Provider for claims arising from the Interconnection
Customer's construction of Transmission Provider's Interconnection
Facilities and Stand Alone Network Upgrades under the terms and
procedures applicable to Article 18.1 Indemnity;
(8) The Interconnection Customer shall transfer control of
Transmission Provider's Interconnection Facilities and Stand Alone
Network Upgrades to the Transmission Provider; and
(9) Transmission Provider shall approve and accept for operation
and maintenance the Transmission Provider's Interconnection
Facilities and Stand Alone Network Upgrades to the extent
engineered, procured, and constructed in accordance with this
Article 5.2.
5.3 Liquidated Damages. The actual damages to the
Interconnection Customer, in the event the Transmission Provider's
Interconnection Facilities or Network Upgrades are not completed by
the dates designated by the Interconnection Customer and accepted by
the Transmission Provider pursuant to subparagraphs 5.1.2 or 5.1.4,
above, may include Interconnection Customer's fixed operation and
maintenance costs and lost opportunity costs. Such actual damages
are uncertain and impossible to determine at this time. Because of
such uncertainty, any liquidated damages paid by the Transmission
Provider to the Interconnection Customer in the event that
Transmission Provider does not complete any portion of the
Transmission Provider's Interconnection Facilities or Network
Upgrades by the applicable dates, shall be an amount equal to \1/2\
of 1 percent per day of the actual cost of the Transmission
Provider's Interconnection Facilities and Network Upgrades, in the
aggregate, for which Transmission Provider has assumed
responsibility to design, procure and construct.
However, in no event shall the total liquidated damages exceed
20 percent of the actual cost of the Transmission Provider
Interconnection Facilities and Network Upgrades for which the
Transmission Provider has assumed responsibility to design, procure,
and construct. The foregoing payments will be made by the
Transmission Provider to the Interconnection Customer as
[[Page 49957]]
just compensation for the damages caused to the Interconnection
Customer, which actual damages are uncertain and impossible to
determine at this time, and as reasonable liquidated damages, but
not as a penalty or a method to secure performance of this LGIA.
No liquidated damages shall be paid to Interconnection Customer
if: (1) Interconnection Customer is not ready to commence use of the
Transmission Provider's Interconnection Facilities or Network
Upgrades to take the delivery of power for the Large Generating
Facility's Trial Operation or to export power from the Large
Generating Facility on the specified dates, unless the
Interconnection Customer would have been able to commence use of the
Transmission Provider's Interconnection Facilities or Network
Upgrades to take the delivery of power for Large Generating
Facility's Trial Operation or to export power from the Large
Generating Facility, but for Transmission Provider's delay; (2) the
Transmission Provider's failure to meet the specified dates is the
result of the action or inaction of the Interconnection Customer or
any other Interconnection Customer who has entered into an LGIA with
the Transmission Provider or any cause beyond Transmission
Provider's reasonable control or reasonable ability to cure; (3) the
interconnection Customer has assumed responsibility for the design,
procurement and construction of the Transmission Provider's
Interconnection Facilities and Stand Alone Network Upgrades; or (4)
the Parties have otherwise agreed.
5.4 Power System Stabilizers. The Interconnection Customer shall
procure, install, maintain and operate Power System Stabilizers in
accordance with the guidelines and procedures established by the
Applicable Reliability Council. Transmission Provider reserves the
right to reasonably establish minimum acceptable settings for any
installed Power System Stabilizers, subject to the design and
operating limitations of the Large Generating Facility. If the Large
Generating Facility's Power System Stabilizers are removed from
service or not capable of automatic operation, the Interconnection
Customer shall immediately notify the Transmission Provider's system
operator, or its designated representative.
5.5 Equipment Procurement. If responsibility for construction of
the Transmission Provider's Interconnection Facilities or Network
Upgrades is to be borne by the Transmission Provider, then the
Transmission Provider shall commence design of the Transmission
Provider's Interconnection Facilities or Network Upgrades and
procure necessary equipment as soon as practicable after all of the
following conditions are satisfied, unless the Parties otherwise
agree in writing:
5.5.1 The Transmission Provider has completed the Facilities
Study pursuant to the Facilities Study Agreement;
5.5.2 The Transmission Provider has received written
authorization to proceed with design and procurement from the
Interconnection Customer by the date specified in Appendix B,
Milestones; and
5.5.3 The Interconnection Customer has provided security to the
Transmission Provider in accordance with Article 11.5 by the dates
specified in Appendix B, Milestones.
5.6 Construction Commencement. The Transmission Provider shall
commence construction of the Transmission Provider's Interconnection
Facilities and Network Upgrades for which it is responsible as soon
as practicable after the following additional conditions are
satisfied:
5.6.1 Approval of the appropriate Governmental Authority has
been obtained for any facilities requiring regulatory approval;
5.6.2 Necessary real property rights and rights-of-way have been
obtained, to the extent required for the construction of a discrete
aspect of the Transmission Provider's Interconnection Facilities and
Network Upgrades;
5.6.3 The Transmission Provider has received written
authorization to proceed with construction from the Interconnection
Customer by the date specified in Appendix B, Milestones; and
5.6.4 The Interconnection Customer has provided security to the
Transmission Provider in accordance with Article 11.5 by the dates
specified in Appendix B, Milestones.
5.7 Work Progress. The Parties will keep each other advised
periodically as to the progress of their respective design,
procurement and construction efforts. Either Party may, at any time,
request a progress report from the other Party. If, at any time, the
Interconnection Customer determines that the completion of the
Transmission Provider's Interconnection Facilities will not be
required until after the specified In-Service Date, the
Interconnection Customer will provide written notice to the
Transmission Provider of such later date upon which the completion
of the Transmission Provider's Interconnection Facilities will be
required.
5.8 Information Exchange. As soon as reasonably practicable
after the Effective Date, the Parties shall exchange information
regarding the design and compatibility of the Parties'
Interconnection Facilities and compatibility of the Interconnection
Facilities with the Transmission Provider's Transmission System, and
shall work diligently and in good faith to make any necessary design
changes.
5.9 Limited Operation. If any of the Transmission Provider's
Interconnection Facilities or Network Upgrades are not reasonably
expected to be completed prior to the Commercial Operation Date of
the Large Generating Facility, Transmission Provider shall, upon the
request and at the expense of Interconnection Customer, perform
operating studies on a timely basis to determine the extent to which
the Large Generating Facility and the Interconnection Customer
Interconnection Facilities may operate prior to the completion of
the Transmission Provider's Interconnection Facilities or Network
Upgrades consistent with Applicable Laws and Regulations, Applicable
Reliability Standards, Good Utility Practice, and this LGIA.
Transmission Provider shall permit Interconnection Customer to
operate the Large Generating Facility and the Interconnection
Customer Interconnection Facilities in accordance with the results
of such studies.
5.10 Interconnection Customer's Interconnection Facilities
(``ICIF''). Interconnection Customer shall, at its expense, design,
procure, construct, own and install the ICIF, as set forth in
Appendix A, Interconnection Facilities, Network Upgrades and
Distribution Upgrades.
5.10.1 Large Generating Facility Specifications. Interconnection
Customer shall submit initial specifications for the ICIF, including
System Protection Facilities, to Transmission Provider at least one
hundred eighty (180) Calendar Days prior to the Initial
Synchronization Date; and final specifications for review and
comment at least ninety (90) Calendar Days prior to the Initial
Synchronization Date. Transmission Provider shall review such
specifications to ensure that the ICIF are compatible with the
technical specifications, operational control, and safety
requirements of the Transmission Provider and comment on such
specifications within thirty (30) Calendar Days of Interconnection
Customer's submission. All specifications provided hereunder shall
be deemed confidential.
5.10.2 Transmission Provider's Review. Transmission Provider's
review of Interconnection Customer's final specifications shall not
be construed as confirming, endorsing, or providing a warranty as to
the design, fitness, safety, durability or reliability of the Large
Generating Facility, or the ICIF. Interconnection Customer shall
make such changes to the ICIF as may reasonably be required by
Transmission Provider, in accordance with Good Utility Practice, to
ensure that the ICIF are compatible with the telemetry,
communications, and safety requirements of the Transmission
Provider.
5.10.3 ICIF Construction. The ICIF shall be designed and
constructed in accordance with Good Utility Practice. Within one
hundred twenty (120) Calendar Days after the Commercial Operation
Date, unless the Parties agree on another mutually acceptable
deadline, the Interconnection Customer shall deliver to the
Transmission Provider ``as-built'' drawings, information and
documents for the ICIF, such as: a one-line diagram, a site plan
showing the Large Generating Facility and the ICIF, plan and
elevation drawings showing the layout of the ICIF, a relay
functional diagram, relaying AC and DC schematic wiring diagrams and
relay settings for all facilities associated with the
Interconnection Customer's step-up transformers, the facilities
connecting the Large Generating Facility to the step-up transformers
and the ICIF, and the impedances (determined by factory tests) for
the associated step-up transformers and the Large Generating
Facilities. The Interconnection Customer shall provide Transmission
Provider specifications for the excitation system, automatic voltage
regulator, Large Generating Facility control and protection
settings, transformer tap settings, and communications.
5.11 Transmission Provider's Interconnection Facilities
Construction. The Transmission Provider's Interconnection
[[Page 49958]]
Facilities shall be designed and constructed in accordance with Good
Utility Practice. Upon request, within one hundred twenty (120)
Calendar Days after the Commercial Operation Date, unless the
Parties agree on another mutually acceptable deadline, the
Transmission Provider shall deliver to the Interconnection Customer
the following ``as-built'' drawings, information and documents for
the Transmission Provider's Interconnection Facilities [include
appropriate drawings and relay diagrams].
The Transmission Provider will obtain control of the
Transmission Provider's Interconnection Facilities and Stand Alone
Network Upgrades upon completion of such facilities.
5.12 Access Rights. Upon reasonable notice and supervision by a
Party, and subject to any required or necessary regulatory
approvals, a Party (``Granting Party'') shall furnish at no cost to
the other Party (``Access Party'') any rights of use, licenses,
rights of way and easements with respect to lands owned or
controlled by the Granting Party and its agents that are necessary
to enable the Access Party to obtain ingress and egress to
construct, operate, maintain, repair, test (or witness testing),
inspect, replace or remove facilities and equipment to: (i)
Interconnect the Large Generating Facility with the Transmission
System; (ii) operate and maintain the Large Generating Facility, the
Interconnection Facilities and the Transmission System; and (iii)
disconnect or remove the Access Party's facilities and equipment
upon termination of this LGIA. In exercising such licenses, rights
of way and easements, the Access Party shall not unreasonably
disrupt or interfere with normal operation of the Granting Party's
business and shall adhere to the safety rules and procedures
established in advance, as may be changed from time to time, by the
Granting Party and provided to the Access Party.
5.13 Lands of Other Property Owners. If any part of the
Transmission Provider or Transmission Owner's Interconnection
Facilities and/or Network Upgrades is to be installed on property
owned by persons other than Interconnection Customer or Transmission
Provider or Transmission Owner, the Transmission Provider or
Transmission Owner shall at Interconnection Customer's expense use
efforts, similar in nature and extent to those that it typically
undertakes on its own behalf, including use of its eminent domain
authority, and to the extent consistent with state law, to procure
from such persons any rights of use, licenses, rights of way and
easements that are necessary to construct, operate, maintain, test,
inspect, replace or remove the Transmission Provider or Transmission
Owner's Interconnection Facilities and/or Network Upgrades upon such
property. Upon receipt of a reasonable siting request, Transmission
Provider shall provide siting assistance to the Interconnection
Customer comparable to that provided to the Transmission Provider's
own, or an Affiliate's generation.
5.14 Permits. The LGIA shall specify the allocation of the
responsibilities of the Transmission Provider or Transmission Owner
and the Interconnection Customer to obtain all permits, licenses and
authorizations that are necessary to accomplish the interconnection
in compliance with Applicable Laws and Regulations. The Transmission
Provider or Transmission Owner and the Interconnection Customer
shall cooperate with each other in good faith in obtaining any such
permits, licenses and authorizations. With respect to this
paragraph, Transmission Provider or Transmission Owner shall provide
permitting assistance to the Interconnection Customer comparable to
that provided to the Transmission Provider's own, or an Affiliate's
generation.
5.15 Early Construction of Base Case Facilities. Interconnection
Customer may request Transmission Provider to construct, and
Transmission Provider shall construct, using Reasonable Efforts to
accommodate Interconnection Customer's In-Service Date, all or any
portion of any Network Upgrades required for Interconnection
Customer to be interconnected to the Transmission System which are
included in the Base Case of the Facilities Study for the
Interconnection Customer, and which also are required to be
constructed for another Interconnection Customer, but where such
construction is not scheduled to be completed in time to achieve
Interconnection Customer's In-Service Date.
5.16 Suspension. Interconnection Customer reserves the right,
upon written notice to Transmission Provider, to suspend at any time
all work by Transmission Provider associated with the construction
and installation of Transmission Provider's Interconnection
Facilities and/or Network Upgrades required under this LGIA with the
condition that the Transmission Provider shall be left in a safe and
reliable condition in accordance with Good Utility Practice and the
Transmission Provider's safety and reliability criteria. In such
event, Interconnection Customer shall be responsible for all
reasonable and necessary costs which Transmission Provider (i) has
incurred pursuant to this LGIA prior to the suspension and (ii)
incurs in suspending such work, including any costs incurred to
perform such work as may be necessary to ensure the safety of
persons and property and the integrity of the Transmission System
during such suspension and, if applicable, any costs incurred in
connection with the cancellation or suspension of material,
equipment and labor contracts which Transmission Provider cannot
reasonably avoid; provided, however, that prior to canceling or
suspending any such material, equipment or labor contract,
Transmission Provider shall obtain Interconnection Customer's
authorization to do so.
Transmission Provider shall invoice Interconnection Customer for
such costs pursuant to Article 12 and shall use due diligence to
minimize its costs. In the event Interconnection Customer suspends
work by Transmission Provider required under this LGIA pursuant to
this Article 5.16, and has not requested Transmission Provider to
recommence the work required under this LGIA on or before the
expiration of three (3) years following commencement of such
suspension, this LGIA shall be deemed terminated.
5.17 Taxes
5.17.1 Interconnection Customer Payments Not Taxable. The
Parties intend that all payments or property transfers made by
Interconnection Customer to Transmission Provider for the
installation of the Transmission Provider's Interconnection
Facilities and the Network Upgrades shall be non-taxable, either as
contributions to capital, or as an advance, in accordance with the
Internal Revenue Code and any applicable state income tax laws and
shall not be taxable as contributions in aid of construction or
otherwise under the Internal Revenue Code and any applicable state
income tax laws.
5.17.2 Representations And Covenants. In accordance with IRS
Notice 2001-82 and IRS Notice 88-129, Interconnection Customer
represents and covenants that (i) ownership of the electricity
generated at the Large Generating Facility will pass to another
party prior to the transmission of the electricity on the
Transmission System, (ii) for income tax purposes, the amount of any
payments and the cost of any property transferred to the
Transmission Provider for the Transmission Provider's
Interconnection Facilities will be capitalized by Interconnection
Customer as an intangible asset and recovered using the straight-
line method over a useful life of twenty (20) years, and (iii) any
portion of the Transmission Provider's Interconnection Facilities
that is a ``dual-use intertie,'' within the meaning of IRS Notice
88-129, is reasonably expected to carry only a de minimis amount of
electricity in the direction of the Large Generating Facility. For
this purpose, ``de minimis amount'' means no more than 5 percent of
the total power flows in both directions, calculated in accordance
with the ``5 percent test'' set forth in IRS Notice 88-129. This is
not intended to be an exclusive list of the relevant conditions that
must be met to conform to IRS requirements for non-taxable
treatment.
At Transmission Provider's request, Interconnection Customer
shall provide Transmission Provider with a report from an
independent engineer confirming its representation in clause (iii),
above. Transmission Provider represents and covenants that the cost
of the Transmission Provider's Interconnection Facilities paid for
by Interconnection Customer will have no net effect on the base upon
which rates are determined.
5.17.3 Indemnification for Taxes Imposed Upon Transmission
Provider. Notwithstanding Article 5.17.1, Interconnection Customer
shall protect, indemnify and hold harmless Transmission Provider
from income taxes imposed against Transmission Provider as the
result of payments or property transfers made by Interconnection
Customer to Transmission Provider under this LGIA, as well as any
interest and penalties, other than interest and penalties
attributable to any delay caused by Transmission Provider.
Transmission Provider shall not include a gross-up for income
taxes in the amounts it charges Interconnection Customer under this
LGIA unless (i) Transmission Provider has determined, in good faith,
that the payments or property transfers made by
[[Page 49959]]
Interconnection Customer to Transmission Provider should be reported
as income subject to taxation or (ii) any Governmental Authority
directs Transmission Provider to report payments or property as
income subject to taxation; provided, however, that Transmission
Provider may require Interconnection Customer to provide security,
in a form reasonably acceptable to Transmission Provider (such as a
parental guarantee or a letter of credit), in an amount equal to
Interconnection Customer's estimated tax liability under this
Article 5.17. Interconnection Customer shall reimburse Transmission
Provider for such taxes on a fully grossed-up basis, in accordance
with Article 5.17.4, within thirty (30) Calendar Days of receiving
written notification from Transmission Provider of the amount due,
including detail about how the amount was calculated.
In the event that the Transmission Provider includes a gross-up
upon its own determination that the payments or property transfers
should be reported as income subject to taxation, the
Interconnection Customer may require the Transmission Provider to
provide security, in a form reasonably acceptable to the
Interconnection Customer (such as a parental guarantee or a letter
of credit) in an amount equal to the Interconnection Customer's
estimated tax liability under this Article 5.17.
The indemnification obligation shall terminate at the earlier of
(1) the expiration of the 10-year testing period, as contemplated by
IRS Notice 88-129, and the applicable statute of limitation, as it
may be extended by the Transmission Provider upon request of the
IRS, to keep these years open for audit or adjustment, or (2) the
occurrence of a subsequent taxable event and the payment of any
related indemnification obligations as contemplated by this Article
5.17.
5.17.4 Tax Gross-Up Amount. Interconnection Customer's liability
for taxes under this Article 5.17 shall be calculated on a fully
grossed-up basis. Except as may otherwise be agreed to by the
parties, this means that Interconnection Customer will pay
Transmission Provider, in addition to the amount paid for the
Interconnection Facilities and Network Upgrades, an amount equal to
(1) the current taxes imposed on Transmission Provider (``Current
Taxes'') on the excess of (a) the gross income realized by
Transmission Provider as a result of payments or property transfers
made by Interconnection Customer to Transmission Provider under this
LGIA (without regard to any payments under this Article 5.17) (the
``Gross Income Amount'') over (b) the present value of future tax
deductions for depreciation that will be available as a result of
such payments or property transfers (the ``Present Value
Depreciation Amount''), plus (2) an additional amount sufficient to
permit the Transmission Provider to receive and retain, after the
payment of all Current Taxes, an amount equal to the net amount
described in clause (1).
For this purpose, (i) Current Taxes shall be computed based on
Transmission Provider's composite federal and state tax rates at the
time the payments or property transfers are received and
Transmission Provider will be treated as being subject to tax at the
highest marginal rates in effect at that time (the ``Current Tax
Rate''), and (ii) the Present Value Depreciation Amount shall be
computed by discounting Transmission Provider's anticipated tax
depreciation deductions as a result of such payments or property
transfers by Transmission Provider's current weighted average cost
of capital. Thus, the formula for calculating Interconnection
Customer's liability to Transmission Owner pursuant to this Article
5.17.4 can be expressed as follows: (Current Tax Rate x (Gross
Income Amount - Present Value of Tax Depreciation))/(1-Current Tax
Rate). Interconnection Customer's estimated tax liability in the
event taxes are imposed shall be stated in Appendix A,
Interconnection Facilities, Network Upgrades and Distribution
Upgrades.
5.17.5 Private Letter Ruling or Change or Clarification of Law.
At Interconnection Customer's request and expense, Transmission
Provider shall file with the IRS a request for a private letter
ruling as to whether any property transferred or sums paid, or to be
paid, by Interconnection Customer to Transmission Provider under
this LGIA are subject to federal income taxation. Interconnection
Customer will prepare the initial draft of the request for a private
letter ruling, and will certify under penalties of perjury that all
facts represented in such request are true and accurate to the best
of Interconnection Customer's knowledge. Transmission Provider and
Interconnection Customer shall cooperate in good faith with respect
to the submission of such request.
Transmission Provider shall keep Interconnection Customer fully
informed of the status of such request for a private letter ruling
and shall execute either a privacy act waiver or a limited power of
attorney, in a form acceptable to the IRS, that authorizes
Interconnection Customer to participate in all discussions with the
IRS regarding such request for a private letter ruling. Transmission
Provider shall allow Interconnection Customer to attend all meetings
with IRS officials about the request and shall permit
Interconnection Customer to prepare the initial drafts of any
follow-up letters in connection with the request. If the private
letter ruling concludes that such transfers or sums are not subject
to federal income taxation, or a clarification of or change in law
results in Transmission Provider determining in good faith that such
transfers or sums are not subject to federal income taxation,
Parties' obligations regarding a gross-up or security under this
Article 5.17 shall be reduced accordingly.
5.17.6 Subsequent Taxable Events. If, within 10 years from the
date on which the relevant Transmission Provider Interconnection
Facilities are placed in service, (i) Interconnection Customer
Breaches the covenant contained in Article 5.17.2(i), (ii) a
``disqualification event'' occurs within the meaning of IRS Notice
88-129, or (iii) this LGIA terminates and Transmission Provider
retains ownership of the Interconnection Facilities and Network
Upgrades, the Interconnection Customer shall pay a tax gross-up for
the taxes imposed on Transmission Provider, calculated using the
methodology described in Article 5.17.4 and in accordance with IRS
Notice 90-60.
5.17.7 Contests. In the event any Governmental Authority
determines that Transmission Provider's receipt of payments or
property constitutes income that is subject to taxation,
Transmission Provider shall notify Interconnection Customer, in
writing, within thirty (30) Calendar Days of receiving notification
of such determination by a Governmental Authority. Upon the timely
written request by Interconnection Customer and at Interconnection
Customer's sole expense, Transmission Provider shall appeal,
protest, seek abatement of, or otherwise oppose such determination.
Upon Interconnection Customer's written request and sole expense,
Transmission Provider shall file a claim for refund with respect to
any taxes paid under this Article 5.17, whether or not it has
received such a determination. Transmission Provider reserves the
right to make all decisions with regard to the prosecution of such
appeal, protest, abatement or other contest, including the selection
of counsel and compromise or settlement of the claim, but
Transmission Provider shall keep Interconnection Customer informed,
shall consider in good faith suggestions from Interconnection
Customer about the conduct of the contest, and shall reasonably
permit Interconnection Customer or an Interconnection Customer
representative to attend contest proceedings.
Interconnection Customer shall pay to Transmission Provider on a
periodic basis, as invoiced by Transmission Provider, Transmission
Provider's documented reasonable costs of prosecuting such appeal,
protest, abatement or other contest. Transmission Provider will not
be required to appeal or seek further review beyond one level of
judicial review. At any time during the contest, Transmission
Provider may agree to a settlement either with Interconnection
Customer's consent or after obtaining written advice from
nationally-recognized tax counsel, selected by Transmission
Provider, but reasonably acceptable to Interconnection Customer,
that the proposed settlement represents a reasonable settlement
given the hazards of litigation. Interconnection Customer's
obligation shall be based on the amount of the settlement agreed to
by Interconnection Customer, or if a higher amount, so much of the
settlement that is supported by the written advice from nationally-
recognized tax counsel selected under the terms of the preceding
sentence. Any settlement without Interconnection Customer's consent
or such written advice will relieve Interconnection Customer from
any obligation to indemnify Transmission Provider for the tax at
issue in the contest.
5.17.8 Refund. In the event that (a) a private letter ruling is
issued to Transmission Provider which holds that any amount paid or
the value of any property transferred by Interconnection Customer to
Transmission Provider under the terms of this LGIA is not subject to
federal income taxation, (b) any legislative change or
administrative announcement, notice, ruling or other determination
makes it reasonably clear to Transmission Provider in good faith
that any
[[Page 49960]]
amount paid or the value of any property transferred by
Interconnection Customer to Transmission Provider under the terms of
this LGIA is not taxable to Transmission Provider, (c) any
abatement, appeal, protest, or other contest results in a
determination that any payments or transfers made by Interconnection
Customer to Transmission Provider are not subject to federal income
tax, or (d) if Transmission Provider receives a refund from any
taxing authority for any overpayment of tax attributable to any
payment or property transfer made by Interconnection Customer to
Transmission Provider pursuant to this LGIA, Transmission Provider
shall promptly refund to Interconnection Customer the following:
(i) Any payment made by Interconnection Customer under this
Article 5.17 for taxes that is attributable to the amount determined
to be non-taxable, together with interest thereon,
(ii) On any amounts paid by Interconnection Customer to
Transmission Provider for such taxes which Transmission Provider did
not submit to the taxing authority, calculated in accordance with
the methodology set forth in FERC's regulations at 18 CFR
35.19a(a)(2)(ii) from the date payment was made by Interconnection
Customer to the date Transmission Provider refunds such payment to
Interconnection Customer, and
(iii) With respect to any such taxes paid by Transmission
Provider, any refund or credit Transmission Provider receives or to
which it may be entitled from any Governmental Authority, interest
(or that portion thereof attributable to the payment described in
clause (i), above) owed to the Transmission Provider for such
overpayment of taxes (including any reduction in interest otherwise
payable by Transmission Provider to any Governmental Authority
resulting from an offset or credit); provided, however, that
Transmission Provider will remit such amount promptly to
Interconnection Customer only after and to the extent that
Transmission Provider has received a tax refund, credit or offset
from any Governmental Authority for any applicable overpayment of
income tax related to the Transmission Provider's Interconnection
Facilities.
The intent of this provision is to leave both parties, to the
extent practicable, in the event that no taxes are due with respect
to any payment for Interconnection Facilities and Network Upgrades
hereunder, in the same position they would have been in had no such
tax payments been made.
5.17.9 Taxes Other Than Income Taxes. Upon the timely request by
Interconnection Customer, and at Interconnection Customer's sole
expense, Transmission Provider shall appeal, protest, seek abatement
of, or otherwise contest any tax (other than federal or state income
tax) asserted or assessed against Transmission Provider for which
Interconnection Customer may be required to reimburse Transmission
Provider under the terms of this LGIA. Interconnection Customer and
Transmission Provider shall cooperate in good faith with respect to
any such contest. Unless the payment of such taxes is a prerequisite
to an appeal or abatement or cannot be deferred, no amount shall be
payable by Interconnection Customer to Transmission Provider for
such taxes until they are assessed by a final, non-appealable order
by any court or agency of competent jurisdiction. In the event that
a tax payment is withheld and ultimately due and payable after
appeal, Interconnection Customer will be responsible for all taxes,
interest and penalties, other than penalties attributable to any
delay caused by Transmission Provider.
5.17.10 Transmission Owners Who Are Not Transmission Providers.
If the Transmission Provider is not the same entity as the
Transmission Owner, then (i) all references in this Article 5.17 to
Transmission Provider shall be deemed also to refer to and to
include the Transmission Owner, as appropriate, and (ii) this LGIA
shall not become effective until such Transmission Owner shall have
agreed in writing to assume all of the duties and obligations of the
Transmission Provider under this Article 5.17 of this LGIA.
5.18 Tax Status. Each Party shall cooperate with the other to
maintain the other Party's tax status. Nothing in this LGIA is
intended to adversely affect any Transmission Provider's tax exempt
status with respect to the issuance of bonds including, but not
limited to, Local Furnishing Bonds.
5.19 Modification
5.19.1 General. Either Party may undertake modifications to its
facilities. If a Party plans to undertake a modification that
reasonably may be expected to affect the other Party's facilities,
that Party shall provide to the other Party sufficient information
regarding such modification so that the other Party may evaluate the
potential impact of such modification prior to commencement of the
work. Such information shall be deemed to be confidential hereunder
and shall include information concerning the timing of such
modifications and whether such modifications are expected to
interrupt the flow of electricity from the Large Generating
Facility. The Party desiring to perform such work shall provide the
relevant drawings, plans, and specifications to the other Party at
least ninety (90) Calendar Days in advance of the commencement of
the work or such shorter period upon which the Parties may agree,
which agreement shall not unreasonably be withheld, conditioned or
delayed.
In the case of Large Generating Facility modifications that do
not require Interconnection Customer to submit an Interconnection
Request, Transmission Provider shall provide, within thirty (30)
Calendar Days (or such other time as the Parties may agree), an
estimate of any additional modifications to the Transmission System,
Transmission Provider's Interconnection Facilities or Network
Upgrades necessitated by such Interconnection Customer modification
and a good faith estimate of the costs thereof.
5.19.2 Standards. Any additions, modifications, or replacements
made to a Party's facilities shall be designed, constructed and
operated in accordance with this LGIA and Good Utility Practice.
5.19.3 Modification Costs. Interconnection Customer shall not be
directly assigned for the costs of any additions, modifications, or
replacements that Transmission Provider makes to the Transmission
Provider's Interconnection Facilities or the Transmission System to
facilitate the interconnection of a third party to the Transmission
Provider's Interconnection Facilities or the Transmission System, or
to provide transmission service under the Transmission Provider's
Tariff. Interconnection Customer shall be responsible for the costs
of any additions, modifications, or replacements to the
Interconnection Customer Interconnection Facilities that may be
necessary to maintain or upgrade such Interconnection Customer
Interconnection Facilities consistent with Applicable Laws and
Regulations, Applicable Reliability Standards or Good Utility
Practice.
Article 6. Testing and Inspection
6.1 Pre-Commercial Operation Date Testing and Modifications.
Prior to the Commercial Operation Date, the Transmission Provider
shall test the Transmission Provider's Interconnection Facilities
and Network Upgrades and Interconnection Customer shall test the
Large Generating Facility and the Interconnection Customer
Interconnection Facilities to ensure their safe and reliable
operation. Similar testing may be required after initial operation.
Each Party shall make any modifications to its facilities that are
found to be necessary as a result of such testing. Interconnection
Customer shall bear the cost of all such testing and modifications.
Interconnection Customer shall generate test energy at the Large
Generating Facility only if it has arranged for the delivery of such
test energy.
6.2 Post-Commercial Operation Date Testing and Modifications.
Each Party shall at its own expense perform routine inspection and
testing of its facilities and equipment in accordance with Good
Utility Practice as may be necessary to ensure the continued
interconnection of the Large Generating Facility with the
Transmission System in a safe and reliable manner. Each Party shall
have the right, upon advance written notice, to require reasonable
additional testing of the other Party's facilities, at the
requesting Party's expense, as may be in accordance with Good
Utility Practice.
6.3 Right to Observe Testing. Each Party shall notify the other
Party in advance of its performance of tests of its Interconnection
Facilities. The other Party has the right, at its own expense, to
observe such testing.
6.4 Right to Inspect. Each Party shall have the right, but shall
have no obligation to: (i) Observe the other Party's tests and/or
inspection of any of its System Protection Facilities and other
protective equipment, including Power System Stabilizers; (ii)
review the settings of the other Party's System Protection
Facilities and other protective equipment; and (iii) review the
other Party's maintenance records relative to the Interconnection
Facilities, the System Protection Facilities and other protective
[[Page 49961]]
equipment. A Party may exercise these rights from time to time as it
deems necessary upon reasonable notice to the other Party. The
exercise or non-exercise by a Party of any such rights shall not be
construed as an endorsement or confirmation of any element or
condition of the Interconnection Facilities or the System Protection
Facilities or other protective equipment or the operation thereof,
or as a warranty as to the fitness, safety, desirability, or
reliability of same. Any information that Transmission Provider
obtains through the exercise of any of its rights under this Article
6.4 shall be deemed to be confidential hereunder.
Article 7. Metering
7.1 General. Each Party shall comply with the Applicable
Reliability Council requirements. Unless otherwise agreed by the
Parties, Transmission Provider shall install Metering Equipment at
the Point of Interconnection prior to any operation of the Large
Generating Facility and shall own, operate, test and maintain such
Metering Equipment. Power flows to and from the Large Generating
Facility shall be measured at or, at Transmission Provider's option,
compensated to, the Point of Interconnection. Transmission Provider
shall provide metering quantities, in analog and/or digital form, to
Interconnection Customer upon request. Interconnection Customer
shall bear all reasonable documented costs associated with the
purchase, installation, operation, testing and maintenance of the
Metering Equipment.
7.2 Check Meters. Interconnection Customer, at its option and
expense, may install and operate, on its premises and on its side of
the Point of Interconnection, one or more check meters to check
Transmission Provider's meters. Such check meters shall be for check
purposes only and shall not be used for the measurement of power
flows for purposes of this LGIA, except as provided in Article 7.4
below. The check meters shall be subject at all reasonable times to
inspection and examination by Transmission Provider or its designee.
The installation, operation and maintenance thereof shall be
performed entirely by Interconnection Customer in accordance with
Good Utility Practice.
7.3 Standards. Transmission Provider shall install, calibrate,
and test revenue quality Metering Equipment in accordance with
applicable ANSI standards.
7.4 Testing of Metering Equipment. Transmission Provider shall
inspect and test all Transmission Provider-owned Metering Equipment
upon installation and at least once every two (2) years thereafter.
If requested to do so by Interconnection Customer, Transmission
Provider shall, at Interconnection Customer's expense, inspect or
test Metering Equipment more frequently than every two (2) years.
Transmission Provider shall give reasonable notice of the time when
any inspection or test shall take place, and Interconnection
Customer may have representatives present at the test or inspection.
If at any time Metering Equipment is found to be inaccurate or
defective, it shall be adjusted, repaired or replaced at
Interconnection Customer's expense, in order to provide accurate
metering, unless the inaccuracy or defect is due to Transmission
Provider's failure to maintain, then Transmission Provider shall
pay. If Metering Equipment fails to register, or if the measurement
made by Metering Equipment during a test varies by more than two
percent from the measurement made by the standard meter used in the
test, Transmission Provider shall adjust the measurements by
correcting all measurements for the period during which Metering
Equipment was in error by using Interconnection Customer's check
meters, if installed. If no such check meters are installed or if
the period cannot be reasonably ascertained, the adjustment shall be
for the period immediately preceding the test of the Metering
Equipment equal to one-half the time from the date of the last
previous test of the Metering Equipment.
7.5 Metering Data. At Interconnection Customer's expense, the
metered data shall be telemetered to one or more locations
designated by Transmission Provider and one or more locations
designated by Interconnection Customer. Such telemetered data shall
be used, under normal operating conditions, as the official
measurement of the amount of energy delivered from the Large
Generating Facility to the Point of Interconnection.
Article 8. Communications
8.1 Interconnection Customer Obligations. Interconnection
Customer shall maintain satisfactory operating communications with
Transmission Provider's Transmission System dispatcher or
representative designated by Transmission Provider. Interconnection
Customer shall provide standard voice line, dedicated voice line and
facsimile communications at its Large Generating Facility control
room or central dispatch facility through use of either the public
telephone system, or a voice communications system that does not
rely on the public telephone system. Interconnection Customer shall
also provide the dedicated data circuit(s) necessary to provide
Interconnection Customer data to Transmission Provider as set forth
in Appendix D, Security Arrangements Details. The data circuit(s)
shall extend from the Large Generating Facility to the location(s)
specified by Transmission Provider. Any required maintenance of such
communications equipment shall be performed by Interconnection
Customer. Operational communications shall be activated and
maintained under, but not be limited to, the following events:
system paralleling or separation, scheduled and unscheduled
shutdowns, equipment clearances, and hourly and daily load data.
8.2 Remote Terminal Unit. Prior to the Initial Synchronization
Date of the Large Generating Facility, a Remote Terminal Unit, or
equivalent data collection and transfer equipment acceptable to both
Parties, shall be installed by Interconnection Customer, or by
Transmission Provider at Interconnection Customer's expense, to
gather accumulated and instantaneous data to be telemetered to the
location(s) designated by Transmission Provider through use of a
dedicated point-to-point data circuit(s) as indicated in Article
8.1. The communication protocol for the data circuit(s) shall be
specified by Transmission Provider. Instantaneous bi-directional
analog real power and reactive power flow information must be
telemetered directly to the location(s) specified by Transmission
Provider.
Each Party will promptly advise the other Party if it detects or
otherwise learns of any metering, telemetry or communications
equipment errors or malfunctions that require the attention and/or
correction by the other Party. The Party owning such equipment shall
correct such error or malfunction as soon as reasonably feasible.
8.3 No Annexation. Any and all equipment placed on the premises
of a Party shall be and remain the property of the Party providing
such equipment regardless of the mode and manner of annexation or
attachment to real property, unless otherwise mutually agreed by the
Parties.
Article 9. Operations
9.1 General. Each Party shall comply with the Applicable
Reliability Council requirements. Each Party shall provide to the
other Party all information that may reasonably be required by the
other Party to comply with Applicable Laws and Regulations and
Applicable Reliability Standards.
9.2 Control Area Notification. At least three months before
Initial Synchronization Date, the Interconnection Customer shall
notify the Transmission Provider in writing of the Control Area in
which the Large Generating Facility will be located. If the
Interconnection Customer elects to locate the Large Generating
Facility in a Control Area other than the Control Area in which the
Large Generating Facility is physically located, and if permitted to
do so by the relevant transmission tariffs, all necessary
arrangements, including but not limited to those set forth in
Article 7 and Article 8 of this LGIA, and remote Control Area
generator interchange agreements, if applicable, and the appropriate
measures under such agreements, shall be executed and implemented
prior to the placement of the Large Generating Facility in the other
Control Area.
9.3 Transmission Provider Obligations. Transmission Provider
shall cause the Transmission System and the Transmission Provider's
Interconnection Facilities to be operated, maintained and controlled
in a safe and reliable manner and in accordance with this LGIA.
Transmission Provider may provide operating instructions to
Interconnection Customer consistent with this LGIA and Transmission
Provider's operating protocols and procedures as they may change
from time to time. Transmission Provider will consider changes to
its operating protocols and procedures proposed by Interconnection
Customer.
9.4 Interconnection Customer Obligations. Interconnection
Customer shall at its own expense operate, maintain and control the
Large Generating Facility and the Interconnection Customer
Interconnection Facilities in a safe and reliable manner and in
accordance with this LGIA. Interconnection Customer shall operate
the
[[Page 49962]]
Large Generating Facility and the Interconnection Customer
Interconnection Facilities in accordance with all applicable
requirements of the Control Area of which it is part, as such
requirements are set forth in Appendix C, Interconnection Details,
of this LGIA. Appendix C, Interconnection Details, will be modified
to reflect changes to the requirements as they may change from time
to time. Either Party may request that the other Party provide
copies of the requirements set forth in Appendix C, Interconnection
Details, of this LGIA.
9.5 Start-Up and Synchronization. Consistent with the Parties'
mutually acceptable procedures, the Interconnection Customer is
responsible for the proper synchronization of the Large Generating
Facility to the Transmission Provider's Transmission System.
9.6 Reactive Power
9.6.1 Power Factor Design Criteria. Interconnection Customer
shall design the Large Generating Facility to maintain a composite
power delivery at continuous rated power output at the Point of
Interconnection at a power factor within the range of 0.95 leading
to 0.95 lagging, unless Transmission Provider has established
different requirements that apply to all generators in the Control
Area on a comparable basis.
9.6.2 Voltage Schedules. Once the Interconnection Customer has
synchronized the Large Generating Facility with the Transmission
System, Transmission Provider shall require Interconnection Customer
to operate the Large Generating Facility to produce or absorb
reactive power within the design limitations of the Large Generating
Facility set forth in Article 9.6.1 (Power Factor Design Criteria).
Transmission Provider's voltage schedules shall treat all sources of
reactive power in the Control Area in an equitable and not unduly
discriminatory manner. Transmission Provider shall exercise
Reasonable Efforts to provide Interconnection Customer with such
schedules at least one (1) day in advance, and may make changes to
such schedules as necessary to maintain the reliability of the
Transmission System. Interconnection Customer shall operate the
Large Generating Facility to maintain the specified output voltage
or power factor at the Point of Interconnection within the design
limitations of the Large Generating Facility set forth in Article
9.6.1 (Power Factor Design Criteria). If Interconnection Customer is
unable to maintain the specified voltage or power factor, it shall
promptly notify the System Operator.
9.6.2.1 Governors and Regulators. Whenever the Large Generating
Facility is operated in parallel with the Transmission System and
the speed governors (if installed on the generating unit pursuant to
Good Utility Practice) and voltage regulators are capable of
operation, Interconnection Customer shall operate the Large
Generating Facility with its speed governors and voltage regulators
in automatic operation. If the Large Generating Facility's speed
governors and voltage regulators are not capable of such automatic
operation, the Interconnection Customer shall immediately notify
Transmission Provider's system operator, or its designated
representative, and ensure that such Large Generating Facility's
reactive power production or absorption (measured in MVARs) are
within the design capability of the Large Generating Facility's
generating unit(s) and steady state stability limits.
Interconnection Customer shall not cause its Large Generating
Facility to disconnect automatically or instantaneously from the
Transmission System or trip any generating unit comprising the Large
Generating Facility for an under or over frequency condition unless
the abnormal frequency condition persists for a time period beyond
the limits set forth in ANSI/IEEE Standard C37.106, or such other
standard as applied to other generators in the Control Area on a
comparable basis.
9.6.3 Payment for Reactive Power. Transmission Provider is
required to pay Interconnection Customer for reactive power that
Interconnection Customer provides or absorbs from the Large
Generating Facility only in those instances where the Transmission
Provider requests the Interconnection Customer to operate its Large
Generating Facility outside the agreed upon dead band. Payments
shall be pursuant to Article 11.6 or such other agreement to which
the Parties have otherwise agreed.
9.7 Outages and Interruptions
9.7.1 Outages
9.7.1.1 Outage Authority and Coordination. Each Party may in
accordance with Good Utility Practice in coordination with the other
Party remove from service any of its respective Interconnection
Facilities or Network Upgrades that may impact the other Party's
facilities as necessary to perform maintenance or testing or to
install or replace equipment. Absent an Emergency Condition, the
Party scheduling a removal of such facility(ies) from service will
use Reasonable Efforts to schedule such removal on a date and time
mutually acceptable to both Parties. In all circumstances any Party
planning to remove such facility(ies) from service shall use
Reasonable Efforts to minimize the effect on the other Party of such
removal.
9.7.1.2 Outage Schedules. The Transmission Provider shall post
scheduled outages of its transmission facilities on the OASIS.
Interconnection Customer shall submit its planned maintenance
schedules for the Large Generating Facility to Transmission Provider
for a minimum of a rolling twenty-four month period. Interconnection
Customer shall update its planned maintenance schedules as
necessary. Transmission Provider may request Interconnection
Customer to reschedule its maintenance as necessary to maintain the
reliability of the Transmission System; provided, however, adequacy
of generation supply shall not be a criterion in determining
Transmission System reliability. Transmission Provider shall
compensate Interconnection Customer for any additional direct costs
that the Interconnection Customer incurs as a result of having to
reschedule maintenance, including any additional overtime, breaking
of maintenance contracts or other costs above and beyond the cost
the Interconnection Customer would have incurred absent the
Transmission Provider's request to reschedule maintenance.
Interconnection Customer will not be eligible to receive
compensation, if during the twelve (12) months prior to the date of
the scheduled maintenance, the Interconnection Customer had modified
its schedule of maintenance activities.
9.7.1.3 Outage Restoration. If an outage on a Party's
Interconnection Facilities or Network Upgrades adversely affects the
other Party's operations or facilities, the Party that owns or
controls the facility that is out of service shall use Reasonable
Efforts to promptly restore such facility(ies) to a normal operating
condition consistent with the nature of the outage. The Party that
owns or controls the facility that is out of service shall provide
the other Party, to the extent such information is known,
information on the nature of the Emergency Condition, an estimated
time of restoration, and any corrective actions required. Initial
verbal notice shall be followed up as soon as practicable with
written notice explaining the nature of the outage.
9.7.2 Interruption of Service. If required by Good Utility
Practice to do so, Transmission Provider may require Interconnection
Customer to interrupt or reduce deliveries of electricity if such
delivery of electricity could adversely affect Transmission
Provider's ability to perform such activities as are necessary to
safely and reliably operate and maintain the Transmission System.
The following provisions shall apply to any interruption or
reduction permitted under this Article 9.7.2:
9.7.2.1 The interruption or reduction shall continue only for so
long as reasonably necessary under Good Utility Practice;
9.7.2.2 Any such interruption or reduction shall be made on an
equitable, non-discriminatory basis with respect to all Generating
Facilities directly connected to the Transmission System;
9.7.2.3 When the interruption or reduction must be made under
circumstances which do not allow for advance notice, Transmission
Provider shall notify Interconnection Customer by telephone as soon
as practicable of the reasons for the curtailment, interruption, or
reduction, and, if known, its expected duration. Telephone
notification shall be followed by written notification as soon as
practicable;
9.7.2.4 Except during the existence of an Emergency Condition,
when the interruption or reduction can be scheduled without advance
notice, Transmission Provider shall notify Interconnection Customer
in advance regarding the timing of such scheduling and further
notify Interconnection Customer of the expected duration.
Transmission Provider shall coordinate with the Interconnection
Customer using Good Utility Practice to schedule the interruption or
reduction during periods of least impact to the Interconnection
Customer and the Transmission Provider;
9.7.2.5 The Parties shall cooperate and coordinate with each
other to the extent necessary in order to restore the Large
Generating Facility, Interconnection Facilities, and the
Transmission System to
[[Page 49963]]
their normal operating state, consistent with system conditions and
Good Utility Practice.
9.7.3 Under-Frequency and Over-Frequency Conditions. The
Transmission System is designed to automatically activate a load-
shed program as required by the Applicable Reliability Council in
the event of an under-frequency system disturbance. Interconnection
Customer shall implement under-frequency and over-frequency relay
set points for the Large Generating Facility as required by the
Applicable Reliability Council to ensure ``ride through'' capability
of the Transmission System. Large Generating Facility response to
frequency deviations of pre-determined magnitudes, both under-
frequency and over-frequency deviations, shall be studied and
coordinated with the Transmission Provider in accordance with Good
Utility Practice. The term ``ride through'' as used herein shall
mean the ability of a Generating Facility to stay connected to and
synchronized with the Transmission System during system disturbances
within a range of under-frequency and over-frequency conditions, in
accordance with Good Utility Practice.
9.7.4 System Protection and Other Control Requirements
9.7.4.1 System Protection Facilities. Interconnection Customer
shall, at its expense, install, operate and maintain System
Protection Facilities as a part of the Large Generating Facility or
the Interconnection Customer Interconnection Facilities.
Transmission Provider shall install at Interconnection Customer's
expense any System Protection Facilities that may be required on the
Transmission Provider Interconnection Facilities or the Transmission
System as a result of the interconnection of the Large Generating
Facility and the Interconnection Customer Interconnection
Facilities.
9.7.4.2 Each Party's protection facilities shall be designed and
coordinated with other systems in accordance with Good Utility
Practice.
9.7.4.3 Each Party shall be responsible for protection of its
facilities consistent with Good Utility Practice.
9.7.4.4 Each Party's protective relay design shall incorporate
the necessary test switches to perform the tests required in Article
6. The required test switches will be placed such that they allow
operation of lockout relays while preventing breaker failure schemes
from operating and causing unnecessary breaker operations and/or the
tripping of the Interconnection Customer's units.
9.7.4.5 Each Party will test, operate and maintain System
Protection Facilities in accordance with Good Utility Practice.
9.7.4.6 Prior to the In-Service Date, and again prior to the
Commercial Operation Date, each Party or its agent shall perform a
complete calibration test and functional trip test of the System
Protection Facilities. At intervals suggested by Good Utility
Practice and following any apparent malfunction of the System
Protection Facilities, each Party shall perform both calibration and
functional trip tests of its System Protection Facilities. These
tests do not require the tripping of any in-service generation unit.
These tests do, however, require that all protective relays and
lockout contacts be activated.
9.7.5 Requirements for Protection. In compliance with Good
Utility Practice, Interconnection Customer shall provide, install,
own, and maintain relays, circuit breakers and all other devices
necessary to remove any fault contribution of the Large Generating
Facility to any short circuit occurring on the Transmission System
not otherwise isolated by Transmission Provider's equipment, such
that the removal of the fault contribution shall be coordinated with
the protective requirements of the Transmission System. Such
protective equipment shall include, without limitation, a
disconnecting device or switch with load-interrupting capability
located between the Large Generating Facility and the Transmission
System at a site selected upon mutual agreement (not to be
unreasonably withheld, conditioned or delayed) of the Parties.
Interconnection Customer shall be responsible for protection of the
Large Generating Facility and Interconnection Customer's other
equipment from such conditions as negative sequence currents, over-
or under-frequency, sudden load rejection, over- or under-voltage,
and generator loss-of-field. Interconnection Customer shall be
solely responsible to disconnect the Large Generating Facility and
Interconnection Customer's other equipment if conditions on the
Transmission System could adversely affect the Large Generating
Facility.
9.7.6 Power Quality. Neither Party's facilities shall cause
excessive voltage flicker nor introduce excessive distortion to the
sinusoidal voltage or current waves as defined by ANSI Standard
C84.1-1989, in accordance with IEEE Standard 519, or any applicable
superseding electric industry standard. In the event of a conflict
between ANSI Standard C84.1-1989, or any applicable superseding
electric industry standard, ANSI Standard C84.1-1989, or the
applicable superseding electric industry standard, shall control.
9.8 Switching and Tagging Rules. Each Party shall provide the
other Party a copy of its switching and tagging rules that are
applicable to the other Party's activities. Such switching and
tagging rules shall be developed on a non-discriminatory basis. The
Parties shall comply with applicable switching and tagging rules, as
amended from time to time, in obtaining clearances for work or for
switching operations on equipment.
9.9 Use of Interconnection Facilities by Third Parties
9.9.1 Purpose of Interconnection Facilities. Except as may be
required by Applicable Laws and Regulations, or as otherwise agreed
to among the Parties, the Interconnection Facilities shall be
constructed for the sole purpose of interconnecting the Large
Generating Facility to the Transmission System and shall be used for
no other purpose.
9.9.2 Third Party Users. If required by Applicable Laws and
Regulations or if the Parties mutually agree, such agreement not to
be unreasonably withheld, to allow one or more third parties to use
the Transmission Provider's Interconnection Facilities, or any part
thereof, Interconnection Customer will be entitled to compensation
for the capital expenses it incurred in connection with the
Interconnection Facilities based upon the pro rata use of the
Interconnection Facilities by Transmission Provider, all third party
users, and Interconnection Customer, in accordance with Applicable
Laws and Regulations or upon some other mutually-agreed upon
methodology. In addition, cost responsibility for ongoing costs,
including operation and maintenance costs associated with the
Interconnection Facilities, will be allocated between
Interconnection Customer and any third party users based upon the
pro rata use of the Interconnection Facilities by Transmission
Provider, all third party users, and Interconnection Customer, in
accordance with Applicable Laws and Regulations or upon some other
mutually agreed upon methodology. If the issue of such compensation
or allocation cannot be resolved through such negotiations, it shall
be submitted to FERC for resolution.
9.10 Disturbance Analysis Data Exchange. The Parties will
cooperate with one another in the analysis of disturbances to either
the Large Generating Facility or the Transmission Provider's
Transmission System by gathering and providing access to any
information relating to any disturbance, including information from
oscillography, protective relay targets, breaker operations and
sequence of events records, and any disturbance information required
by Good Utility Practice.
Article 10. Maintenance
10.1 Transmission Provider Obligations. Transmission Provider
shall maintain the Transmission System and the Transmission
Provider's Interconnection Facilities in a safe and reliable manner
and in accordance with this LGIA.
10.2 Interconnection Customer Obligations. Interconnection
Customer shall maintain the Large Generating Facility and the
Interconnection Customer Interconnection Facilities in a safe and
reliable manner and in accordance with this LGIA.
10.3 Coordination. The Parties shall confer regularly to
coordinate the planning, scheduling and performance of preventive
and corrective maintenance on the Large Generating Facility and the
Interconnection Facilities.
10.4 Secondary Systems. Each Party shall cooperate with the
other in the inspection, maintenance, and testing of control or
power circuits that operate below 600 volts, AC or DC, including,
but not limited to, any hardware, control or protective devices,
cables, conductors, electric raceways, secondary equipment panels,
transducers, batteries, chargers, and voltage and current
transformers that directly affect the operation of a Party's
facilities and equipment which may reasonably be expected to impact
the other Party. Each Party shall provide advance notice to the
other Party before undertaking any work on such circuits, especially
on electrical circuits involving circuit breaker trip and close
contacts, current transformers, or potential transformers.
[[Page 49964]]
10.5 Operating and Maintenance Expenses. Subject to the
provisions herein addressing the use of facilities by others, and
except for operations and maintenance expenses associated with
modifications made for providing interconnection or transmission
service to a third party and such third party pays for such
expenses, Interconnection Customer shall be responsible for all
reasonable expenses including overheads, associated with: (1)
owning, operating, maintaining, repairing, and replacing
Interconnection Customer Interconnection Facilities; and (2)
operation, maintenance, repair and replacement of Transmission
Provider's Interconnection Facilities.
Article 11. Performance Obligation
11.1 Interconnection Customer Interconnection Facilities.
Interconnection Customer shall design, procure, construct, install,
own and/or control the Interconnection Customer Interconnection
Facilities described in Appendix A, Interconnection Facilities,
Network Upgrades and Distribution Upgrades, at its sole expense.
11.2 Transmission Provider's Interconnection Facilities.
Transmission Provider or Transmission Owner shall design, procure,
construct, install, own and/or control the Transmission Provider's
Interconnection Facilities described in Appendix A, Interconnection
Facilities, Network Upgrades and Distribution Upgrades, at the sole
expense of the Interconnection Customer.
11.3 Network Upgrades and Distribution Upgrades. Transmission
Provider or Transmission Owner shall design, procure, construct,
install, and own the Network Upgrades and Distribution Upgrades
described in Appendix A, Interconnection Facilities, Network
Upgrades and Distribution Upgrades. The Interconnection Customer
shall be responsible for all costs related to Distribution Upgrades.
Unless the Transmission Provider or Transmission Owner elects to
fund the capital for the Network Upgrades, they shall be solely
funded by the Interconnection Customer.
11.4 Transmission Credits
11.4.1 Refund of Amounts Advanced for Network Upgrades.
Interconnection Customer shall be entitled to a cash refund, equal
to the total amount paid to Transmission Provider and Affected
System Operator, if any, for the Network Upgrades, including any tax
gross-up or other tax-related payments, and not refunded to
Interconnection Customer pursuant to Article 5.17.8 or otherwise, to
be paid to Interconnection Customer on a dollar-for-dollar basis for
the non-usage sensitive portion of transmission charges, as payments
are made under the Transmission Provider's Tariff and Affected
System's Tariff for transmission services with respect to the Large
Generating Facility.
Notwithstanding the foregoing, Interconnection Customer,
Transmission Provider, and Affected System Operator may adopt any
alternative payment schedule that is mutually agreeable so long as
Transmission Provider and Affected System Operator refund all
amounts paid by Interconnection Customer for the Network Upgrades,
together with interest, within five (5) years from the Commercial
Operation Date. Transmission Provider and Affected System Operator
shall provide refunds to Interconnection Customer only after
commercial operation of the Large Generating Facility has been
demonstrated.
If the Large Generating Facility fails to achieve commercial
operation, but it or another Generating Facility is later
constructed and makes use of the Network Upgrades, Transmission
Provider and Affected System Operator shall at that time provide
refunds to Interconnection Customer for the amounts advanced for the
Network Upgrades. Any refund shall include interest calculated in
accordance with the methodology set forth in FERC's regulations at
18 CFR Sec. 35.19a(a)(2)(ii) from the date of any payment for
Network Upgrades through the date on which the Interconnection
Customer receives a refund of such payment pursuant to this
subparagraph. Interconnection Customer may assign such refund rights
to any person.
11.4.2 Special Provisions for Affected Systems. Unless the
Transmission Provider provides, under the LGIA, for the payment of
refunds for amounts advanced to Affected System Operator for Network
Upgrades, the Interconnection Customer and Affected System Operator
shall enter into an agreement that provides for such payment. The
agreement shall specify the terms governing payments to be made by
the Interconnection Customer to the Affected System Operator as well
as the payment of refunds by the Affected System Operator.
Refunds are to be paid without regard to whether the
Interconnection Customer contracts for transmission service on the
Affected System. If the Interconnection Customer does not contract
for transmission service, and in the absence of another mutually
agreeable payment schedule, refunds shall be established at a level
equal to the Affected System's rate for firm point-to-point
transmission service multiplied by the output of the Large
Generating Facility assumed in the Interconnection Facilities Study.
All refunds must be paid within five years of the Commercial
Operation Date.
11.4.3 Notwithstanding any other provision of this LGIA, nothing
herein shall be construed as relinquishing or foreclosing any
rights, including but not limited to firm transmission rights,
capacity rights, transmission congestion rights, or transmission
credits, that the Interconnection Customer, shall be entitled to,
now or in the future under any other agreement or tariff as a result
of, or otherwise associated with, the transmission capacity, if any,
created by the Network Upgrades, including the right to obtain
refunds or transmission credits for transmission service that is not
associated with the Large Generating Facility.
11.5 Provision of Security. At least thirty (30) Calendar Days
prior to the commencement of the procurement, installation, or
construction of a discrete portion of a Transmission Provider's
Interconnection Facilities, Network Upgrades, or Distribution
Upgrades, Interconnection Customer shall provide Transmission
Provider, at Interconnection Customer's option, a guarantee, a
surety bond, letter of credit or other form of security that is
reasonably acceptable to Transmission Provider and is consistent
with the Uniform Commercial Code of the jurisdiction identified in
Article 14.2.1. Such security for payment shall be in an amount
sufficient to cover the costs for constructing, procuring and
installing the applicable portion of Transmission Provider's
Interconnection Facilities, Network Upgrades, or Distribution
Upgrades and shall be reduced on a dollar-for-dollar basis for
payments made to Transmission Provider under this LGIA during its
term.
In addition:
11.5.1 The guarantee must be made by an entity that meets the
creditworthiness requirements of Transmission Provider, and contain
terms and conditions that guarantee payment of any amount that may
be due from Interconnection Customer, up to an agreed-to maximum
amount.
11.5.2 The letter of credit must be issued by a financial
institution reasonably acceptable to Transmission Provider and must
specify a reasonable expiration date.
11.5.3 The surety bond must be issued by an insurer reasonably
acceptable to Transmission Provider and must specify a reasonable
expiration date.
11.6 Interconnection Customer Compensation. If Transmission
Provider requests or directs Interconnection Customer to provide a
service pursuant to Articles 9.6.3 (Payment for Reactive Power), or
13.5.1 of this LGIA, Transmission Provider shall compensate
Interconnection Customer in accordance with Interconnection
Customer's applicable rate schedule then in effect unless the
provision of such service(s) is subject to an RTO or ISO FERC-
approved rate schedule. Interconnection Customer shall serve
Transmission Provider or RTO or ISO with any filing of a proposed
rate schedule at the time of such filing with FERC. To the extent
that no rate schedule is in effect at the time the Interconnection
Customer is required to provide or absorb any Reactive Power under
this LGIA, the Transmission Provider agrees to compensate the
Interconnection Customer in such amount as would have been due the
Interconnection Customer had the rate schedule been in effect at the
time service commenced; provided, however, that such rate schedule
must be filed at FERC or other appropriate Governmental Authority
within sixty (60) Calendar Days of the commencement of service.
11.6.1 Interconnection Customer Compensation for Actions During
Emergency Condition. Transmission Provider or RTO or ISO shall
compensate Interconnection Customer for its provision of real and
reactive power and other Emergency Condition services that
Interconnection Customer provides to support the Transmission System
during an Emergency Condition in accordance with Article 11.6.
Article 12. Invoice
12.1 General. Each Party shall submit to the other Party, on a
monthly basis, invoices of amounts due for the preceding month.
[[Page 49965]]
Each invoice shall state the month to which the invoice applies and
fully describe the services and equipment provided. The Parties may
discharge mutual debts and payment obligations due and owing to each
other on the same date through netting, in which case all amounts a
Party owes to the other Party under this LGIA, including interest
payments or credits, shall be netted so that only the net amount
remaining due shall be paid by the owing Party.
12.2 Final Invoice. Within six months after completion of the
construction of the Transmission Provider's Interconnection
Facilities and the Network Upgrades, Transmission Provider shall
provide an invoice of the final cost of the construction of the
Transmission Provider's Interconnection Facilities and the Network
Upgrades and shall set forth such costs in sufficient detail to
enable Interconnection Customer to compare the actual costs with the
estimates and to ascertain deviations, if any, from the cost
estimates. Transmission Provider shall refund to Interconnection
Customer any amount by which the actual payment by Interconnection
Customer for estimated costs exceeds the actual costs of
construction within thirty (30) Calendar Days of the issuance of
such final construction invoice.
12.3 Payment. Invoices shall be rendered to the paying Party at
the address specified in Appendix F. The Party receiving the invoice
shall pay the invoice within thirty (30) Calendar Days of receipt.
All payments shall be made in immediately available funds payable to
the other Party, or by wire transfer to a bank named and account
designated by the invoicing Party. Payment of invoices by
Interconnection Customer will not constitute a waiver of any rights
or claims Interconnection Customer may have under this LGIA.
12.4 Disputes. In the event of a billing dispute between
Transmission Provider and Interconnection Customer, Transmission
Provider shall continue to provide Interconnection Service under
this LGIA as long as Interconnection Customer: (i) Continues to make
all payments not in dispute; and (ii) pays to Transmission Provider
or into an independent escrow account the portion of the invoice in
dispute, pending resolution of such dispute. If Interconnection
Customer fails to meet these two requirements for continuation of
service, then Transmission Provider may provide notice to
Interconnection Customer of a Default pursuant to Article 17. Within
thirty (30) Calendar Days after the resolution of the dispute, the
Party that owes money to the other Party shall pay the amount due
with interest calculated in accord with the methodology set forth in
FERC's Regulations at 18 CFR Sec. 35.19a(a)(2)(ii).
Article 13. Emergencies
13.1 Definition. ``Emergency Condition'' shall mean a condition
or situation: (i) That in the judgment of the Party making the claim
is imminently likely to endanger life or property; or (ii) that, in
the case of Transmission Provider, is imminently likely (as
determined in a non-discriminatory manner) to cause a material
adverse effect on the security of, or damage to the Transmission
System, the Transmission Provider's Interconnection Facilities or
the Transmission Systems of others to which the Transmission System
is directly connected; or (iii) that, in the case of Interconnection
Customer, is imminently likely (as determined in a non-
discriminatory manner) to cause a material adverse effect on the
security of, or damage to, the Large Generating Facility or the
Interconnection Customer Interconnection Facilities. System
restoration and black start shall be considered Emergency
Conditions; provided, that Interconnection Customer is not obligated
by this LGIA to possess black start capability.
13.2 Obligations. Each Party shall comply with the Emergency
Condition procedures of the applicable ISO/RTO, NERC, the Applicable
Reliability Council, Applicable Laws and Regulations, and any
emergency procedures agreed to by the Joint Operating Committee.
13.3 Notice. Transmission Provider shall notify Interconnection
Customer promptly when it becomes aware of an Emergency Condition
that affects the Transmission Provider's Interconnection Facilities
or the Transmission System that may reasonably be expected to affect
Interconnection Customer's operation of the Large Generating
Facility or the Interconnection Customer's Interconnection
Facilities. Interconnection Customer shall notify Transmission
Provider promptly when it becomes aware of an Emergency Condition
that affects the Large Generating Facility or the Interconnection
Customer Interconnection Facilities that may reasonably be expected
to affect the Transmission System or the Transmission Provider's
Interconnection Facilities. To the extent information is known, the
notification shall describe the Emergency Condition, the extent of
the damage or deficiency, the expected effect on the operation of
Interconnection Customer's or Transmission Provider's facilities and
operations, its anticipated duration and the corrective action taken
and/or to be taken. The initial notice shall be followed as soon as
practicable with written notice.
13.4 Immediate Action. Unless, in Interconnection Customer's
reasonable judgment, immediate action is required, Interconnection
Customer shall obtain the consent of Transmission Provider, such
consent to not be unreasonably withheld, prior to performing any
manual switching operations at the Large Generating Facility or the
Interconnection Customer Interconnection Facilities in response to
an Emergency Condition either declared by the Transmission Provider
or otherwise regarding the Transmission System.
13.5 Transmission Provider Authority
13.5.1 General. Transmission Provider may take whatever actions
or inactions with regard to the Transmission System or the
Transmission Provider's Interconnection Facilities it deems
necessary during an Emergency Condition in order to (i) preserve
public health and safety, (ii) preserve the reliability of the
Transmission System or the Transmission Provider's Interconnection
Facilities, (iii) limit or prevent damage, and (iv) expedite
restoration of service.
Transmission Provider shall use Reasonable Efforts to minimize
the effect of such actions or inactions on the Large Generating
Facility or the Interconnection Customer Interconnection Facilities.
Transmission Provider may, on the basis of technical considerations,
require the Large Generating Facility to mitigate an Emergency
Condition by taking actions necessary and limited in scope to remedy
the Emergency Condition, including, but not limited to, directing
Interconnection Customer to shut-down, start-up, increase or
decrease the real or reactive power output of the Large Generating
Facility; implementing a reduction or disconnection pursuant to
Article 13.5.2; directing the Interconnection Customer to assist
with blackstart (if available) or restoration efforts; or altering
the outage schedules of the Large Generating Facility and the
Interconnection Customer Interconnection Facilities. Interconnection
Customer shall comply with all of Transmission Provider's operating
instructions concerning Large Generating Facility real power and
reactive power output within the manufacturer's design limitations
of the Large Generating Facility's equipment that is in service and
physically available for operation at the time, in compliance with
Applicable Laws and Regulations.
13.5.2 Reduction and Disconnection. Transmission Provider may
reduce Interconnection Service or disconnect the Large Generating
Facility or the Interconnection Customer Interconnection Facilities,
when such, reduction or disconnection is necessary under Good
Utility Practice due to Emergency Conditions. These rights are
separate and distinct from any right of curtailment of the
Transmission Provider pursuant to the Transmission Provider's
Tariff. When the Transmission Provider can schedule the reduction or
disconnection in advance, Transmission Provider shall notify
Interconnection Customer of the reasons, timing and expected
duration of the reduction or disconnection. Transmission Provider
shall coordinate with the Interconnection Customer using Good
Utility Practice to schedule the reduction or disconnection during
periods of least impact to the Interconnection Customer and the
Transmission Provider. Any reduction or disconnection shall continue
only for so long as reasonably necessary under Good Utility
Practice. The Parties shall cooperate with each other to restore the
Large Generating Facility, the Interconnection Facilities, and the
Transmission System to their normal operating state as soon as
practicable consistent with Good Utility Practice.
13.6 Interconnection Customer Authority. Consistent with Good
Utility Practice and the LGIA and the LGIP, the Interconnection
Customer may take whatever actions or inactions with regard to the
Large Generating Facility or the Interconnection Customer
Interconnection Facilities during an Emergency Condition in order to
(i) preserve public health and safety, (ii) preserve the reliability
of the Large Generating Facility or
[[Page 49966]]
the Interconnection Customer Interconnection Facilities, (iii) limit
or prevent damage, and (iv) expedite restoration of service.
Interconnection Customer shall use Reasonable Efforts to minimize
the effect of such actions or inactions on the Transmission System
and the Transmission Provider's Interconnection Facilities.
Transmission Provider shall use Reasonable Efforts to assist
Interconnection Customer in such actions. Interconnection Customer
shall not be obligated to follow Transmission Provider's
instructions to the extent the instruction would have a material
adverse impact on the safe and reliable operation of Interconnection
Customer's Large Generating Facility. Upon request, Interconnection
Customer shall provide Transmission Provider with documentation of
any such alleged material adverse impact.
13.7 Limited Liability. Except as otherwise provided in Article
11.6.1 of this LGIA, neither Party shall be liable to the other for
any action it takes in responding to an Emergency Condition so long
as such action is made in good faith and is consistent with Good
Utility Practice.
Article 14. Regulatory Requirements and Governing Law
14.1 Regulatory Requirements. Each Party's obligations under
this LGIA shall be subject to its receipt of any required approval
or certificate from one or more Governmental Authorities in the form
and substance satisfactory to the applying Party, or the Party
making any required filings with, or providing notice to, such
Governmental Authorities, and the expiration of any time period
associated therewith. Each Party shall in good faith seek and use
its Reasonable Efforts to obtain such other approvals. Nothing in
this LGIA shall require Interconnection Customer to take any action
that could result in its inability to obtain, or its loss of, status
or exemption under the Federal Power Act or the Public Utility
Holding Company Act of 1935, as amended.
14.2 Governing Law and Applicable Tariffs
14.2.1 The validity, interpretation and performance of this LGIA
and each of its provisions shall be governed by the laws of the
state where the Point of Interconnection is located, without regard
to its conflicts of law principles.
14.2.2 This LGIA is subject to all Applicable Laws and
Regulations.
14.2.3 Each Party expressly reserves the right to seek changes
in, appeal, or otherwise contest any laws, orders, rules, or
regulations of a Governmental Authority.
Article 15. Notices
15.1 General. Unless otherwise provided in this LGIA, any
notice, demand or request required or permitted to be given by
either Party to the other and any instrument required or permitted
to be tendered or delivered by either Party in writing to the other
shall be effective when delivered and may be so given, tendered or
delivered, by recognized national courier, or by depositing the same
with the United States Postal Service with postage prepaid, for
delivery by certified or registered mail, addressed to the Party, or
personally delivered to the Party, at the address set out in
Appendix F, Addresses for Delivery of Notices and Billings.
Either Party may change the notice information in this LGIA by
giving five (5) Business Days written notice prior to the effective
date of the change.
15.2 Billings and Payments. Billings and payments shall be sent
to the addresses set out in Appendix F.
15.3 Alternative Forms of Notice. Any notice or request required
or permitted to be given by either Party to the other and not
required by this Agreement to be given in writing may be so given by
telephone, facsimile or e-mail to the telephone numbers and e-mail
addresses set out in Appendix F.
15.4 Operations and Maintenance Notice. Each Party shall notify
the other Party in writing of the identity of the person(s) that it
designates as the point(s) of contact with respect to the
implementation of Articles 9 and 10.
Article 16. Force Majeure
16.1 Force Majeure
16.1.1 Economic hardship is not considered a Force Majeure
event.
16.1.2 Neither Party shall be considered to be in Default with
respect to any obligation hereunder, (including obligations under
Article 4), other than the obligation to pay money when due, if
prevented from fulfilling such obligation by Force Majeure. A Party
unable to fulfill any obligation hereunder (other than an obligation
to pay money when due) by reason of Force Majeure shall give notice
and the full particulars of such Force Majeure to the other Party in
writing or by telephone as soon as reasonably possible after the
occurrence of the cause relied upon. Telephone notices given
pursuant to this Article shall be confirmed in writing as soon as
reasonably possible and shall specifically state full particulars of
the Force Majeure, the time and date when the Force Majeure occurred
and when the Force Majeure is reasonably expected to cease. The
Party affected shall exercise due diligence to remove such
disability with reasonable dispatch, but shall not be required to
accede or agree to any provision not satisfactory to it in order to
settle and terminate a strike or other labor disturbance.
Article 17. Default
17.1 Default
17.1.1 General. No Default shall exist where such failure to
discharge an obligation (other than the payment of money) is the
result of Force Majeure as defined in this LGIA or the result of an
act or omission of the other Party. Upon a Default, the non-
defaulting Party shall give written notice of such Default to the
defaulting Party. Except as provided in Article 17.1.2, the
defaulting Party shall have thirty (30) Calendar Days from receipt
of the Default notice within which to cure such Default; provided
however, if such Default is not capable of cure within thirty (30)
Calendar Days, the defaulting Party shall commence such cure within
thirty (30) Calendar Days after notice and continuously and
diligently complete such cure within ninety (90) Calendar Days from
receipt of the Default notice; and, if cured within such time, the
Default specified in such notice shall cease to exist.
17.1.2 Right to Terminate. If a Default is not cured as provided
in this Article, or if a Default is not capable of being cured
within the period provided for herein, the non-defaulting Party
shall have the right to terminate this LGIA by written notice at any
time until cure occurs, and be relieved of any further obligation
hereunder and, whether or not that Party terminates this LGIA, to
recover from the defaulting Party all amounts due hereunder, plus
all other damages and remedies to which it is entitled at law or in
equity. The provisions of this Article will survive termination of
this LGIA.
Article 18. Indemnity, Consequential Damages and Insurance
18.1 Indemnity. The Parties shall at all times indemnify,
defend, and save the other Party harmless from, any and all damages,
losses, claims, including claims and actions relating to injury to
or death of any person or damage to property, demand, suits,
recoveries, costs and expenses, court costs, attorney fees, and all
other obligations by or to third parties, arising out of or
resulting from the other Party's action or inactions of its
obligations under this LGIA on behalf of the indemnifying Party,
except in cases of gross negligence or intentional wrongdoing by the
indemnified Party.
18.1.1 Indemnified Person. If an Indemnified Person is entitled
to indemnification under this Article 18 as a result of a claim by a
third party, and the indemnifying Party fails, after notice and
reasonable opportunity to proceed under Article 18.1, to assume the
defense of such claim, such Indemnified Person may at the expense of
the indemnifying Party contest, settle or consent to the entry of
any judgement with respect to, or pay in full, such claim.
18.1.2 Indemnifying Party. If an Indemnifying Party is obligated
to indemnify and hold any Indemnified Person harmless under this
Article 18, the amount owing to the Indemnified Person shall be the
amount of such Indemnified Person's actual Loss, net of any
insurance or other recovery.
18.1.3 Indemnity Procedures. Promptly after receipt by an
Indemnified Person of any claim or notice of the commencement of any
action or administrative or legal proceeding or investigation as to
which the indemnity provided for in Article 18.1 may apply, the
Indemnified Person shall notify the Indemnifying Party of such fact.
Any failure of or delay in such notification shall not affect a
Party's indemnification obligation unless such failure or delay is
materially prejudicial to the indemnifying Party.
The Indemnifying Party shall have the right to assume the
defense thereof with counsel designated by such Indemnifying Party
and reasonably satisfactory to the Indemnified Person. If the
defendants in any such action include one or more Indemnified
Persons and the Indemnifying Party and if the Indemnified Person
reasonably concludes that there may be legal defenses available to
it and/or other Indemnified Persons which are different from or
additional to those available to the Indemnifying Party, the
[[Page 49967]]
Indemnified Person shall have the right to select separate counsel
to assert such legal defenses and to otherwise participate in the
defense of such action on its own behalf. In such instances, the
Indemnifying Party shall only be required to pay the fees and
expenses of one additional attorney to represent an Indemnified
Person or Indemnified Persons having such differing or additional
legal defenses.
The Indemnified Person shall be entitled, at its expense, to
participate in any such action, suit or proceeding, the defense of
which has been assumed by the Indemnifying Party. Notwithstanding
the foregoing, the Indemnifying Party (i) shall not be entitled to
assume and control the defense of any such action, suit or
proceedings if and to the extent that, in the opinion of the
Indemnified Person and its counsel, such action, suit or proceeding
involves the potential imposition of criminal liability on the
Indemnified Person, or there exists a conflict or adversity of
interest between the Indemnified Person and the Indemnifying Party,
in such event the Indemnifying Party shall pay the reasonable
expenses of the Indemnified Person, and (ii) shall not settle or
consent to the entry of any judgement in any action, suit or
proceeding without the consent of the Indemnified Person, which
shall not be reasonably withheld, conditioned or delayed.
18.2 Consequential Damages. Other than the Liquidated Damages
heretofore described, in no event shall either Party be liable under
any provision of this LGIA for any losses, damages, costs or
expenses for any special, indirect, incidental, consequential, or
punitive damages, including but not limited to loss of profit or
revenue, loss of the use of equipment, cost of capital, cost of
temporary equipment or services, whether based in whole or in part
in contract, in tort, including negligence, strict liability, or any
other theory of liability; provided, however, that damages for which
a Party may be liable to the other Party under another agreement
will not be considered to be special, indirect, incidental, or
consequential damages hereunder.
18.3 Insurance. Each party shall, at its own expense, maintain
in force throughout the period of this LGIA, and until released by
the other Party, the following minimum insurance coverages, with
insurers authorized to do business in the state where the Point of
Interconnection is located:
18.3.1 Employers' Liability and Workers' Compensation Insurance
providing statutory benefits in accordance with the laws and
regulations of the state in which the Point of Interconnection is
located. The minimum limits for the Employers' Liability insurance
shall be One Million Dollars ($1,000,000) each accident bodily
injury by accident, One Million Dollars ($1,000,000) each employee
bodily injury by disease, and One Million Dollars ($1,000,000)
policy limit bodily injury by disease.
18.3.2 Commercial General Liability Insurance including premises
and operations, personal injury, broad form property damage, broad
form blanket contractual liability coverage (including coverage for
the contractual indemnification) products and completed operations
coverage, coverage for explosion, collapse and underground hazards,
independent contractors coverage, coverage for pollution to the
extent normally available and punitive damages to the extent
normally available and a cross liability endorsement, with minimum
limits of One Million Dollars ($1,000,000) per occurrence/One
Million Dollars ($1,000,000) aggregate combined single limit for
personal injury, bodily injury, including death and property damage.
18.3.3 Comprehensive Automobile Liability Insurance for coverage
of owned and non-owned and hired vehicles, trailers or semi-trailers
designed for travel on public roads, with a minimum, combined single
limit of One Million Dollars ($1,000,000) per occurrence for bodily
injury, including death, and property damage.
18.3.4 Excess Public Liability Insurance over and above the
Employers' Liability Commercial General Liability and Comprehensive
Automobile Liability Insurance coverage, with a minimum combined
single limit of Twenty Million Dollars ($20,000,000) per occurrence/
Twenty Million Dollars ($20,000,000) aggregate.
18.3.5 The Commercial General Liability Insurance, Comprehensive
Automobile Insurance and Excess Public Liability Insurance policies
shall name the other Party, its parent, associated and Affiliate
companies and their respective directors, officers, agents, servants
and employees (``Other Party Group'') as additional insured. All
policies shall contain provisions whereby the insurers waive all
rights of subrogation in accordance with the provisions of this LGIA
against the Other Party Group and provide thirty (30) days advance
written notice to the Other Party Group prior to anniversary date of
cancellation or any material change in coverage or condition.
18.3.6 The Commercial General Liability Insurance, Comprehensive
Automobile Liability Insurance and Excess Public Liability Insurance
policies shall contain provisions that specify that the polices are
primary and shall apply to such extent without consideration for
other policies separately carried and shall state that each insured
is provided coverage as though a separate policy had been issues to
each, except the insurer's liability shall not be increased beyond
the amount for which the insurer would have been liable had only one
insured been covered. Each Party shall be responsible for its
respective deductibles or retentions.
18.3.7 The Commercial General Liability Insurance, Comprehensive
Automobile Liability Insurance and Excess Public Liability Insurance
policies, if written on a Claims First Made Basis, shall be
maintained in full force and effect for two (2) years after
termination of this LGIA, which coverage may be in the form of tail
coverage or extended reporting period coverage if agreed by the
Parties.
18.3.8 The requirements contained herein as to the types and
limits of all insurance to be maintained by the Parties are not
intended to and shall not in any manner, limit or qualify the
liabilities and obligations assumed by the Parties under this LGIA.
18.3.9 Within ten (10) days following execution of this LGIA,
and as soon as practicable after the end of each fiscal year or at
the renewal of the insurance policy and in any event within ninety
(90) days thereafter, each Party shall provide certification of all
insurance required in this LGIA, executed by each insurer or by an
authorized representative of each insurer.
18.3.10 Notwithstanding the foregoing, each Party may self-
insure to the extent it maintains a self-insurance program; provided
that, such Party's senior secured debt is rated at investment grade,
or better, by Standard & Poor's. For any period of time that a
Party's senior secured debt is unrated by Standard & Poor's or is
rated at less than investment grade by Standard & Poor's, such Party
shall comply with the insurance requirements applicable to it under
Articles 18.3.1 through 18.3.9. In the event that a Party is
permitted to self-insure pursuant to this Article 18.3.10, it shall
not be required to comply with the insurance requirements applicable
to it under Articles 18.3.1 through 18.3.9.
18.3.11 The Parties agree to report to each other in writing as
soon as practical all accidents or occurrences resulting in injuries
to any person, including death, and any property damage arising out
of this LGIA.
Article 19. Assignment
19.1 Assignment. This LGIA may be assigned by either Party only
with the written consent of the other; provided that either Party
may assign this LGIA without the consent of the other Party to any
Affiliate of the assigning Party with an equal or greater credit
rating and with the legal authority and operational ability to
satisfy the obligations of the assigning Party under this LGIA; and
provided further that the Interconnection Customer shall have the
right to assign this LGIA, without the consent of the Transmission
Provider, for collateral security purposes to aid in providing
financing for the Large Generating Facility, provided that the
Interconnection Customer will require any secured party, trustee or
mortgagee to notify the Transmission Provider of any such
assignment. Any financing arrangement entered into by the
Interconnection Customer pursuant to this Article will provide that
prior to or upon the exercise of the secured party's, trustee's or
mortgagee's assignment rights pursuant to said arrangement, the
secured creditor, the trustee or mortgagee will notify the
Transmission Provider of the date and particulars of any such
exercise of assignment right(s). Any attempted assignment that
violates this Article is void and ineffective. Any assignment under
this LGIA shall not relieve a Party of its obligations, nor shall a
Party's obligations be enlarged, in whole or in part, by reason
thereof. Where required, consent to assignment will not be
unreasonably withheld, conditioned or delayed.
Article 20. Severability
20.1 Severability. If any provision in this LGIA is finally
determined to be invalid, void or unenforceable by any court or
other Governmental Authority having jurisdiction, such determination
shall not invalidate, void or make unenforceable any other
provision,
[[Page 49968]]
agreement or covenant of this LGIA; provided that if the
Interconnection Customer (or any third party, but only if such third
party is not acting at the direction of the Transmission Provider)
seeks and obtains such a final determination with respect to any
provision of the Alternate Option (Article 5.1.2), or the Negotiated
Option (Article 5.1.4), then none of these provisions shall
thereafter have any force or effect and the Parties' rights and
obligations shall be governed solely by the Standard Option (Article
5.1.1).
Article 21. Comparability
21.1 Comparability. The Parties will comply with all applicable
comparability and code of conduct laws, rules and regulations, as
amended from time to time.
Article 22. Confidentiality
22.1 Confidentiality. Confidential Information shall include,
without limitation, all information relating to a Party's
technology, research and development, business affairs, and pricing,
and any information supplied by either of the Parties to the other
prior to the execution of this LGIA.
Information is Confidential Information only if it is clearly
designated or marked in writing as confidential on the face of the
document, or, if the information is conveyed orally or by
inspection, if the Party providing the information orally informs
the Party receiving the information that the information is
confidential.
If requested by either Party, the other Party shall provide in
writing, the basis for asserting that the information referred to in
this Article warrants confidential treatment, and the requesting
Party may disclose such writing to the appropriate Governmental
Authority. Each Party shall be responsible for the costs associated
with affording confidential treatment to its information.
22.1.1 Term. During the term of this LGIA, and for a period of
three (3) years after the expiration or termination of this LGIA,
except as otherwise provided in this Article 22, each Party shall
hold in confidence and shall not disclose to any person Confidential
Information.
22.1.2 Scope. Confidential Information shall not include
information that the receiving Party can demonstrate: (1) Is
generally available to the public other than as a result of a
disclosure by the receiving Party; (2) was in the lawful possession
of the receiving Party on a non-confidential basis before receiving
it from the disclosing Party; (3) was supplied to the receiving
Party without restriction by a third party, who, to the knowledge of
the receiving Party after due inquiry, was under no obligation to
the disclosing Party to keep such information confidential; (4) was
independently developed by the receiving Party without reference to
Confidential Information of the disclosing Party; (5) is, or
becomes, publicly known, through no wrongful act or omission of the
receiving Party or Breach of this LGIA; or (6) is required, in
accordance with Article 22.1.7 of the LGIA, Order of Disclosure, to
be disclosed by any Governmental Authority or is otherwise required
to be disclosed by law or subpoena, or is necessary in any legal
proceeding establishing rights and obligations under this LGIA.
Information designated as Confidential Information will no longer be
deemed confidential if the Party that designated the information as
confidential notifies the other Party that it no longer is
confidential.
22.1.3 Release of Confidential Information. Neither Party shall
release or disclose Confidential Information to any other person,
except to its employees, consultants, or to parties who may be or
considering providing financing to or equity participation with
Interconnection Customer, or to potential purchasers or assignees of
Interconnection Customer, on a need-to-know basis in connection with
this LGIA, unless such person has first been advised of the
confidentiality provisions of this Article 22 and has agreed to
comply with such provisions. Notwithstanding the foregoing, a Party
providing Confidential Information to any person shall remain
primarily responsible for any release of Confidential Information in
contravention of this Article 22.
22.1.4 Rights. Each Party retains all rights, title, and
interest in the Confidential Information that each Party discloses
to the other Party. The disclosure by each Party to the other Party
of Confidential Information shall not be deemed a waiver by either
Party or any other person or entity of the right to protect the
Confidential Information from public disclosure.
22.1.5 No Warranties. By providing Confidential Information,
neither Party makes any warranties or representations as to its
accuracy or completeness. In addition, by supplying Confidential
Information, neither Party obligates itself to provide any
particular information or Confidential Information to the other
Party nor to enter into any further agreements or proceed with any
other relationship or joint venture.
22.1.6 Standard of Care. Each Party shall use at least the same
standard of care to protect Confidential Information it receives as
it uses to protect its own Confidential Information from
unauthorized disclosure, publication or dissemination. Each Party
may use Confidential Information solely to fulfill its obligations
to the other Party under this LGIA or its regulatory requirements.
22.1.7 Order of Disclosure. If a court or a Government Authority
or entity with the right, power, and apparent authority to do so
requests or requires either Party, by subpoena, oral deposition,
interrogatories, requests for production of documents,
administrative order, or otherwise, to disclose Confidential
Information, that Party shall provide the other Party with prompt
notice of such request(s) or requirement(s) so that the other Party
may seek an appropriate protective order or waive compliance with
the terms of this LGIA. Notwithstanding the absence of a protective
order or waiver, the Party may disclose such Confidential
Information which, in the opinion of its counsel, the Party is
legally compelled to disclose. Each Party will use Reasonable
Efforts to obtain reliable assurance that confidential treatment
will be accorded any Confidential Information so furnished.
22.1.8 Termination of Agreement. Upon termination of this LGIA
for any reason, each Party shall, within ten (10) Calendar Days of
receipt of a written request from the other Party, use Reasonable
Efforts to destroy, erase, or delete (with such destruction,
erasure, and deletion certified in writing to the other Party) or
return to the other Party, without retaining copies thereof, any and
all written or electronic Confidential Information received from the
other Party.
22.1.9 Remedies. The Parties agree that monetary damages would
be inadequate to compensate a Party for the other Party's Breach of
its obligations under this Article 22. Each Party accordingly agrees
that the other Party shall be entitled to equitable relief, by way
of injunction or otherwise, if the first Party Breaches or threatens
to Breach its obligations under this Article 22, which equitable
relief shall be granted without bond or proof of damages, and the
receiving Party shall not plead in defense that there would be an
adequate remedy at law. Such remedy shall not be deemed an exclusive
remedy for the Breach of this Article 22, but shall be in addition
to all other remedies available at law or in equity. The Parties
further acknowledge and agree that the covenants contained herein
are necessary for the protection of legitimate business interests
and are reasonable in scope. No Party, however, shall be liable for
indirect, incidental, or consequential or punitive damages of any
nature or kind resulting from or arising in connection with this
Article 22.
22.1.10 Disclosure to FERC or its Staff. Notwithstanding
anything in this Article 22 to the contrary, and pursuant to 18 CFR
section 1b.20, if FERC or its staff, during the course of an
investigation or otherwise, requests information from one of the
Parties that is otherwise required to be maintained in confidence
pursuant to this LGIA, the Party shall provide the requested
information to FERC or its staff, within the time provided for in
the request for information. In providing the information to FERC or
its staff, the Party must, consistent with 18 CFR 388.112, request
that the information be treated as confidential and non-public by
FERC and its staff and that the information be withheld from public
disclosure. Parties are prohibited from notifying the other Party to
this LGIA prior to the release of the Confidential Information to
the Commission or its staff. The Party shall notify the other Party
to the LGIA when it is notified by FERC or its staff that a request
to release Confidential Information has been received by FERC, at
which time either of the Parties may respond before such information
would be made public, pursuant to 18 CFR 388.112.
22.1.11 Subject to the exception in Article 22.1.10, any
information that a Party claims is competitively sensitive,
commercial or financial information under this LGIA (``Confidential
Information'') shall not be disclosed by the other Party to any
person not employed or retained by the other Party, except to the
extent disclosure is (i) required by law; (ii) reasonably deemed by
the disclosing Party to be required to be disclosed in connection
with a dispute between or among the Parties, or the defense of
litigation or dispute; (iii) otherwise permitted by consent of the
other Party, such consent not to be unreasonably withheld; or
[[Page 49969]]
(iv) necessary to fulfill its obligations under this LGIA or as a
transmission service provider or a Control Area operator including
disclosing the Confidential Information to an RTO or ISO or to a
regional or national reliability organization. The Party asserting
confidentiality shall notify the other Party in writing of the
information it claims is confidential. Prior to any disclosures of
the other Party's Confidential Information under this subparagraph,
or if any third party or Governmental Authority makes any request or
demand for any of the information described in this subparagraph,
the disclosing Party agrees to promptly notify the other Party in
writing and agrees to assert confidentiality and cooperate with the
other Party in seeking to protect the Confidential Information from
public disclosure by confidentiality agreement, protective order or
other reasonable measures.
22.1.12 This provision shall not apply to any information that
was or is hereafter in the public domain (except as a result of a
Breach of this provision).
Article 23. Environmental Releases
23.1 Each Party shall notify the other Party, first orally and
then in writing, of the release of any Hazardous Substances, any
asbestos or lead abatement activities, or any type of remediation
activities related to the Large Generating Facility or the
Interconnection Facilities, each of which may reasonably be expected
to affect the other Party. The notifying Party shall: (i) Provide
the notice as soon as practicable, provided such Party makes a good
faith effort to provide the notice no later than twenty-four hours
after such Party becomes aware of the occurrence; and (ii) promptly
furnish to the other Party copies of any publicly available reports
filed with any Governmental Authorities addressing such events.
Article 24. Information Requirements
24.1 Information Acquisition. Transmission Provider and the
Interconnection Customer shall submit specific information regarding
the electrical characteristics of their respective facilities to
each other as described below and in accordance with Applicable
Reliability Standards.
24.2 Information Submission by Transmission Provider. The
initial information submission by Transmission Provider shall occur
no later than one hundred eighty (180) Calendar Days prior to Trial
Operation and shall include Transmission System information
necessary to allow the Interconnection Customer to select equipment
and meet any system protection and stability requirements, unless
otherwise mutually agreed to by both Parties. On a monthly basis
Transmission Provider shall provide Interconnection Customer a
status report on the construction and installation of Transmission
Provider's Interconnection Facilities and Network Upgrades,
including, but not limited to, the following information: (1)
Progress to date; (2) a description of the activities since the last
report; (3) a description of the action items for the next period;
and (4) the delivery status of equipment ordered.
24.3 Updated Information Submission by Interconnection Customer.
The updated information submission by the Interconnection Customer,
including manufacturer information, shall occur no later than one
hundred eighty (180) Calendar Days prior to the Trial Operation.
Interconnection Customer shall submit a completed copy of the Large
Generating Facility data requirements contained in Appendix 1 to the
LGIP. It shall also include any additional information provided to
Transmission Provider for the Feasibility and Facilities Study.
Information in this submission shall be the most current Large
Generating Facility design or expected performance data. Information
submitted for stability models shall be compatible with Transmission
Provider standard models. If there is no compatible model, the
Interconnection Customer will work with a consultant mutually agreed
to by the Parties to develop and supply a standard model and
associated information.
If the Interconnection Customer's data is materially different
from what was originally provided to Transmission Provider pursuant
to the Interconnection Study Agreement between Transmission Provider
and Interconnection Customer, then Transmission Provider will
conduct appropriate studies to determine the impact on the
Transmission Provider Transmission System based on the actual data
submitted pursuant to this Article 24.3. The Interconnection
Customer shall not begin Trial Operation until such studies are
completed.
24.4 Information Supplementation. Prior to the Operation Date,
the Parties shall supplement their information submissions described
above in this Article 24 with any and all ``as-built'' Large
Generating Facility information or ``as-tested'' performance
information that differs from the initial submissions or,
alternatively, written confirmation that no such differences exist.
The Interconnection Customer shall conduct tests on the Large
Generating Facility as required by Good Utility Practice such as an
open circuit ``step voltage'' test on the Large Generating Facility
to verify proper operation of the Large Generating Facility's
automatic voltage regulator.
Unless otherwise agreed, the test conditions shall include: (1)
Large Generating Facility at synchronous speed; (2) automatic
voltage regulator on and in voltage control mode; and (3) a five
percent (5 percent) change in Large Generating Facility terminal
voltage initiated by a change in the voltage regulators reference
voltage. Interconnection Customer shall provide validated test
recordings showing the responses of Large Generating Facility
terminal and field voltages. In the event that direct recordings of
these voltages is impractical, recordings of other voltages or
currents that mirror the response of the Large Generating Facility's
terminal or field voltage are acceptable if information necessary to
translate these alternate quantities to actual Large Generating
Facility terminal or field voltages is provided. Large Generating
Facility testing shall be conducted and results provided to the
Transmission Provider for each individual generating unit in a
station.
Subsequent to the Operation Date, the Interconnection Customer
shall provide Transmission Provider any information changes due to
equipment replacement, repair, or adjustment. Transmission Provider
shall provide the Interconnection Customer any information changes
due to equipment replacement, repair or adjustment in the directly
connected substation or any adjacent Transmission Provider-owned
substation that may affect the Interconnection Customer
Interconnection Facilities equipment ratings, protection or
operating requirements. The Parties shall provide such information
no later than thirty (30) Calendar Days after the date of the
equipment replacement, repair or adjustment.
Article 25. Information Access and Audit Rights
25.1 Information Access. Each Party (the ``disclosing Party'')
shall make available to the other Party information that is in the
possession of the disclosing Party and is necessary in order for the
other Party to: (i) verify the costs incurred by the disclosing
Party for which the other Party is responsible under this LGIA; and
(ii) carry out its obligations and responsibilities under this LGIA.
The Parties shall not use such information for purposes other than
those set forth in this Article 25.1 and to enforce their rights
under this LGIA.
25.2 Reporting of Non-Force Majeure Events. Each Party (the
``notifying Party'') shall notify the other Party when the notifying
Party becomes aware of its inability to comply with the provisions
of this LGIA for a reason other than a Force Majeure event. The
Parties agree to cooperate with each other and provide necessary
information regarding such inability to comply, including the date,
duration, reason for the inability to comply, and corrective actions
taken or planned to be taken with respect to such inability to
comply. Notwithstanding the foregoing, notification, cooperation or
information provided under this Article shall not entitle the Party
receiving such notification to allege a cause for anticipatory
breach of this LGIA.
25.3 Audit Rights. Subject to the requirements of
confidentiality under Article 22 of this LGIA, each Party shall have
the right, during normal business hours, and upon prior reasonable
notice to the other Party, to audit at its own expense the other
Party's accounts and records pertaining to either Party's
performance or either Party's satisfaction of obligations under this
LGIA. Such audit rights shall include audits of the other Party's
costs, calculation of invoiced amounts, the Transmission Provider's
efforts to allocate responsibility for the provision of reactive
support to the Transmission System, the Transmission Provider's
efforts to allocate responsibility for interruption or reduction of
generation on the Transmission System, and each Party's actions in
an Emergency Condition. Any audit authorized by this Article shall
be performed at the offices where such accounts and records are
maintained and shall be limited to those portions of such accounts
and records that relate to each Party's performance and satisfaction
of obligations under this LGIA.
[[Page 49970]]
Each Party shall keep such accounts and records for a period
equivalent to the audit rights periods described in Article 25.4.
25.4 Audit Rights Periods
25.4.1 Audit Rights Period for Construction-Related Accounts and
Records. Accounts and records related to the design, engineering,
procurement, and construction of Transmission Provider's
Interconnection Facilities and Network Upgrades shall be subject to
audit for a period of twenty-four months following Transmission
Provider's issuance of a final invoice in accordance with Article
12.2.
25.4.2 Audit Rights Period for All Other Accounts and Records.
Accounts and records related to either Party's performance or
satisfaction of all obligations under this LGIA other than those
described in Article 25.4.1 shall be subject to audit as follows:
(i) for an audit relating to cost obligations, the applicable audit
rights period shall be twenty-four months after the auditing Party's
receipt of an invoice giving rise to such cost obligations; and (ii)
for an audit relating to all other obligations, the applicable audit
rights period shall be twenty-four months after the event for which
the audit is sought.
25.5 Audit Results. If an audit by a Party determines that an
overpayment or an underpayment has occurred, a notice of such
overpayment or underpayment shall be given to the other Party
together with those records from the audit which support such
determination.
Article 26. Subcontractors
26.1 General. Nothing in this LGIA shall prevent a Party from
utilizing the services of any subcontractor as it deems appropriate
to perform its obligations under this LGIA; provided, however, that
each Party shall require its subcontractors to comply with all
applicable terms and conditions of this LGIA in providing such
services and each Party shall remain primarily liable to the other
Party for the performance of such subcontractor.
26.2 Responsibility of Principal. The creation of any
subcontract relationship shall not relieve the hiring Party of any
of its obligations under this LGIA. The hiring Party shall be fully
responsible to the other Party for the acts or omissions of any
subcontractor the hiring Party hires as if no subcontract had been
made; provided, however, that in no event shall the Transmission
Provider be liable for the actions or inactions of the
Interconnection Customer or its subcontractors with respect to
obligations of the Interconnection Customer under Article 5 of this
LGIA. Any applicable obligation imposed by this LGIA upon the hiring
Party shall be equally binding upon, and shall be construed as
having application to, any subcontractor of such Party.
26.3 No Limitation by Insurance. The obligations under this
Article 26 will not be limited in any way by any limitation of
subcontractor's insurance.
Article 27. Disputes
27.1 Submission. In the event either Party has a dispute, or
asserts a claim, that arises out of or in connection with this LGIA
or its performance, such Party (the ``disputing Party'') shall
provide the other Party with written notice of the dispute or claim
(``Notice of Dispute''). Such dispute or claim shall be referred to
a designated senior representative of each Party for resolution on
an informal basis as promptly as practicable after receipt of the
Notice of Dispute by the other Party. In the event the designated
representatives are unable to resolve the claim or dispute through
unassisted or assisted negotiations within thirty (30) Calendar Days
of the other Party's receipt of the Notice of Dispute, such claim or
dispute may, upon mutual agreement of the Parties, be submitted to
arbitration and resolved in accordance with the arbitration
procedures set forth below. In the event the Parties do not agree to
submit such claim or dispute to arbitration, each Party may exercise
whatever rights and remedies it may have in equity or at law
consistent with the terms of this LGIA.
27.2 External Arbitration Procedures. Any arbitration initiated
under this LGIA shall be conducted before a single neutral
arbitrator appointed by the Parties. If the Parties fail to agree
upon a single arbitrator within ten (10) Calendar Days of the
submission of the dispute to arbitration, each Party shall choose
one arbitrator who shall sit on a three-member arbitration panel.
The two arbitrators so chosen shall within twenty (20) Calendar Days
select a third arbitrator to chair the arbitration panel. In either
case, the arbitrators shall be knowledgeable in electric utility
matters, including electric transmission and bulk power issues, and
shall not have any current or past substantial business or financial
relationships with any party to the arbitration (except prior
arbitration). The arbitrator(s) shall provide each of the Parties an
opportunity to be heard and, except as otherwise provided herein,
shall conduct the arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association
(``Arbitration Rules'') and any applicable FERC regulations or RTO
rules; provided, however, in the event of a conflict between the
Arbitration Rules and the terms of this Article 27, the terms of
this Article 27 shall prevail.
27.3 Arbitration Decisions. Unless otherwise agreed by the
Parties, the arbitrator(s) shall render a decision within ninety
(90) Calendar Days of appointment and shall notify the Parties in
writing of such decision and the reasons therefor. The arbitrator(s)
shall be authorized only to interpret and apply the provisions of
this LGIA and shall have no power to modify or change any provision
of this Agreement in any manner. The decision of the arbitrator(s)
shall be final and binding upon the Parties, and judgment on the
award may be entered in any court having jurisdiction. The decision
of the arbitrator(s) may be appealed solely on the grounds that the
conduct of the arbitrator(s), or the decision itself, violated the
standards set forth in the Federal Arbitration Act or the
Administrative Dispute Resolution Act. The final decision of the
arbitrator must also be filed with FERC if it affects jurisdictional
rates, terms and conditions of service, Interconnection Facilities,
or Network Upgrades.
27.4 Costs. Each Party shall be responsible for its own costs
incurred during the arbitration process and for the following costs,
if applicable: (1) The cost of the arbitrator chosen by the Party to
sit on the three member panel and one half of the cost of the third
arbitrator chosen; or (2) one half the cost of the single arbitrator
jointly chosen by the Parties.
Article 28. Representations, Warranties and Covenants
28.1 General. Each Party makes the following representations,
warranties and covenants:
28.1.1 Good Standing. Such Party is duly organized, validly
existing and in good standing under the laws of the state in which
it is organized, formed, or incorporated, as applicable; that it is
qualified to do business in the state or states in which the Large
Generating Facility, Interconnection Facilities and Network Upgrades
owned by such Party, as applicable, are located; and that it has the
corporate power and authority to own its properties, to carry on its
business as now being conducted and to enter into this LGIA and
carry out the transactions contemplated hereby and perform and carry
out all covenants and obligations on its part to be performed under
and pursuant to this LGIA.
28.1.2 Authority. Such Party has the right, power and authority
to enter into this LGIA, to become a party hereto and to perform its
obligations hereunder. This LGIA is a legal, valid and binding
obligation of such Party, enforceable against such Party in
accordance with its terms, except as the enforceability thereof may
be limited by applicable bankruptcy, insolvency, reorganization or
other similar laws affecting creditors' rights generally and by
general equitable principles (regardless of whether enforceability
is sought in a proceeding in equity or at law).
28.1.3 No Conflict. The execution, delivery and performance of
this LGIA does not violate or conflict with the organizational or
formation documents, or bylaws or operating agreement, of such
Party, or any judgment, license, permit, order, material agreement
or instrument applicable to or binding upon such Party or any of its
assets.
28.1.4 Consent and Approval. Such Party has sought or obtained,
or, in accordance with this LGIA will seek or obtain, each consent,
approval, authorization, order, or acceptance by any Governmental
Authority in connection with the execution, delivery and performance
of this LGIA, and it will provide to any Governmental Authority
notice of any actions under this LGIA that are required by
Applicable Laws and Regulations.
Article 29. Joint Operating Committee
29.1 Joint Operating Committee. Except in the case of ISOs and
RTOs, Transmission Provider shall constitute a Joint Operating
Committee to coordinate operating and technical considerations of
Interconnection Service. At least six (6) months prior to the
expected Initial Synchronization Date, Interconnection Customer and
Transmission Provider shall each appoint one representative and one
alternate to the Joint Operating Committee. Each Interconnection
[[Page 49971]]
Customer shall notify the Transmission Provider of its appointment
in writing. Such appointments may be changed at any time by similar
notice. The Joint Operating Committee shall meet as necessary, but
not less than once each calendar year, to carry out the duties set
forth herein. The Joint Operating Committee shall hold a meeting at
the request of either Party, at a time and place agreed upon by the
representatives. The Joint Operating Committee shall perform all of
its duties consistent with the provisions of this LGIA. Each Party
shall cooperate in providing to the Joint Operating Committee all
information required in the performance of the Joint Operating
Committee's duties. All decisions and agreements, if any, made by
the Joint Operating Committee shall be evidenced in writing. The
duties of the Joint Operating Committee shall include the following:
29.1.1 Establish data requirements and operating record
requirements.
29.1.2 Review the requirements, standards, and procedures for
data acquisition equipment, protective equipment, and any other
equipment or software.
29.1.3 Annually review the one (1) year forecast of maintenance
and planned outage schedules of Transmission Provider's and
Interconnection Customer's facilities at the Point of
Interconnection.
29.1.4 Coordinate the scheduling of maintenance and planned
outages on the Interconnection Facilities, the Large Generating
Facility and other facilities that impact the normal operation of
the interconnection of the Large Generating Facility to the
Transmission System.
29.1.5 Ensure that information is being provided by each Party
regarding equipment availability.
29.1.6 Perform such other duties as may be conferred upon it by
mutual agreement of the Parties.
Article 30. Miscellaneous
30.1 Binding Effect. This LGIA and the rights and obligations
hereof, shall be binding upon and shall inure to the benefit of the
successors and assigns of the Parties hereto.
30.2 Conflicts. In the event of a conflict between the body of
this LGIA and any attachment, appendices or exhibits hereto, the
terms and provisions of the body of this LGIA shall prevail and be
deemed the final intent of the Parties.
30.3 Rules of Interpretation. This LGIA, unless a clear contrary
intention appears, shall be construed and interpreted as follows:
(1) The singular number includes the plural number and vice versa;
(2) reference to any person includes such person's successors and
assigns but, in the case of a Party, only if such successors and
assigns are permitted by this LGIA, and reference to a person in a
particular capacity excludes such person in any other capacity or
individually; (3) reference to any agreement (including this LGIA),
document, instrument or tariff means such agreement, document,
instrument, or tariff as amended or modified and in effect from time
to time in accordance with the terms thereof and, if applicable, the
terms hereof; (4) reference to any Applicable Laws and Regulations
means such Applicable Laws and Regulations as amended, modified,
codified, or reenacted, in whole or in part, and in effect from time
to time, including, if applicable, rules and regulations promulgated
thereunder; (5) unless expressly stated otherwise, reference to any
Article, Section or Appendix means such Article of this LGIA or such
Appendix to this LGIA, or such Section to the LGIP or such Appendix
to the LGIP, as the case may be; (6) ``hereunder'', ``hereof'',
``herein'', ``hereto'' and words of similar import shall be deemed
references to this LGIA as a whole and not to any particular Article
or other provision hereof or thereof; (7) ``including'' (and with
correlative meaning ``include'') means including without limiting
the generality of any description preceding such term; and (8)
relative to the determination of any period of time, ``from'' means
``from and including'', ``to'' means ``to but excluding'' and
``through'' means ``through and including''.
30.4 Entire Agreement. This LGIA, including all Appendices and
Schedules attached hereto, constitutes the entire agreement between
the Parties with reference to the subject matter hereof, and
supersedes all prior and contemporaneous understandings or
agreements, oral or written, between the Parties with respect to the
subject matter of this LGIA. There are no other agreements,
representations, warranties, or covenants which constitute any part
of the consideration for, or any condition to, either Party's
compliance with its obligations under this LGIA.
30.5 No Third Party Beneficiaries. This LGIA is not intended to
and does not create rights, remedies, or benefits of any character
whatsoever in favor of any persons, corporations, associations, or
entities other than the Parties, and the obligations herein assumed
are solely for the use and benefit of the Parties, their successors
in interest and, where permitted, their assigns.
30.6 Waiver. The failure of a Party to this LGIA to insist, on
any occasion, upon strict performance of any provision of this LGIA
will not be considered a waiver of any obligation, right, or duty
of, or imposed upon, such Party.
Any waiver at any time by either Party of its rights with
respect to this LGIA shall not be deemed a continuing waiver or a
waiver with respect to any other failure to comply with any other
obligation, right, duty of this LGIA. Termination or Default of this
LGIA for any reason by the Interconnection Customer shall not
constitute a waiver of the Interconnection Customer's legal rights
to obtain an interconnection from the Transmission Provider. Any
waiver of this LGIA shall, if requested, be provided in writing.
30.7 Headings. The descriptive headings of the various Articles
of this LGIA have been inserted for convenience of reference only
and are of no significance in the interpretation or construction of
this LGIA.
30.8 Multiple Counterparts. This LGIA may be executed in two or
more counterparts, each of which is deemed an original but all
constitute one and the same instrument.
30.9 Amendment. The Parties may by mutual agreement amend this
LGIA by a written instrument duly executed by both of the Parties.
30.10 Modification by the Parties. The Parties may by mutual
agreement amend the Appendices to this LGIA by a written instrument
duly executed by both of the Parties. Such amendment shall become
effective and a part of this LGIA upon satisfaction of all
Applicable Laws and Regulations.
30.11 Reservation of Rights. Transmission Provider shall have
the right to make a unilateral filing with FERC to modify this LGIA
with respect to any rates, terms and conditions, charges,
classifications of service, rule or regulation under section 205 or
any other applicable provision of the Federal Power Act and FERC's
rules and regulations thereunder, and Interconnection Customer shall
have the right to make a unilateral filing with FERC to modify this
LGIA pursuant to section 206 or any other applicable provision of
the Federal Power Act and FERC's rules and regulations thereunder;
provided that each Party shall have the right to protest any such
filing by the other Party and to participate fully in any proceeding
before FERC in which such modifications may be considered. Nothing
in this LGIA shall limit the rights of the Parties or of FERC under
sections 205 or 206 of the Federal Power Act and FERC's rules and
regulations thereunder, except to the extent that the Parties
otherwise mutually agree as provided herein.
30.12 No Partnership. This LGIA shall not be interpreted or
construed to create an association, joint venture, agency
relationship, or partnership between the Parties or to impose any
partnership obligation or partnership liability upon either Party.
Neither Party shall have any right, power or authority to enter into
any agreement or undertaking for, or act on behalf of, or to act as
or be an agent or representative of, or to otherwise bind, the other
Party.
In witness whereof, the Parties have executed this LGIA in
duplicate originals, each of which shall constitute and be an
original effective Agreement between the Parties.
[Insert name of Transmission Provider or Transmission Owner, if
applicable]
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------
p[Insert name of Interconnection Customer]
By:--------------------------------------------------------------------
Title:-----------------------------------------------------------------
Date:------------------------------------------------------------------
Appendices to LGIA
Appendix A--Interconnection Facilities, Network Upgrades and
Distribution Upgrades
Appendix B--Milestones
Appendix C--Interconnection Details
Appendix D--Security Arrangements Details
Appendix E--Commercial Operation Date
Appendix F--Addresses for Delivery of Notices and Billings
[[Page 49972]]
Appendix A to LGIA--Interconnection Facilities, Network Upgrades and
Distribution Upgrades1. Interconnection Facilities:
(a) [insert Interconnection Customer's Interconnection Facilities]:
(b) [insert Transmission Provider's Interconnection Facilities]:
2. Network Upgrades:
(a) [insert Stand Alone Network Upgrades]:
(b) [insert Other Network Upgrades]:
3. Distribution Upgrades:
Appendix B to LGIA--Milestones [Reserved]
Appendix C to LGIA--Interconnection Details [Reserved]
Appendix D to LGIA--Security Arrangements Details
Infrastructure security of Transmission System equipment and
operations and control hardware and software is essential to ensure
day-to-day Transmission System reliability and operational security.
The Commission will expect all Transmission Providers, market
participants, and Interconnection Customers interconnected to the
Transmission System to comply with the recommendations offered by
the President's Critical Infrastructure Protection Board and,
eventually, best practice recommendations from the electric
reliability authority. All public utilities will be expected to meet
basic standards for system infrastructure and operational security,
including physical, operational, and cyber-security practices.
Appendix E to LGIA--Commercial Operation Date
This Appendix E is a part of the LGIA between Transmission
Provider and Interconnection Customer.
[Date]
[Transmission Provider Address]
Re: ------------Large Generating Facility
Dear: ------------
On [Date] [Interconnection Customer] has completed Trial
Operation of Unit No. ------. This letter confirms that
[Interconnection Customer] commenced commercial operation of Unit
No. ---- at the Large Generating Facility, effective as of [Date
plus one day].
Thank you.
[Signature]
[Interconnection Customer Representative]
Appendix F to LGIA--Addresses for Delivery of Notices and Billings
Notices:
Transmission Provider:
[To be supplied.]
Interconnection Customer:
[To be supplied.]
Billings and Payments:
Transmission Provider:
[To be supplied.]
Interconnection Customer:
[To be supplied.]
Alternative Forms of Delivery of Notices (telephone, facsimile
or email):
Transmission Provider:
[To be supplied.]
Interconnection Customer:
[To be supplied.]
[FR Doc. 03-20157 Filed 8-18-03; 8:45 am]
BILLING CODE 6717-01-P