FERC Order on Initial Decision an Important Victory for Wind Developers Looking to Challenge Interconnection Costs

20 July 2013 Renewable Energy Outlook Blog

Renewable Energy Outlook

FERC recently reversed an ALJ’s initial decision and found that MISO violated its obligation with respect to the study of network upgrades by requiring Jeffers South, LLC to pay for the construction of a $43 million transmission line to interconnect its 130 MW wind facility in Minnesota (a copy of the order is available here). This order should provide comfort to wind developers in MISO that they will not be on the hook for upgrades beyond what is needed for the project and that any system-wide benefits a developer must fund are those that directly result from upgrades needed to interconnect the project.

MISO originally evaluated the facility’s interconnection request in combination with other pending projects as part of a larger System Impact Study. Both the facility’s developer and transmission owner rejected this study and commissioned their own study; however, other transmission owners impacted by the interconnection request rejected that study as well and commissioned yet another broader system-wide planning study. This last study required the construction of a new 161 kV transmission line. Based on the construction of this new line, MISO separately filed with FERC unexecuted Large Generator Interconnection and Facilities Construction Agreements. The agreements were filed unexecuted because the developer disputed its cost responsibility arguing that the transmission system upgrades laid out in the agreements provided system-wide benefits and were not required to interconnect the facility. MISO countered that these upgrades were needed both to interconnect the facility and provide regional reliability once the facility was connected.

The issue ultimately settled, only because the settlement agreement provided that the developer would be eligible to receive 100% reimbursement for its network upgrades under the interconnection agreement. Under the then existing ITC Midwest generator interconnection reimbursement policy put in place just before the settlement and interconnection agreement were signed, certain network upgrades received full reimbursement. Now generators seeking to interconnect only receive 10% reimbursement for network upgrades rated 345 kV and above and no reimbursement for network upgrades rated less than 345 kV. (See our prior post on FERC’s recent ruling striking down 100% crediting for network upgrades in the ITC Midwest pricing zone here.)

However, right after FERC approved the settlement, the line’s sponsor backed out. Two more rounds of studies were performed, and the developer chose an option in the MISO re-study that did not include building the transmission line. MISO countered that construction of the transmission line must go ahead as planned because not doing so would violate the MISO tariff as an impermissible material modification to the interconnection request. The developer filed a complaint, and FERC set for hearing whether the MISO restudy was performed in accordance with the settlement and restudy agreements and whether the line would be needed “but for” the interconnection of the facility.

FERC’s order overruling the ALJ’s initial decision found that the facility was only one of a number of unrelated new projects slated for construction and used to justify constructing the transmission line, and as a result it was not possible to conclude that the line would be unnecessary “but for” the need to interconnect the facility. FERC’s order further pointed to evidence in the record that the line was part of a comprehensive plan to improve overall system performance that went beyond any strain the facility would place on the system, and that the line was not included as a Network Upgrade within the Facilities Construction Agreement the developer executed with MISO and the line’s sponsor. FERC rejected MISO’s argument that the developer was attempting to make an impermissible material modification to the settlement and restudy agreements because those agreements cannot be interpreted to assign responsibility for interconnection costs that would not be needed “but for” the facility. MISO has since filed a request for rehearing of FERC’s order.

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