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Interconnection Open Access Gone Astray?

Richard Tabors


  • Questions if Federal Energy Regulatory Commission (FERC) “sleepwalking” away from its commitment to nondiscriminatory open access to the electric transmission grid.
  • Discusses how the replacement of interconnected generators is accelerating.
  • Explores why fast-tracking the replacement generator or storage interconnection process may or may not prove good regulatory policy.
Interconnection Open Access Gone Astray?
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“[T]he Commission is sleepwalking toward a fundamental reshaping of interconnection procedures without adequate consideration . . . or deep inquiry. . . .”*

Duke Energy Carolinas et al., 180 FERC ¶ 61,156 P2 (2022) (Clements, concurring).

Is the Federal Energy Regulatory Commission (FERC) “sleepwalking” away from its commitment to nondiscriminatory open access to the electric transmission grid? Seems it might be. FERC Order No. 888 inaugurated the nondiscriminatory open-access transmission tariff (OATT) in 1996 Seven years later in Order No. 2003, FERC extended open access to generator interconnections—adding to the OATT a standard agreement and procedures prescribing the timing, expense and priority with which new sources of power are able to plug into the open-access transmission grid. The “sleep-walk” has emerged in recent FERC rulings that waive for already connected incumbent generators certain Order No. 2003 standard agreement terms and procedures in order to fast-track those incumbents’ ability to replace an old generator with a new power source at the same point of interconnection.

Is FERC “sleepwalking” away from its commitment to nondiscriminatory open access to the electric transmission?

Is FERC “sleepwalking” away from its commitment to nondiscriminatory open access to the electric transmission?

Replacement of interconnected generators is accelerating. This has diverse drivers. Most respond in some fashion to state or local mandates or federal tax incentives to retire aging fossil-fuel generation and replace it with new generation or storage that emits less or no greenhouse gasses or other pollutants. These retirements free existing interconnection capacity for use by replacement generation or storage. Consistent with open-access principles of Order Nos. 888 and 2003, freed interconnection capacity should be equally accessible to incumbent generation owners or operators and new entrant competitors so long as the replacement is at the same electrical location on the grid and the power inputs are of the same or a lesser quantity and of the same or comparable quality (voltage, system stability and response, and short-circuit capability).

Recent FERC rulings waive certain open-access interconnection procedures, but only for incumbents, allowing those incumbents to forgo backlogged, first-come-first-served interconnection queues (in which new-entrant competitors languish) and instead secure a fast-track opportunity to interconnect. These rulings justify preferring incumbents over new entrants on the ground that the incumbent seeking a waiver in connection with a generator replacement is required to contract with an “independent generator replacement coordinator” to police the fast-track process and “ensure reasonable and non-discriminatory evaluation” and prevent interconnection “queue jumping.” The need to hire a third-party generator replacement policeman simply underscores that these waivers are inherently discriminatory and require policing. And the echo-chamber about “queue jumping” is puzzling: Until a generator retirement is announced, there is no reason for a queue to exist at that point of potential interconnection. Once a retirement is announced sufficiently far in advance, then all proposals to become the replacement power or storage source at that location could be clustered, consistent with FERC’s pending rulemaking proposal to eliminate “first-come-first-served” queues and replace them with “first-ready, first-served cluster studies.” All proposals to interconnect at the retired location could and then should be evaluated on the comparative economic and/or environmental merits of each clustered proposal.

In the concurring opinion quoted above from Duke Energy, Commissioner Clements recognizes the possibility that fast-tracking interconnection of replacement generation or storage “may facilitate . . . engineering efficiencies . . . and lower overall costs,” particularly when the replacement reduces harmful emissions. But she proceeds to ask why replacement interconnection policy “should not be applied in a fairer manner [viz., consistent with open-access] that allows any developer of new generation to replace existing generation . . . .”? The recent decisions granting fast-track waivers only to incumbents provide either no or (at best) dubious answers to this obvious question.

The majority opinion in Duke Energy contends that fast-tracking only incumbents but not “new entrants” is warranted because “owners of existing generation have already gone through an interconnection process and faced cost responsibility for any network upgrades that may have been necessary.” These putative justifications for discrimination fail. Generation being retired was connected to the transmission grid decades ago, before open access, when there was no “interconnection process” to speak of, other than a prudent investment prerequisite to inclusion in rates. For example, the retired generation being replaced for which FERC granted a fast-track waiver in Indianapolis Power & Light became operational in 1969, 27 years before Order No. 888 ushered in the OATT and 34 years before Order 2003 extended open access to grid interconnections and generator replacements.

The “cost responsibility” contention is yet less credible. It presupposes that the incumbent has any unrecovered investment in the network upgrades that were required for an interconnection made decades earlier; in other words, the incumbent would have “stranded costs,” which Order No. 888 explicitly sought to avoid in the transition to open access. But no costs are stranded from investments in ancient network upgrades; under all prevailing ratemaking schemes, the incumbent long ago recovered those costs in rates paid to it by captive or contract customers. Denying those same rate-paying customers today access to replacement generation or storage from new entrant competitors that offer a product superior to that offered by the incumbent cannot be defended as sound policy consistent with non-discriminatory open access principles.

Fast-tracking the replacement generator or storage interconnection process, per se, may or may not prove good regulatory policy. It may incentivize transmission providers to devote more resources to speed up the processing of all interconnection requests—thawing the habitually glacial interconnection queues that succeed in connecting almost nothing. It may also cause FERC and transmission operators to rethink and eliminate limitations on generator interconnection replacements. Many of those limitations have never made any sense, but simply thwart open access. These include requirements setting very long lead times on advance notice that a generator is going to be retired, very short deadlines on when the replacement must become operational, and, most nonsensical, requirements that the incumbent generator owner retain all or some percentage ownership in the replacement source of power. Fast-tracking should apply to all proposed replacements, whether from the incumbent generator or new entrant, whichever makes more economic and environmental sense.

Open access demands equal scoops, and not all for incumbents.

Open access demands equal scoops, and not all for incumbents.

Rather than being applied fairly, sans discrimination, consistent with open access, recent FERC orders waiving interconnection procedures only for incumbents have not been analyzed or explained coherently. Rather, those orders have “sleep-walked” away from nondiscriminatory open access. As a U.S. Court of Appeals analogized (and Commissioner Clements quoted), “putting existing generators first in line is not akin ‘to an office-wide ice-cream social’ in which ‘the boss who pays for the event[] takes a scoop’ but rather is more like a situation where the boss is ‘in line for six scoops out of every ten’ . . . .” Open access demands equal scoops, and not all for incumbents. Electricity consumers deserve access to the purveyor of the most economical ice cream and electricity.