FERC Issues Rule to Reduce Regulatory Burdens for Generators That Own Generator Tie-Lines

I. Introduction

Last month, the Federal Energy Regulatory Commission (“FERC”) issued its final rule on Open Access and Priority Rights on Interconnection Customer’s Interconnection Facilities (“Order No. 807” or “Final Rule”)[1]. Order No. 807 is intended to reduce the regulatory burdens for generators that own generation tie-lines (referred to in the Final Rule as “Interconnection Customer’s Interconnection Facilities” or “ICIF”)[2], and to promote the development of generation resources. The Final Rule makes three significant changes to the treatment of ICIF under FERC’s regulations. First, it establishes a blanket waiver of the Open Access Transmission Tariff (“OATT”), Open Access Same-Time Information System (“OASIS”) and the Standards of Conduct requirements for all ICIF owners who in the past were subject to such requirements solely as a result of their ownership of ICIF. Second, the Final Rule requires that all third-party requests for service on ICIF eligible for the blanket waiver be made pursuant to Sections 210, 211 and 212 of the Federal Power Act (“FPA”). Finally, the Final Rule establishes a five-year safe harbor period during which ICIF owners who are eligible for the blanket waiver will benefit from a rebuttable presumption that they or their affiliates have definitive plans to use any excess capacity available on the ICIF.

II. Background

Prior to Order No. 807, ICIF have been treated the same as all other FERC-jurisdictional transmission facilities, meaning that owners and operators of ICIF were required to either file an OATT with FERC or request a waiver of the filing requirement (“OATT-waiver”). To obtain an OATT-waiver, the ICIF owner was required to demonstrate that its ICIF were limited and discrete facilities used solely to interconnect the applicant’s generation facilities to a transmission grid, and that there were no outstanding third-party requests for access to the ICIF. FERC granted OATT-waivers on a case-by-case basis, and would rescind an OATT-waiver and require the filing of an OATT within 60 days if a third party requested service on the ICIF. In the event that a third party requested service, the ICIF owner was required to make excess capacity on its ICIF available, unless the owner could make a showing that it or its affiliates had definitive plans to use of the excess capacity in the future.

On May 15, 2014, FERC issued a Notice of Proposed Rulemaking (“NOPR”) in which it explained that changes to its treatment of ICIF were necessary because its approach had created undue risk, burden and uncertainty for generation developers. In the NOPR, FERC proposed the blanket waiver and safe-harbor period adopted in Order No. 807 in order to reduce regulatory burdens for generators that own ICIF and to promote the development of generation resources, while ensuring that third parties could receive open, nondiscriminatory access to ICIF and the transmission grid. A summary of the NOPR can be found here.

III. Order No. 807

1. Establishment of a Blanket Waiver
As outlined by the NOPR, the Final Rule grants eligible ICIF owners a blanket waiver of FERC’s OATT, OASIS and Standards of Conduct requirements, and thus removes the requirement that ICIF owners either file an OATT or an OATT-waiver with FERC. Additionally, subsequent third-party requests for service on ICIF will no longer trigger a requirement that the ICIF owner file an OATT. As such, ICIF owners are free to enter into bilateral agreements for service with affiliates and nonaffiliates, including common-use and shared-facilities agreements, without jeopardizing the blanket waiver. The waiver will also apply to ICIF owners who only own transmission facilities and do not generate electricity, provided that such owners file a statement with the Commission in which they commit to comply with, and be bound by, Section 210 of the FPA (a “Section 210 Statement”). In adopting the above changes, the Commission explained that the “limited and discrete nature of ICIF and the ICIF’s dedicated interconnection purpose means that such facilities do not typically present concerns about discriminatory conduct that the Commission’s [OATT regulations] were intended to address.”[3] Along the same lines, the Commission found that treating ICIF the same as other transmission facilities for OATT purposes “creates undue burden for ICIF owners without a corresponding enhancement of access given the ICIF owner’s typical ability to establish priority rights.”[4]

2. Third-Party Requests for Service Governed by Sections 210, 211 and 212 of the FPA
As discussed above, ICIF that qualify for the blanket waiver will no longer be required to file an OATT. Accordingly, Order 807 requires entities seeking service on eligible ICIF to follow the rules and regulations set forth in Sections 210, 211 and 212 of the FPA, under which the Commission may order that a third party be granted interconnection and transmission service over an ICIF if certain conditions are met.[5]  In adopting this change, the Commission found that the use of Sections 210 and 211 “appropriately balances ICIF owners’ and third parties’ rights to service on ICIF.”[6]  The Commission also noted that many of the pro forma OATT provisions are not applicable to ICIF, and therefore Sections 210 and 211 will provide greater contractual flexibility and will allow ICIF owners and third parties to enter into service agreements tailored to fit their particular circumstances. Determinations as to whether the ICIF owner has priority rights to the ICIF capacity will also be made during the Section 210, 211 or 212 proceeding, subject to the safe-harbor discussed below.

3. Five-Year Safe Harbor
Finally, and in order to reduce risks to ICIF owners during the “critical early years” of a project, Order No. 807 institutes a five-year safe-harbor period during which there is a rebuttable presumption that an eligible ICIF owner has definitive plans to use any excess capacity on its ICIF without having to make a showing through specific plans or milestones. The safe-harbor period begins as of the commercial operation date of an ICIF and is intended to provide ICIF owners with a degree of certainty that planned capacity will be available for later projects. A third party may request service during the five-year period, but the burden is on the third party to rebut the presumption. FERC believes that the safe harbor will allow ICIF owners to focus on building generation during the early stages of development, while still allowing third parties to obtain access in appropriate circumstances.[7]

4. Implementation
The blanket waiver will automatically take effect for all eligible ICIF owners and operators on June 30, 2015. For those entities that are required to file a Section 210 Statement to be eligible, the blanket waiver will be effective on the latter of June 30, 2015 or date on which the Section 210 Statement is filed with the Commission. Additionally, all eligible ICIF owners are required to submit an informational filing in order to obtain the rebuttable presumption.

A copy of Order 807 is available here.

[1] Order No. 807, https://www.ferc.gov/whats-new/comm-meet/2015/031915/E-1.pdf
[2] The Commission defines ICIF, generally, as “all facilities and equipment 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 generation facility to the transmission providers transmission system.” Although this definition comes from the pro forma Large Generator Interconnection Agreement (“LGIA”), the Commission made clear that for the purposes of the Final Rule, the definition of ICIF also includes “comparable jurisdictional interconnection facilities that are subject to interconnection agreements other than an LGIA.” Order No. 807 at P 43.
[3] Order No. 807 at P.55.
[4] Id. at P 3.
[5] An application under Section 210 of the FPA must show that the requested interconnection: (1) is in the public interest; (2) would either encourage conservation of energy or capital, optimize efficient use of facilities and resources, or improve reliability; and (3) meets the requirements of Section 212. 16 U.S.C. 824i(c); Order No. 807 at P. 105. An application under Section 211 of the FPA requires that the third party seeking transmission service first make a good-faith request for service. 16 U.S.C. 824i(a); Order No. 807 at P. 106. Section 212 requires, generally, that the Commission provide the parties with a reasonable amount of time to agree to terms and conditions for carrying out an interconnection order, including the allocation of costs. 16 U.S.C. 824k(c)(2); Order No. 807 at P. 107.
[6] Order No. 807 at P 113.
[7] Order No. 807 at P 139.

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