FERC Proposes Blanket Waiver of Tariff Requirements for Generators with Interconnection Facilities Potentially Subject to Open Access Transmission Requirements
The Federal Energy Regulatory Commission (“FERC” or the “Commission”), through a recent Notice of Proposed Rulemaking (“NOPR”),
Current Regulatory Environment
In the NOPR, the Commission argues that current compliance requirements for such entities, specifically, FERC’s Open Access Transmission Tariff (“OATT”) requirements (18 C.F.R. § 35.28 (2013)), Open Access Same-Time Information System (“OASIS”) requirements (18 C.F.R. § 37 (2013)), and the Standards of Conduct (“SOC”) requirements (18 C.F.R. § 358 (2013)) impose risks and uncertainty on the owners of the ICIFs but “[are] not necessary to prevent unjust or unreasonable rates or unduly discriminatory behavior…”,
Such proposals likely will be welcomed by generators, especially those not affiliated with an otherwise FERC-regulated public utility that is already subject to the Commission’s OATT and OASIS requirements. The ability to use excess ICIF capacity is especially important to generators, who have paid for and often built the ICIF and thus would reasonably expect to be able to use any excess capacity in later years.
Questions Posed in the NOPR
In the NOPR, the Commission seeks comment on this proposal, specifically soliciting comments on:
Under what circumstances and through what procedures the blanket waiver should be revoked for a particular ICIF owner that no longer qualifies;
Whether it is appropriate to limit the waiver solely to those ICIF owners that both own the ICIF and make the power sales from the interconnected generator;
Whether the safe harbor period is appropriate, including whether ICIF owners seeking to take advantage of the safe harbor period should be required to make an informational filing with the Commission noting the energization date of the ICIF, providing sufficient detail to identify the ICIF and identifying the ICIF owner; and
Whether it is appropriate to include affiliates of public utility transmission providers in the class of ICIF owners eligible for the blanket waiver.
The reforms described in the NOPR are most directly relevant to interconnection customers with interconnection facilities potentially subject to third party transmission service requests. However, stakeholders other than generation owners should consider the impact these reforms could have on their interests. Particularly, the NOPR appears focused on the interaction between an ICIF owner and another generation owner that may wish to use to ICIF to interconnect generation. The NOPR does not apparently contemplate circumstances for potential third party use of ICIF for interconnection of load. If the NOPR has not sufficiently addressed special concerns of load interconnecting to generator tie lines, commenters will likely seek to address this in comments.
ICIF owners that own transmission facilities in interstate commerce, even if those facilities consist solely of the facilities necessary to interconnect their generating facility to the transmission system, are public utilities for the purposes of the Federal Power Act. As such, these entities are required to file an OATT, which as FERC notes, is often an onerous requirement for entities that do not see themselves in the business of providing transmission service. Further, given the nature of these transmission facilities, which tend to be radial lines simply connecting a generator or series of generators to the transmissions system, there is rarely even a desire on the part of third parties, let alone a compelling need, for third party interconnection in order to ensure just and reasonable and not unduly discriminatory access to the transmission system. Although today an ICIF owner can request, and will typically obtain, waivers of requirements related to filing an OATT, the entity automatically loses its waiver if a third party requests interconnection service. ICIF owners also face regulatory hurdles when they file at FERC to secure priority interest of the interconnection facility’s capacity.
To reduce risks and burdens to owners under current rules, the Commission proposes to substitute the current “case-by-case approach” for issuing exceptions with an approach that would grant blanket waivers of all OATT, OASIS and SOC requirements for the relevant ICIF owners. Unlike the current framework, an ICIF owner’s eligibility for the blanket waiver would not be annulled by a third party’s service request. A third party seeking transmission service would be required to file an application with FERC under Section 210 and 211 of the Federal Power Act to attempt to require interconnection and transmission service. As FERC is proposing to use the Section 210 and Section 211 procedures for seeking service, FERC has proposed to limit the applicability of the blanket waivers to entities that are selling electric power from the generators (and thus meet the definition of an “electric utility” subject to Section 210) and that also own the ICIF (and thus are “transmitting utilities” for the purposes of Section 211). FERC seeks comment on whether it is appropriate to exclude from the blanket waiver ICIF owners that are subject to Section 211 as transmitting utilities but that do not sell the power from the generation units at wholesale, and thus are not electric utilities for the purposes of Section 210.
The proposed rule would also allow owners to maintain priority rights until a third-party initiates a concurrent proceeding under section 210 and 211, since FERC has reached the conclusion that “with respect to ICIF eligible for the blanket waiver…it is generally in the public interest under sections 210 and 211 of the Federal Power ACT (FPA) to allow an ICIF owner to retain priority rights to the use of excess capacity.”
The NOPR also provides for a safe harbor period whereby ICIF owners will enjoy a rebuttable presumption that for the first five years after the ICIF is energized “(1) the owner and/or operator of such facilities has definitive plans to use the capacity thereon, and it is thus in the public interest to grant priority rights to the owner and/or operator of such facilities to use capacity thereon; and (2) the owner and/or operator of such facilities should not be required to expand its facilities.”
Finally, the Commission seeks comment on whether the blanket waiver should extend to ICIF owners that are affiliated with public utility transmission providers in the same region.
In sum, a wide variety of industry participants, including generators, developers, load serving entities and transmission providers will want to closely review the NOPR and consider submitting comments on issues of concern or interest.
If you have any questions concerning these developing issues, please do not hesitate to contact any of the following Paul Hastings Washington D.C. lawyers:
William D. DeGrandis
Stephen J. Snyder
Paul Hastings LLP
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