FERC Approves MISO Interconnection Queue Reforms, Rejects Overall Queue Cap

The Federal Energy Regulatory Commission on Jan. 19 approved most of the Midcontinent Independent System Operator’s (MISO) proposed revisions to its Generator Interconnection Procedures (GIP) designed to reduce the submission and negative impacts of speculative interconnection requests. The changes apply prospectively, starting with the DPP-2023 queue cycle, which has not yet entered the Definitive Planning Phase (DPP).

In its filings, MISO noted that the most recent cycle, DPP-2022, included 171 GW of proposed new generation, about 50 GW more than MISO’s entire peak load. Further, MISO claims that the majority of interconnection requests are for generation that will never be built; 70% of projects submitted in the now completed 2017 and 2018 queue cycles were withdrawn.

COMMENTARY

Finding MISO’s arguments persuasive after an active notice and comment period, the commission approved almost all of the proposed reforms, rejecting only the imposition of an overall cap on the volume of interconnection requests that would be studied in a cluster (which proposal had some significant exceptions).  However, we may not have seen the last of MISO’s efforts to impose such a cap; the commission indicated it was not categorically opposed to this type of mechanism and provided a roadmap for the kind of cap that could be acceptable.  In his partial dissent, Commissioner Mark Christie stated he would have approved the cap as proposed.

Overview of Selected Reforms

Higher milestone payments: The DPP entry milestone (M2) has been doubled from $4,000 to $8,000 per MW.  Milestones M3 and M4, which correspond to Interconnection Customer Decision Points I and II, respectively, have also been increased. M3 has been increased from 10% of identified network upgrade costs to the greater of 20% or $1,000/MW. This means that even where a project does not require network upgrades, it would still be subject to a minimum M3 payment equal to $1,000/MW of requested interconnection service. M4 has been increased from 20% of identified network upgrade costs to 30%.

Expanded site control requirements—Interconnection Customer Interconnection Facilities: In order to enter the DPP, Interconnection Customers are now subject to site control requirements for Interconnection Customer Interconnection Facilities (ICIF), in addition to existing site control requirements for the planned generating facilities. Customers must provide reasonable evidence of site control for at least 50% of the mileage of the Generating Facility’s Interconnection Facilities, or provide financial security in lieu of such control in the amount of $80,000 per line mile of right-of-way on a straight line basis. At any time during Decision Point II, MISO may also require the Interconnection Customer to demonstrate 50% site control for the location where a switchyard will be located.  The financial security is only refunded when the site control requirements are satisfied or upon withdrawal from the queue.

One hundred percent site control for ICIF (and switchyard location, if requested by MISO) must be demonstrated prior to the GIA execution period. MISO has discretion to extend this deadline to 180 days after the GIA effective date.

Adoption of an “Automatic Withdrawal Penalty” that will apply for most queue withdrawals, and higher cost increase thresholds for refundability for withdrawals based on increases in upgrade costs: Milestone payments may be refundable if a customer withdraws from the queue due to an excessive increase in required system upgrade or facilities construction cost estimates between the preliminary system impact study (SIS) and the revised SIS, or between the revised SIS and final SIS, due to MISO, transmission owner, or affected system error. Previously, if the cost increase thresholds were met, milestone payments were fully refundable.

Most withdrawals from the queue after the beginning of DPP Phase I will now be subject to an Automatic Withdrawal Penalty (AWP), in addition to application of the pre-existing “harm test.” The AWP is calculated as a percentage of project’s M2 milestone payment increasing based on the timing of the withdrawal, starting at 10% prior to the end of Decision Point I, up to 100% after the start of GIA negotiations. The only instances where the AWP would not apply are when customer withdrawal is a result of an increase in total Network Upgrade cost estimates of (1) more than 50% and $10,000/MW between the preliminary SIS and revised SIS, or (2) by more than 35% and $10,000/MW between the revised SIS and final SIS.

In addition to imposition of the new AWP, the cost increases required to obtain otherwise penalty-free withdrawal (i.e., to not have “at-risk” milestone payments subject to the harm test) based on increases in estimated upgrade costs have also been increased by various amounts depending on the timing of the customer’s withdrawal. For withdrawals at Decision Point II, for example, the threshold has doubled from a minimum 25% and $10,000/MW increase in MISO network upgrade costs between the preliminary SIS and revised SIS to a 50% and $10,000/MW increase required.

In addition, GIP Section 7.6.2.4.3 has been completely stricken, which previously provided for penalty-free queue withdrawal in the event of an increase of more than 50% and $20,000/MW from the preliminary SIS to any subsequent restudy.

MISO will take the AWPs withheld from withdrawing customers and reallocate those funds on a pro-rata per MW basis towards the study and network upgrade costs of the remaining projects in the study cluster that proceed to GIA execution (or request filing unexecuted).

Conclusion

These reforms are intended to reduce the quantity and impact of speculative interconnection requests. FERC approved MISO’s proposals under the independent entity variation standard with the expectation that they will improve the readiness and overall quality of interconnection requests entering MISO’s interconnection queue.

All interconnection requests entering the DPP after Jan. 22, 2024, will be subject to the new provisions.

BCLP has experience working with utilities and independent project developers on interconnection and tariff issues in MISO and markets across the country.

—Maxwell Multer, a Charlotte, N.C., and Washington, D.C.-based counsel with Bryan Cave Leighton Paisner, represents energy and financial clients in regulatory and enforcement matters before the Federal Energy Regulatory Commission, as well as state utility commissions, and other regulatory authorities. He previously served as an attorney-adviser in FERC’s Office of Enforcement as well as in-house counsel at a large combination utility.