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FERC rejects MISO's proposed interconnection reforms

Findingthe proposed reforms to be incomplete, inconsistent and not well supported,FERC on March 29 rejectedthe Midcontinent IndependentSystem Operator Inc.'s request to change the way it processesinterconnection requests in an attempt to address backlogs in itsinterconnection queue.

"Thereare unreconciled inconsistencies between the proposed tariff revisions and thetransmittal letter, and there is a general lack of justification for theproposed revisions — several of which are significantly opposed by MISOstakeholders," the order stated.

Thecommission therefore rejected MISO's proposal without prejudice and offeredguidance on how the RTO could develop a new proposal that would be moreacceptable.

Meanwhile,FERC has agreed to take a closer look at its general generation interconnectionrequirements, which have been in place for more than 12 years. The AmericanWind Energy Association last year asked FERC to initiate a rulemaking on theissue and, following a round of comments on that request, the commissionrecently announcedthat it will hold a technical conference to consider interconnection-relatedmatters further.

Theproposed reforms to MISO's generation interconnection procedures center on theuse of milestone payments to ensure that projects that are not ready do notlinger in the queue. MISO said the changes are needed to deal with all theexpected new renewable and natural gas investment in its footprint over thenext few years and reserve margin shortages in 2020.

Inparticular, MISO said the current process is just too slow given that the gridoperator must conduct numerous unplanned restudies whenever a project exits thequeue because the assumptions then change for every lower-queued project. MISOcomplained that the cascading restudies delay the execution of interconnectionagreements and extend the uncertainty surrounding project costs.

Sinceprojects that are not yet ready to proceed with the interconnection agreementphase have little incentive to voluntarily exit the queue, MISO proposedreforms to minimize the need for restudies. One reform would create twooff-ramps for interconnection customers to withdraw projects that are not readyto proceed, and another would restrict restudies after the generationinterconnection agreement stage.

Athird proposed major reform is more complicated, and involves adding twomilestone payments and subdividing the second phase of the queue — thedefinitive planning phase — into three sequential phases.

FERCagreed that the record shows that MISO's interconnection rules probably need tobe revised. However, the agency expressed concern that the proposed reformsfocus entirely on "speculative" projects and that the RTO failed toconsider other factors — such as the time MISO takes to process interconnectionrequests and the lack of coordination with neighboring regions — that may haveled to the current backlog.

"Weappreciate that the generator interconnection process is complicated andrequires a balancing of objectives and interests; however, we are concernedthat MISO's proposal fails to achieve balance," FERC stated.

MISO'sproposal was also unclear regarding how certain aspects of it would impactready projects as well as non-ready projects, FERC said. It further found thatthe proposed milestone payments may create barriers to entry for smallerdevelopers, bias the queue in favor of utility-owned generation and negativelyimpact resource adequacy.

Inaddition, FERC suggested that MISO could learn from the methods employed byother RTOs/ISOs to create more efficient processing of generatorinterconnection queues. The order specifically noted that some grid operatorsengage transmission owners and affected systems "earlier and moresystematically in the generator interconnection review process" — aneffort some have claimed can go a long way toward avoiding queue delays.

Finally,among other things, the commission agreed with protesters that MISO failed toshow that its proposed transition plan is a just and reasonable method ofresolving current backlogs and to state clearly how it plans to implement theproposal. (ER16-675)