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On remand, FERC reverses position on MISO transmission upgrade funding policy

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On remand, FERC reverses position on MISO transmission upgrade funding policy

Transmission-owning members of the Midcontinent ISO can resume unilaterally deciding whether they will provide up-front funding for upgrades to their systems needed to accommodate requested generator interconnections, according to the Federal Energy Regulatory Commission.

FERC reversed its earlier finding that MISO's policies on the funding of certain electric transmission network upgrades were discriminatory because they might increase the costs for some of a transmission owner's interconnection customers but not others.

The move responds to an appeals court remand of that earlier decision, which found that FERC failed to adequately explain why it rejected transmission owners' arguments that they should not have to accept the reliability and litigation risks associated with generator up-front funded upgrades without receiving adequate compensation.

The policy at the heart of the dispute provides two methodologies for funding the costs of network upgrades needed to facilitate generators' interconnections with the transmission grid. Under one option, the interconnecting generator provides up-front funding for the network upgrade. Under the other, the transmission owners can choose to pay for the upgrade and then recover the generator's portion through a network upgrade charge that includes a return on capital investment.

But FERC in 2015 found that giving transmission owners the unilateral option of providing up-front funding for the upgrades was discriminatory and directed MISO to revise its tariff to rectify the problem. The U.S. Court of Appeals for the District of Columbia Circuit in January remanded that decision, however, finding that FERC failed to adequately explain how it had reached its conclusion.

Acting on that remand, FERC found (FERC docket EL15-68 et al.) that its earlier order did not adequately address transmission owners' assertions that removing their right to make the funding decision essentially would force them to construct and operate generator-funded upgrades on a nonprofit basis. It also fell short with respect to offering evidence or economic theory to support its finding of discrimination by transmission owners among their customers or addressing the orders' impact on the ability of transmission businesses to attract future capital, the commission said.

"Upon further review of the record, we find that there was not enough evidence in the record to sustain the commission's findings in the vacated orders," the agency explained.

FERC accordingly gave MISO 30 days to file tariff revisions reinstating the provision giving transmission owners the unilateral right to provide initial funding for the upgrades, effective immediately.

And because FERC ordered that right restored, the agency also reconsidered its earlier decision to partially reject a related (EL15-36) complaint that challenged MISO's policy allowing some transmission owners to unilaterally choose to provide the initial funding for network upgrades but not others.

FERC in that earlier decision said the policy appeared to be discriminatory because it treated upgrades covered by a generator interconnection agreement differently than those covered by a facilities construction agreement, or FCA, with respect to the self-funding option. The agency nevertheless denied the complaint in part because it found that no transmission owner should have the unilateral right to self-fund.

Now, however, FERC reversed that decision and granted the complaint in full. "MISO's tariff is unjust and unreasonable to the extent that the pro forma FCA and pro forma [multi-party FCA] ... do not permit a transmission owner or an affected system operator to unilaterally elect the transmission owner initial funding option for network upgrades similar to the treatment of transmission owners under MISO's pro forma [generator interconnection agreement]," FERC said.

Finally, in a concurrent order, FERC dismissed as moot certain compliance filings (ER18-1964, ER18-1965) MISO submitted in response to the court's remand.