Interconnection customers: be on notice. Your interconnection agreement may not be just a transmission provider service agreement that allows your project to interconnect with the transmission system. It may also be a rate schedule--your rate schedule--that you must file with FERC or suffer the consequences for violating the Federal Power Act.
At last week's open meeting, FERC issued a decision in Chehalis Power Generating, LP where FERC recapped the longstanding requirement that public utilities must file the rates, terms, and conditions for the jurisdictional services they provide. So far, so good. But the Chehalis decision focuses on an interconnection customer who, for some time, provided uncompensated reactive power service under its interconnection agreement--a service that is provided by all interconnection customers who are required to operate their projects within a specified power factor range. (If you're keeping track, that's everyone but wind projects.) In fact, FERC's pro forma interconnection agreement even requires interconnection customers to operate their projects in this way in order to maintain reliability.
In Chehalis, FERC said the following: "In order to clarify the Commission's policy related to reactive power service provided without compensation, the Commission finds that, on a prospective basis, for any jurisdictional reactive power service (including within dead-the-deadband reactive power service [i.e., the service that nearly all interconnection customers supply]) provided by both existing and new generators, the rates, terms, and conditions for such service must be pursuant to a rate schedule on file with the Commission, even though the rate schedule would provide no compensation for such service." (brackets added)
In other words, interconnection customers who have not offered to provide any service but who instead operate their projects pursuant to the requirements that have been imposed by FERC, and who do so without compensation, must file their interconnection agreements as a rate schedule. But what regulatory purpose does this serve?
As a result of the Chehalis decision, FERC will be holding a workshop to explore the mechanics of filing reactive power rate schedules for which there is no compensation. At a minimum, I hope that FERC exempts all interconnection customers who provide uncompensated reactive power services from any filing requirement. If not, FERC Staff will be very busy.
At today's open meeting, the Federal Energy Regulatory Commission (FERC) adopted a new rule that may be particularly helpful for variable energy resources (wind and solar) that, in the past, have been hit with pricey imbalance penalties, and for the transmission providers who have struggled to integrate those resources. The new rule adopted today requires transmission providers to provide generators with the option of scheduling transmission service on 15-minute intervals, rather than the typical 60-minute interval. With the shorter scheduling interval, generators will be able to better mitigate imbalance penalties, and transmission providers should be able to maintain reserves that more closely match the variable generation that is expected to be online. The bottom line--cost savings!
FERC also issued a Notice of Proposed Rulemaking (NOPR) in which FERC proposes to revise its policies governing the sale of ancillary services at market-based rates. FERC also proposes to require transmission providers outside of organized markets (e.g. WECC) to take into account resource speed and accuracy in determining regulation and frequency response reserve requirements. That consideration may help to establish a stated need for fast-acting resources, such as certain energy storage technologies. The NOPR also suggests other regulatory changes that, in part, aim to provide energy storage technologies with better access to providing ancillary services.
We will soon issue full clients alerts on the results of today's open meeting at FERC. If you would like to receive an electronic copy of our Energy Law Alerts, please follow this link: Sign Up - Stoel Rives Energy Law Alerts
The Montana Supreme Court has reversed a December 2010 district court decision that found that the developers of the Montana-Alberta Tie Line merchant transmission project do not possess eminent domain authority under Montana law and therefore could not take private land from a nonconsenting landowner. In its reversal, the state Supreme Court cited House Bill 198 that passed during the 2011 Montana legislative session, which bill grants eminent domain authority to any person issued a certificate under the state's Major Facility Siting Act. The Supreme Court noted that because the legislation applies retroactively to persons issued a certificate after September 30, 2008, and the MATL developers received their certificate on October 22, 2008, HB 198 now expressly provides eminent authority to MATL's developers. The district court must now reconsider its earlier decision in light of HB 198.
On a related note, Concerned Citizens Montana is driving a citizens' referendum to repeal HB 198. If the petition receives enough signatures, Montana voters will decide HB 198's fate in 2012.
FERC Clarifies Qualifying Facility Restrictions in Sale/Resale Transactions
On May 19, the Federal Energy Regulatory Commission ("FERC") issued an order in Idaho Wind Partners I, LLC, a docket in which wind farm owners in Idaho petitioned FERC for approval of a unique transaction that would both provide eligible Renewable Energy Credits ("RECs") to a utility in California and leave the wind farm owners in a position to make a Qualifying Facility ("QF") "put" sale at avoided cost rates on the interconnecting utility.
FERC confirmed that so long as the third party is a QF, the size, affiliation, or relative physical location of the third party has no effect on the QF status of the power being sold and repurchased. Consequently, any power that the Idaho wind farms sell to a QF and then buy back may subsequently be sold to an electric utility at avoided cost rates.
SunZia Transmission Obtains Approval of Ownership Structure, Anchor Tenant Proposal
On May 20, FERC granted SunZia Transmission's ("SunZia") petition for FERC's approval of the ownership structure and transmission service plans for the SunZia Southwest Transmission Project (the "Project"). SunZia had requested that each of its investor-owners be allocated ownership rights representing 100 percent of its respective pro rata investment in the Project, and that certain of the investor-owners be able to allocate up to 50 percent of their pro rata shares of transmission capacity to anchor tenants through long-term negotiated transmission contracts. In May 2010, FERC rejected SunZia's request to allocate 100 percent of the Project's transmission capacity (as opposed to ownership rights) among the owners according to their pro rata investment in the Project's capacity and ruled that the owners do not have exclusive rights to the Project's capacity equal to their share of investment in the Project.
Midwest ISO Releases Group 5 Re-Study System Impact Study
On May 19, the Midwest ISO released the long-anticipated Minnesota Group 5 Re-Study Generator Interconnection System Impact Study, which Re-Study was ordered by FERC as the result of a cost allocation dispute between a wind developer (Community Wind) and the Midwest ISO with respect to the Brookings County-Twin Cities transmission line.
A Big Day for Transmission Rate Incentives: Multiple Applications Approved, and FERC Seeks Comments on Its Policies
FERC's May 19 open meeting turned out to be positive for transmission developers, as FERC approved transmission rate incentives (or related settlements) for five transmission projects located from the Atlantic coast to the desert Southwest. FERC also issued a Notice of Inquiry on its implementation of Section 219 of the Federal Power Act, and is seeking comments on how it should modify its policies and regulations to promote increased transmission investment.
FERC Seeks Comments on Regulatory Reforms for Merchant Transmission and Generator Interconnection Capacity
The Federal Energy Regulatory Commission ("FERC") is seeking comments from energy industry participants on regulatory reforms that address how FERC should regulate merchant transmission development and generator interconnection (or lead) lines. Specifically, FERC desires comments on how it should balance the requirements of open access transmission and the needs of project developers.
Merchant transmission and generator interconnection issues have caused a surge of contested FERC proceedings in recent years. In 2009, merchant transmission developers, for instance, were granted the ability to place transmission capacity with anchor tenants prior to making capacity available through an open season. The anchor tenant model was a significant shift in merchant transmission regulation, but, to date, merchant transmission developers have struggled to maintain meaningful anchor tenant arrangements. As a result, more recent filings at FERC have pushed the boundaries of the anchor tenant model, and FERC now seeks to determine through public comment how its open access policies could be further changed to incentivize merchant transmission development.
Generator interconnection lines have also been a popular subject at FERC of late—specifically whether and how interconnection line owners should be granted priority rights to interconnection capacity. This issue is particularly relevant for renewable energy developers who are planning to build generation projects in phases and will rely on having interconnection capacity available to serve later phases when they come online. To maintain priority over competing interconnection requests, FERC has asked generation developers to show they have established milestones for developing the generation phases that seek priority (and to demonstrate progress toward meeting those milestones). Such filings are generally confidential, and thus interconnection line owners from the outside looking in have not been given much insight into what is required to establish priority. FERC's precedent on the issue has also created dissimilar treatment of interconnection owners who are affiliated with open access transmission providers.
On March 15, 2011, FERC staff held a technical conference where the invited speakers shared a wide range of opinions on these issues. With respect to merchant transmission, speakers supported (i) creating a new section to the Open Access Transmission Tariff ("OATT") that would specify the rules for developing merchant transmission and the ancillary services obligations of those developers, (ii) placing AC merchant lines under existing incumbent transmission provider OATTs, (iii) allowing more incentives for anchor tenants, and (iv) having FERC back away from regulating these projects in their early stages. Those who spoke about priority to interconnection capacity shared opinions that included (x) requiring interconnection developers to give public notice of their development intentions and allow others to bid on capacity (a "speak now or forever hold your peace" approach), (y) requiring all interconnection owners to develop and maintain an "OATT light"—a pared down version of the full OATT, and (z) advocating for less regulation of interconnection lines altogether. FERC staff also questioned whether and how FERC should regulate transmission service over interconnection facilities that are shared or jointly owned (e.g., through a Joint Ownership Agreement, Shared Facilities Agreement, or Common Facilities Agreement) directly by generation developers, or indirectly through an affiliate that owns and operates an interconnection line.
Written comments on these issues are due to FERC no later than April 21, 2011.
Congress’ experiment with establishing federal siting authority for transmission lines suffered another setback after a Ninth Circuit Court of Appeals decision issued yesterday, February 1, 2011, vacated the Department of Energy’s (“DOE”) 2007 Transmission Congestion Study that had designated national interest electric transmission corridors in mid-Atlantic and Southwestern states. This ruling is the latest of three court and agency decisions that have limited or undermined the federal siting authority established at Federal Power Act section 216 by the Energy Policy Act of 2005.
Congress created section 216 to confront concerns that states were acting too slowly in siting new transmission lines needed to address growing reliability and congestion problems. In part, section 216 directs the DOE to study transmission congestion in consultation with the states, and designate certain transmission-constrained areas as national interest electric transmission corridors (“NIETCs”). Section 216 also grants the Federal Energy Regulatory Commission authority to issue permits to construct transmission facilities in these NIETCs under certain circumstances. Congress also provided that an applicant who receives a permit to construct transmission in a NIETC would be granted with the authority to acquire rights-of-way by eminent domain. In sum, section 216 had the potential to uncork the transmission bottleneck, but that potential has not materialized.
IN THIS EDITION:
- FERC opens a rulemaking on variable energy resources.
- FERC extends the comment deadline in the appeals by wind farms registered for transmission reliability functions.
- FERC denies a petition to protect priority to interconnection capacity rights.
FERC Opens Rulemaking on Intra-Hour Scheduling, Forecasting Requirements, and Integration Services for Variable Energy Resources
The Federal Energy Regulatory Commission (FERC) proposed amending its pro forma open access transmission tariff to correct practices that are unduly discriminate against variable energy resources (VERs) such as wind and solar energy generators. In the November 18, 2010 Notice of Proposed Rulemaking, FERC outlines measures that, if adopted, will (a) require transmission providers to offer transmission service that can be scheduled on 15-minute intervals, (b) require interconnection customers that operate VERs to provide site-specific forecasting and meteorological data to transmission providers that are deploying and/or developing power production forecasting processes, and (c) add a new rate schedule for generation regulation (i.e., integration) services. The proposed rulemaking is the first to come out of the January 2010 Notice of Inquiry on the Integration of VERs—a docket that received well over 100 comments from industry stakeholders.
FERC Extends Comment Period in Wind Farms’ Appeal of NERC Decision to Uphold Registration as Transmission Owners/Operators
FERC has extended the comment deadline in an appeal by two wind farms that were registered for Transmission Owner and Transmission Operator reliability functions, a potentially costly registration for the wind farms that was affirmed by the North American Electric Reliability Corporation (NERC) in October. The NERC decision and its supporting analysis, if affirmed by FERC, have the potential to broadly apply to many generation developers, owners, and operators.
FERC Denies Puget Sound Energy's Request to Protect Interconnection Capacity Rights
In June of this year, Puget Sound Energy (Puget) filed a petition with FERC for a declaratory order to protect its rights to 1,250 MW of interconnection capacity that would eventually serve the Lower Snake River Project wind farm. Puget argued that constructing the entire interconnection capacity needed for the full project upfront was financially efficient and environmentally responsible, and that other developers should not be able to claim rights to the capacity. On November 18, 2010, FERC distinguished the petition from an earlier decision in Milford and denied Puget’s request to establish its priority rights to the interconnection capacity. FERC reasoned that the capacity over Puget’s generator lead lines must be governed by its open access transmission tariff. FERC also found that any interconnection capacity that is not appropriately reserved for Puget’s native load must be made available to other open access customers.
If you have questions about the issues addressed in this report, please contact:
Marcus Wood at (503) 294-9434 or firstname.lastname@example.org
Jennifer Martin at (503) 294-9852 or email@example.com
Jason Johns at (503) 294-9618 or firstname.lastname@example.org
Sara Bergan at (503) 294-9336 or email@example.com
The Idaho Public Utilities Commission (PUC) has issued a straw man proposal that lays out plans to revise the surrogate avoided resource (SAR) methodology used to calculate avoided cost rates for wind generators. The "avoided cost" is the price paid to Qualifying Facilities that are selling power to Idaho utilities under the Public Utility Regulatory Policies Act (PURPA).
The PUC included six cost categories in the wind SAR: capital costs; fixed and variable O&M costs, transmission costs; tax credits; wind integration; and forecasting costs. The PUC assumed transmission costs of $1.90/kw-month, production tax credits at $0.021/kWh, a $0.00 REC premium, and wind integration at $6.50/MWh. With those inputs and others, the PUC arrived at 20-year levelized wind rates for a 2010 project as follows:
|Utility||Wind SAR||Gas SAR|
The PUC proposed that where the Wind SAR is higher than the Gas SAR, a wind developer may choose whether to sell power at the wind or gas rate. If the wind developer opts for the latter, it retains ownership of RECs. If the wind developer opts for the former, RECs go to the utility. However, when the Gas SAR is higher than the wind SAR, wind developers would only be eligible for the wind SAR, meaning that the utility would automatically receive RECs under a PPA. Non-wind projects would be entitled to the gas SAR when the gas rate is higher, and RECs would remain with developers.
The PUC is accepting written comments on the straw man proposal until November 23, 2010.
Sens. Jeff Bingaman (D-NM) and Sam Brownback (R-KS), with Sens. Byron Dorgan (D-ND), Susan Collins (R-ME), Tom Udall (D-NM), Mark Udall (D-CO) and others joining, announced today that they will introduce a stand-alone Renewable Electricity Standard (RES) bill. The bill will require sellers of electricity to obtain the following milestones in adding renewable energy resources or energy efficiency:
2012-2013 - 3%
2014-2015 - 6%
2017-2018 - 9%
2019-2020 - 12%
2021 - 2039 -15%
Renewable resources that can be used toward compliance will include wind, solar, ocean, geothermal, biomass, landfill gas, incremental hydropower, hydrokinetic, new hydropower at existing dams, and waste-to-energy. For utilities that are unable to meet their RES targets, the bill proposes to charge a compliance payment at a rate of 2.1 cents per kilowatt hour, with such amounts then being used for renewable energy development or to offset consumers' bills.
A first step, yes. But a small one.
Follow the link to learn more:Continue Reading...
I am proud to announce the publication of two white papers that focus on the issues of transmission development and broader issues facing renewable energy. These white papers were written by attorneys at Stoel Rives and were prepared at the request of the Energy Foundation, a partnership of major foundations interested in sustainable energy. The Energy Foundation was launched in 1991 by The John D. and Catherine T. MacArthur Foundation.
Both papers focus on the challenge of developing U.S. transmission infrastructure and capacity, particularly in the West. In The Way Forward: Why Transmission Right Sizing and Federal Bridge Financing Hold the Key to Western Renewable Resource Development, the authors (Marcus Wood, Pam Jacklin, and myself) consider economy-of-scale and environmental impact concepts and their application to the sizing of transmission facilities. The authors also argue for a significant overhaul of current financing and cost recovery mechanisms in order to provide a pathway for greater development of renewable energy resources. You can download a copy of The Way Forward by clicking here.
In Uncork That Transmission Bottleneck: A Legislative and Technological Roadmap for Tapping the West's Vast Renewable Energy Resources, the authors examine broader issues affecting renewable energy development. This white paper proposes a number of policy goals that could drive transmission development in the West and on a national level. You can download a copy of Uncork That Transmission Bottleneck by clicking here.
We hope that you enjoy these papers.