On December 6, 2021, the California ISO issued an issue paper and straw proposal (“Straw Proposal”) for its Interconnection Process Enhancements stakeholder proceeding. The California ISO initiated this stakeholder proceeding on September 30, 2021 with the issuance of a preliminary issue paper. The stakeholder process comes at a time when an unprecedented level of energy procurement in California has caused dramatic increases in the number of projects in the California ISO’s interconnection queue. The California ISO’s most recent cluster, cluster 14, saw a record number of 373 interconnection requests being submitted, representing 150,000 megawatts of generating capacity, compared to 155 requests submitted in 2020. Ultimately, the volume of interconnection requests forced the California ISO to seek authority from the Federal Energy Regulatory Commission to extend its interconnection process by approximately one year.

The Interconnection Process Enhancements initiative will have two phases. Phase 1 will focus on near-term enhancements for cluster 14 and before the summer of 2022. The proposals in Phase 1 are scheduled be submitted to the California ISO Board of Governors in May 2022. Phase 2 will focus on longer term modifications and broader reforms to align interconnection processes with procurement activities. Those proposals are scheduled to be submitted to the Board in November 2022.

The Straw Proposal separates the issues to be addressed in the initiative into three categories: (1) topics that would aid in moving resources more efficiently and effectively through the queue, (2) topics that would aid in managing the overheated queue, and (3) other residual issues.

The Straw Proposal provides two specific proposals in Category 1. First, the Straw Proposal suggests simplifying the process for downsizing projects in the queue, removing the downsizing window that limited when projects could submit downsizing requests. Downsizing requests would be studied in the next reassessment study, and the California ISO would also potentially use the material modification assessment (MMA) process to approve downsizing projects where the downsizing would have no impact on other projects. This issue would be included in Phase 1.

The California ISO is also proposing to revise the existing allocation process for transmission plan deliverability (“TPD”). The California ISO proposes to eliminate the current allocation group 3, for projects that are proceeding without a power purchase agreement. TPD would be allocated based on three simplified allocation groups: Group 1 would be any project with an executed power purchase agreement requiring full capacity deliverability status; Group 2 would be any project currently shortlisted for a power purchase agreement, or actively negotiating a power purchase agreement; and Group 3 would be any energy-only project that has achieved commercial operation. This issue would be included in Phase 2.

In Category 2, the Straw Proposal includes the following modifications. First, the Straw Proposal suggests increasing the study deposit from $150,000 to $250,000 per interconnection request. The California ISO also proposes increasing the study deposit for a parent company that submits more than two interconnection requests in a cluster window. For the third through fifth interconnection requests submitted by a company, the deposit would be increased to $500,000, and for more than five requests, the deposit would be $1 million per request. The California ISO also proposes to increase the site exclusivity deposit requirements to $250,000 for small generators and $500,000 for large generators, and if a project withdraws after the interconnection request is deemed complete, 50% of the deposit would be non-refundable. This proposal would be included in Phase 2.

Second, the California ISO would require site exclusivity to move into the Phase II study process. This would be applied to cluster 14 and future clusters, and therefore would be included in Phase 1.

In Category 3, the Straw Proposal includes the following proposed modifications. First, the California ISO proposes to cap the percentage of interconnection-related network upgrade costs within each Participating Transmission Owner’s (“PTO”) local transmission revenue requirement. Currently, PTOs are required to reimburse interconnection customers for the costs of reliability and local delivery network upgrades necessary for the interconnection. Upgrades below 200 kV are considered local and are included only in the transmission access charge (TAC) of the PTO owning the facilities. The cap is intended to prevent disproportionate impacts on a single set of ratepayers for interconnection-related local network upgrades. Any costs for low voltage network upgrades in excess of the cap would be financed by interconnection customers without cash reimbursement. This proposal would be included in Phase 2.

Second, the California ISO is for the first time beginning to see notices from neighboring balancing authority areas of proposed interconnections that may affect the California ISO system (an “affected system”). The California ISO therefore needs to develop a process for conducting studies as an affected system. That process will be developed in Phase 2.

Third, the California ISO is looking to address situations where the network upgrade requirements change after the second Interconnection Financial Security (“IFS”) posting, and the issue of cost responsibility when errors or omissions in study reports are discovered after the first or second IFS postings. The California ISO proposes to make any cost increases associated with errors or omissions discovered after the second IFS posting the responsibility of the party that made the error or omission, so that the maximum cost responsibility (MCR) and maximum cost E (MCE) cannot be increased after the second IFS posting. Also, the California ISO proposes that if an error or omission is discovered after the first or second IFS posting that increases the aggregate of all costs for the project to interconnect (even if the cost is refundable), or pushes aback its earliest achievable in-service date, then the project could either accept and move forward with the changes or withdraw and receive a full refund for its IFS and any remaining study deposit. The threshold for withdrawal would be a cost increase of at least five percent, and a minimum of a 12-month delay in in-service date. These changes would be included in Phase 1.

Fourth, the California ISO proposes to clarify that any remedial action scheme, regardless of the study, including a deliverability study, in which it is identified, will always be a reliability network upgrade (“RNU”) that will be included in the RNU reimbursement calculation. This clarification will be included in Phase 1.

Fifth, the California ISO proposes to develop tariff language that will allow the California ISO to accept interconnection request transfers from a PTO’s wholesale distribution access tariff to the California ISO queue. These tariff procedures will be addressed in Phase 1.

Sixth, the California ISO proposes that during the period when an interconnection customer is allowed to change its point of interconnection, it may also change its site as well. This change will be addressed in Phase 1.

Seventh, the California ISO proposes that a project may not submit a MMA request while the project is parked. This issue will be addressed in Phase 1.

In addition to these specific proposals, the California ISO is also taking comments on numerous other issues it has identified in the Straw Proposal.  Comments on the Straw Proposal are due January 4, 2022.