On January 30, 2012, the Federal Energy Regulatory Commission (“FERC” or the “Commission”) conditionally approved a series of changes to the California Independent System Operator Corporation’s (“CAISO”) generator interconnection procedures (“GIP Phase 2”).  GIP Phase 2, the CAISO’s second set of major interconnection reforms in recent years, includes 18 different modifications to the CAISO’s generator interconnection procedures and pro forma generator interconnection agreements.

Among the GIP Phase 2 changes, CAISO submitted, and FERC approved, the following contested tariff provisions:

1. A new GIP section to allow CAISO to study interconnections to non-participating transmission owner transmission facilities in CAISO’s balancing authority area; 
2. A revision to CAISO’s LGIA that allows interconnection customers to reduce the size of their generating facilities by up to 5 percent without needing a new interconnection request; 
3. Tariff revisions that will allow for repayment of an interconnection customer’s funding of network upgrades associated with a “phased generating facility;” where an interconnection customer can seek repayment of its costs towards network upgrades of a particular phase of construction when specific conditions are met; 
4. Tariff provisions that accommodate special circumstances such as qualifying facility conversions, repowering and smaller “less transmission dependent distributed supply.”  FERC also approved CAISO’s tariff revisions to accommodate specific “behind-the-meter” expansions to an existing facility;
5. Tariff provisions that allow customers to select a partial delivery option.  CAISO indicated in its filing that full capacity deliverability status was “financially prohibitive” to some stakeholders due to the costs of network upgrades needed for full deliverability;
6. A proposed definition of “substantial error or omission” that defines a “substantial” error as one that overstates or understates an interconnection customer’s cost responsibility for network upgrades or participating transmission owner interconnection facilities by more than five percent or one million dollars;
7. Tariff revisions that allow the third posting of interconnection financial security to be separated into separate and discrete components;
8. Tariff revisions so that posting amounts and cap match the screen and cap approach where financial security required for the first and second postings is based on the lower of three screens, with a hard cap on the total amount required, while the security required for participating transmission owner interconnection facilities was a straight percentage of the overall cost of those facilities.

CAISO submitted, and FERC approved, the following uncontested tariff provisions:

1. Tariff revisions to clarify that CAISO will post to its secure website documents or other materials pursuant to the GIP or Business Practice Manual that contain Critical Energy Infrastructure Information;
2. Tariff revisions to the GIP to allow interconnection customers to be relieved of their obligation to make second and third interconnection financial security posting for network upgrades that the participating transmission owner commits to fund up-front on behalf of the interconnection customer;
3. Tariff modifications to exclude CAISO from having to provide evidence of insurance coverage as other parties who are engaging in construction obligations;
4. Tariff modification to clarify all cost estimates for interconnection facilities and network upgrades contained in interconnection studies will use present dollar costs as well as time-adjusted dollar costs, adjusted to the estimated year of construction of the components being constructed;
5. Tariff modification to clarify that interconnection customer’s maximum cost responsibility for network upgrades is established first by the cost estimates in the Phase I interconnection study report, and next, after issuance of the Phase II interconnection study report, by the lower of cost estimates contained in the Phase I or Phase II interconnection study;
6. Tariff modifications to clarify that interconnection customer’s right of suspension shall not extend to specific generating facilities;
7. Tariff modifications to clarify that CAISO applies the same technical requirements to small and large “asynchronous generating facilities” interconnecting with the CAISO-controlled grid; 
8. Tariff modifications to align the requirement that generators and/or participating transmission owners fund network upgrades identified through the off-peak requirement with the concept of deliverability as a resource adequacy issue; and
9. Tariff modifications to state that it will perform an operational partial and interim deliverability assessment.

In the order, FERC rejected the CAISO’s proposed tariff revisions seeking guaranteed recovery of costs for a participating transmission owner where: (1) an interconnection customer withdraws the project but a network upgrade cannot be downsized;  (2) costs of a project exceed the maximum cost responsibility of the relevant interconnection customers but the scope of the project cannot be adjusted; and (3) costs exceed a relevant generator’s cost cap provisions and the transmission owner must up-front finance the difference.  Further, the Commission found that recovery of costs of abandoned plant is reviewed through Section 205 applications at FERC.  The Commission agreed with interveners who argued that CAISO’s proposed tariff revisions on cost recovery could result in automatic approval of abandoned plant costs or stranded cost for a participating transmission owner.

A copy of the Commission’s Order is available here.

A copy of CAISO’s GIP Phase 2 filing is available here.