On March 30, 2012, FERC conditionally approved a proposal from the Midwest Independent System Operator (“MISO”) to revise its interconnection queue procedures.  The new procedures are designed to address backlogs and late-stage terminations of generation interconnection agreements.  FERC approved the new procedures to take effect on January 1, 2012.

MISO’s proposal is an attempt to address a situation where projects that are “ready” but have an interest in not moving forward are causing a backlog of projects later in the queue.  The reforms will attempt to resolve this issue and continue MISO’s shift from a “first-come, first served” approach to a “first-ready, first-served” approach.

MISO’s proposal significantly alters its interconnection queue by establishing a two-part queue structure.  Under this approach, an interconnection customer will be assigned an “initial queue position” and then a “definitive planning phase queue position” once the project enters the Definitive Planning Phase.  In addition, FERC approved a proposal that allows an interconnection customer to remain in the System Planning and Analysis Phase, without moving forward to the Definitive Planning Phase, provided the customer refreshes its system impact study every 18 months.

In addition to changes to the queue, MISO will replace its existing M2 milestones and require a customer to make a “cash-at-risk” payment when moving to the Definitive Planning Phase.  Previously customers were able to choose from several non-monetary options to demonstrate readiness.  MISO argued that this new payment is a better indicator of whether a project will advance to commercial operation.  FERC agreed, noting that “significant numbers of terminations of late-stage projects whose developers had met the existing M2 milestone” have caused “multiple and iterative restudies for lower-queued customers.”  The payment will be based upon a formula and must be at least $2,000 per gross megawatt (“MW”) addition and no more than $10,000 per gross MW addition.  The payment is fully refundable if: (1) the initial payment milestone is satisfied; (2) a customer commences commercial operation under a provisional Generator Interconnection Agreement (“GIA”); and (3) if (a) the network upgrade cost estimates in the Interconnection Study and completed in the Definitive Planning Phase increase by more than 25% over the impact study and (b) the customer withdraws its interconnection request. The initial payment milestone requires a customer to make a payment toward its network upgrade costs 30 days after the execution of a GIA or filing of an unexecuted GIA.

While these new milestones will apply to almost all projects in the queue, FERC clarified those projects that will be exempt from the payments.  Exempt projects include: (1) projects already in commercial operation and have executed a GIA; (2) projects that possessed a GIA before January 1, 2012 and are not subject to restudy; (3) projects subject to restudy and has met existing milestones under its current GIA; and (4) projects subject to restudy but have reached a point where the M2 milestone payment would be refunded.

In approving the proposal, FERC required MISO to make several modifications to the proposal and submit those within 30 days.  FERC also ruled that existing interconnection customers have 90 days to comply with the new procedures.

A copy of the order can be found here.