On Thursday, May 15, 2014, FERC issued a Notice of Proposed Rulemaking titled “Open Access and Priority Rights on Interconnection Customer’s Interconnection Facilities” (the “NOPR”).  The NOPR proposes to amend certain of FERC’s regulations as they relate to public utilities that are subject to such regulations solely due to owning, controlling or operating generator tie lines, now referred to by FERC as Interconnection Customer’s Interconnection Facilities or “ICIFs.”  Specifically, FERC is proposing making changes to the regulations related to ICIFs and the Open Access Transmission Tariff (“OATT”), the Open Access-Same-Time Information System (“OASIS”) and the Standards of Conduct (“SOC”).

In the NOPR, FERC makes a preliminary conclusion that its current policies intended to achieve nondiscriminatory open access over ICIFs are unduly burdensome and have the potential to discourage competitive generation development.  The current paradigm requires owners of facilities that only interconnect a generator to the grid (i.e. ICIFs) to file an OATT and provide open access transmission service.  Those ICIF owners can request a waiver of these requirements so long as their ICIF only connects the generator to the grid and there have been no requests for third party service over the ICIF.  If there are third party requests for service over the ICIF in the future, the wavier would no longer be valid, and the OATT and open access requirements would apply.  If a third party request is placed, FERC would allow the ICIF owner to attempt to protect a priority interest in the capacity of its ICIF by proving that the ICIF owner has specific, pre-existing generator expansion plans with milestones for construction of generation facilities, coupled with material progress toward meeting the milestones.  FERC refers to this proof as the “specific plans and milestones” showing.  Under this structure, the regulatory burden for the ICIF owner, who is primarily in the business of generation, can be quite extensive.

To reduce the burden to the ICIF owner while still promoting open access, FERC is considering altering the ICIF framework.  In the NOPR, FERC proposes to grant a blanket ICIF waiver of all OATT, OASIS and SOC “requirements to any [existing or future] public utility that is subject to such requirements solely because it owns, controls, or operates ICIF, in whole or in part, and sells electric energy from its Generating Facility, as those terms are defined in the LGIP and LGIA.”  This waiver would not be revoked based on a third party request for service over the ICIF, but instead would only be revoked by Commission determination that it is in the public interest to do so or if the material circumstances change such that the ICIF owner no longer qualifies for the waiver.  This blanket waiver would not affect OATTs currently on file with FERC, but FERC will consider withdrawals of OATTs on a case-by-case basis, so long as no third party is currently taking service under it.

Third parties seeking to use ICIF that are subject to the ICIF blanket waiver would need to follow FERC’s rules and regulations to make a request for service under Federal Power Act sections 210 and 211.  Since sections 210 and 211 deal with only transmission or only interconnection respectively, all requests for service on ICIFs would need to be made under both provisions.  Determinations as to whether the ICIF owner has priority rights to the ICIF capacity will be made during the 210/211 proceeding by FERC.  FERC explains that “it is generally in the public interest under sections 210 and 211 to allow an ICIF owner to retain priority rights to the use of excess capacity on ICIF that it plans to use to interconnect its own or its affiliates’ future generation projects [as can be demonstrated through a ‘specific plans and milestones showing’].”  For the first five years after the ICIF is energized, there would be a rebuttal presumption that (1) the eligible ICIF owner has definitive plans to use its capacity without having to make a demonstration through a specific plans and milestones showing; and (2) the eligible ICIF owner should not be required to expand its facilities.  A third-party requester for service on ICIF during the “safe harbor” period could attempt to rebut these presumptions, but has the burden of proof to demonstrate that the owner and/or operator does not have definitive plans to use its capacity and that the public interest under sections 210 and 211 is better served by granting access to the third party.

FERC seeks the following specific feedback on its proposal:

  • Whether and how the burden for eligible ICIF owners of potential OATT compliance bears on the need to reform existing Commission policies with respect to ICIF access.
  • The circumstances under which and the mechanism by which FERC should revoke the blanket waiver of OATT, OASIS and SOC requirements.
  • Whether the fact that the blanket waiver only applies to ICIF owners who also meet the applicable requirements for purposes of sections 210 and 211 is an appropriate limitation.
  • What would be the appropriate procedures for granting waivers to ICIF owners who do not meet the applicable requirements for purposes of sections 210 and 211?  Should this process be done on a case-by-case process or through a general structure?
  • Whether a safe harbor period is appropriate, what the structure and length of the safe harbor period should be, and how the ICIF energization date should be reported.
  • Whether ICIF owners that are not eligible for the blanket waiver, but that seek waiver on an individual basis of the OATT, OASIS, and SOC, should be eligible for safe harbor.
  • What set of entities to which it is appropriate to extend these reforms and whether the blanket ICIF waiver should be limited to only nonaffiliates of public utility transmission providers.

Comments on the issues raised in the NOPR, including any alternative proposals or commentary on related matters, should be filed in FERC’s Docket No. RM14-11.  Comments are due sixty days after the NOPR is published in the Federal Register.

To view the NOPR, click here.