On June 18, 2015, FERC issued an order granting in part and denying in part a complaint, and instituting a 206 proceeding to examine the justness and reasonableness of MISO’s Facilities Construction Agreement (“FCA”), Generator Interconnection Agreement (“GIA”), and Multi-Party Facilities Construction Agreement (“MPFCA”). FERC determined that MISO’s pro forma FCA and GIA may be unjust, unreasonable, or unduly discriminatory or preferential because they treat customers of an affected system operator and those of a directly-connected transmission owner differently without providing any increased level of service. The case deals with the means by which transmission owners are compensated for network upgrades associated with generator interconnection requests.
On December 12, 2014, FERC issued an order conditionally accepting an unexecuted, non-conforming FCA among Border Winds Energy, LLC (“Border Winds”), Otter Tail Power Company (“Otter Tail”), and MISO, subject to the removal of provisions that deviated from MISO’s pro forma FCA (“December 12th Order”). In particular, the non-conforming FCA contained language that would have allowed Otter Tail the unilateral right to elect to initially fund the network upgrades and subsequently assess a network upgrade charge on Border Winds. FERC’s December 12th order required this non-conforming language to be removed because it was not necessary and MISO did not assert any reliability concerns, novel legal issues, or other unique factors to justify the non-conforming language in the Border Winds FCA. Both Border Winds and Otter Tail filed for rehearing of FERC’s December 12th Order, and Otter Tail also filed a complaint alleging that MISO’s Open Access Transmission, Energy and Operating Reserve Markets Tariff (“Tariff”) is unjust and unreasonable because the pro forma FCA does not permit an affected system operator the same right to elect to provide the initial funding for network upgrades that is afforded to directly-connected transmission owners under MISO’s pro forma Generator Interconnection Agreement (“GIA”).
FERC’s recent order granted in part and denied in part Otter Tail’s complaint. Specifically, FERC granted the complaint on the grounds that customers of an affected system operator under MISO’s pro forma FCA or MPFCA, and the customers of a directly-connected transmission owner under MISO’s pro forma GIA, are similarly situated customers that must be treated similarly under FERC’s comparability principle. However, FERC disagreed with Otter Tail’s argument that the pro forma FCA should adopt the language of MISO’s pro forma GIA, which allows the transmission owner to unilaterally elect to provide the initial funding for network upgrades. Instead, FERC determined that this provision of the GIA may also be unjust, unreasonable, unduly discriminatory or preferential because “it allows the transmission owner the discretion to elect to initially fund the upgrades and subsequently assess the interconnection customer a network upgrade charge that is not later reimbursed to the interconnection customer through the provision of credits, which may result in discriminatory treatment by the transmission owner of different interconnection customers.”
FERC went on to explain that, “by unilaterally electing to initially fund network upgrades where the interconnection customer is held responsible for such costs and does not receive credits to reimburse it for those costs, pursuant to MISO’s Interconnection Customer Funding Policy, the affected system operator or transmission owner may deprive the interconnection customer of other options to finance the cost of network upgrades that provide more favorable terms and rates.” (Emphasis in original.) As a result, FERC concluded that charging more for upgrade costs, through potentially higher rates, may result in unjust and unreasonable rates. Because FERC suggested there may not be a corresponding increase in service associated with the higher cost, FERC instituted a 206 proceeding to examine whether these rates are unjust, unreasonable, unduly discriminatory or preferential.