On November 24, 2015, FERC issued an order accepting proposed CAISO tariff revisions, closing what has been described by CAISO as a loophole in CAISO’s generator interconnection process. CAISO proposed the corrective tariff revisions to prevent interconnection customers from taking advantage of CAISO’s annual opportunity to decrease the size of queued projects. CAISO expressed concern that queued projects were using this “downsizing” process for the sole purpose of reducing the amount of financial security that an interconnection customer could be required to forfeit upon withdrawal from CAISO’s interconnection queue.

The potential issue arose as a result of two prior tariff amendments. The first, adopted in 2008, required CAISO’s interconnection customers to post additional financial security for network upgrades, which would be non-refundable unless the customer met one of several criteria. If the customer met one of these criteria, then the customer would be entitled to a partial refund. The second amendment, adopted in 2012, permitted CAISO’s interconnection customers a one-time opportunity to decrease the size of their generation projects without losing their queue position.  According to CAISO, this downsizing of projects was designed to allow otherwise economically viable projects to proceed in the queue by allowing these projects to adjust their MW size to match the actual capacity financed or awarded a power purchase agreement. CAISO later sought and received FERC approval to make this downsizing an annual process.

During last year’s downsizing process, it appeared that a significant number of the interconnection customers in CAISO’s interconnection queue downsized their projects for the sole purpose of reducing their non-refundable interconnection security. CAISO claimed that certain interconnection customers would delay dropping out of the queue until directly after the downsizing process so that these customers could downsize their projects and reduce the non-refundable portion of their interconnection security, thereby receiving a larger refund of these deposits from CAISO. To remedy this situation, CAISO proposed tariff amendments to expand the reversion process already contained in its tariff. Specifically, CAISO proposed tariff revisions to provide that, if an interconnection customer withdraws from the queue during or after the downsizing process, the determination of the refundable portion of the interconnection financial security will be based upon the project capacity prior to the downsizing request. These proposed tariff revisions arose out of CAISO 2015 Interconnection Process Enhancements stakeholder initiative.

FERC concluded that these tariff amendments were just and reasonable and were not unduly discriminatory or preferential. FERC also waived the 60-day prior notice period to allow the tariff revisions to go into effect as of October 14, 2015, one day prior to the commencement of the 2015 downsizing window on October 15, 2015.

A copy of CAISO’s proposed tariff revisions can be found here. A copy of FERC’s order approving these tariff revisions can be found here.