On April 29, 2022, the FERC rejected Midcontinent Independent System Operator Inc.’s (“MISO”) proposed tariff revisions that sought to “extend” MISO Transmission Owners’ option to self-fund transmission upgrades so as to apply to Necessary Upgrades to support the connection of Merchant High Voltage Direct Current (“MHVDC”) transmission into MISO. FERC found that MISO failed to show its proposal was just and reasonable because MISO argued that Network Upgrades and Necessary Upgrades were functionally identical yet only proposed to extend the self-funding option traditionally applied to Network Upgrades without also extending other funding options and protections for customers.

The MISO tariff governs the connection of MHVDCs under procedures similar to generator interconnection, with the resulting connection subject to a Transmission Connection Agreement (“TCA”) which, like a generator interconnection agreement, governs the construction, ownership, operation, and maintenance of transmission facilities needed to support the connection (i.e., Network Upgrades and, specific to MHVDC, Necessary Upgrades). Where Network Upgrades are identified, the MHVDC customer must also enter into either a Facilities Construction Agreement (“FCA”) or a Multi-Party Facilities Construction Agreement (“MPFCA”). Under the existing provisions, Network Upgrades are eligible for unilateral self-funding by transmission owners pursuant to the FCA/MPFCA, however Necessary Upgrades are not because those agreements do not apply.

In the proceeding, MISO argued that, consistent with the D.C. Circuit’s holding in Ameren Servs. Co. v. FERC, MISO Transmission Owners “have the right to earn a return sufficient to attract new capital in connection with investing in Network Upgrades” and thus Necessary Upgrades, which MISO argued are “functionally identical.” However, the Commission found that MISO failed to substantiate this claim and clarified that Ameren did not overturn FERC’s determination that “the same funding options should be available to all interconnection customers in MISO, regardless of whether their network upgrades are governed pursuant to MISO’s pro forma GIA or MISO’s pro forma FCA.” The Commission suggested it is a violation of comparability to extend one of the funding options under those agreements to the TCA without also extending other customer benefits such as the option to build and liquidated damages provisions. Additionally, MISO argued that Necessary Upgrades were not expected to be as costly as they are at present, to which FERC found that MISO failed to show any evidence of uncompensated risks or costs resulting therefrom.

Commissioner Danly dissented, arguing that the Commission’s rationale that other funding options should be extended does not address whether self-funding is just and reasonable. Danly would uphold MISO’s proposed revisions because FERC has already found the self-funding option to be just and reasonable and the revisions represent minor improvements to this determination, absent evidence to the contrary.

A copy of FERC’s order can be found here.