Mark R. Haskell, George D. Billinson, and Lamiya N. Rahman
On August 16, 2019, the Federal Energy Regulatory Commission (“FERC” or “the Commission”) issued an order granting in part and denying in part requests for further clarification of its reform of Large Generator Interconnection Agreements (“LGIA”) and Procedures (“LGIP”).[1] Order No. 845-B affirms FERC’s prior findings that the expansion of an interconnection customer’s option to build does not impede transmission owners’ ability to recover a return of and on network upgrades. The order also reiterates FERC’s determination not to revise the pro forma LGIA’s indemnity provisions.
Order No. 845—FERC’s Final Rule revising the pro forma LGIP and LGIA—made various reforms to “improve certainty for interconnection customers, promote more informed interconnection decisions, and enhance the interconnection process.”[2] Among these changes, the Commission expanded interconnection customers’ ability to exercise the option to build transmission providers’ interconnection facilities and standalone network upgrades beyond instances where the transmission provider is unable to meet the interconnection customer’s preferred construction timeline.
A subsequent decision, Order No. 845-A, among other things, rejected arguments that the option build revisions contradicted the United States Court of Appeals for the District of Columbia Circuit’s (“D.C. Circuit”) decision in Ameren Services Co. v. FERC. According to the Commission, “Ameren stands for the principle that the Commission cannot prohibit a transmission owner from earning a return of, and on, the cost of its network upgrades.”[3] In that case, the D.C. Circuit vacated FERC’s orders requiring the Midcontinent Independent System Operator, Inc. (“MISO”) to remove an option under its tariff allowing transmission owners to unilaterally elect to initially fund network upgrades and to thereafter recover the interconnection customer’s portion of the cost burden through periodic network upgrade charges that included a return on the capital investment (i.e., the “transmission owner initial funding option”). Although the Commission initially found the transmission owner initial funding option unjust and unreasonable, the D. C. Circuit remanded the orders directing the Commission to “explain how investors could be expected to underwrite the prospect of potentially large non-profit appendages with no compensatory incremental return.”[4] The Commission reinstated the transmission-owner initial funding option on remand.
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