Midcontinent Independent System Operator, Inc., 122019 FERC, EL15-68-003

Docket Nº:EL15-68-003, EL15-68-004, EL15-36-003, EL15-36-004, ER16-696-004, ER16-696-005, ER18-2513-000
Party Name:Midcontinent Independent System Operator, Inc. v. Midcontinent Independent System Operator, Inc. Otter Tail Power Co. Midcontinent Independent System Operator, Inc.
Judge Panel:Before Commissioners: Neil Chatterjee, Chairman; Richard Glick and Bernard L. McNamee. Nathaniel J. Davis, Sr., Deputy Secretary. GLICK, Commissioner, dissenting:
Case Date:December 20, 2019
Court:Federal Energy Regulatory Commission
 
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169 FERC ¶ 61, 233

Midcontinent Independent System Operator, Inc.

Otter Tail Power Co.

v.

Midcontinent Independent System Operator, Inc.

Midcontinent Independent System Operator, Inc.

Nos. EL15-68-003, EL15-68-004, EL15-36-003, EL15-36-004, ER16-696-004, ER16-696-005, ER18-2513-000

United States of America, Federal Energy Regulatory Commission

December 20, 2019

Before Commissioners: Neil Chatterjee, Chairman; Richard Glick and Bernard L. McNamee.

ORDER ON BRIEFING, COMPLIANCE, AND REHEARING

1. On August 31, 2018, the Commission issued an order on remand1 addressing an opinion issued by the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit).2 The D.C. Circuit had vacated and remanded to the Commission several orders concerning generator interconnection financing procedures in the Midcontinent Independent System Operator, Inc. (MISO) region. In the Ameren Remand Order, the Commission reversed its prior determination in the vacated orders (effective June 24, 2015) that transmission owners and affected system operators should not be allowed the unilateral right to elect to provide initial funding for network upgrades.3 The Commission directed MISO to submit a compliance filing making corresponding changes to its pro forma Generator Interconnection Agreement (GIA), pro forma Facilities Construction Agreement (FCA), and pro forma Multi-Party Facilities Construction Agreement (MPFCA) within 30 days of the date of the order (August 31, 2018), with such changes to be effective prospectively from that date.[4] The Commission also requested further briefing limited to the treatment of the GIAs, FCAs, and MPFCAs that were entered into during the time period between June 24, 2015 and August 31, 2018.5In this order, after consideration of the briefs filed with the Commission, we find that GIAs, FCAs, and MPFCAs entered into between June 24, 2015 and August 31, 2018 should be revised to allow transmission owners and affected system operators to unilaterally elect to provide initial funding for network upgrades, if they so choose. We also accept MISO's filing made in compliance with the Ameren Remand Order. Finally, we deny a request for rehearing of the Ameren Remand Order.

1.

Background

A. MISO Open Access Transmission, Energy and Operating Reserve Markets Tariff

2. MISO's pro forma GIA in Attachment X of the MISO Open Access Transmission, Energy and Operating Reserve Markets Tariff (Tariff) and Attachment FF of the Tariff govern the network upgrades constructed for the interconnection customer by the transmission owner with which it directly interconnects.6 In MISO, an interconnection customer is responsible for 100 percent of network upgrade costs, with a possible 10 percent reimbursement for network upgrades that are 345 kV and above.7 MISO's Tariff initially provided three alternatives for funding the costs of network upgrades for generator interconnections. Under Option 1: (1) the interconnection customer provided up-front funding for network upgrades; (2) the transmission owner provided a 100 percent refund of the cost of network upgrades to the interconnection customer upon completion of the network upgrades; and (3) the transmission owner assessed the interconnection customer a monthly network upgrade charge to recover the cost of the non-reimbursable portion8 of the network upgrade costs. The Commission later found Option 1 to be unjust and unreasonable and ordered MISO to remove this funding option from its Tariff, effective March 22, 2011.9

3. Under Option 2: (1) the interconnection customer provides up-front funding for network upgrades and (2) the transmission owner refunds the reimbursable portion10 of the payment, as applicable, to the interconnection customer in the form of a credit to reduce the transmission service charges incurred by the transmission customer with no further financial obligations on the interconnection customer for the cost of network upgrades (the "Generator Up-Front Funding" option, or "Generator Up-Front Funded" network upgrades).

4. Under a third alternative set forth in Article 11.3 of MISO's pro forma GIA, the transmission owner could unilaterally elect to provide the up-front funding for the capital cost of the network upgrades (the "Transmission Owner Initial Funding" option). A MISO transmission owner electing this option would assign the non-reimbursable portion of the costs of the network upgrades directly to the interconnection customer through a network upgrade charge that recovers a return on and of the transmission owner's cost of capital.

5. In addition to MISO's pro forma GIA, the Commission has also accepted a pro forma FCA and pro forma MPFCA for use in the MISO region.[11] The pro forma FCA is an agreement for network upgrades on affected systems, i.e., network upgrades constructed for an interconnection customer by a transmission owner other than the transmission owner with which the interconnection customer directly interconnects. This indirectly-connected transmission owner is known as the affected system operator.12 The pro forma MPFCA is used when multiple interconnection requests cause the need for construction of common network upgrades (network upgrades that are constructed by a transmission owner for more than one interconnection customer) on a directly-connected transmission system or the transmission system of an affected system operator. The pro forma FCA and the pro forma MPFCA did not originally include the Transmission Owner Initial Funding option that was contained in Article 11.3 of MISO's pro forma GIA.

B. Orders on Review

6. On January 12, 2015, in Docket No. EL15-36-000, Otter Tail Power Company (Otter Tail) filed a complaint alleging that MISO's Tariff was unjust and unreasonable to the extent that the pro forma FCA contained therein did not permit an affected system operator to elect Transmission Owner Initial Funding for network upgrades, a right which was provided to directly-connected transmission owners under MISO's pro forma GIA.13On June 18, 2015, the Commission granted the complaint in part, finding that the same network upgrade funding options should be available to all interconnection customers whether in a GIA, FCA, or MPFCA.14 The Commission denied, however, Otter Tail's preferred remedy. Instead, the Commission found that the interconnection customers- not the transmission owners-should be allowed to select the financing mechanism because the interconnection customer was directly assigned the costs. Thus, the Commission determined that Article 11.3 of the pro forma GIA may be unjust, unreasonable, and unduly discriminatory because allowing transmission owners to unilaterally elect Transmission Owner Initial Funding and recover a return on and of the capital costs of the network upgrades, without reimbursing interconnection customers' costs through credits "may deprive the interconnection customer of other options to finance the cost of the network upgrades that provide more favorable terms and rates, "15 and also subjects the customer to a more onerous security requirement.16 Further, the Commission argued that this practice could result in discriminatory treatment by the transmission owner of different interconnection customers.17 The Commission instituted a proceeding pursuant to section 206 of the FPA18 to examine MISO's pro forma GIA, pro forma FCA, and pro forma MPFCA and required MISO to make a filing either to report whether it would (1) propose Tariff changes providing that the transmission owner or affected system operator may only elect the Transmission Owner Initial Funding option for network upgrades if the interconnection customer agrees to such election, or (2) explain why such changes are not necessary to address the potential that MISO transmission owners may exercise their discretion to increase the network upgrade costs that are directly assigned to interconnection customers.19

7. On rehearing, the Commission affirmed its finding that the Transmission Owner Initial Funding option is unjust, unreasonable, unduly discriminatory or preferential in light of the opportunities for undue discrimination and for increasing costs to interconnection customers where there is no increase in service, given that interconnection customers are held responsible for network upgrade costs and do not receive credits that reimburse them for those costs.20 The Commission directed MISO to make a compliance filing revising its pro forma GIA, pro forma FCA, and pro forma MPFCA to provide that the transmission owner or affected system operator may elect the Transmission Owner Initial Funding option to fund network upgrades only upon the mutual agreement of the interconnection customer, with such Tariff changes to be effective on June 24, 2015.[21]

8. On August 9, 2016, the Commission accepted, subject to condition...

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