customer 10 business days to demonstrate satisfaction with the
applicable requirement. We find the adopted approach to require 90%
site control at the time of the interconnection request and 100% site
control at the time of the facilities study and when executing, or
requesting the unexecuted filing of, the LGIA appropriately balances
the concerns identified in the record. In particular, we find that it
will provide sufficiently stringent site control requirements to help
prevent interconnection customers from submitting interconnection
requests for speculative, commercially non-viable proposed generating
facilities, while accommodating development challenges faced by
interconnection customers that may otherwise present unjust and
unreasonable barriers to entering the interconnection queue. We believe
that this approach appropriately recognizes that issues often arise in
developing a generating facility, such that requiring a demonstration
of 90% site control at the time of the interconnection request, rather
than 100%, provides valuable flexibility for interconnection customers
with viable prospective generating facilities to resolve those issues
and continue through the interconnection process.
    597. We are persuaded by commenters that contend that there are
significant benefits to allowing interconnection customers to enter the
cluster study process and potentially use the interconnection study
results to better understand their generating facility configuration
before obtaining 100% site control. We agree with commenters that
allowing less than 100% site control at the interconnection request
stage would provide interconnection customers flexibility to address
the results of interconnection studies or other regulatory processes
\1195\ and afford flexibility for interconnection customers that are
still actively negotiating with landowners close to the deadline for a
cluster request window.\1196\ Establishing a requirement for 90% site
control at the time of an interconnection request allows an
interconnection request to be submitted even if a few parcels of land
are still in negotiation or where a different site configuration arises
based on the scoping meeting with the transmission provider. Moreover,
the adopted approach provides flexibility for interconnection customers
to sign certain leases for particularly challenging parcels at a later
point in time, reducing the exposure to risk of expiration of those
leases.\1197\ Additionally, we agree with commenters that shifting the
100% site control requirement until the execution of a facilities study
agreement allows the interconnection customer to put less money at risk
for obtaining particularly challenging land rights and to obtain a more
meaningful understanding of what upgrade costs its generating facility
may be assigned, for instance, from the cluster study report that is
provided before the execution of the facilities study agreement.\1198\
---------------------------------------------------------------------------

    \1195\ See CREA and NewSun Initial Comments at 55; SEIA Initial
Comments at 14-15.
    \1196\ See Pine Gate Initial Comments at 23-24.
    \1197\ Enel Initial Comments at 40.
    \1198\ AEE Initial Comments at 18; Clean Energy Associations
Initial Comments at 31-32; CREA and NewSun Initial Comments at 55;
Cypress Creek Initial Comments at 22; SEIA Initial Comments at 15;
Shell Reply Comments at 23-24.
---------------------------------------------------------------------------

    598. At the same time, we believe that the approach adopted in this
final rule, along with the other reforms adopted herein, is
sufficiently stringent to help prevent speculative, commercially non-
viable proposed generating facilities from entering and continuing
through the interconnection queue. As an initial matter, we establish a
more stringent requirement for site control at the time of submission
of an interconnection request than required by the pro forma LGIP prior
to this final rule. In particular, obtaining nearly all of the land
rights necessary to develop a proposed generating facility prior to
submitting the interconnection request entails a significant
commitment, both financial and in terms of the time and resources
required to negotiate with landowners. Moreover, the 100% site control
requirement at the time of the execution of the facilities study
agreement adds further stringency to ensure generating facilities that
proceed through the interconnection queue are the most likely to be
commercially viable.
    599. We agree with commenters that requiring 100% site control at
the time of submission of an interconnection request may not be
compatible with the project development cycle,\1199\ which includes
stringent permitting requirements, and may disadvantage certain
interconnection customers despite there being a path to full site
control and commercial readiness.\1200\ Further, requiring 100% site
control at submission of the interconnection request would not allow
for minor revisions to the generating facility plan if, upon meeting
with the transmission provider at the scoping meeting, such revisions
would facilitate an improved generating facility design. This could
present a barrier to entry for interconnection customers with viable
proposed generating facilities.
---------------------------------------------------------------------------

    \1199\ AEE Initial Comments at 17; CREA and NewSun Initial
Comments at 54; Clean Energy Associations Initial Comments at 31;
Cypress Creek Initial Comments at 22; EPSA Initial Comments at 8;
NextEra Initial Comments at 21; R Street Initial Comments at 8.
    \1200\ AEE Initial Comments at 17.
---------------------------------------------------------------------------

    600. We decline to adopt commenters' suggestions that transmission
providers be allowed to confirm site control

throughout the interconnection process.\1201\ The adopted site control
requirements require site control demonstrations at three specific
points in the interconnection process--submission of the
interconnection request; at the time of execution of the facilities
study agreement; and when executing, or requesting the unexecuted
filing of, an LGIA. We find that these points are sufficient to help
prevent interconnection customers with commercially non-viable
interconnection requests from entering and proceeding through the
interconnection queue.
---------------------------------------------------------------------------

    \1201\ See Indicated PJM TOs Initial Comments at 26; MISO
Initial Comments at 53.
---------------------------------------------------------------------------

    601. With respect to eliminating the option for any interconnection
customer to submit a deposit in lieu of site control, except in limited
circumstances where an interconnection customer demonstrates a
regulatory limitation, we find that, because a deposit in lieu of site
control does not demonstrate that an interconnection customer has the
exclusive right to develop a site, it does not indicate that an
interconnection customer is ready to proceed with construction and
commercial operation of the generating facility. As a result, we
believe that allowing deposits in lieu of site control for all
interconnection customers, as requested by some commenters, would not
help to prevent speculative, commercially non-viable interconnection
requests from entering the interconnection queue. Thus, we decline to
include such an option in the pro forma LGIP.
    602. We are persuaded by commenters that requiring transmission
providers to publicly maintain per MW acreage requirements for each
generating facility technology type is necessary to afford adequate
transparency and certainty to interconnection customers. At the same
time, we do not believe that such acreage requirements must be
contained within transmission providers' tariffs; rather, we find that,
consistent with the rule of reason, transmission providers may choose
to maintain acreage requirements in their business practice manuals or
may otherwise post them on a publicly accessible website. We find that
acreage requirements are properly classified as implementation details
that do not significantly affect rates, terms, and conditions of
service,\1202\ and we therefore do not require their inclusion in
tariffs. This is consistent with previous Commission orders approving
transmission providers' proposals to specify technology-specific
acreage requirements for site control in their business practice
manuals.\1203\ This will also afford transmission providers more
flexibility in updating acreage requirements to account for
technological advancements without being required to make FPA section
205 filings each time they seek to modify the acreage requirements. On
the other hand, to give the interconnection customer certainty, as
noted above, we clarify that the interconnection customer is required
to meet the technology-specific acreage requirement for its generating
facility publicly posted by the transmission provider at the time it
submits its interconnection request.
---------------------------------------------------------------------------

    \1202\ See, e.g., N.Y. Indep. Sys. Operator, Inc., 179 FERC ]
61,102 at PP 105-114.
    \1203\ See Midcontinent Indep. Sys. Operator, Inc., 169 FERC ]
61,173 at P 48 (finding MISO's proposal to place resource-specific
acreage requirements in its business practice manuals to be
appropriate because ``these requirements include technical
calculations that may require updates from time to time''); Sw.
Power Pool, Inc., 128 FERC ] 61,114 at P 48; PJM Interconnection,
L.L.C., 181 FERC ] 61,162 at P 102.
---------------------------------------------------------------------------

    603. To provide clarity for interconnection customers and
transmission providers, we modify the pro forma LGIP definition of
``Generating Facility'' to replace ``device'' with ``device(s)'' to
clarify that this definition includes hybrid generating
facilities.\1204\ We believe this clarification is necessary to ensure
that hybrid generating facilities have the same rights and
responsibilities as other types of generating facilities under the pro
forma LGIP and pro forma LGIA. In response to commenters and consistent
with the modified definition of ``Generating Facility,'' we clarify
that the transmission providers' per MW acreage requirements for each
generating facility technology-type must include specific requirements
for hybrid generating facilities. We also clarify that generating
facilities that are co-located on the same site and behind the same
point of interconnection are subject to the technology-specific acreage
requirements based on the generating facilities' technology-type.
---------------------------------------------------------------------------

    \1204\ A hybrid generating facility is a generating facility
composed of more than one device of different technology types for
the production and/or storage for later injection of electricity
that are located on the same site and are operated and dispatched as
a single integrated generating facility.
---------------------------------------------------------------------------

    604. In response to requests for clarification as to whether the
site control demonstration at the time of submission of the
interconnection request applies to interconnection facilities as well
as generating facilities, we clarify that the site control
demonstration requirements apply only to the land needed for the
generating facility. In the NOPR, the Commission did not propose site
control requirements for interconnection facilities.\1205\ Based on
this clarification, we decline to address comments suggesting
alternative site control requirements for interconnection facilities or
network upgrades.
---------------------------------------------------------------------------

    \1205\ Under the pro forma LGIP, interconnection facilities
shall mean the transmission provider's interconnection facilities
and the interconnection customer's interconnection facilities.
Collectively, interconnection facilities include all facilities and
equipment between the generating facility and the point of
interconnection, including any modification, additions or upgrades
that are necessary to physically and electrically interconnect the
generating facility to the transmission provider's transmission
system. Interconnection facilities are sole use facilities and shall
not include distribution upgrades, stand alone network upgrades or
network upgrades.
---------------------------------------------------------------------------

(c) Site Control Considerations for Interconnection Customers With
Regulatory Limitations
    605. We adopt the NOPR proposal, with modification, to revise
section 3.4.2 of the pro forma LGIP to include a limited option for
interconnection customers to submit a deposit in lieu of site control
when they submit their interconnection request--only if qualifying
regulatory limitations prohibit the interconnection customer from
obtaining site control. We adopt the NOPR proposal to provide that
interconnection customers with regulatory limitations may submit an
initial deposit in lieu of site control of $10,000 per MW, subject to a
floor of $500,000 and a ceiling of $2 million. As discussed below, this
deposit shall be refundable but may not be applied toward
interconnection studies or withdrawal penalties, if applicable.
However, we decline to adopt the proposed requirement in the NOPR that
an interconnection customer facing regulatory limitations must
demonstrate 100% site control prior to the execution of a facilities
study agreement. Instead, we modify the proposed requirement for an
interconnection customer facing regulatory limitations to provide that
a deposit in lieu of site control will be accepted and held by the
transmission provider until the interconnection customer can
demonstrate 90% site control prior to execution of the facilities study
agreement or 100% site control at execution of the facilities study
agreement or thereafter. Additionally, we modify the NOPR proposal to
specify in Appendix B of the pro forma LGIA that interconnection
customers facing qualifying regulatory limitations must demonstrate
100% site control within 180 calendar days of the effective date of the
LGIA or the LGIA may be terminated per article 17

(Default) of the pro forma LGIA and the interconnection customer may be
subject to withdrawal penalties per new pro forma LGIP section <IP_ADDRESS>
(Calculation of the Withdrawal Penalty).
    606. We adopt the NOPR proposal to revise section 3.4.2 of the pro
forma LGIP to provide how interconnection customers may demonstrate
regulatory limitations. Specifically interconnection customers must
provide to the transmission provider: (1) a signed affidavit from an
officer of the company indicating that site control is unobtainable due
to regulatory limitations as such term is defined by the transmission
provider; and (2) documentation sufficiently describing and explaining
the source and effects of such regulatory limitations, including a
description of any conditions that must be met to satisfy the
regulatory limitations and the anticipated time by which the
interconnection customer expects to satisfy the regulatory
restrictions.
    607. With respect to what qualifies as a regulatory limitation, we
require transmission providers to define regulatory limitations
relevant to their service territory, to publicly post the definition,
and to provide a narrative description of how they define regulatory
limitations as part of their compliance filings. While we decline to
require a uniform definition of regulatory limitations for all
transmission providers, we clarify that a regulatory limitation is
generally a Federal, state, Tribal, or local law that makes it
practically infeasible to obtain site control within the time frame
detailed in the pro forma LGIP. We allow transmission providers
flexibility on how to publicly post the definition, such as by
including it in business practice manuals or posting on a publicly
accessible website. We consider the definition of regulatory
limitations to be an implementation detail appropriately housed outside
of transmission providers' tariffs, consistent with the rule of reason.
We expect that the appropriate scope of regulatory limitations may vary
by region and is likely to need to be updated over time as relevant
Federal, state, Tribal, or local laws change. For these reasons, we do
not require transmission providers to include their definitions of
regulatory limitations in their tariffs.
    608. We believe that these requirements will ensure a transparent,
consistent, and orderly process to facilitate demonstration of
regulatory limitations by interconnection customers and will establish
minimum requirements to provide transmission providers sufficient
information to evaluate such demonstrations. We agree with commenters
that transmission providers are best positioned to develop appropriate
definitions of regulatory limitations to address the specific
circumstances and unique regulatory limitations that interconnection
customers in their regions may face. We believe that this approach
preserves flexibility for transmission providers to account for
regional diversity.
    609. As noted above, we decline to adopt the proposed requirement
in the NOPR that an interconnection customer facing regulatory
limitations must demonstrate 100% site control prior to commencement of
the facilities study. We agree with commenters that the requirement to
demonstrate site control at the facilities study stage could act as a
barrier for generating facilities faced with regulatory limitations in
demonstrating site control because the permitting process may still be
underway at the facilities study stage.\1206\ To account for these
barriers, we clarify that, in such circumstances, interconnection
customers are permitted to proceed through the interconnection process
and execute, or request the unexecuted filing of, an LGIA before
obtaining site control, by providing documentation that demonstrates
they are taking identifiable steps to secure the necessary regulatory
approvals from the applicable Federal, state, and/or Tribal entities,
as described above. Such interconnection customers must provide this
documentation at the time of execution of the facilities study
agreement and when executing, or requesting the unexecuted filing of,
the LGIA, or alternatively, demonstrate site control in accordance with
the requirements of the pro forma LGIP.
---------------------------------------------------------------------------

    \1206\ See, e.g., NV Energy Initial Comments at 17.
---------------------------------------------------------------------------

    610. We acknowledge that certain interconnection customers
developing generating facilities on sites owned or controlled by a
government entity, such as those who site generating facilities on BLM
lands, may not be able to demonstrate site control under the pro forma
LGIP definition even by the later stages of the interconnection process
because final permitting approval from BLM may not occur until after
the facilities study stage.\1207\ We believe the site control
requirements included in the pro forma LGIP strike an appropriate
balance between disincentivizing speculative interconnection requests
and accommodating interconnection customers facing extensive permitting
requirements by allowing such customers to submit a deposit in lieu of
site control where they demonstrate a qualifying regulatory limitation.
---------------------------------------------------------------------------

    \1207\ See, e.g., id.
---------------------------------------------------------------------------

    611. In response to commenters' concerns that, without
clarification, the regulatory limitations exception to the site control
requirement may be interpreted broadly to allow interconnection
customers to claim regulatory limitations when obtaining site control
is simply impractical or expensive, we reiterate that transmission
providers may exercise discretion when defining regulatory
limitations--generally a Federal, state, Tribal, or local law that
makes it practically infeasible to obtain site control within the time
frame detailed in the pro forma LGIP--as appropriate for
interconnection customers in their regions. We believe that allowing
flexibility in defining regulatory limitations will enable transmission
providers to account for any local, county, Tribal and state
regulations in their respective region that may delay an
interconnection customer's efforts to obtain site control.
    612. With respect to the amount of the deposit in lieu of site
control for interconnection customers with regulatory limitations, we
find that the amounts that we adopt in this final rule will help
prevent speculative interconnection requests without placing an undue
burden on interconnection customers. We are not persuaded by commenters
that argue that the deposit amounts in lieu of site control for
interconnection customers with regulatory limitations need to be even
higher to deter interconnection requests that are not likely to achieve
site control, particularly when considered in conjunction with the
commercial readiness deposits and withdrawal penalties adopted in this
final rule, discussed below. We also find that deposits in lieu of site
control for interconnection customers with regulatory limitations
should be refundable, but may not be applied toward interconnection
studies or withdrawal penalties. We find that making these deposits in
lieu of site control for interconnection customers with regulatory
limitations non-refundable, as some commenters argue, may unduly burden
certain interconnection customers facing regulatory limitations where
certain regulatory constraints may be beyond their control.
c. Commercial Readiness
i. NOPR Proposal
    613. In the NOPR, the Commission proposed to revise the pro forma
LGIP to include a commercial readiness

framework, which included commercial readiness demonstration options
and commercial readiness deposits.\1208\ The Commission explained that
such a framework would encourage interconnection customers that are not
ready to proceed to withdraw from the interconnection queue earlier in
the study process while also providing them the flexibility to enter
and remain in the interconnection queue without an off-take agreement;
reduce the number of times an interconnection customer executes and
suspends an LGIA for a speculative interconnection request, only to
later withdraw the request, leading to the shifting of network upgrade
costs to lower-queued interconnection customers; and reduce the strain
on transmission providers and enable viable interconnection requests to
progress more quickly through a less congested interconnection queue,
thereby remedying the unjust and unreasonable Commission-jurisdictional
rates discussed in section II of this final rule.
---------------------------------------------------------------------------

    \1208\ NOPR, 179 FERC ] 61,194 at P 128.
---------------------------------------------------------------------------

    614. Therefore, the Commission proposed to establish the defined
terms ``commercial readiness demonstration \1209\ and ``commercial
readiness deposit'' \1210\ in the pro forma LGIP.\1211\ The Commission
also proposed to add to sections 3.4.2, 7.5, and 8.1 of the pro forma
LGIP the following options as acceptable forms of commercial readiness
demonstration to enter into the cluster study and cluster restudy:
---------------------------------------------------------------------------

    \1209\ The Commission proposed to revise section 1 of the pro
forma LGIP to provide that commercial readiness demonstration shall
have the meaning set forth in sections 3.4.2, 7.5, and 8.1 of the
pro forma LGIP. Id. P 129 n.204.
    \1210\ The Commission proposed to revise section 1 of the pro
forma LGIP to provide that commercial readiness deposit shall mean a
deposit paid in lieu of submitting a commercial readiness
demonstration, as set forth in sections 3.4.2, 7.5, and 8.1 of the
pro forma LGIP. Id. P 129 n.205.
    \1211\ Id. P 129.
---------------------------------------------------------------------------

     An executed term sheet (or comparable evidence) related to
a contract, binding upon the parties to the contract, for sale of (1)
the constructed generating facility, (2) the generating facility's
energy or capacity, or (3) the generating facility's ancillary
services; where the term of sale is not less than five years;
     Reasonable evidence that the generating facility has been
selected in a resource plan or resource solicitation process by or for
a load-serving entity (LSE), is being developed by an LSE, or is being
developed for purposes of a sale to a commercial, industrial, or other
large end-use customer; or
     A provisional LGIA which has been filed at the Commission
(executed or unexecuted), which is not suspended and includes a
commitment to construct the generating facility.
    615. The Commission also proposed to add to section 8.1 of the pro
forma LGIP the following options to serve as forms of commercial
readiness demonstration to enter the facilities study, to be provided
with the executed facilities study agreement:
     An executed contract (as opposed to a term sheet), binding
upon the parties to the contract, for sale of (1) the constructed
generating facility, (2) the generating facility's energy or capacity,
or (3) the generating facility's ancillary services; where the term of
sale is not less than five years;
     Reasonable evidence that the generating facility has been
selected in a resource plan or resource solicitation process by or for
an LSE, is being developed by an LSE, or is being developed for
purposes of a sale to a commercial, industrial, or other large end-use
customer; or
     A provisional LGIA accepted for filing by the Commission,
which is not suspended, with reasonable evidence that the generating
facility and interconnection facilities have commenced design and
engineering.\1212\
---------------------------------------------------------------------------

    \1212\ Id. P 130.
---------------------------------------------------------------------------

    616. The Commission also proposed to require the interconnection
customer to inform the transmission provider of any material change to
its commercial readiness demonstration. The Commission proposed to
require the transmission provider to give the interconnection customer
10 business days to demonstrate satisfaction with the applicable
requirement after notification of a change to the interconnection
request's commercial readiness demonstration.\1213\ The Commission
explained that the interconnection customer would have the option to
submit a commercial readiness deposit within the 10-day cure period if
the change to the commercial readiness demonstration meant that the
interconnection request no longer satisfied the criteria.
---------------------------------------------------------------------------

    \1213\ Id. P 131.
---------------------------------------------------------------------------

    617. The Commission preliminarily concluded that this approach was
appropriate for all transmission providers and therefore proposed to
allow interconnection customers the option to submit a commercial
readiness deposit, in lieu of demonstrating commercial readiness
through the commercial readiness demonstration options required to
enter a cluster study, cluster restudy, and facilities study.\1214\ The
Commission noted that, outside of RTOs/ISOs, transmission providers may
be able to provide certain contractual arrangements to their own
generating facilities or other preferred interconnection customers,
such as the term sheet option noted above, which could lead to unduly
discriminatory behavior. The Commission stated that this deposit in
lieu of demonstrating commercial readiness may potentially prevent any
undue discrimination in the generator interconnection process,
consistent with the adoption of a standard set of procedures in the
first instance.\1215\
---------------------------------------------------------------------------

    \1214\ Id. P 132.
    \1215\ Id. (citing Order No. 2003, 104 FERC ] 61,103 at PP 1-2).
---------------------------------------------------------------------------

    618. The Commission proposed to revise the pro forma LGIP to
include a framework to allow interconnection customers to provide a
commercial readiness deposit in lieu of meeting commercial readiness
requirements in the following amounts:
     Two times the study deposit amount to enter the initial
cluster study phase;
     Five times the study deposit amount after the initial
cluster study phase and before the system impact restudy phase; and
     Seven times the study deposit amount after receipt of the
facilities study agreement.\1216\
---------------------------------------------------------------------------

    \1216\ Id. P 133.
---------------------------------------------------------------------------

    619. The Commission clarified that the proposed commercial
readiness deposit is separate from the study deposit.\1217\ The
Commission stated that the commercial readiness deposit would be
returned if the interconnection customer later makes a commercial
readiness demonstration. If the interconnection customer withdraws from
the interconnection queue, the Commission proposed that the commercial
readiness deposit would be applied toward any incurred withdrawal
penalties.
---------------------------------------------------------------------------

    \1217\ Id. P 134.
---------------------------------------------------------------------------

    620. Additionally, the Commission proposed revisions to the list of
development milestones in section 11.3 of the pro forma LGIP to clarify
the following:
     A contract for the supply or transportation of fuel and a
contract for the supply of cooling water will not be accepted for wind,
storage, or solar photovoltaic resources;
     Comparable evidence of a contract for the sale of energy
or capacity will be accepted; and
     Any of the commercial readiness demonstration options
accepted to enter

the facilities study will be accepted along with the executed LGIA or
within 15 days of the Commission issuing an order on the unexecuted
LGIA filing, while a commercial readiness deposit will not be
accepted.\1218\
---------------------------------------------------------------------------

    \1218\ Id. P 135.
---------------------------------------------------------------------------

    621. The Commission preliminarily found that this framework would
allow interconnection customers to calculate the exact deposit that
would be required prior to entering the interconnection queue, as it is
based on multiples of the study deposit, and the study deposit is based
on the size of the proposed generating facility, as chosen by the
interconnection customer, leading to predictability in the deposit
amount.\1219\ The Commission explained that this increased transparency
in the deposit amount early in the interconnection process would
discourage speculative interconnection requests from entering the
interconnection queue.
---------------------------------------------------------------------------

    \1219\ Id. P 136.
---------------------------------------------------------------------------

    622. The Commission sought comment on whether the Commission should
also establish, as other alternative demonstrations of commercial
readiness, evidence of a commitment to participate in RTO/ISO markets,
a site-specific purchase order for generating equipment specific to the
interconnection request, or a statement signed by an officer or
authorized agent of the interconnection customer attesting that the
generating facility is to be supplied with major electric generating
components (such as wind turbines) with a manufacturer's blanket
purchase agreement to which the interconnection customer is a
party.\1220\
---------------------------------------------------------------------------

    \1220\ Id. P 137.
---------------------------------------------------------------------------

ii. Comments
(a) Comments in Support
    623. Several commenters support the commercial readiness framework
because they believe that it will reduce the submission of exploratory
or speculative interconnection requests.\1221\ These commenters argue
that requiring financial commitments and commercial readiness
requirements early in the interconnection process, as the Commission
proposed, is important to more efficiently allocate transmission
provider resources to generating facilities that are more likely to
achieve commercial operation and to enhance the certainty of
interconnection study results, benefiting all interconnection
customers. Pacific Northwest Utilities similarly assert that requiring
commercial readiness at an appropriate point in the cluster study
process minimizes the cost and inefficiency risk of restudies and
increases the probability that planned network upgrades will be funded
and constructed.\1222\ Navajo Utility also supports the Commission's
use of the commercial readiness requirements to discourage speculative
interconnection requests from slowing the interconnection
process.\1223\
---------------------------------------------------------------------------

    \1221\ APPA-LPPC Reply Comments at 5; Avangrid Initial Comments
at 9; Consumer Energy Initial Comments at 5; EEI Initial Comments at
6-7; EEI Reply Comments at 5; NERC Initial Comments at 26; Google
Initial Comments at 20; Idaho Power Initial Comments at 7; MISO TOs
Initial Comments at 28-29; NARUC Initial Comments at 10; NESCOE
Initial Comments at 13; North Carolina Commission and Staff Initial
Comments at 26; Ohio Commission Consumer Advocate Initial Comments
at 12; Omaha Public Power Initial Comments at 9; Pacific Northwest
Utilities Initial Comments at 3, 6; Pennsylvania Commission Initial
Comments at 14; U.S. Chamber of Commerce Initial Comments at 9; UMPA
Initial Comments at 5; Xcel Reply Comments at 6-10.
    \1222\ Pacific Northwest Utilities Initial Comments at 6.
    \1223\ Navajo Utility Initial Comments at 10.
---------------------------------------------------------------------------

    624. Navajo Utility explains that, as an LSE that constructs
generating facilities for the benefit of the Navajo Nation and to
export clean energy to surrounding LSEs, it specifically supports the
second criterion related to generating facilities developed by an
LSE.\1224\ NRECA contends that the proposed commercial readiness
demonstration requirements protect generating facilities that have been
committed to serve load from being hindered by interconnection requests
for generating facilities that are still looking for off-takers,
thereby helping reduce the pressure on transmission provider
interconnection queues.\1225\
---------------------------------------------------------------------------

    \1224\ Id. at 10-11.
    \1225\ NRECA Initial Comments at 29.
---------------------------------------------------------------------------

    625. APPA-LPPC note that there may be power purchase agreements,
asset sales agreements and competitive procurement programs that
currently contemplate full knowledge of interconnection costs before
deals may be finalized.\1226\ However, APPA-LPPC argue that there is
nothing inevitable about the structure and sequencing of these
arrangements. APPA-LPPC state that, assuming the Commission moves ahead
with a commercial readiness requirement, it is not hard to envision
revisions to standard form power purchase agreements, asset sales
agreements, and bids into power procurement programs that are
contingent on specified assumptions regarding interconnection costs.
APPA-LPPC contend that with improvements in the availability of
interconnection costs, along with much-needed stability in the
interconnection queues, it is reasonable to expect that interconnection
costs will be substantially more predictable than is now the case.
---------------------------------------------------------------------------

    \1226\ APPA-LPPC Reply Comments at 5.
---------------------------------------------------------------------------

    626. SoCal Edison supports the proposals to require the
interconnection customer to notify the transmission provider of any
material change to its commercial readiness demonstration and to
require the transmission provider to give the interconnection customer
10 business days to cure the commercial readiness deficiency.\1227\
---------------------------------------------------------------------------

    \1227\ SoCal Edison Initial Comments at 9.
---------------------------------------------------------------------------

(b) Comments in Opposition
    627. Several commenters argue that the NOPR proposal is
inconsistent with prevailing commercial practices (especially those in
RTOs/ISOs), sets unreasonable standards for off-take agreements, and
ignores the commercial reality of the competitive solicitation process,
which could create an undue preference for self-build options in areas
that rely on competitive solicitations and undue discrimination against
merchant developers, thereby subverting competition in wholesale power
markets.\1228\ Some commenters contend that the proposed commercial
readiness demonstration options are heavily weighted in favor of
incumbent utility practices, such as evidence of a power purchase
agreement or executed term sheet or evidence that a project has been
selected in a resource plan or resource solicitation process by an
LSE.\1229\
---------------------------------------------------------------------------

    \1228\ ACORE Reply Comments at 4; AEE Initial Comments at 20;
AEE Reply Comments at 12; Alliant Energy Initial Comments at 5-6;
Clean Energy Associations Initial Comments at 34-35; Clean Energy
Associations Reply Comments at 4-6; CREA and NewSun Initial Comments
at 57; CREA and NewSun Reply Comments at 22-45; Cypress Creek
Initial Comments at 22-23; Enel Initial Comments at 44; ENGIE
Initial Comments at 5; ENGIE Reply Comments at 2-3; EPSA Initial
Comments at 9; Fervo Energy Reply Comments at 6-7; New Jersey
Commission Reply Comments at 6-8; NextEra Initial Comments at 24;
Pine Gate Initial Comments at 27; NextEra Reply Comments at 14-16;
Public Interest Organizations Initial Comments at 29-30; R Street
Initial Comments at 13; SEIA Initial Comments at 25; Vistra Initial
Comments at 6.
    \1229\ EPSA Initial Comments at 9; R Street Initial Comments at
13.
---------------------------------------------------------------------------

    628. Enel argues that ratepayers and off-takers benefit from
generating facilities being selected in competitive processes that
consider both a generating facility's inherent characteristics and its
interconnection costs and schedule, which cannot be done if off-take
arrangements are made prior to applying for interconnection
service.\1230\ NextEra asserts that being part of the interconnection
queue is an essential step in the competitive

process,\1231\ and Public Interest Organizations note that utilities
conducting RFPs for their resource plans often require at least a
position in an interconnection queue as a precondition of
offering.\1232\ Cypress Creek argues that commercial readiness
demonstrations should not apply until an interconnection customer
receives the results from the proposed initial cluster study, which may
be required to bid into a resource solicitation.\1233\ Cypress Creek
contends that it is impractical to include the proposed demonstration
requirements at early stages in the interconnection study process and
that this construct is not workable in markets where merchant sales are
common.
---------------------------------------------------------------------------

    \1230\ Enel Initial Comments at 44.
    \1231\ NextEra Initial Comments at 24.
    \1232\ Public Interest Organizations Initial Comments at 29.
    \1233\ Cypress Creek Initial Comments at 22-23.
---------------------------------------------------------------------------

    629. Enel, NextEra, and Public Interest Organizations argue that
precluding entry into the interconnection queue due to lack of a
demonstration of commercial readiness would be an anticompetitive
measure favoring entities, such as incumbent transmission providers,
that could favor their own proposed generating facilities ahead of
others because of their enhanced ability to demonstrate their proposed
generating facilities as commercially ready.\1234\ For instance, CREA
and NewSun assert that, unlike independent power producers, an
incumbent, vertically integrated utility can easily meet the second
prong of the readiness criteria to enter the interconnection queue and
proceed to the facilities study by simply identifying its preferred
resource in its own resource plan, selecting it as the winning bid in
its own utility-run RFP, or just attesting that the utility is
``developing'' the generating facility.\1235\
---------------------------------------------------------------------------

    \1234\ Enel Initial Comments at 44; NextEra Initial Comments at
24; Public Interest Organizations Initial Comments at 29.
    \1235\ CREA and NewSun Initial Comments at 66 (citing NOPR, 179
FERC ] 61,194 at PP 129, 130).
---------------------------------------------------------------------------

    630. CREA and NewSun claim that the commercial readiness proposal
would drive most, if not all, independent power producers from the
market, which would raise costs to consumers by eliminating competition
and innovation.\1236\ SEIA asserts that by proposing a commercial
readiness demonstration framework that is nearly impossible for
independent power producers to meet, the Commission is incorrectly
implying that generating facilities developed by independent power
producers are inherently not commercially viable.\1237\ SEIA emphasizes
that independent power producers play a critical role in bringing
robust competition to markets by driving innovation and decreasing the
cost of providing power.\1238\
---------------------------------------------------------------------------

    \1236\ Id. at 57.
    \1237\ SEIA Initial Comments at 16, 25.
    \1238\ Id. at 25.
---------------------------------------------------------------------------

    631. Alliant Energy claims that requiring demonstration of
commercial readiness prior to an interconnection customer entering the
interconnection queue may do more harm than good.\1239\ Alliant Energy
argues that the commercial viability of a proposed generating facility
depends heavily on the costs of network upgrades and interconnection
facilities required to accommodate a generating facility's
interconnection, which cannot be known prior to a generating facility
receiving cost estimates that are dependable and enable interconnection
customers to make decisions during the interconnection process.
---------------------------------------------------------------------------

    \1239\ Alliant Energy Initial Comments at 5-6.
---------------------------------------------------------------------------

    632. Vistra argues that the proposed increase in study deposits,
withdrawal penalties, and exclusive site control requirements will
significantly reduce the number of speculative interconnection requests
entering the interconnection queue, making the commercial readiness
proposal redundant.\1240\ Vistra notes that the Commission has relied
on fact-specific showings to accept requirements to demonstrate
commercial readiness thus far, and Vistra argues that the fact that the
Commission has accepted a transmission provider's revised LGIP under
FPA section 205 does not establish that the pro forma LGIP is unjust
and unreasonable without the commercial readiness proposal.\1241\
---------------------------------------------------------------------------

    \1240\ Vistra Initial Comments at 6.
    \1241\ Id. at 6, 8.
---------------------------------------------------------------------------

    633. Vistra states that, beyond simple timing concerns, procurement
decisions and eligibility to enter the interconnection queue are
interrelated in a way that creates a chicken-and-egg problem.\1242\
Vistra explains that it is difficult for a generating facility to be
shortlisted for procurement without line of sight to obtaining a signed
interconnection agreement because the signed interconnection agreement
brings more certainty to the generating facility's commercial operation
date. Vistra expresses concern that the Commission's proposal to
require an executed term sheet to enter the interconnection queue and
an executed contract to enter the facilities study process will simply
shift the burden of this chicken-and-egg problem to the procurement
process. Vistra asserts that the status quo appropriately balances the
inherent difficulty of coordinating procurement and interconnection.
---------------------------------------------------------------------------

    \1242\ Id. at 9.
---------------------------------------------------------------------------

    634. Invenergy argues that the proposed requirements are
inappropriate and should not be applied nationally because they are
based on a small subset of transmission providers that have adopted
``readiness'' requirements with little evidence that they are
effective, given the continuing interconnection queue reform efforts in
some of those same regions.\1243\ Invenergy adds that, if additional
assurance of an interconnection customer's intent to pursue its
interconnection request is needed, the Commission should consider a
requirement to post a certain amount of security that becomes
increasingly at risk to move through the interconnection queue, as is
done in some RTO/ISO regions.
---------------------------------------------------------------------------

    \1243\ Invenergy Initial Comments at 11-12.
---------------------------------------------------------------------------

    635. NextEra asserts that generating facilities may be fully viable
based on criteria that are different from what the NOPR proposes. For
example, NextEra states that it is possible that storage or other types
of generating facilities entering the market will not require power
purchase agreements or designation as network resources to be
commercially viable.\1244\
---------------------------------------------------------------------------

    \1244\ NextEra Initial Comments at 24.
---------------------------------------------------------------------------

    636. R Street argues that a key to efficient generating facility
development is to enable parallel work flows.\1245\ R Street claims
that, by imposing extensive prerequisites to advance in the
interconnection process, commercial readiness requirements would
introduce greater process dependencies in generating facility
development. R Street adds that granting non-RTO/ISO transmission
providers discretion over commercial readiness requirements could lead
to discriminatory behavior (e.g., non-RTO/ISO transmission providers
withholding off-take contracts to discriminate against other potential
suppliers).
---------------------------------------------------------------------------

    \1245\ R Street Initial Comments at 13.
---------------------------------------------------------------------------

    637. MISO states that it is concerned about the utility and impacts
of the proposed commercial readiness framework.\1246\ MISO explains
that interconnection customers with commitments from off-takers can be
commercially unready and often cause the greatest interconnection queue
disruption by lingering the longest in the queue. As an example, MISO
posits a proposed generating facility that would be commercially viable
provided it does not incur network upgrade costs

in excess of $5 million dollars. MISO argues that such a generating
facility is likely to remain in the interconnection queue despite not
having a viable business case, in the hopes that other interconnection
customers will withdraw their requests and costs will decrease. MISO
asserts that, to indicate commercial readiness, a term sheet or
contract would need to show not only that there was an off-taker but
also that the projected income for the proposed generating facility is
sufficient to render the generating facility commercially viable, given
estimated study and network upgrade costs, which would be exceedingly
difficult to require from interconnection customers and nearly
impossible for a transmission provider to evaluate and verify.
---------------------------------------------------------------------------

    \1246\ MISO Initial Comments at 62-63.
---------------------------------------------------------------------------

    638. Anbaric claims that the proposed core readiness requirements
do not align with the development trajectory of planned transmission
projects for offshore wind generation.\1247\
---------------------------------------------------------------------------

    \1247\ Anbaric Initial Comments at 15-16.
---------------------------------------------------------------------------

    639. NextEra asserts that commercial readiness requirements at the
interconnection request stage are inappropriate.\1248\ NextEra explains
that interconnection customers do not have a simple test for
distinguishing speculative interconnection requests from other
interconnection requests. Rather, NextEra continues, successful
generating facility development depends on whether the interconnection
customer concludes that the interconnection arrangement is acceptable
and whether the generating facility's location and costs are agreeable
to its customers.
---------------------------------------------------------------------------

    \1248\ NextEra Initial Comments at 23-24.
---------------------------------------------------------------------------

    640. NextEra also argues that meeting any readiness milestones
after the submission of an interconnection request (e.g., when entering
the facilities study phase) should be premised on the interconnection
customer having received timely and accurate study results, including
from affected systems.\1249\ NextEra asserts that it is not just and
reasonable to impose increasingly strict requirements on
interconnection customers without devising means of accelerating
interconnection queue processing by transmission providers and ensuring
transmission providers comply with their tariffs.
---------------------------------------------------------------------------

    \1249\ Id. at 25.
---------------------------------------------------------------------------

    641. Longroad recommends that the Commission clearly tie the
interconnection customer's commitment to pay for network upgrades to a
security deposit applied toward the costs thereof during the cluster
study phases, and that the security deposits for network upgrades
progressively increase at each stage of the cluster study
process.\1250\ Longroad asserts that in the initial cluster study, the
security deposit should be a modest percentage of the allocated network
upgrade cost and increase to, for example, 25% of the network upgrade
cost allocation to enter the facilities study. Longroad contends that
the interconnection customer should have the option to either fully
fund the network upgrade as a milestone in the LGIA or to fund in
advance the transmission provider's estimated quarterly spending
towards engineering, procurement, and construction of the network
upgrades.
---------------------------------------------------------------------------

    \1250\ Longroad Reply Comments at 13.
---------------------------------------------------------------------------

(c) Comments on Specific Proposals
(1) Proposed Readiness Demonstrations
    642. Commenters raise significant issues with the readiness
demonstration options proposed in the NOPR. With respect to the first
proposed readiness demonstration option,\1251\ commenters argue that
providing power purchase agreements or term sheets will be unworkable
for most interconnection customers, particularly merchant developers,
because: (1) developers do not have sufficient information about
interconnection costs to move forward with a term sheet or power
purchase agreement at the time they enter into the interconnection
study process; and (2) the proposals to make more information available
to interconnection customers prior to submitting an interconnection
request will not provide sufficiently granular or certain information
to overcome this barrier.\1252\
---------------------------------------------------------------------------

    \1251\ Executed term sheet (or comparable evidence) related to a
contract for sale of (1) the constructed generating facility to a
load-serving entity or to a commercial, industrial, or other large
end-use customer, (2) the generating facility's energy or capacity
where the term of sale is not less than five (5) years, or (3) the
generating facility's ancillary services where the term of sale is
not less than five (5) years.
    \1252\ AEE Initial Comments at 21; AES Clean Energy Initial
Comments at 16; CAISO Initial Comments at 18; CESA Initial Comments
at 10; CESA Reply Comments at 6; Clean Energy Associations Initial
Comments at 37; ClearPath Initial Comments at 8; CREA and NewSun
Initial Comments at 57-58; New Jersey Commission Reply Comments at
6-7; Enel Initial Comments at 42-43; Invenergy Initial Comments at
13-15; Invenergy Reply Comments at 1-5; Fervo Energy Initial
Comments at 5; Longroad Energy Reply Comments at 17; SEIA Initial
Comments at 17; SEIA Reply Comments at 7-9; Shell Reply Comments at
20-21; Longroad Energy Initial Comments at 15-16; Omaha Public Power
Initial Comments at 8-9; R Street Initial Comments at 13; Shell
Initial Comments 13-15; Vistra Initial Comments at 8, 10.
---------------------------------------------------------------------------

    643. Commenters further note that the vast majority of power
purchasers seek generating facilities with advanced interconnection
queue positions (with preference for a finalized LGIA or SGIA) before
signing a power purchase agreement or finalizing a state
procurement.\1253\ CREA and NewSun, as well as SEIA, argue that a
contract for provision of ancillary services, is almost entirely
foreclosed to many non-synchronous generating facilities because nearly
every transmission provider bars non-synchronous generating facilities
from providing ancillary services, either explicitly or through
operating requirements.\1254\
---------------------------------------------------------------------------

    \1253\ Invenergy Initial Comments at 13; Northwest and
Intermountain Initial Comments at 9; Public Interest Organizations
Initial Comments at 28.
    \1254\ CREA and NewSun Initial Comments at 62; SEIA Initial
Comments at 17.
---------------------------------------------------------------------------

    644. Commenters also assert that, if independent power producers
are forced to enter into contracts before costs are certain, then they
would need to incorporate that uncertainty into the power purchase
agreement offer, which would drive up the costs of these contracts,
resulting in higher consumer costs.\1255\ Commenters contend that, if
the independent power producer does not reflect the costs of the
network upgrades in its power purchase agreement price, either the
independent power producer or the consumer may attempt to break the
contract, which would lead to increased contractual litigation.\1256\
Vistra adds that the purchaser will then need to start the procurement
process over or choose to over-procure as insurance against potential
contract termination, to the detriment of reliability and cost.\1257\
---------------------------------------------------------------------------

    \1255\ CREA and NewSun Initial Comments at 57; Clean Energy
Associations Initial Comments at 37; SEIA Initial Comments at 17;
SoCal Edison Initial Comments at 8; Vistra Initial Comments at 9-10.
    \1256\ AEE Initial Comments at 21; Longroad Energy Initial
Comments at 15; SEIA Initial Comments at 17; Vistra Initial Comments
at 10.
    \1257\ Vistra Initial Comments at 10.
---------------------------------------------------------------------------

    645. SoCal Edison argues that, in some regions, an executed
contract option for entering the facilities study could unintentionally
encourage LSEs to sign contracts with developers for more energy or
capacity than they need to secure resources to meet their procurement
targets.\1258\ SoCal Edison contends that competition in certain areas
for particular generation resources may be high, which may force other
LSEs to prematurely enter into contracts with developers to secure
generation without the benefit of the facilities study, which is
currently relied on by LSEs to assess commercial viability of a
generating facility before contracts are signed. AEE asserts that
customers may ultimately bear the cost of the selection of generating
facilities that may not be the least cost options in the market but

are able to execute a term sheet or power purchase agreement regardless
of the ultimate level of interconnection costs.\1259\
---------------------------------------------------------------------------

    \1258\ SoCal Edison Initial Comments at 7-8.
    \1259\ AEE Initial Comments at 21.
---------------------------------------------------------------------------

    646. Commenters also assert that it is unreasonable to expect that
a buyer and seller will be able to finalize negotiation of a contract
between the time of the cluster restudy (or amendment of the restudy if
additional interconnection customers withdraw upon receipt of the
restudy results) and the time the facilities study agreement must be
executed.\1260\
---------------------------------------------------------------------------

    \1260\ CREA and NewSun Initial Comments at 62; Longroad Energy
Initial Comments at 16; SEIA Initial Comments at 17.
---------------------------------------------------------------------------

    647. CAISO requests that the Commission describe in detail what
would constitute a term sheet.\1261\ CAISO states that in its
experience with similar tariff provisions, interconnection customers
frequently try to submit questionable or even misleading documentation
to meet the tariff requirements.
---------------------------------------------------------------------------

    \1261\ CAISO Initial Comments at 20.
---------------------------------------------------------------------------

    648. Invenergy argues that, to the extent an off-take agreement or
term sheet remains an option to demonstrate readiness, the Commission
should clarify that transmission providers are not entitled or even
permitted to review the commercial terms of the term sheet or
agreement, which may be confidential and is not subject to the
transmission provider's discretion.\1262\
---------------------------------------------------------------------------

    \1262\ Invenergy Initial Comments at 18.
---------------------------------------------------------------------------

    649. GSCE does not dispute that readiness requirements are
important but argues that basing them on contracting status is
misguided for the following reasons: (1) it does not focus on early-
stage developmental steps that drive generating facility viability and
indicate true commercial readiness; (2) it provides incentives for
interconnection customers that have not taken concrete steps toward
readiness to bid low in competitive solicitations, creating fictional
``contracted'' capacity that may never prove viable; (3) the
contracting landscape is evolving, and long-term contracting is no
longer required for successful project financing or the emerging
realities of capital markets, and with the inflationary environment,
long-term contracts may currently be harder to finance than short-term
contracts; and (4) a focus on contracting to enter the interconnection
study process forces commercial negotiations to occur before generating
facilities are studied and have sufficient cost certainty or
development timeline assurances.\1263\
---------------------------------------------------------------------------

    \1263\ GSCE Initial Comments at 8-9.
---------------------------------------------------------------------------

    650. Commenters also point to significant issues with the second
proposed readiness demonstration option.\1264\ They argue that
requiring evidence that a proposed generating facility is ``selected in
a resource plan or resource solicitation plan by or for [an LSE], is
being developed by [an LSE], or is being developed for purposes of a
sale to a commercial, industrial, or other a large end-use customer''
is discriminatory and preferential without cause or reasonable
support.\1265\
---------------------------------------------------------------------------

    \1264\ Reasonable evidence that the generating facility has been
selected in a resource plan or resource solicitation process by or
for an LSE, is being developed by an LSE, or is being developed for
purposes of a sale to a commercial, industrial, or other large end-
use customer.
    \1265\ AEE Initial Comments at 23; Clean Energy Associations
Initial Comments at 35; CREA and NewSun Initial Comments at 58-70;
EPSA Initial Comments at 9; Interwest Initial Comments at 19-20;
SEIA Initial Comments at 18; Shell Initial Comments at 16.
---------------------------------------------------------------------------

    651. Several commenters argue that the option for interconnection
customers to demonstrate commercial readiness by showing that the
generating facility is being developed for purposes of a sale to an
end-use customer suffers a timing challenge because it is nearly
impossible for the independent power producer to price a sales contract
to a retail customer, or the customer having much interest in
discussing the transaction, without having reasonable certainty as to
the generating facility's likely interconnection costs.\1266\
---------------------------------------------------------------------------

    \1266\ AEE Initial Comments at 22-23; CREA and NewSun Initial
Comments at 59; SEIA Initial Comments at 19-20; Shell Initial
Comments at 14; Vistra Initial Comments at 6.
---------------------------------------------------------------------------

    652. SoCal Edison recommends that the Commission clarify or give
additional examples of reasonable evidence that a proposed generating
facility has been selected in an LSE's resource solicitation process or
allow a transmission provider to determine how this option can be
met.\1267\ SoCal Edison states that evidence that a proposed generating
facility has been short-listed in an LSE request for offer should be
considered reasonable evidence for moving into the facilities study.
---------------------------------------------------------------------------

    \1267\ SoCal Edison Initial Comments at 8.
---------------------------------------------------------------------------

    653. Several commenters argue that the third readiness
demonstration option, a provisional LGIA,\1268\ is likely unworkable as
well because it would require independent power producers to assume
almost all the risk of the network upgrade costs without knowing those
costs.\1269\ On the other hand, CAISO asserts that interconnection
customers could escape financial consequences and bypass the NOPR's
requirements through the provisional LGIA option.\1270\ CAISO argues
that, at a minimum, the Commission should allow transmission providers
to provide the provisional LGIA option where they believe it will work,
but not require all transmission providers to enable interconnection
customers to bypass commercial readiness through provisional LGIAs.
---------------------------------------------------------------------------

    \1268\ A provisional LGIA that has been filed at the Commission
executed, or requested to be filed unexecuted, which is not in
suspension pursuant to article 5.16 of the LGIA, and includes a
commitment to construct the generating facility.
    \1269\ AEE Initial Comments at 23-24; CREA and NewSun Initial
Comments at 59-63; SEIA Initial Comments at 20-23.
    \1270\ CAISO Initial Comments at 20-21.
---------------------------------------------------------------------------

    654. SoCal Edison and CAISO recommend that the Commission provide
additional guidance on, or more clearly define, the term ``provisional
LGIA.'' \1271\ CAISO also states that it is unclear how interconnection
customers that have yet to be studied could submit provisional LGIAs
because LGIAs describe the network upgrades and facilities from
interconnection studies.\1272\ CAISO states that interconnection
customers are likely to request provisional LGIAs because demonstrating
commercial readiness in RTOs/ISOs is generally impossible until after
studies are complete.
---------------------------------------------------------------------------

    \1271\ SoCal Edison Initial Comments at 8; CAISO Initial
Comments at 20.
    \1272\ CAISO Initial Comments at 20.
---------------------------------------------------------------------------

    655. Commenters claim that the record does not support adopting the
proposed commercial readiness framework within RTOs/ISOs, arguing that
it would be unreasonable and unduly discriminatory.\1273\ These
commenters argue that the record in RTOs/ISOs does not support the
NOPR's assertion that generating facilities are generally not
constructed without some form of off-take agreement. They assert that
the commercial readiness criteria should not be required at all in RTO/
ISO regions (with locational marginal price-based markets), where
generating facilities can move forward in many cases without a specific
off-taker. Some commenters also argue that an RTO/ISO should not have
to evaluate contracts for the sale of a generating facility's output or
determine whether the generating facility has been selected in a
resource plan or resource solicitation process in

any of the potentially multiple states within its footprint.\1274\
---------------------------------------------------------------------------

    \1273\ ACE-NY Initial Comments at 6-7; AEE Initial Comments at
22; AES Clean Energy Initial Comments at 16-17; CESA Initial
Comments at 9-10; Clean Energy Associations Initial Comments at 38;
PJM Initial Comments at 33-34; Public Interest Organizations Initial
Comments at 28-29; SEIA Initial Comments at 23-24.
    \1274\ MISO Initial Comments at 63; MISO TOs Initial Comments at
29; PJM Initial Comments at 33.
---------------------------------------------------------------------------

    656. Commenters argue that the proposed 10-business day cure period
to resolve potential commercial readiness deficiencies is insufficient
given the complicated business and technical decisions involved.\1275\
Invenergy states the interconnection process often extends for several
years and it is entirely possible that commercial arrangements may
change during that time.\1276\ Invenergy states that these changes may
require additional negotiations, but should not call into question the
customer's commitment to developing its project and risk being
withdrawn from the interconnection queue. [Oslash]rsted requests a 30-
business day cure period instead.\1277\
---------------------------------------------------------------------------

    \1275\ Invenergy Initial Comments at 21; [Oslash]rsted Initial
Comments at 13.
    \1276\ Invenergy Initial Comments at 21.
    \1277\ [Oslash]rsted Initial Comments at 13.
---------------------------------------------------------------------------

(2) Alternative Commercial Readiness Demonstrations
    657. Some commenters argue that the Commission should consider
expanding this list of proposed criteria to include other
demonstrations of commercial readiness, such as completion of
environmental, local, state, or Federal permitting processes.\1278\
CREA and NewSun, as well as Northwest and Intermountain, ask the
Commission to provide QFs a more relaxed readiness option than a fully
executed power purchase agreement, especially when a transmission
provider requires qualifying facilities to have a completed
interconnection study result to obtain a draft power purchase agreement
under its state Public Utility Regulatory Policies Act (PURPA)
implementation programs (e.g., PacifiCorp).\1279\ CREA and NewSun
suggest that the Commission could allow QFs to submit an affidavit from
the interconnection customer, stating that the avoided cost rates
offered are sufficient to finance and bring the QF into commercial
operation if interconnection can be obtained.\1280\ CREA and NewSun
contend that this option is consistent with the Commission's obligation
to adopt regulations that encourage development of QFs.
---------------------------------------------------------------------------

    \1278\ ClearPath Initial Comments at 9; CREA and NewSun Initial
Comments at 71; Enel Initial Comments at 47; Longroad Energy Initial
Comments at 17; Northwest and Intermountain Initial Comments at 11;
Vistra Initial Comments at 11.
    \1279\ CREA and NewSun Initial Comments at 72-73; Northwest and
Intermountain Initial Comments at 11.
    \1280\ CREA and NewSun Initial Comments at 73.
---------------------------------------------------------------------------

    658. Comments are mixed on the potential additional demonstrations
of commercial readiness on which the Commission requested comment in
the NOPR. Several commenters support the three potential other
readiness options suggested in the NOPR, or a combination
thereof.\1281\
---------------------------------------------------------------------------

    \1281\ Id. at 70-71; APS Initial Comments at 15; NERC Initial
Comments at 26-27; ENGIE Initial Comments at 5-6; Clean Energy
Associations Initial Comments at 39; Invenergy Initial Comments at
16-17; NESCOE Initial Comments at 13; NextEra Initial Comments at
25; Pattern Energy Initial Comments at 31-32; R Street Initial
Comments at 13; SEIA Initial Comments at 25; Tri-State Initial
Comments at 15.
---------------------------------------------------------------------------

    659. Other commenters oppose the various alternative demonstration
options. With regard to the first--evidence of a commitment to
participate in RTO/ISO markets--several commenters argue that the
proposal would be essentially meaningless because practically all
interconnection requests would qualify.\1282\
---------------------------------------------------------------------------

    \1282\ Indicated PJM TOs Initial Comments at 31-32; PJM Initial
Comments at 34.
---------------------------------------------------------------------------

    660. As for the second and third potential alternative
demonstration options--a site specific purchase order for generating
equipment specific to the interconnection request, or a statement
signed by an officer or authorized agent of the interconnection
customer attesting that the generating facility is to be supplied with
major electric generating components (such as wind turbines) with a
manufacturer's blanket purchase agreement to which the interconnection
customer is a party--PacifiCorp and Ameren oppose these options.\1283\
PacifiCorp argues that, although it originally adopted a similar
provision in its initial interconnection queue reform process, in the
course of administering its first two cluster studies, it determined
that this readiness option set a low hurdle that speculative
interconnection requests could easily overcome.\1284\ Similarly, SPP
does not support site-specific purchase orders or statements attesting
to supply of major components as evidence of commercial
readiness.\1285\ Enel asserts that it is inappropriate to require
procurement of major power equipment prior to an interconnection
request or, in many cases, even before executing an LGIA.\1286\ Enel
contends that requiring procurement of specific generating equipment
prior to applying for interconnection is detrimental to reliability
because newer technologies procured after the execution of an LGIA
often have advanced features that did not exist a few years earlier.
Enel explains that it procures major wind, solar, and battery
generation equipment between 12 and 24 months prior to energizing a new
generating facility to the transmission system, typically after
execution of an LGIA and a full investment review (including knowledge
of interconnection costs and schedules) are complete. Enel adds that a
generating facility without interconnection results carries too much
risk for interconnection customers and investors to risk significant
financial deposits to reserve site specific generation equipment.
Similarly, Xcel states that interconnection customers want the
flexibility to wait until the last minute to order equipment and start
construction, which results in different equipment being ordered than
initially expected.\1287\
---------------------------------------------------------------------------

    \1283\ Ameren Initial Comments at 17; PacifiCorp Initial
Comments at 31.
    \1284\ PacifiCorp Initial Comments at 31.
    \1285\ SPP Initial Comments at 10.
    \1286\ Enel Initial Comments at 46.
    \1287\ Xcel Initial Comments at 33.
---------------------------------------------------------------------------

    661. Some commenters argue that the proposed commercial readiness
requirements unduly discriminate against pumped storage projects, which
often do not have the commercial pathways and timelines associated with
other types of generating facilities.\1288\ Those commenters explain
that the development of a pumped storage project is an iterative
process of assessment and de-risking that takes several years to
complete, at a cost of tens of millions of dollars. They suggest that
achieving one of the following three criteria would be sufficient
evidence of commercial readiness for a pumped storage project: (1) a
filing of notice of intent to apply for an original license and pre-
application document with the Commission; (2) an executed memorandum of
understanding, letter of intent, or an equivalent term sheet with a
utility; or (3) selection of the project in an integrated resource plan
(IRP) process. They add that, in lieu of having achieved one of these,
a commercial readiness deposit of $2,000 per MW is appropriate. These
commenters ask the Commission to add the receipt of a Commission
license to the list of milestone developments in section 11.3 of the
pro forma LGIP.
---------------------------------------------------------------------------

    \1288\ Hydropower Commenters Initial Comments at 9, 25-26; rPlus
Initial Comments at 4.
---------------------------------------------------------------------------

    662. Commenters recommend several alternative bases to determine
commercial readiness, including: (1) a 50% generator tie line site
control requirement; \1289\ (2) a project development plan to determine
readiness; \1290\ (3) documentation of developer due diligence,
including

available transmission capacity and modeling; \1291\ (4) participating
in and meeting the eligibility requirements for a state-mandated
procurement program; \1292\ and (5) an executed firm point-to-point
transmission service agreement from the proposed point of
interconnection to a point of consumption for the generating facility's
output.\1293\
---------------------------------------------------------------------------

    \1289\ Enel Initial Comments at 45.
    \1290\ Xcel Initial Comments at 33.
    \1291\ SEIA Initial Comments at 25.
    \1292\ SoCal Edison Initial Comments at 8.
    \1293\ Avangrid Initial Comments at 15.
---------------------------------------------------------------------------

    663. To address the Commission's concerns while maintaining the
commercial viability of planned transmission projects for offshore
wind, Anbaric asks the Commission to consider requiring such projects
to make the following demonstrations to satisfy the commercial
readiness requirements: (1) site control of property near the point of
interconnection suitable for a converter station of a specified size
(expressed in MWs) needed to enable high voltage direct current (HVDC)
lines carrying offshore wind energy to be put onto the regional
transmission system; (2) site control of a property at a coastline
location suitable for the transition from seabed to terrestrial routes
sufficient to move the specified amount of MWs identified in
interconnection requests; and (3) a state procurement policy or goal to
procure a defined amount of offshore wind generation associated with a
planned transmission project within a defined time frame.\1294\
---------------------------------------------------------------------------

    \1294\ Anbaric Initial Comments at 17-18.
---------------------------------------------------------------------------

    664. Eversource supports the Commission's proposed commercial
readiness framework but asks the Commission to strengthen it by
requiring the interconnection customer to demonstrate project financing
(along with the current proposed requirements).\1295\ Eversource also
asks the Commission to require interconnection customers to provide a
preliminary project schedule that identifies all key milestones and
timelines.
---------------------------------------------------------------------------

    \1295\ Eversource Initial Comments at 18.
---------------------------------------------------------------------------

    665. Fervo Energy argues that, for cluster study and restudy
processes, the proposed framework should allow the interconnection
customer to demonstrate readiness by using a combination of options,
such as executed term sheets for a portion of the facility plus
deposits on a $/MW basis calculated from the quotient of the study
deposit amount and the proposed generating facility size.\1296\
---------------------------------------------------------------------------

    \1296\ Fervo Energy Initial Comments at 4.
---------------------------------------------------------------------------

    666. ENGIE and SEIA ask the Commission to make the commercial
readiness demonstration a requirement for entering into an LGIA.\1297\
ENGIE and SEIA assert that a later-stage commercial readiness
demonstration will allow independent power producers to make rational
business decisions based on reasonably certain network upgrade costs.
---------------------------------------------------------------------------

    \1297\ ENGIE Initial Comments at 6; SEIA Initial Comments at 25.
---------------------------------------------------------------------------

(3) Deposit in Lieu of Readiness
    667. Some commenters contend that the proposal to allow
interconnection customers to provide a deposit in lieu of demonstrating
commercial readiness does not cure the potential for undue
discrimination that results from retaining commercial readiness options
that are easily attained by incumbent, vertically integrated utilities
but infeasible for independent power producers.\1298\ These commenters
claim that, because it is nearly impossible for an independent power
producer to make any of the commercial readiness demonstrations
currently proposed, the deposit in lieu of meeting the commercial
readiness requirements would not be an ``option'' for independent power
producers but rather would be the only path forward in the
interconnection process.
---------------------------------------------------------------------------

    \1298\ AEE Initial Comments at 24; Clean Energy Associations
Initial Comments at 38; NextEra Initial Comments at 24; SEIA Initial
Comments at 22-25; Vistra Initial Comments at 6-7.
---------------------------------------------------------------------------

    668. Some commenters support the deposit in lieu of readiness
option, as proposed. For instance, SoCal Edison asserts that an
increased financial requirement via a deposit in lieu of demonstrating
commercial readiness should help to identify those interconnection
requests that are economically viable and to which the transmission
provider should focus its resources.\1299\ Northwest and Intermountain
state that providing interconnection customers with an option to
demonstrate commercial readiness through a deposit is essential to
ensuring a competitive market for generation by providing a way for
independent power producers to enter the interconnection queue.\1300\
MISO supports the concept of commercial readiness deposits, with the
first one due at the time of submission of an interconnection request,
which would then be forfeited if the interconnection request does not
result in an LGIA, and a second, higher deposit due at the time of
execution of an LGIA, to be refunded upon a generating facility
achieving commercial operation.\1301\ MISO also supports the
Commission's proposal to make these deposits separate from, and in
addition to, study deposits, as well as MISO's existing milestone
requirements in its interconnection study process. MISO believes that
these proposals could be a useful deterrent to speculative or unviable
interconnection requests entering into or lingering in MISO's
interconnection queue.
---------------------------------------------------------------------------

    \1299\ SoCal Edison Initial Comments at 9.
    \1300\ Northwest and Intermountain Initial Comments at 12.
    \1301\ MISO Initial Comments at 60.
---------------------------------------------------------------------------

    669. MISO TOs argue that, in keeping with the overall theme of
flexibility and respect for regional differences, the Commission should
afford transmission providers flexibility to adopt readiness
requirements and deposit amounts that are appropriate for their
regions.\1302\ MISO suggests deposits could consist of two components:
(1) a minimum amount per interconnection request, regardless of
proposed service levels, and (2) a per MW amount.\1303\ MISO asks that
the commercial readiness deposit increase the pool of money available
to offset cost shifts, and any additional monies be utilized to defray
the study costs of interconnection customers that actually reach
commercial operation.
---------------------------------------------------------------------------

    \1302\ MISO TOs Initial Comments at 29.
    \1303\ MISO Initial Comments at 61.
---------------------------------------------------------------------------

    670. Some commenters argue that allowing deposits and security to
be posted in lieu of demonstrating commercial readiness may not be
sufficient to accomplish the NOPR's goals,\1304\ and may, in fact,
hinder the NOPR's goals.\1305\ APPA-LPPC assert that the financial
commitments proposed in the NOPR, while not insignificant, do not
reflect the potentially substantial cost of continuing to tolerate the
ongoing uncertainty.\1306\ APS claims that, in its experience,
speculative interconnection requests are well-funded but may not be
commercially viable.\1307\ Tri-State asserts that the fact that all 53
applicants in its 2022 interconnection queue elected to provide
additional financial security at phase 1 in its study process, instead
of one of three readiness milestones, demonstrates that deposits are
not effective at deterring unready interconnection requests from
entering the interconnection queue.\1308\
---------------------------------------------------------------------------

    \1304\ APS Initial Comments at 15; EEI Initial Comments at 7-8;
Idaho Power Initial Comments at 7; Omaha Public Power Initial
Comments at 8; Southern Initial Comments at 8.
    \1305\ APPA-LPPC Initial Comments at 19; APS Initial Comments at
15; Omaha Public Power Initial Comments at 8; Southern Initial
Comments at 9-10.
    \1306\ APPA-LPPC Initial Comments at 19.
    \1307\ APS Initial Comments at 15.
    \1308\ Tri-State Initial Comments at 15-16.
---------------------------------------------------------------------------

    671. Other commenters recommend changes to the Commission's
proposal.

For instance, North Dakota Commission recommends either removing the
deposits in lieu of demonstrating readiness or increasing readiness
deposit amounts to an amount that provides a quantifiable, evidence-
based reduction in speculative interconnection requests.\1309\
---------------------------------------------------------------------------

    \1309\ North Dakota Commission Initial Comments at 5.
---------------------------------------------------------------------------

    672. PacifiCorp states that its interconnection process also allows
an interconnection customer to make a payment of $3,000/MW in lieu of
meeting commercial readiness demonstration requirements.\1310\
PacifiCorp expresses concern that the NOPR proposal would reduce the
payment obligation (in comparison to what is required today under
PacifiCorp's LGIP), thus lowering the bar for more speculative
interconnection requests to enter the interconnection queue and
increasing risks for further study delays.
---------------------------------------------------------------------------

    \1310\ PacifiCorp Initial Comments at 30.
---------------------------------------------------------------------------

    673. CAISO contends that the Commission's proposed deposit
requirements are low, such that any modern interconnection customer
could meet them.\1311\ CAISO questions whether the deposit requirements
(or any deposit requirements) would deter uncompetitive interconnection
requests or reduce interconnection queue sizes. CAISO argues that using
arbitrary figures to set deposit requirements is unlikely to yield
meaningful results. CAISO urges the Commission to gather more data or
hold a technical conference to develop meaningful deposit amounts,
based on data provided by transmission providers.
---------------------------------------------------------------------------

    \1311\ CAISO Initial Comments at 19-20.
---------------------------------------------------------------------------

    674. EEI and NRECA suggest further reducing potential risks of
speculative interconnection requests by making deposits non-
refundable.\1312\ NRECA argues that the deposit in lieu of readiness
should only be refunded when the interconnection customer has provided
an appropriate commercial readiness demonstration or achieves
commercial operation, adding that allowing any other refund of this
deposit dilutes the effectiveness of this readiness requirement.\1313\
EEI and NYTOs assert that a deposit in lieu of readiness should only be
allowed in limited circumstances.\1314\
---------------------------------------------------------------------------

    \1312\ EEI Initial Comments at 8; NRECA Initial Comments at 9.
    \1313\ NRECA Initial Comments at 29.
    \1314\ EEI Initial Comments at 7; NYTOs Initial Comments at 20.
---------------------------------------------------------------------------

    675. Commenters urge the Commission to decline to adopt a
commercial readiness standard that is tied to the status of an
interconnection customer's off-take arrangements and instead to adopt
an increasingly ``at-risk'' readiness deposit framework, similar to
what has been accepted in various RTOs/ISOs.\1315\ They contend that
more directly associating readiness deposits to the estimated costs and
likely impact to other interconnection customers if an interconnection
customer withdraws would provide greater accountability for
interconnection customers and transmission providers.\1316\
---------------------------------------------------------------------------

    \1315\ AEE Initial Comments at 20, 24-25; AES Clean Energy
Initial Comments at 16-19; Clean Energy Associations Initial
Comments at 39; EPSA Initial Comments at 10; Indicated PJM TOs
Initial Comments at 30-31; Invenergy Initial Comments at 16; MISO
Initial Comments at 64-65; R Street Initial Comments at 13; Shell
Initial Comments at 15-16.
    \1316\ AEE Initial Comments at 20, 24-25; AES Clean Energy
Initial Comments at 16- 19; Clean Energy Associations Initial
Comments at 39; EPSA Initial Comments at 10; Indicated PJM TOs
Initial Comments at 30-31; Invenergy Initial Comments at 16; MISO
Initial Comments at 64-65; R Street Initial Comments at 13; Shell
Initial Comments at 15-16.
---------------------------------------------------------------------------

    676. PJM and Omaha Public Power assert that the Commission should
consider basing the readiness deposit amount on an average cost of
network upgrades in the region determined during previous studies, as
this method would be based on a less arbitrary valuation than as
proposed.\1317\ SEIA urges the Commission to set the value of the
deposit amount as a percentage of the estimated network upgrade costs,
which should be capped at $2 million.\1318\ rPlus recommends a
commercial readiness deposit of $2,000/MW, noting that this figure is
common in industry practice.\1319\
---------------------------------------------------------------------------

    \1317\ Omaha Public Power Initial Comments at 8; PJM Initial
Comments at 35.
    \1318\ SEIA Initial Comments at 25.
    \1319\ rPlus Initial Comments at 4.
---------------------------------------------------------------------------

    677. Some commenters contend that the level of the proposed
readiness deposits is too high and should be significantly
revised.\1320\ Pattern Energy requests that the Commission clarify if
these deposits are additive or whether they would require an
interconnection customer to have available seven times the study
deposit amount by the time the interconnection request reaches the
facilities study phase. Pattern Energy states that if the payments are
additive, then the Commission would be requiring an interconnection
customer to have 14 times its initial study deposit on hand by the time
the interconnection customer reaches the LGIA milestone, which Pattern
Energy contends would be unreasonable.\1321\
---------------------------------------------------------------------------

    \1320\ CREA and NewSun Initial Comments at 63; ACE-NY Initial
Comments at 7; Invenergy Initial Comments at 15-16.
    \1321\ Pattern Energy Initial Comments at 31.
---------------------------------------------------------------------------

    678. Invenergy argues that depositing as much as $3.5 million
before learning how much must be spent on network upgrades is not
reasonable.\1322\ ACE-NY argues that the deposit values for the second
cluster and beyond should be limited to just two times the study
deposit amount.\1323\ CREA and NewSun contend that the hefty deposits
will bar smaller companies with less access to capital from competing
and entering the interconnection study process.\1324\ CREA and NewSun
argue that the NOPR's deposit levels are purely arbitrary and appear
aimed at driving interconnection customers out of the interconnection
process rather than measurably improving the process.
---------------------------------------------------------------------------

    \1322\ Invenergy Initial Comments at 15-16.
    \1323\ ACE-NY Initial Comments at 7.
    \1324\ CREA and NewSun Initial Comments at 65.
---------------------------------------------------------------------------

    679. National Grid requests clarification that transmission
providers may deduct from a to-be-returned deposit any expenses
incurred by the transmission provider in administering the respective
escrow account.\1325\
---------------------------------------------------------------------------

    \1325\ National Grid Initial Comments at 24-25.
---------------------------------------------------------------------------

    680. Pattern Energy contends that the Commission must clarify that
deposits will be applied toward future security obligations if a
generating facility reduces its size as it progresses through the
interconnection process.\1326\ Pattern Energy states that if the size
of an interconnection request is reduced, in accordance with allowable
reduction amounts, then: (1) future deposits should be based on the new
generating facility size; and (2) previous deposits should be credited
toward future deposits based on the portion of those previous deposits
that are associated with the reduced MW quantity.
---------------------------------------------------------------------------

    \1326\ Pattern Energy Initial Comments at 31.
---------------------------------------------------------------------------

(d) Requests for Flexibility
    681. Several commenters generally support the proposed commercial
readiness requirements but ask the Commission to provide flexibility to
allow transmission providers to determine the detailed readiness and
deposit criteria for their footprint.\1327\ These commenters argue that
such measures need to be carefully balanced to avoid overly burdening
interconnection customers with legitimate interconnection requests that
are delayed for reasons out of their control. For example, NY
Commission

and NYSERDA explain that, in New York, renewable energy certificates
procured by NYSERDA could demonstrate commercial readiness, and a
similar state agency certificate could be used in a different
state.\1328\
---------------------------------------------------------------------------

    \1327\ Avangrid Initial Comments at 15; Dominion Initial
Comments at 25; Dominion Reply Comments at 10, 13-14; El Paso
Electric Initial Comments at 4; Invenergy Initial Comments at 12;
ISO-NE Initial Comments at 31; National Grid Initial Comments at 25;
NEPOOL Initial Comments at 14; NESCOE Reply Comments at 8; NY
Commission and NYSERDA Initial Comments at 8; NYISO Initial Comments
at 23; NYTOs Initial Comments at 20; Pacific Northwest Utilities
Initial Comments at 2-4.
    \1328\ NY Commission and NYSERDA Initial Comments at 9.
---------------------------------------------------------------------------

    682. Pacific Northwest Utilities claim that it would be difficult
for transmission providers to implement the commercial readiness
proposal in regions such as the Northwest without reforming RFP
processes and coordinating amongst multiple transmission owners and
LSEs.\1329\ Pacific Northwest Utilities explain that many generating
facilities in the Pacific Northwest use interconnection and
transmission services crossing multiple balancing authority areas,
which require coordination of timelines, milestones, and off-ramps in
both the RFPs and interconnection queues.
---------------------------------------------------------------------------

    \1329\ Pacific Northwest Utilities Initial Comments at 4-5.
---------------------------------------------------------------------------

(e) Miscellaneous
    683. Enel supports the proposed modification to pro forma LGIP
section 11.3 to require submission of the development milestones
concurrently with returning the executed LGIA so that the
interconnection customer cannot avoid the demonstration required by pro
forma LGIP section 11.3 by suspending its LGIA.\1330\ However, Enel
notes that it is important for the Commission to retain (and
reinstitute where removed by specific transmission providers) the
ability for interconnection customers to suspend work under their LGIAs
for up to three years.
---------------------------------------------------------------------------

    \1330\ Enel Initial Comments at 45.
---------------------------------------------------------------------------

    684. Arizona Commission generally supports the prioritization of
commercially ready projects and agrees with the proposed readiness
criteria, but also encourages the Commission to consider the
possibility of allowing market forces to provide discipline to the
interconnection process, such as by allowing transmission owners to
prioritize generation projects through the use of competitive
solicitations.\1331\
---------------------------------------------------------------------------

    \1331\ Arizona Commission Initial Comments at 2.
---------------------------------------------------------------------------

    685. The Colorado Commission generally supports prioritizing
commercially ready interconnection requests and agrees with the
proposed readiness criteria.\1332\ However, the Colorado Commission
emphasizes that the NOPR does not include a mechanism to prioritize
among the many viable, and competing, interconnection requests when
interconnection service capacity is scarce.\1333\ The Colorado
Commission argues that, under existing RTO/ISO interconnection
processes as well as the proposed revised pro forma LGIP, there is
limited ability in the interconnection process to consider the
generating facility's broader attributes from a system perspective,
including cost, timing, location, and resource type.\1334\ The Colorado
Commission asserts that new proposed generating facilities would likely
be stuck in cluster studies with no clear or timely prioritization that
ensures that the lowest cost or highest value generating facilities
come online quickly and at a reasonable cost. The Colorado Commission
contends that prioritizing native load and end-use customers and third-
party owned generating facilities through competitive bid processes is
the most logical criteria to maintain a reliable system at reasonable
cost.\1335\ To accomplish this, and help the system rationally move
forward in a timely manner, the Colorado Commission suggests adding the
following additional language to the commercial readiness section:
``RTOs and Transmission Providers shall have the ability to create a
separate cluster study process or other mechanisms to prioritize
executed contracts that serve and benefit native load in accordance
with local load-serving resources needs and priorities as determined
through equitable competitive bid processes.'' \1336\
---------------------------------------------------------------------------

    \1332\ Colorado Commission Initial Comments at 1.
    \1333\ Id. at 2.
    \1334\ Id. at 7.
    \1335\ Id. at 28.
    \1336\ Id. The Colorado Commission also notes that some or all
of this proposed language may be more appropriate for section 4
(Queue Position) of the pro forma LGIP.
---------------------------------------------------------------------------

    686. AEE, on the other hand, responds to the Colorado Commission by
arguing that allowing transmission providers to prioritize generating
facilities that are selected through IRP processes or utility
procurements and that benefit native load could allow vertically
integrated utilities to push preferred generating facilities through
the interconnection process and therefore comes with a risk of
discrimination.\1337\
---------------------------------------------------------------------------

    \1337\ AEE Reply Comments at 16.
---------------------------------------------------------------------------

    687. CESA argues that proposals to prioritize and favor certain
generating facilities and interconnection customers must be rejected as
violating the Commission's long-standing policies on open access and
non-discriminatory interconnection procedures.\1338\ CESA contends that
the Colorado Commission's proposal is therefore unduly discriminatory
and also goes well beyond what the Commission contemplated in the NOPR.
---------------------------------------------------------------------------

    \1338\ CESA Reply Comments at 11.
---------------------------------------------------------------------------

    688. Clean Energy Associations state that they support the
Commission's instead accepting regionally specific proposals that would
align the interconnection process with competitive procurements
associated with resource planning, rather than placing them at
odds.\1339\ Clean Energy Associations state that projects selected
though competitive procurement processes are ready projects, and these
processes attempt to consider the transmission (interconnection service
and transmission service) costs and the production-related costs. Clean
Energy Associations state that one way to accomplish this might be to
grant resource solicitation clusters a queue position distinct from
other clustered projects, but that concept could be extended to ensure
more certainty to the bidder and the resource planning entity of the
interconnection and delivery requirements and associated rights.
---------------------------------------------------------------------------

    \1339\ Clean Energy Associations Initial Comments at 38.
---------------------------------------------------------------------------

    689. Bonneville sees value in applying commercial readiness
requirements to the pro forma SGIP and SGIA and contends that failing
to do so could create a perverse incentive for interconnection
customers to break up large projects into smaller projects to avoid
stringent commercial readiness requirements under the pro forma
LGIP.\1340\
---------------------------------------------------------------------------

    \1340\ Bonneville Initial Comments at 24-25.
---------------------------------------------------------------------------

iii. Commission Determination
    690. We adopt a modified NOPR proposal to revise sections 3.4.2,
7.5, 8.1, and 11.3 of the pro forma LGIP, insofar as they require
interconnection customers to submit commercial readiness deposits, and
we do not adopt the NOPR proposal insofar as it included non-financial
commercial readiness demonstrations in the pro forma LGIP. To
effectuate the requirements that we adopt in this final rule, we modify
the proposed revisions to sections 3.4.2, 7.5, and 8.1 to remove the
proposed readiness demonstrations and to require that the
interconnection customer submit the commercial readiness deposit at the
beginning of each study in the cluster study process (i.e., the initial
cluster study, the cluster restudy, and the facilities study). For the
commercial readiness deposit submitted to enter the cluster restudy and
the commercial readiness deposit to enter the facilities study, we also
modify the NOPR proposal to move from commercial readiness deposits
based on study deposit amounts to commercial

readiness deposits based on percentages of the interconnection
customer's identified network upgrade costs. We also modify proposed
section 11.3 of the pro forma LGIP to remove the language providing
that one of the proposed readiness demonstrations can be provided when
the interconnection customer returns the executed LGIA or requests that
the LGIA be filed unexecuted. We also adopt the definition of
commercial readiness deposit but do not adopt the definition of
commercial readiness demonstration. We discuss each in turn.
    691. We believe that, along with the other reforms adopted in this
final rule, the commercial readiness deposits we require will address
the need for reform underlying this section by helping reduce the
submission of speculative, commercially non-viable interconnection
requests into interconnection queues.\1341\ Further, because the
interconnection customer's total commercial readiness deposit held by
the transmission provider increases as the interconnection process
proceeds, we find that this approach will encourage interconnection
customers not ready to proceed through the interconnection process--or
whose projects become commercially non-viable during the
interconnection process--to withdraw earlier in the process, thereby
lessening the incidence of late-stage withdrawals that result in delays
and restudies. Similarly, by basing the cluster restudy and the
facilities study commercial readiness deposits on the interconnection
customer's identified network upgrade cost assignment, an
interconnection customer will be subject to the cost consequences of
its estimated network upgrades earlier. As a result, this approach will
encourage interconnection customers to withdraw earlier in the
interconnection process if they face large network upgrade initial cost
assignments or encounter other concerns that cause their
interconnection request to be uneconomic. By reducing the number of
speculative interconnection requests submitted into the interconnection
queue and the number of late-stage withdrawals of interconnection
requests, we believe that the commercial readiness deposit requirements
that we adopt herein will also enable commercially viable
interconnection requests to progress more quickly through the
interconnection process. Transmission providers will be able to focus
their resources on those interconnection requests most likely to
achieve commercial operation, to the benefit of all interconnection
customers.\1342\
---------------------------------------------------------------------------

    \1341\ SoCal Edison Initial Comments at 9, Northwest and
Intermountain Initial Comments at 12, MISO Initial Comments at 60,
PJM Initial Comments at 35.
    \1342\ Alliant Energy Initial Comments at 6; Avangrid Initial
Comments at 9; Consumer Energy Initial Comments at 5; EEI Initial
Comments at 6-7; NERC Initial Comments at 26; Google Initial
Comments at 20; Idaho Power Initial Comments at 7; MISO TOs Initial
Comments at 28-29; NARUC Initial Comments at 10; NESCOE Initial
Comments at 13; North Carolina Commission and Staff Initial Comments
at 26; Ohio Commission Consumer Advocate Initial Comments at 12;
Omaha Public Power Initial Comments at 9; Pacific Northwest
Utilities Initial Comments at 3, 6; Pennsylvania Commission Initial
Comments at 14; U.S. Chamber of Commerce Initial Comments at 9; UMPA
Initial Comments at 5.
---------------------------------------------------------------------------

    692. The commercial readiness deposit amounts proposed in the NOPR
are tied to generating facility size, as they are based on the initial
study deposit, which is likewise tied to generating facility size. We
adopt the NOPR proposal for the initial commercial readiness deposit,
where the interconnection customer pays a deposit of two times the
study deposit to enter the cluster study. Basing the initial commercial
readiness deposit on the size of the generating facility aligns the
size of the deposit roughly with any impact from a withdrawal of the
interconnection request, as generally, all else equal, increasing the
size of the generating facility increases the likelihood of larger,
more costly network upgrades and a greater change in interconnection
study inputs.
    693. However, we are persuaded by several commenters that
commercial readiness deposits should be based on assigned network
upgrade costs.\1343\ Therefore, we modify the remaining commercial
readiness deposits (i.e., the second and third commercial readiness
deposits) such that, rather than relying on multiples of the initial
study deposit, once estimates of network upgrade costs are available,
the commercial readiness deposits equate to increasing percentages of
the interconnection customer's identified network upgrade cost
assignment. Specifically, we adopt a deposit structure where the
commercial readiness deposit to enter the cluster restudy is the amount
required to bring the total amount of the interconnection customer's
commercial readiness deposit to 5% of the interconnection customer's
network upgrade cost assignment identified in the cluster study, and
the commercial readiness deposit to enter the facilities study is the
amount required to bring the total amount of the interconnection
customer's commercial readiness deposit to 10% of the interconnection
customer's network upgrade cost assignment identified in the cluster
study or restudy, as applicable.\1344\ We find that tying the
commercial readiness deposits to the network upgrade cost estimate
requires the interconnection customer to deposit an amount that
corresponds to its network upgrade cost estimates earlier and, thereby,
can incentivize interconnection customers with large network upgrade
cost estimates to withdraw at earlier points in the interconnection
process to the extent the network upgrade cost assignment causes the
interconnection request to no longer be viable. This approach achieves
the Commission's goals of ensuring that interconnection customers are
able to interconnect in a reliable, efficient, transparent, and timely
manner.
---------------------------------------------------------------------------

    \1343\ For assertions that more directly associating commercial
readiness deposits to the estimated costs and likely impact to other
interconnection customers in the case of withdrawal would provide
greater accountability for interconnection customers and
transmission providers, see AEE Initial Comments at 24-25; AES Clean
Energy Initial Comments at 16- 19; CAISO Initial Comments at 23-24;
Clean Energy Associations Initial Comments at 39; EPSA Initial
Comments at 10; Indicated PJM TOs Initial Comments at 30-31;
Invenergy Initial Comments at 16; MISO Initial Comments at 64-65; R
Street Initial Comments at 13; Shell Initial Comments at 15-16.
    \1344\ See SEIA Initial Comments at 25 (urging the Commission to
set the value of the commercial readiness deposit as a percentage of
the estimated network upgrade costs).
---------------------------------------------------------------------------

    694. We decline to adopt the non-financial commercial readiness
demonstrations proposed in the NOPR. We find that the non-financial
commercial readiness demonstrations are not necessary to address the
subject of these reforms--providing additional deterrence of
speculative, commercially non-viable interconnection requests--given
the significant, increasing commercial readiness deposits we adopt
instead.\1345\
---------------------------------------------------------------------------

    \1345\ See N.Y. v. FERC, 535 U.S. 1, 27 (2002) (declining to
require reforms where ``FERC determined that the remedy it ordered
constituted a sufficient response to the problems FERC had
identified'').
---------------------------------------------------------------------------

    695. We are also persuaded by commenters who express concerns that
the non-financial commercial readiness demonstrations in the NOPR
proposal may not necessarily serve as appropriate indicators of a
proposed generating facility's commercial viability on a national
basis. In some instances, the proposed non-financial commercial
readiness demonstrations may be unavailable to interconnection
customers with commercially viable projects. For example, this may be
true as a result of a misalignment of the timing between resource
procurement

decisions and interconnection study processes or inconsistency with a
relevant local commercial practice, rather than because the proposed
generating facilities lack commercial viability.
    696. As commenters note, resource procurement efforts across the
country all have different timelines, and the timeline to demonstrate
commercial readiness proposed in the NOPR was not tailored to meet the
timelines of multiple state procurement efforts.\1346\ As commenters
explain, an interconnection queue position is often a precondition of
offering into a resource solicitation.\1347\ We agree that, absent a
regionally tailored tariff process pursuant to which commercial
readiness criteria could be aligned with applicable resource
solicitation processes, the commercial readiness criteria proposed in
the NOPR may not be workable in markets where merchant sales are
common, and this generally applicable final rule is not an appropriate
forum to dictate regionally tailored solutions.
---------------------------------------------------------------------------

    \1346\ AEE Initial Comments at 21; SoCal Edison Initial Comments
at 7-8; Vistra Initial Comments 6-10.
    \1347\ See Cypress Creek Initial Comments at 22-23; NextEra
Initial Comments at 24; Public Interest Organizations Initial
Comments at 29.
---------------------------------------------------------------------------

    697. We are further concerned that there may be trade-offs entailed
in requiring the proposed non-financial commercial readiness
demonstrations, which are more appropriately assessed on a regional,
rather than national basis. We agree with Enel that ratepayers may
benefit from generating facilities being selected in competitive
processes that consider the facilities' interconnection costs and
schedule, which cannot be done if off-take arrangements are made prior
to applying for interconnection service.
    698. In addition, we are concerned that the proposed non-financial
commercial readiness demonstrations could incentivize power purchasers
in some regions to execute purchase contracts with interconnection
customers whose generating facilities will later be determined to be
commercially non-viable. As commenters note, this could lead to
purchasers having to start the procurement process over or choose to
over-procure as insurance against potential contract termination, to
the detriment of reliability and cost.
    699. Therefore, we are persuaded to adopt a framework that requires
a commercial readiness deposit for all interconnection customers,
similar to what the Commission has accepted in various RTO/ISO
regions.\1348\ We find that requiring deposits in amounts substantial
enough to demonstrate commitment to reaching commercial operation at
progressive milestones throughout the interconnection process will be a
sufficient deterrent to speculative behavior--especially when
considered as part of the comprehensive package of reform, including
increased site control requirements, increased study deposits, and
withdrawal penalties, established by this final rule.
---------------------------------------------------------------------------

    \1348\ See, e.g., Midcontinent Indep. Sys. Operator, Inc., 158
FERC ] 61,003 (2017); Sw. Power Pool, Inc., 178 FERC ] 61,015
(2022).
---------------------------------------------------------------------------

    700. In the NOPR, the Commission acknowledged the potential that
certain non-financial commercial readiness demonstrations could provide
an unduly discriminatory or preferential advantage to projects being
developed by transmission providers or their affiliates.\1349\ As
summarized above, several commenters have raised--and elaborated on--
those concerns. Because we find that the commercial readiness deposits
that we adopt in this final rule are sufficient to address the relevant
need for reform, and therefore do not adopt the proposed non-financial
commercial readiness demonstrations, we need not further address those
concerns in this final rule.
---------------------------------------------------------------------------

    \1349\ NOPR, 179 FERC ] 61,194 at P 132.
---------------------------------------------------------------------------

    701. We recognize that the Commission has previously accepted
proposals that include commercial readiness demonstration requirements
similar to those proposed in the NOPR. Although we find that commercial
readiness deposits are sufficient to address the need for reform in
this proceeding, this finding does not preclude transmission providers
from adopting non-financial commercial readiness demonstrations,
provided they meet the relevant standards when requesting a variation,
as discussed above.
    702. Some commenters suggest that the Commission could add
government and environmental permits as commercial readiness
demonstrations as an indicator of commercial readiness that is viable
both for independent power producers and for transmission providers and
their affiliates.\1350\ Although the record provides some support for
this, we are concerned that permits and studies may expire due to the
length of the interconnection process, and those re-permitting and
restudy efforts are still at risk of rejection or failure, which could
lead to late-stage withdrawals.\1351\ We are also concerned about the
possible administrative burden placed on transmission providers, as
they must determine which types of permits should be accepted as
commercial readiness demonstrations and evaluate the validity of
different permits submitted by interconnection customers.
---------------------------------------------------------------------------

    \1350\ ClearPath Initial Comments at 9; CREA and NewSun Initial
Comments at 71; Enel Initial Comments at 47; Longroad Energy Initial
Comments at 17; Northwest and Intermountain Initial Comments at 11;
Vistra Initial Comments at 11.
    \1351\ Enel Initial Comments at 47.
---------------------------------------------------------------------------

    703. Pattern Energy requests that the Commission clarify whether
the commercial readiness deposits are additive, meaning that, as each
phase of the interconnection process is reached, the full amount of
each new readiness deposit must be added on top of the full amounts of
earlier readiness deposits (as opposed to merely increasing the total
amount of the aggregate readiness deposit to match the level specified
for that phase). In response, we clarify that, as modified, the
commercial readiness deposits in sections 7.5 and 8.1 of the pro forma
LGIP make clear that for the second and third commercial readiness
deposits, the interconnection customer is only required to submit an
additional deposit that brings the total commercial readiness deposit
to the amount specified in sections 7.5 and 8.1 of the pro forma LGIP
(5% of the interconnection customer's identified network upgrade cost
estimate and 10% of the interconnection customer's identified network
upgrade cost estimate, respectively).
    704. In response to comments on the magnitude of commercial
readiness deposits (e.g., too high or too low), we reiterate that the
commercial readiness deposits are part of a package of reforms meant to
deter speculative behavior that also includes site control requirements
and withdrawal penalties. Thus, the commercial readiness deposits are
not intended to be of such magnitude to alone prevent speculative
behavior as they are intended to work together with other reforms
adopted in this final rule, such as site control and withdrawal
penalties. We believe that the deposits should not be so high that
viable projects from smaller developers are unable to enter the queue.
At the same time, they will only achieve the aims if they are
sufficiently high to serve as some deterrent, in concert with the other
relevant reforms adopted in this final rule. In response to National
Grid's request that the final rule provide for the deduction from a to-
be-returned deposit of any expenses incurred by the transmission
provider or RTO/ISO in administering the respective escrow account, we
note that Order No. 2003

required the collection of various deposits without addressing this
type of administrative expense.\1352\ We find, in this instance, that
there is no need to deviate from Order No. 2003, and we decline to
adopt tariff revisions to address the management of an escrow account.
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    \1352\ Order No. 2003, 104 FERC ] 61,103 at PP 91-92, 100, 101,
218-219.
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    705. In response to Pattern Energy's request for clarification of
the commercial readiness deposit amounts in the event that an
interconnection customer reduces the size of a proposed generating
facility, we clarify that because the modified commercial readiness
deposit structure is based on network upgrade cost estimates, a size
reduction to a proposed generating facility may or may not impact the
remaining commercial readiness deposits, depending on whether the size
reduction reduces the interconnection customer's assigned network
upgrade costs. This is consistent with the requirements for entering
the cluster restudy and facilities study adopted in pro forma LGIP
sections 7.5 and 8.1, respectively, which require commercial readiness
deposits based on percentages of the interconnection customer's
identified network upgrade costs.
    706. Pattern Energy's request to require that previous deposits be
credited towards future deposits based on the portion of those previous
deposits that are associated with the reduced MW quantity therefore
represents the modified commercial readiness deposit framework we
adopt. Under this modified framework, an interconnection customer's
previous commercial readiness deposits are effectively credited when it
pays later commercial readiness deposits (i.e., the second and third
commercial readiness deposits); it pays the required amount of a
commercial readiness deposit less the amounts paid for through earlier
commercial readiness deposits.
    707. We also decline to adopt Bonneville's suggestion to add the
commercial readiness provisions to the SGIP because the record does not
demonstrate a need for such reform at this time. Because we are not
adopting the proposed non-financial commercial readiness
demonstrations, we do not address comments proposing revisions or
clarifications to those demonstrations. Additionally, several
commenters provide additional suggestions for the NOPR proposal,
including: (1) addressing the Commission's rules for suspending an
LGIA; \1353\ (2) addressing queue priority; \1354\ and (3) better
supporting competitive procurement processes.\1355\ We find these
comments to be outside the scope of the NOPR.
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    \1353\ Clean Energy Associations Initial Comments at 38; PPL
Initial Comments at 10.
    \1354\ Arizona Commission Initial Comments at 2; Colorado
Commission Initial Comments at 1-2.
    \1355\ Clean Energy Associations Initial Comments at 38;
Colorado Commission Initial Comments at 1-2, 7, 28.
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d. LGIA Deposit
i. NOPR Proposal
    708. In the NOPR, the Commission proposed to require
interconnection customers to submit a deposit equal to nine times the
amount of its study deposit when executing the LGIA or requesting the
filing of an unexecuted LGIA. The Commission explained that this
deposit would be fully refunded once the generating facility achieves
commercial operation, but if the interconnection customer withdraws
after executing the LGIA or after requesting the filing of an
unexecuted LGIA, this deposit would be refunded subject to the
withdrawal penalty.\1356\ The Commission also sought comment on whether
to adopt additional provisions or a different framework that would
require larger proposed generating facilities to provide a higher
deposit amount--such as a per MW framework.\1357\
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    \1356\ NOPR, 179 FERC ] 61,194 at P 108.
    \1357\ Id. P 110.
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ii. Comments
    709. MISO supports the proposal to require interconnection
customers to submit a deposit equal to nine times the amount of its
study deposit at LGIA execution because MISO believes it is necessary
to continue the commercial readiness deposit and withdrawal penalty
framework until the interconnection request achieves commercial
operation.\1358\ Shell supports the security deposit obligations used
in MISO's and SPP's generator interconnection processes, which include
a deposit at LGIA execution.\1359\
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    \1358\ MISO Initial Comments at 51.
    \1359\ Shell Initial Comments at 19.
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    710. Invenergy argues that requiring more security at LGIA
execution, in addition to the other proposed burdens on interconnection
customers in the NOPR, goes beyond the goal of disincentivizing
speculative interconnection requests to creating potentially
prohibitive burdens on all interconnection customers, including those
with commercially viable proposed generating facilities.\1360\
Invenergy contends that, while a deposit based on study costs may make
sense in earlier stages of the study process when assigned network
upgrade costs are not yet known, it is not appropriate after an LGIA is
executed and assigned network upgrade costs are known and memorialized.
ACE-NY and AES oppose any additional deposits due from an
interconnection customer at the signing of the LGIA that are not tied
to network upgrade costs.\1361\ AES asserts that in many RTOs/ISOs,
interconnection customers have to post security for a portion, if not
all, of the assigned network upgrade costs associated with an
interconnection request, and such posted security is a sufficient
incentive to keep an interconnection customer engaged so that they will
complete a generating facility after the LGIA is executed.\1362\
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    \1360\ Invenergy Initial Comments at 6.
    \1361\ ACE-NY Initial Comments at 5; AES Initial Comments at 14.
    \1362\ AES Initial Comments at 14.
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    711. Several commenters argue that the Commission's LGIA deposit
proposal is excessive and potentially exposes ratepayers to unjust and
unreasonable costs.\1363\ [Oslash]rsted would support a lower amount,
such as two times the study deposit, because it believes that the