interconnection request, including emergency requests, enter through
the cluster request window, but that an emergency request be
accelerated if it meets the pre-determined and publicly available
requirements.
---------------------------------------------------------------------------

    \781\ ENGIE Initial Comments at 3.
---------------------------------------------------------------------------

    387. A number of commenters oppose an option to process
interconnection requests outside of the annual cluster study
process.\782\ A few parties argue that maintaining an option to process
interconnection requests outside of the annual cluster study process
would likely create an administrative burden for transmission providers
without a clear benefit.\783\ Some commenters assert that processing
certain interconnection requests outside of the interconnection queue
could increase the time needed to complete the cluster studies or could
increase restudies.\784\
---------------------------------------------------------------------------

    \782\ Bonneville Initial Comments at 9; Enel Initial Comments at
19; PacifiCorp Initial Comments at 21; PJM Initial Comments at 23;
PPL Initial Comments at 12.
    \783\ Enel Initial Comments at 19; PacifiCorp Initial Comments
at 21; PJM Initial Comments at 23.
    \784\ Bonneville Initial Comments at 9; Enel Initial Comments at
19; NRECA Initial Comments at 20.
---------------------------------------------------------------------------

    388. Some commenters express concern that such an option could
become overly used or abused.\785\ Enel asserts that if interconnection
requests could be accepted for processing outside the annual cluster
study process, especially on an individual basis, there would be a high
degree of interest because this would allow interconnection customers
to avoid being allocated the costs of regional upgrades that result
from many cluster studies.\786\ Bonneville asserts that permitting an
interconnection request to be processed outside of the annual cluster
study process would create a ``perverse incentive'' for some
interconnection customers to forgo the cluster study process to avoid
cluster study requirements.\787\
---------------------------------------------------------------------------

    \785\ Bonneville Initial Comments at 9-10; Enel Initial Comments
at 19; MISO Initial Comments at 44; NRECA Initial Comments at 20.
    \786\ Enel Initial Comments at 19.
    \787\ Bonneville Initial Comments at 9-10.
---------------------------------------------------------------------------

    389. OMS states that it has considered the benefits of some sort of
a ``fast-lane process'' for resources that are more ``certain,'' like
those that have received all necessary permits and regulatory
approvals.\788\ OMS states that use of such a mechanism may be
important or necessary in the future to address reliability concerns,
but OMS explains that it is neutral on the proposal because bypassing
the interconnection queue invites a myriad of potential unintended
consequences that might not outweigh the value OMS otherwise envisions
in this type of mechanism.
---------------------------------------------------------------------------

    \788\ OMS Initial Comments at 8.
---------------------------------------------------------------------------

    390. PacifiCorp states that the Commission's proposal on this topic
is not clear.\789\ PacifiCorp states that, if the NOPR refers to an
interconnection customer's ability to request surplus or provisional
interconnection service or an informational interconnection study,
PacifiCorp supports maintaining these options. However, PacifiCorp
requests the Commission clarify that requests for such service will be
evaluated in the order that completed interconnection requests are
received. PacifiCorp states that it does not currently support
expanding non-cluster service and study offerings.
---------------------------------------------------------------------------

    \789\ PacifiCorp Initial Comments at 21.

---------------------------------------------------------------------------

    391. Regarding under what time frame and at what priority
interconnection requests should be studied outside of the cluster study
process, as compared to any active clusters, Fervo Energy recommends a
270-day time frame for completion of the study with secondary priority
to the active cluster studies.\790\
---------------------------------------------------------------------------

    \790\ Fervo Energy Initial Comments at 3.
---------------------------------------------------------------------------

iii. Commission Determination
    392. We decline to include an additional option in the pro forma
LGIP for transmission providers to process some interconnection
requests outside the annual cluster study process adopted in this final
rule. We find that establishing in the pro forma LGIP a separate
interconnection process outside the cluster study process could detract
from transmission providers' efforts to efficiently process cluster
studies--a point persuasively argued by commenters.\791\ A separate set
of interconnection studies outside of the cluster study process could
cause transmission providers to divert resources away from cluster
studies and cluster restudies. Such diversion could hinder the
transmission provider from meeting the cluster study and cluster
restudy deadlines adopted in this final rule, which would be
insufficient to ensure that interconnection customers are able to
interconnect to the transmission system in a reliable, efficient,
transparent, and timely manner. We also find that such an option in the
pro forma LGIP would be too open-ended, as it would leave a significant
amount of discretion to the transmission provider to create new study
processes for processing any types of interconnection requests it
chooses outside the cluster study process and could therefore result in
a separate but unduly discriminatory interconnection process. We
further find that establishing such an open-ended option in the pro
forma LGIP could create an incentive for some interconnection customers
to forgo the cluster study process, which could increase the time and
resources needed for transmission providers to complete the cluster
studies or could increase restudies.\792\
---------------------------------------------------------------------------

    \791\ Bonneville Initial Comments at 9; Enel Initial Comments at
19; NRECA Initial Comments at 20; PacifiCorp Initial Comments at 21;
PJM Initial Comments at 23.
    \792\ Bonneville Initial Comments at 9-10; Enel Initial Comments
at 19; MISO Initial Comments at 44; NRECA Initial Comments at 20;
PJM Initial Comments at 23.
---------------------------------------------------------------------------

    393. A number of commenters see benefits to establishing an option
in the pro forma LGIP for particular types of interconnection requests
to be processed outside of the annual cluster study process, such as
for generator replacement, projects ready for development, emergency
replacements, for certain special circumstances, or for transmission
providers who have too few interconnection requests to justify a
cluster study approach.\793\ However, we are not persuaded that
establishing such processes in the pro forma LGIP is necessary to
ensure that interconnection customers are able to interconnect to the
transmission system in a reliable, efficient, transparent, and timely
manner. We believe that processing such one-off interconnection
requests will be needed less often under the cluster study process
adopted in this final rule, and therefore, any benefits that exist to
processing some interconnection requests outside a transmission
provider's interconnection process may be outweighed by the benefit of
allowing transmission providers to conduct cluster studies efficiently
without diverting resources to a separate set of studies.
---------------------------------------------------------------------------

    \793\ AEP Initial Comments at 19; APPA-LPPC Initial Comments at
14-15; Clean Energy Associations Initial Comments at 21; Energy
Keepers Initial Comments at 4-5; Navajo Utility Initial Comments at
13; NRECA Initial Comments at 19-20; UMPA Initial Comments at 3-4.
---------------------------------------------------------------------------

    394. In response to the Iowa Commission's argument that state
commissions should be able to require studies outside of annual cluster
studies, we similarly find that any such studies would divert a
transmission provider's resources away from conducting the cluster
studies and cluster restudies.
    395. Regarding AEP's suggestion that those RTOs/ISOs that have
consolidated their small and large generator interconnection procedures
should be permitted to propose that all or some smaller-sized
generating facilities would be ``too small'' to be included in the
cluster, we note that the Commission did not propose the cluster study
process for small generating facilities subject to the pro forma SGIP.
    396. Finally, because we are not revising the pro forma LGIP to add
a new option for some interconnection requests to be processed outside
of the annual cluster study process, we find moot those comments on the
time frame and priority of interconnection requests studied outside of
the cluster study process.\794\ In response to PacifiCorp,\795\ we
clarify that requests for surplus interconnection service, or an
optional interconnection study, will continue to be processed as
received and outside of the cluster study process, and that this does
not entail an expansion of non-cluster service and study offerings.
---------------------------------------------------------------------------

    \794\ Fervo Energy Initial Comments at 3; Tri-State Initial
Comments at 12; Xcel Initial Comments at 24-25.
    \795\ PacifiCorp Initial Comments at 21.
---------------------------------------------------------------------------

o. Other Comments
i. Comments
    397. Some entities recommend automation or standardization of the
interconnection queue process and studies.\796\ NextEra states that the
proposed cluster study process time frame requires significant
information technology and personnel resources.\797\ NextEra argues
that, despite the lack of such a proposal in the NOPR, automation of
the interconnection queue process and studies is likely the key to
compressing interconnection process timelines. NextEra encourages the
Commission to convene a technical conference or other process to focus
on the root causes of interconnection study delays as well as the
potential to accelerate the interconnection queue process through
enhanced automation.
---------------------------------------------------------------------------

    \796\ ACORE Initial Comments at 4-5; Clean Energy Associations
Initial Comments at 26; NextEra Initial Comments at 13.
    \797\ NextEra Initial Comments at 13-14.
---------------------------------------------------------------------------

    398. Several commenters argue that the Commission should require
transmission providers to provide more cost information to
interconnection customers throughout the interconnection process.\798\
Clean Energy Associations and SEIA argue that cluster studies should
also ensure that interim cost information is made available to
interconnection customers so that they can make more informed decisions
earlier in the interconnection process, which will in turn lead to a
more efficient interconnection process overall.\799\ Clean Energy
Associations argue that as part of the cluster studies provided to
interconnection customers prior to their receiving facilities studies,
the Commission should require transmission providers to provide
interconnection customers with cost estimates for the upgrades required
if they were to request ERIS or NRIS (or long-term firm transmission
service), respectively--and coupled with minimum thresholds for
materiality (such as distribution factor) and transparency regarding
how these costs are derived (detailing the assumptions and criteria
that will be used).\800\ Clean Energy Associations also suggest that
the Commission should provide concrete direction regarding how

differing service types should be studied, and what outcome an
interconnection customer should receive for making the necessary
transmission system improvements to obtain that interconnection
service.\801\ AEE similarly believes that additional reforms are needed
to bring more transparency and predictability to interconnection costs,
and without this transparency and predictability, interconnection
customers face continued risks of unjust and unreasonable
interconnection study results that derail or delay interconnection
requests and cause increased costs.\802\
---------------------------------------------------------------------------

    \798\ ACE-NY Initial Comments at 4; Clean Energy Associations
Initial Comments at 20; Enel Initial Comments at 18; SEIA Initial
Comments at 8.
    \799\ Clean Energy Associations Initial Comments at 20; SEIA
Initial Comments at 8.
    \800\ Clean Energy Associations Initial Comments at 27.
    \801\ Id. at 29.
    \802\ AEE Initial Comments at 12.
---------------------------------------------------------------------------

    399. Affected Interconnection Customers state that the Commission
should permit interconnection customers to use independent studies to
demonstrate whether the request for limited interconnection service
would result in stability, short circuit, thermal, and/or voltage
issues, if the transmission provider or transmission owner is unable to
complete the studies on time.\803\ Affected Interconnection Customers
argue that allowing interconnection customers to use any available
resources to conduct these studies would enable already built
interconnection facilities to flow power onto the system, as long as
studies show that such interim services will not harm the system.
---------------------------------------------------------------------------

    \803\ Affected Interconnection Customers Initial Comments at 21.
---------------------------------------------------------------------------

    400. Clean Energy Associations ask that in a final rule, the
Commission adopt a cost threshold (in terms of the anticipated upgrade
cost relative to distribution factor) beyond which upgrades should be
evaluated in the next near-term transmission planning process.
Similarly, Clean Energy Associations argue that cumulative congestion
issues should also be addressed via the transmission planning
process.\804\
---------------------------------------------------------------------------

    \804\ Clean Energy Associations Initial Comments at 29.
---------------------------------------------------------------------------

ii. Commission Determination
    401. We decline to adopt the remainder of the proposals advocated
for in the comments regarding our requirement for transmission
providers to use a cluster study process. We decline to adopt three of
these proposals because they are outside the scope of the NOPR: (1)
NextEra's request to require or standardize automated processing of
interconnection requests; \805\ (2) Clean Energy Associations' argument
that the Commission should adopt a cost threshold beyond which upgrades
should be evaluated in the next near-term transmission planning
process; \806\ and (3) Clean Energy Associations' argument that the
Commission should provide concrete direction regarding how differing
service types should be studied, and what outcome an interconnection
customer should receive for making the necessary transmission system
improvements to obtain that interconnection service.\807\
---------------------------------------------------------------------------

    \805\ NextEra Initial Comments at 14. We also decline to convene
a technical conference to explore the causes of interconnection
study delays and the potential to accelerate the interconnection
queue process through enhanced automation. As discussed above, we
have adequate record of the causes of interconnection study delays
to fashion a remedy with the combination of reforms we adopt in this
final rule.
    \806\ Clean Energy Associations Initial Comments at 29.
    \807\ Id.
---------------------------------------------------------------------------

    402. Regarding Affected Interconnection Customers' arguments
discussing the use of independent studies, we note that interconnection
customers can use independent resources during the interconnection
process. However, the results of independent studies will not be
binding on transmission providers, as the use of studies conducted by
an interconnection customer cannot ensure that the cluster study
process results in a just, reasonable, and not unduly discriminatory or
preferential outcome for all interconnection customers in the cluster.
In addition, transmission providers must be able to conduct the
necessary studies to maintain the reliability of their transmission
system.
    403. We will not require transmission providers to provide
additional cost information to interconnection customers that is not
already required to be provided pursuant to the pro forma LGIP, as
modified by this final rule. For example, revised pro forma LGIP
sections 3.4.5 (Customer Engagement Window) and 8.1 (Interconnection
Facilities Study Agreement) require the transmission provider to
provide the interconnection customer with a good faith estimate of the
costs of the cluster study and the interconnection facility study,
respectively. Similarly, revised pro forma LGIP sections 7.3 (Scope of
Cluster Study) and 8.2 (Scope of Interconnection Facilities Study)
require the transmission provider to provide cost estimates for
interconnection facilities and network upgrades. It is unclear what
other ``interim cost information'' \808\ Clean Energy Associations want
transmission providers to provide, nor the value of such information
vis-[agrave]-vis the burden on transmission providers to develop it.
---------------------------------------------------------------------------

    \808\ Id. at 20.
---------------------------------------------------------------------------

    404. Clean Energy Associations argue that as part of the cluster
studies provided to interconnection customers prior to receiving
facilities studies, the Commission should require transmission
providers to provide interconnection customers with cost estimates for
the upgrades required if they were to request ERIS or NRIS. Section 3.2
of the pro forma LGIP provides that an interconnection customer
requesting NRIS may also request that it be concurrently studied for
ERIS, up to the point when the facility study agreement is executed. As
the pro forma LGIP already provides interconnection customers the
ability to have both ERIS and NRIS studied concurrently, we find Clean
Energy Associations' request moot.
3. Allocation of Cluster Study Costs
a. NOPR Proposal
    405. In the NOPR, the Commission proposed to require transmission
providers to allocate the shared costs of cluster studies as follows:
90% of the applicable study costs allocated pro rata to interconnection
customers based on requested MWs included in the applicable cluster,
and 10% of the applicable study costs allocated per capita to
interconnection customers based on the number of interconnection
requests included in the applicable cluster.\809\ The Commission
preliminarily found that this allocation of the costs of cluster
studies would result in just and reasonable Commission-jurisdictional
rates because it appropriately recognizes that the MW size of a cluster
has a dramatic impact on the cost of studying the cluster, while also
recognizing that the number of interconnection requests included in the
cluster also impacts the cost of studying the cluster, but to a lesser
degree. The Commission sought comment on whether a different cost
allocation approach may be appropriate or whether each transmission
provider should be provided additional flexibility to propose a cost
allocation approach on compliance with any final rule.\810\
---------------------------------------------------------------------------

    \809\ NOPR, 179 FERC ] 61,194 at P 82.
    \810\ Id. P 83.
---------------------------------------------------------------------------

b. Comments
i. Comments in Support
    406. Multiple commenters support the proposal.\811\ Clean Energy
Buyers note

that certainty and consistency in cost allocation for interconnection
studies will be helpful for interconnection customers that site
generating facilities in more than one region.\812\ Idaho Power adds
that a uniform cost allocation would prevent interconnection customers
from ``shopping around'' for the best price for larger generating
facility locations.\813\ Duke Southeast Utilities note that Duke
Carolinas Utilities' currently effective LGIP/LGIA contains the same
90/10 cost allocation, which it states provides a balanced and
equitable study cost allocation based on the Commission's cost
causation principle.\814\ Duke Southeast Utilities assert that the
proposed allocation aligns with study deposits that would be submitted
based on varying assumptions around the number and size of
interconnection requests submitted into the cluster study process.
---------------------------------------------------------------------------

    \811\ Clean Energy Buyers Initial Comments at 8; Consumers
Energy Initial Comments at 4; Cypress Creek Initial Comments at 19;
Duke Southeast Utilities Initial Comments at 8-9; Enel Initial
Comments at 20; Fervo Energy Initial Comments at 3; Idaho Power
Initial Comments at 5; Interwest Initial Comments at 5; Public
Interest Organizations Initial Comments at 31; R Street Initial
Comments at 11; Tri-State Initial Comments at 3, 12.
    \812\ Clean Energy Buyers Initial Comments at 8-9.
    \813\ Idaho Power Initial Comments at 5.
    \814\ Duke Southeast Utilities Initial Comments at 8-9.
---------------------------------------------------------------------------

ii. Comments in Opposition
    407. Several commenters oppose the proposal. For instance, National
Grid and NRECA argue that any predetermined study cost allocation
method will produce results that do not comport with cost
causation.\815\ National Grid gives the example of a 20 MW generating
facility that has unique or complex engineering features at a
particular point of interconnection that may require considerably more
time to conduct a study than a much larger 100 MW generating facility;
in this situation, according to National Grid, the 90/10 cost
allocation methodology proposed in the NOPR would not align with cost
causation, a problem that would be exacerbated if the interconnection
customer withdraws the interconnection request.\816\ National Grid
asserts that a predetermined cost allocation risks undermining
competitive pressures in the interconnection process, which it states
should be retained to the maximum extent possible consistent with
revisions to mitigate the existing interconnection queue
inefficiencies. Similarly, Xcel and NextEra argue that the size of the
interconnection request does not impact the study costs by a 9:1 ratio
compared to the number of interconnection requests, noting that the
size of the interconnection request does not materially impact the time
to add the generating facility to the model or time to design the
interconnecting substation.\817\ NRECA adds that the Commission has not
produced data showing the fixed costs of processing an interconnection
request or a precise linear correlation between generating facility
size and study costs.\818\ rPlus argues that the proposed 90/10 cost
allocation is ``unduly discriminatory toward pumped storage, and wholly
disincentivizes large capacity projects.'' \819\ rPlus argues that the
assertion that the MW size of a cluster study is significantly more
impactful on the cost and effort required to perform the study is
incorrect. rPlus states that the number of interconnection requests and
the cluster size are both burdensome for the study process, as each
generating facility requires its own project management, technical
review, study implementation, and deliverability assessment.\820\ SDG&E
and SoCal Edison agree that a 90/10 cost allocation would
inappropriately burden larger generating facilities with higher study
costs, as the level of effort to study an interconnection request is
driven more by complexity around the point of interconnection and is
not strongly correlated to the size of the generating facility.\821\
---------------------------------------------------------------------------

    \815\ National Grid Initial Comments at 16; NRECA Initial
Comments at 8.
    \816\ National Grid Initial Comments at 16-17.
    \817\ NextEra Initial Comments at 16; Xcel Initial Comments at
25.
    \818\ NRECA Initial Comments at 21.
    \819\ rPlus Initial Comments at 5.
    \820\ Id.; Hydropower Commenters Initial Comments at 27.
    \821\ SDG&E Initial Comments at 7; SoCal Edison Initial Comments
at 15.
---------------------------------------------------------------------------

iii. Alternatives and Requests for Flexibility
    408. Several commenters put forth alternatives to the NOPR
proposal. For instance, some commenters generally contend that
transmission providers should allocate study costs based on the
proposed generating facility's impact on the overall study, measured by
the time and resources expended on a particular generating facility
within the study.\822\ National Grid asserts that this process would be
consistent with the current serial study approach, which directly
correlates cost responsibility to cost causation.\823\ AES argues that
the final rule's cost allocation framework should reflect the reality
that study costs are not only a function of generating facility size,
but also the location of the generating facility and the degree to
which that location is constrained.\824\
---------------------------------------------------------------------------

    \822\ AES Initial Comments at 12; Clean Energy Associations
Initial Comments at 23; National Grid Initial Comments at 17.
    \823\ National Grid Initial Comments at 17.
    \824\ AES Initial Comments at 12.
---------------------------------------------------------------------------

    409. Several commenters argue that the Commission should allocate
cluster study costs based solely on the number of interconnection
requests in the cluster.\825\ Ameren and SDG&E state that, in their
experience, study costs are not based on the size of the proposed
generating facilities.\826\ In contrast, Fervo Energy argues against
allocating study costs evenly to all interconnection customers within a
cluster, asserting that it is ``not at all clear'' how this proposal is
just and reasonable, as it strays away from allocating costs on a pro
rata basis based on requested MWs.\827\
---------------------------------------------------------------------------

    \825\ Ameren Initial Comments at 11; SDG&E Initial Comments at
7; SoCal Edison Initial Comments at 15-16.
    \826\ Ameren Initial Comments at 11; SDG&E Initial Comments at
7.
    \827\ Fervo Energy Reply Comments at 4.
---------------------------------------------------------------------------

    410. CAISO argues that the proposal appears arbitrary and
capricious because the Commission does not adequately explain the basis
for the 90% to 10% ratio.\828\ CAISO asserts that the 10% allocation is
so small as to be de minimis, yet it still increases the administrative
burden to allocate the cluster study costs. CAISO argues that it would
be much simpler and easier if transmission providers simply allocated
all cluster study costs based on the MW capacity alone.
---------------------------------------------------------------------------

    \828\ CAISO Initial Comments at 12.
---------------------------------------------------------------------------

    411. Enel argues that there are study phases where it would be more
appropriate to assign study costs to individual interconnection
requests, ``such as the [f]acilities [s]tudy for upgrades assigned to
only a single customer.'' \829\ Enel argues that a 90/10 study cost
split may disproportionately exclude very small generating facilities
which still require modeling from study cost responsibility, and
suggests that a minimum MW size be assumed, such as was used to set the
minimum study deposit in proposed pro forma LGIP section <IP_ADDRESS>.
---------------------------------------------------------------------------

    \829\ Enel Initial Comments at 20.
---------------------------------------------------------------------------

    412. Several commenters argue for a cost allocation of 50% of the
study costs based on requested MW and 50% based on the number of
interconnection requests in the cluster.\830\ NextEra states that,
based on its experience, it takes comparable time and effort to study a
small proposed generating facility as a large one.\831\ NextEra and
SoCal Edison argue that allocating study costs based

mostly on the MW size would likely cause some cross-subsidies from
interconnection customers submitting large proposed generating
facilities to those submitting smaller ones.\832\ SEIA notes that the
MW size of the cluster may be artificially inflated when certain
interconnection customers submit multiple exploratory requests, and
recommends a 50/50 cost allocation to deter such requests.\833\ SEIA
argues that, similar to CAISO's study cost allocation, the Commission
should structure the cost allocation so that interconnection customers
with multiple interconnection requests are responsible for a greater
share of the study costs.\834\
---------------------------------------------------------------------------

    \830\ Hydropower Commenters Initial Comments at 26-27; NextEra
Initial Comments at 16; Pattern Energy Initial Comments at 18-19;
rPlus Initial Comments at 5; SEIA Initial Comments at 9-10.
    \831\ NextEra Initial Comments at 16.
    \832\ Id.; SoCal Edison Initial Comments at 15-16.
    \833\ SEIA Initial Comments at 10.
    \834\ Id. (citing Cal. Indep. Sys. Operator, Inc., 140 FERC ]
61,070, at P 4 (2012)).
---------------------------------------------------------------------------

    413. Clean Energy Associations add that cluster studies should be
conducted in subgroups based on electrical relevance, and that study
costs related to each subgroup should be tracked independently and
allocated only among those interconnection customers within that
subgroup.\835\
---------------------------------------------------------------------------

    \835\ Clean Energy Associations Initial Comments at 23.
---------------------------------------------------------------------------

    414. Multiple commenters argue that the Commission should not
impose a specific cluster study cost allocation, but instead allow
transmission providers flexibility in proposing their own cost
allocation methods.\836\ For example, APPA-LPPC argue that the use of a
``one-size-fits-all'' approach may result in unreasonable results in
certain circumstances.\837\ APPA-LPPC assert that weighting the
allocation of cluster study costs based on MWs may unfairly burden
interconnection customers proposing large generating facilities in
regions where a cluster is likely to include a large number of
relatively small proposed generating facilities and a small number of
large proposed generating facilities because study costs do not
necessarily track linearly with generating facility size.
---------------------------------------------------------------------------

    \836\ AES Initial Comments at 12; Ameren Initial Comments at 11;
APPA-LPPC Initial Comments at 3; Bonneville Initial Comments at 10;
Clean Energy Associations Initial Comments at 24; Dominion Initial
Comments at 19; Indicated PJM TOs Initial Comments at 18-19; ISO-NE
Initial Comments at 25; MISO Initial Comments at 45; National Grid
Initial Comments at 16; NextEra Initial Comments at 16-17; NRECA
Initial Comments at 8; NYISO Initial Comments at 13; Omaha Public
Power Initial Comments at 5; [Oslash]rsted Initial Comments at 9;
Pattern Energy Initial Comments at 19; PPL Initial Comments at 12; R
Street Initial Comments at 11; SEIA Initial Comments at 10; Xcel
Initial Comments at 25.
    \837\ APPA-LPPC Initial Comments at 16.
---------------------------------------------------------------------------

    415. Several commenters argue that RTOs/ISOs should be able to
retain their existing cluster study cost allocations, where applicable,
because those cost allocations accomplish the purpose of the
Commission's proposal to equitably allocate study costs among
interconnection customers.\838\
---------------------------------------------------------------------------

    \838\ Dominion Initial Comments at 19; Indicated PJM TOs Initial
Comments at 18-19; ISO-NE Initial Comments at 25; MISO Initial
Comments at 45; NYISO Initial Comments at 14; Omaha Public Power
Initial Comments at 5; PJM Initial Comments at 35; SPP Initial
Comments at 7. In response, Fervo Energy cautions against permitting
transmission providers too much flexibility, arguing that this opens
the door for undue discrimination against interconnection customers.
Fervo Energy Reply Comments at 4.
---------------------------------------------------------------------------

c. Commission Determination
    416. We adopt the NOPR proposal, with modification, to revise
section 13.3 (Obligation for Study Costs) of the pro forma LGIP to
allow each transmission provider to propose its own study cost
allocation ratio for allocating the shared costs of cluster studies
between a per capita basis and pro rata by MW, provided that: between
10% and 50% of study costs must be allocated on a per capita basis,
with the remainder (between 90% and 50%) allocated pro rata by MW.
Under this revised provision, a transmission provider may propose to
retain its existing study cost allocation ratio if it falls within this
range and meets the requirements of this final rule.
    417. We are persuaded by comments arguing that it is appropriate to
allow transmission providers a degree of flexibility in proposing on
compliance the method for allocating study costs in their tariff to
adapt to their specific regional circumstances and help avoid
unreasonable outcomes. Some commenters assert that the NOPR-proposed
90%-10% allocation could in some instances unduly burden larger
generating facilities, such as when a cluster includes a large number
of interconnection requests representing relatively small generating
facilities and a small number of large generating facilities.\839\
Conversely, other commenters caution that straying too far from the
NOPR proposal for a 90%-10% allocation could disproportionately burden
smaller generating facilities, given the role that size may play in
determining study costs.\840\ Accordingly, we believe that granting
transmission providers the flexibility to propose in their tariff the
study cost allocation appropriate to their region, within the limits
detailed above, strikes a better balance than the NOPR proposal.
---------------------------------------------------------------------------

    \839\ APPA-LPPC Initial Comments at 16.
    \840\ Fervo Energy Reply Comments at 4-5.
---------------------------------------------------------------------------

    418. The revised study cost allocation requirements that we adopt
in this final rule recognize that cluster study costs are impacted by
both the number of interconnection requests in a cluster and the size
of the proposed generating facilities in each cluster. We find that
requiring transmission providers to allocate between 10% and 50% of
cluster study costs on a per capita basis is just and reasonable
because it ensures that interconnection customers that propose smaller
generating facilities or submit multiple interconnection requests to
explore different interconnection scenarios for a single proposed
generator adequately contribute to study costs, particularly given that
some study costs are incurred independent of the MW size of a specific
proposed generating facility in a cluster.\841\ Further, we agree with
commenters that observe that not all study costs track linearly with
generating facility size because there are other factors, such as the
point of interconnection selected, that can lead to increasingly
complex studies and correspondingly higher study costs.\842\ We believe
that the per capita component of the study cost allocation requirements
addresses this fact. Requiring a per capita component also ensures that
an interconnection customer that proposes a large generating facility
in a cluster of many smaller generating facilities will not bear a
disproportionate amount of the study costs. We likewise find that
requiring transmission providers to allocate between 50% and 90% of
study costs on a pro rata by MW basis prevents a disproportionate
amount of study costs from being allocated to interconnection customers
that propose smaller generating facilities in the cluster. The pro rata
by MW component reflects the fact that, to a significant extent, study
costs correlate to the total MW size of the cluster. In general, even
if the number of interconnection requests in each cluster remains
constant, we expect that a cluster of 10,000 MW will be significantly
more costly to study than a cluster of 100 MW.\843\ Accordingly,
requiring that a substantial share of study costs is allocated based on
each generating facility's contribution to the total MW size of the
cluster study ensures consistency with cost causation principles.
---------------------------------------------------------------------------

    \841\ SDG&E Initial Comments at 7; SoCal Edison Initial Comments
at 15.
    \842\ AES Initial Comments at 12; APPA-LPPC Initial Comments at
16; NRECA Initial Comments at 21.
    \843\ Fervo Initial Comments at 4.
---------------------------------------------------------------------------

    419. We disagree with CAISO that the Commission should require the

allocation of all cluster study costs based on the MW capacity because
allocating 10% of study costs on a per capita basis is de minimis and
not worth the administrative burden. First, this final rule now allows
transmission providers to allocate up to 50% of costs on a per capita
basis. Even if a transmission provider chooses to allocate only 10% of
study costs on a per capita basis, as explained above, we believe that
this is an important component that is needed to ensure that study
costs are allocated in a manner that is at least roughly commensurate
with estimated benefits (i.e., consistent with cost causation). We are
unpersuaded that the administrative burden associated with allocating a
potentially small fraction of the study costs among interconnection
customers in a cluster outweighs the benefits, particularly given that
nothing in the record demonstrates that those administrative costs are
significant.
    420. In response to commenters' arguments in favor of a uniform
study cost allocation method across regions, we find that the benefits
of allowing transmission providers flexibility to tailor their study
cost allocation to the specific circumstances of their region outweigh
the benefits of uniformity cited by commenters, such as consistency and
preventing ``shopping around.'' We believe that the guardrails that we
provide in this final rule will ensure just, reasonable, and not unduly
discriminatory or preferential rates while at the same time addressing
concerns with the different characteristics of regions. We urge
stakeholders to engage with transmission providers as part of the
compliance process as the transmission providers develop their proposed
study cost allocations.
    421. In response to National Grid, AES, and Clean Energy
Associations' comments arguing that costs should be allocated based on
individual calculations of the actual time and resources expended on a
particular interconnection request, we find that such individual
calculations would not only increase the administrative burden on
transmission providers, but also would offer little benefit given the
cluster study context, which requires transmission providers to
evaluate multiple interconnection requests simultaneously.\844\ We are
also unconvinced that a transmission provider could accurately perform
such calculations because, as explained above, some study costs are
unrelated to an individual interconnection request and are instead
incurred as a matter of course as part of studying a cluster of
interconnection requests.
---------------------------------------------------------------------------

    \844\ AES Initial Comments at 12; Clean Energy Associations
Initial Comments at 23; National Grid Initial Comments at 17.
---------------------------------------------------------------------------

4. Allocation of Cluster Network Upgrade Costs
a. NOPR Proposal
    422. In the NOPR, the Commission proposed to require transmission
providers to allocate network upgrade costs to interconnection
customers within a cluster using a proportional impact method.\845\ The
Commission also proposed to add the defined term proportional impact
method to the pro forma LGIP and require transmission providers to
revise their LGIPs to include the specific technical parameters and
thresholds of their method for cost allocation. The Commission also
proposed to require transmission providers to allocate the costs of
transmission provider's interconnection facilities equally among all
interconnection customers sharing use of the transmission provider's
interconnection facilities. The Commission sought comment on: (1)
whether there are specific types of analyses that the Commission should
require transmission providers to use to determine the proportional
impact attributed to an interconnection request, including the benefits
and drawbacks of any proposed approach; (2) whether there are specific
types of analyses that the Commission should prohibit because they are
known to be inaccurate, provide undue discretion to the transmission
provider, or could otherwise be problematic; (3) whether alternative
methods to allocate the costs of network upgrades within a cluster,
such as the proportional capacity method, can be sufficiently accurate
in certain instances, in a manner consistent with or superior to the
proposed method; and (4) whether there are some circumstances where the
proportional capacity method would not be appropriate, such as
circumstances where there may be potential for discriminatory
treatment.\846\
---------------------------------------------------------------------------

    \845\ NOPR, 179 FERC ] 61,194 at P 88.
    \846\ Id. P 89.
---------------------------------------------------------------------------

b. Comments
i. General Comments
    423. Several commenters support the proposal.\847\ These commenters
state that the proposed proportional impact cost allocation method is
widely used, both by RTOs/ISOs and non-RTO/ISO transmission
providers,\848\ and ensures that each interconnection customer
contributes to the cost of network upgrades in proportion to its impact
on the transmission system.\849\ These commenters assert that other
options (such as a proportional capacity or a pro rata allocation per
interconnection request) would be more likely to shift a
disproportionate share of network upgrade costs to smaller generating
facilities, which may have less impact on the transmission system.\850\
Bonneville and Interwest argue that the proportional impact method
could also reduce the incentive for interconnection customers to submit
multiple speculative requests and reduce the amount of cascading
withdrawals and restudies.\851\ ELCON contends that, should any one
proposed generating facility in the cluster have an outsized impact on
the transmission system compared to other proposed generating
facilities in the cluster, those other proposed generating facilities
should be protected from exorbitant network upgrade costs to
accommodate a proposed generating facility that may not be suitably
located.\852\ CAISO adds

that it has used distribution factor analysis without controversy.\853\
---------------------------------------------------------------------------

    \847\ ACORE Initial Comments at 8; Ameren Initial Comments at
12; Avangrid Initial Comments at 31; Cypress Creek Initial Comments
at 19; Eversource Initial Comments at 15; Fervo Energy Initial
Comments at 3; Interwest Initial Comments at 16-17; Invenergy
Initial Comments at 21; NEPOOL Initial Comments at 15; New Jersey
Commission Initial Comments at 15; Northwest and Intermountain
Initial Comments at 8; NYTOs Initial Comments at 16; Omaha Public
Power Initial Comments at 5; Pennsylvania Commission Initial
Comments at 8-9.
    \848\ For example, several transmission providers support the
Commission's proposal, and state that they already use a
proportional impact method or distribution factor analysis. CAISO
Initial Comments at 13; ISO-NE Initial Comments at 25; MISO Initial
Comments at 46-47; NYISO Initial Comments at 14; PJM Initial
Comments at 36; SoCal Edison Initial Comments at 16; Tri-State
Initial Comments at 12.
    \849\ ACORE Initial Comments at 8; Ameren Initial Comments at
12; Avangrid Initial Comments at 31; Cypress Creek Initial Comments
at 19; Eversource Initial Comments at 15; Fervo Energy Initial
Comments at 3; Interwest Initial Comments at 16-17; Invenergy
Initial Comments at 21; NEPOOL Initial Comments at 15; New Jersey
Commission Initial Comments at 15; Northwest and Intermountain
Initial Comments at 8; NYTOs Initial Comments at 16; Omaha Public
Power Initial Comments at 5; Pennsylvania Commission Initial
Comments at 8-9.
    \850\ ACORE Initial Comments at 8; Ameren Initial Comments at
12; Avangrid Initial Comments at 31; Cypress Creek Initial Comments
at 19, Eversource Initial Comments at 15; Fervo Energy Initial
Comments at 3, Interwest Initial Comments at 16-17; Invenergy
Initial Comments at 21; NEPOOL Initial Comments at 15; New Jersey
Commission Initial Comments at 15; Northwest and Intermountain
Initial Comments at 8; NYTOs Initial Comments at 16; Omaha Public
Power Initial Comments at 5; Pennsylvania Commission Initial
Comments at 8-9.
    \851\ Bonneville Initial Comments at 10; Interwest Initial
Comments at 17.
    \852\ ELCON Initial Comments at 9.
    \853\ CAISO Initial Comments at 13.
---------------------------------------------------------------------------

    424. NRECA states that it interprets this proposal to implement--
and not modify, weaken, or permit deviations from--the Commission's
established policy that transmission costs, including network upgrade
costs, must be allocated in a manner at least reasonably commensurate
with estimated benefits.\854\ NRECA states that, based on that
interpretation of the NOPR's proposal, NRECA believes this method is
fair to both interconnection customers and transmission providers and
helps ensure that the costs to implement an interconnection request are
allocated reasonably commensurate with cost causation and expected
benefits. NRECA states that the proportional impact method is also
reasonably transparent and relatively easy for transmission providers
to implement, explain, and defend.
---------------------------------------------------------------------------

    \854\ NRECA Initial Comments at 22.
---------------------------------------------------------------------------

    425. In response to the Commission's request for comment on whether
there are circumstances in which the proportional capacity method would
be appropriate, some commenters argue that the proportional capacity
method is never appropriate and should be expressly prohibited for
clusters.\855\ MISO argues that network upgrade cost allocation methods
that only consider installed capacity without considering the network
topology do not consider the full picture of what an interconnection
customer's responsibility for the network upgrade costs should be.\856\
Pennsylvania Commission asserts that large generating facilities would
continue to bear high network upgrade costs and would have an incentive
to interconnect wisely, while small generating facilities, which are
becoming the norm in interconnection queues, would not.\857\
Pennsylvania Commission contends that this would create a subsidy
whereby large generating facilities pay a share of unnecessary network
upgrade costs caused by poor siting of smaller generating
facilities.\858\ Longroad Energy illustrates this point by noting that
one of its generating facilities was recently allocated nearly $10
million under the proportional capacity method based solely on the
generating facility's size, despite the fact that relevant
interconnection studies firmly established that its generating
facility, while large, actually reduced the identified overload.\859\
---------------------------------------------------------------------------

    \855\ Longroad Energy Initial Comments at 9; MISO Initial
Comments at 45-46; NRECA Initial Comments at 22; Pennsylvania
Commission Initial Comments at 9.
    \856\ MISO Initial Comments at 45-46.
    \857\ Pennsylvania Commission Initial Comments at 9.
    \858\ Id.; see also NRECA Initial Comments at 22.
    \859\ Longroad Energy Initial Comments at 9.
---------------------------------------------------------------------------

    426. NV Energy urges the Commission to reconsider the application
of pro rata allocation of network upgrade costs over using the
proportional impact method.\860\ NV Energy contends that the
proportional impact method could negatively impact interconnection
customers due to the time and risk of reallocations required by
restudies.\861\ NV Energy argues that assigned network upgrade costs
could change dramatically if a cluster participant withdraws from the
interconnection queue and requires a restudy, potentially resulting in
each participant's cost allocation changing.\862\ NV Energy asserts
that in addition to disintegrating cost reassurance for the
interconnection customer, performing studies using the proportional
impact method defeats the purpose of completing cluster studies where
each interconnection customer in the cluster has the same
interconnection queue position and that this method will require the
transmission provider to review each interconnection request within the
cluster individually to assign the proportional impact.
---------------------------------------------------------------------------

    \860\ NV Energy Initial Comments at 12.
    \861\ Id.; PacifiCorp Reply Comments at 3.
    \862\ NV Energy Initial Comments at 12.
---------------------------------------------------------------------------

    427. NV Energy contends that using the proportional impact method
to allocate the costs of network upgrades resulting from cluster
studies will be burdensome in application because of the volume of
interconnection requests being studied and the large number of network
upgrades identified in each study.\863\ NV Energy states that, under a
proportional capacity method, when an interconnection customer
withdraws and the same network upgrades are deemed necessary, the
transmission provider could simply reallocate a pro rata share to the
remaining interconnection customers and expedite the study; however, in
the case of the proportional impact method, the transmission provider
would need to complete a full restudy to review each generating
facility's impact on the system.
---------------------------------------------------------------------------

    \863\ Id.
---------------------------------------------------------------------------

    428. According to NV Energy, this issue is further exacerbated when
a network upgrade becomes a shared network upgrade with another cluster
and the proportional impact is expanded to include additional
interconnection customers.\864\ NV Energy states that, not only would
the restudy be required for the lower-queued cluster based on the
withdrawal, but also the concurrently queued cluster to modify the
network upgrade cost allocation. NV Energy also argues that, without a
consistent proportional impact cost allocation amongst transmission
providers, there is risk that this could lead to disputes at the
Commission from interconnection customers, which would lead to
increased costs and delays.
---------------------------------------------------------------------------

    \864\ Id. at 13.
---------------------------------------------------------------------------

    429. PacifiCorp strongly opposes the proportional impact method to
allocate network upgrade costs.\865\ PacifiCorp argues that the
Commission has not made a transmission provider-specific finding that
the proportional capacity method, approved for PacifiCorp by the
Commission in May 2020,\866\ is no longer just and reasonable.
PacifiCorp contends that transmission providers should be permitted to
use proportional capacity-based network upgrade cost allocation
methods.\867\ PacifiCorp claims that the proportional capacity method
it uses is informed by three additional mechanisms within the cluster
study process, all of which work in tandem to ensure that costs are
appropriately allocated: (1) the use of electrically or geographically
relevant subregions; (2) iterative studies that consider ERIS network
upgrades prior to NRIS requests; and (3) a floor of 1% of total MW
within a cluster, under which interconnection requests will be deemed
not to contribute to the network upgrades identified in the cluster
study.\868\
---------------------------------------------------------------------------

    \865\ PacifiCorp Initial Comments at 23.
    \866\ PacifiCorp, 171 FERC ] 61,112 (2020).
    \867\ PacifiCorp Initial Comments at 22, 26.
    \868\ Id. at 23-24.
---------------------------------------------------------------------------

    430. PacifiCorp states that the proportional capacity method also
assists it in completing cluster studies and restudies on a timely
basis, and minimizes disputes.\869\ PacifiCorp argues that, in sharp
contrast, the proportional impact method involves a complex analysis
that, in addition to being excessively time consuming, will result in
disputes, both of which will put substantial pressure on PacifiCorp's
ability to meet study deadlines.\870\ Therefore, according to
PacifiCorp, requiring use of the proportional impact method will be
counterproductive to the Commission's intent of making processing of
interconnection requests more efficient.
---------------------------------------------------------------------------

    \869\ Id.; PacifiCorp Reply Comments at 2.
    \870\ PacifiCorp Initial Comments at 24-25.
---------------------------------------------------------------------------

    431. PacifiCorp explains that the degree of contribution to a
needed network upgrade can be very difficult to

determine depending on the size, number of interconnection requests,
and location of proposed generating facilities in a cluster.\871\
PacifiCorp adds that a proportional impact method analysis is
complicated further by the fact that all interconnection requests
within a single cluster are considered equally queued. In addition,
PacifiCorp argues that, given the size of its multi-state system and
the thousands of MWs of interconnection requests entering the cluster
study process each year,\872\ it is simply not possible to both perform
a proportional impact method analysis on each interconnection request
and complete the cluster study process within 150 calendar days.\873\
---------------------------------------------------------------------------

    \871\ Id. at 25.
    \872\ PacifiCorp states that during the most recent cluster
study, which commenced in May 2022, PacifiCorp received around 40
GW-worth of interconnection requests, which is more than three times
PacifiCorp's peak system load.
    \873\ PacifiCorp Initial Comments at 25.
---------------------------------------------------------------------------

ii. Comments on Specific Proposal
(a) Specificity Regarding Technical Parameters and Thresholds
    432. Several commenters state that, if the Commission adopts its
proposal for each transmission provider to revise its tariff to include
its specific technical parameters and thresholds for the proportional
impact method for network upgrade cost allocation, the Commission
should at least consider guidance or principles for those technical
parameters and thresholds.\874\ The same commenters ask that the
Commission also require sufficient specificity to provide transparency
and certainty for potential interconnection customers and to avoid
disputes over cost allocation.
---------------------------------------------------------------------------

    \874\ Clean Energy Buyers Initial Comments at 9; Cypress Creek
Initial Comments at 19; Invenergy Initial Comments at 21.
---------------------------------------------------------------------------

    433. EPSA and Vistra argue that the Commission should provide an
opportunity for comments prior to moving to a final rule with more
detailed parameters.\875\ Vistra contends that without such an
opportunity, the Commission will have not provided sufficient
notice.\876\ Vistra argues that adopting a final rule that contains
only the very high-level requirement to allocate costs based on
proportional impact method simply defers the Commission's determination
on important implementation details to litigation over the individual
compliance filings that will be submitted. Without sufficient detail,
Vistra continues, the Commission will arguably need to accept any set
of technical details as in compliance with the requirement to allocate
network upgrade costs based on proportional impact.
---------------------------------------------------------------------------

    \875\ EPSA Initial Comments at 8; Vistra Initial Comments at 12-
13.
    \876\ Vistra Initial Comments at 13.
---------------------------------------------------------------------------

    434. PPL states that the NOPR did not address the allocation of
network upgrade costs within a cluster after an interconnection
customer withdraws.\877\ PPL states that, prior to the execution of an
interconnection agreement by the interconnection customer(s), the
Commission should provide that any interconnection facility and network
upgrade costs previously allocated to the withdrawing interconnection
customer be reallocated among the remaining interconnection customers
in the cluster to prevent delays and allow the study process to
proceed. PPL states that the Commission should allow for withdrawal to
be treated as an event that allows the transmission provider to retain
or call on the security provided by the withdrawing interconnection
customer. PPL adds that the Commission should allow for an increase in
the cost allocated to remaining interconnection customers in a cluster
to account for the amount previously allocated to the withdrawing
interconnection customer.
---------------------------------------------------------------------------

    \877\ PPL Initial Comments at 14.
---------------------------------------------------------------------------

(b) Tariff Requirement for Technical Details
    435. PJM states that, while it generally supports the requirement
to describe the cost allocation method in the applicable tariff, the
Commission should clarify that transmission providers may provide the
detailed and specific technical information in business practice
manuals rather than in tariffs.\878\ PJM states that these types of
implementation details change from time to time and, consistent with
Commission precedent, are appropriately addressed in the transmission
provider's manuals. PJM asserts that mandating that these procedures be
placed in the transmission provider's tariff, on the other hand, would
require a transmission provider to submit an FPA section 205 filing
every time the implementation details changed, which would be
inefficient and burdensome.
---------------------------------------------------------------------------

    \878\ PJM Initial Comments at 37.
---------------------------------------------------------------------------

    436. In contrast, other commenters argue that these thresholds, and
any associated procedures, should be codified in transmission
providers' tariffs.\879\ AES explains that the thresholds used as part
of the proportional impact method are important planning criteria, and
constitute ``practices that affect rates and services significantly,
that are realistically susceptible of specification and that are not so
generally understood as to render recitation superfluous;''
accordingly, AES continues, they should be included in transmission
providers' filed rates, and subject to review and approval by the
Commission pursuant to section 205 of the FPA.\880\ Union of Concerned
Scientists contends that the combination of issues that are expressed
through network upgrade decisions and cost allocations for
interconnection customers are arguably central to this rulemaking and
the fulfillment of the competition amongst interconnection customers as
a regulatory approach to setting wholesale energy prices and must be
subject to notice and review, both initially and for any subsequent
changes, through filings with the Commission.\881\
---------------------------------------------------------------------------

    \879\ AES Initial Comments at 8; Union of Concerned Scientists
Reply Comments at 20.
    \880\ AES Initial Comments at 8 (citing Pub. Serv. Co. of Colo.,
67 FERC ] 61,371, at 62,267 (1994); Portland Gen. Elec. Co., 144
FERC ] 61,087 (2013)).
    \881\ Union of Concerned Scientists Reply Comments at 20-21.
---------------------------------------------------------------------------

    437. Xcel states that the Commission should make clear that there
are several just and reasonable approaches to allocating network
upgrade costs to interconnection customers within a cluster.\882\ For
example, states Xcel, if two generating facilities are connecting to a
new a transmission line, a substation must be constructed. Xcel
explains that, using some analysis, a larger generating facility might
be considered to have a larger impact, but the respective size of the
interconnection request did not have any impact on the cost or size of
the substation needed. Xcel states that, for example, the cost of the
substation is not different for a 100 MW and 500 MW generating facility
or for two 300 MW generating facilities if they are interconnecting at
the same voltage, and as a result, the cost of that substation should
be allocated equally to both generating facilities. Xcel states that
there could be a third generating facility (not directly connected to
the substation) from which the power flows through the new substation,
but it is not clear if the Commission is proposing that the
interconnection customer proposing that third generating facility pays
for a portion of the substation costs because its flows ``impact'' the
substation. Xcel states that it does not generally support allocating
network upgrade costs to interconnection customers simply because their
proposed generating facilities have a flow impact if they are not
causing the

need for the network upgrade under a ``but for'' evaluation.
---------------------------------------------------------------------------

    \882\ Xcel Initial Comments at 26.
---------------------------------------------------------------------------

    438. Invenergy states that, in the occasional circumstance where a
point of interconnection is shared among more than one interconnection
request within a cluster, which could involve new equipment that does
not vary based on proportional impact, the associated costs at the
point of interconnection (e.g., the substation) could be allocated on a
pro rata basis.\883\ PacifiCorp states that the proportional impact
method would not be necessary to account for costs that are agnostic to
interconnection customer impacts, such as the need to construct a new
substation to connect to a new transmission line regardless of whether
one or several generating facilities are interconnecting.\884\
---------------------------------------------------------------------------

    \883\ Invenergy Initial Comments at 21-22.
    \884\ PacifiCorp Reply Comments at 2 (citing Xcel Initial
Comments at 26 (describing how a proportional impact analysis is not
necessary to allocate costs for a new station connecting to a
transmission line, as ``[t]he cost of the station is not different
for a 100 MW and 500 MW generator or for two 300 MW generators if
they are interconnecting at the same voltage'')).
---------------------------------------------------------------------------

    439. Invenergy states that the NOPR could be read to permit each
transmission provider to adopt different and possibly inconsistent
analyses and that the Commission should be clear that it is requiring a
proportional impact method for allocating network upgrade costs, just
as the NOPR proposes to do with respect to shared network
upgrades.\885\
---------------------------------------------------------------------------

    \885\ Invenergy Initial Comments at 21.
---------------------------------------------------------------------------

    440. Several commenters state that the final rule should require
transmission providers to submit compliance filings that propose
minimum distribution factor thresholds that will be used to evaluate
NRIS and ERIS requests.\886\
---------------------------------------------------------------------------

    \886\ AEE Reply Comments at 10; AES Initial Comments at 8;
Longroad Energy Initial Comments at 9; SEIA Initial Comments at 11.
---------------------------------------------------------------------------

(c) Requests for Flexibility
    441. Some commenters support the proportional capacity method only
for certain network upgrades or limited circumstances.
    442. Tri-State states that it does not apply a proportional impact
method to transient-stability-driven network upgrades, which cannot be
measured using a proportional impact approach; rather, Tri-State uses a
MW pro rata method approach when allocating the costs of transient-
stability-driven network upgrades.\887\ Longroad Energy states that, to
the extent the Commission allows a transmission provider to use some
method other than a flow-based proportional impact allocation for
transient stability constraints, the transmission provider should be
required to demonstrate that the alternative cost allocation method is
based on sound engineering principles for the specific transient
stability constraint observed in the studies.\888\
---------------------------------------------------------------------------

    \887\ PacifiCorp Reply Comments at 2; Tri-State Initial Comments
at 12.
    \888\ Longroad Energy Initial Comments at 9.
---------------------------------------------------------------------------

    443. R Street states that allocating network upgrade costs based on
proportional capacity is appropriate in situations where clusters are
composed of similar types of generation.\889\ R Street asserts that the
default should be that all thermal network upgrade cost allocations are
based on proportional capacity. R Street states that this leaves open
the possibility for transmission providers to allocate other types of
network upgrade costs (voltage, transient stability, short circuit)
using a different but predefined method.
---------------------------------------------------------------------------

    \889\ R Street Initial Comments at 12.
---------------------------------------------------------------------------

    444. Several commenters ask the Commission to provide flexibility
for transmission providers to establish a cost allocation method for
network upgrades, rather than mandating a prescriptive approach.\890\
PPL claims that such region-specific cost allocations are necessary to
keep disputes from overwhelming the reform process the Commission
anticipates.\891\ New York State Department asserts that any strict or
limiting requirement for a specific cost allocation method may
undermine and replace existing processes that work well.\892\ National
Grid recommends that the Commission allow for consideration of the
unique circumstances of a region, input from relevant stakeholders in
the region, including the potential for regions to propose cost
allocation methods that allow for broader allocation to load or
transmission customers in addition to interconnection customers.\893\
---------------------------------------------------------------------------

    \890\ AES Initial Comments at 7; APPA-LPPC Initial Comments at
16; Bonneville Initial Comments at 10; Dominion Initial Comments at
19; Indicated PJM TOs Initial Comments at 20; ISO-NE Initial
Comments at 25; MISO Initial Comments at 45; National Grid Initial
Comments at 8; NEPOOL Initial Comments at 15; New York State
Department Initial Comments at 8; NYISO Initial Comments at 15; PPL
Initial Comments at 14.
    \891\ PPL Initial Comments at 14.
    \892\ New York State Department Initial Comments at 8-9.
    \893\ National Grid Initial Comments at 18.
---------------------------------------------------------------------------

    445. Dominion points out that courts and the Commission have long
recognized that there is not one single just and reasonable method for
establishing cost allocation.\894\ Dominion states that rather, cost
allocation proposals are reviewed to determine whether they meet
certain principles, chiefly that costs are allocated in a manner that
is at least ``roughly commensurate'' with estimated benefits
received.\895\ Accordingly, Dominion recommends that if the Commission
imposes any requirements related to cost allocation, it simply retains
a general definition of proportional impact method and is not overly
prescriptive.\896\
---------------------------------------------------------------------------

    \894\ Dominion Initial Comments at 19, 21 (citing Entergy La.,
Inc. v. La. Pub. Serv. Comm'n, 539 U.S. 39, 50 (2003)).
    \895\ Id. at 19.
    \896\ Id. at 22.
---------------------------------------------------------------------------

iii. Requests for Clarification or Technical Conference
    446. Pattern Energy generally supports the application of the
proportional impact method, subject to clarification on which form of
distribution factor analysis the Commission is contemplating.\897\
Pattern Energy states that there are two types of distribution factors
used to determine the impact of given power injection flows over a
monitored facility: (1) power transfer distribution factor, which is
the percentage of power that will flow on a specific monitored facility
and does not consider outage/contingent facilities; and (2) outage
transfer distribution factor, which is the percentage of power that
will flow on a specific facility that does consider outage/contingent
facilities. Pattern Energy states that the difference between the two
distribution factors (i.e., the consideration of the outage/contingent
facility) is important because power transfer distribution factor is
usually more relevant for evaluating ``local impacts'' (e.g.,
generating facilities that are connecting in very close electrical
proximity to a given monitored element), compared to outage transfer
distribution factor, which captures impacts that may be more
geographically and electrically distant from a given monitored
facility. Pattern Energy asserts that the Commission should require
outage transfer distribution factor to be the required distribution
factor utilized in the proportional impact method for identifying
impacts to constrained facilities and resultant cost allocation for
network upgrades. Pattern Energy argues that outage transfer
distribution factor is a better measure of power flows on the bulk-
power system, and, in turn, its use ensures that impacts to constrained
facilities are properly mitigated by, and cost allocated to, the
actual, full set of contributors and not just the nearby highest
contributors.
---------------------------------------------------------------------------

    \897\ Pattern Energy Initial Comments at 11-12.
---------------------------------------------------------------------------

    447. Pine Gate contends that certain proposed enhancements to the
NOPR

proposal would provide much needed certainty to interconnection
customers and mitigate the systematic problem of interconnection queues
being the primary mechanism by which needed transmission infrastructure
is identified, developed, and constructed.\898\ Specifically, Pine Gate
requests that the Commission make the following clarifications: (1)
transmission providers are not permitted to allocate to interconnection
customers network upgrade costs associated with preexisting operating
conditions (such as overloads); (2) transmission providers are not
permitted to allocate network upgrade costs to interconnection
customers for loading that results from the simulation of conditions
that do not reflect typical operating conditions; (3) transmission
providers are required to use consistent, uniform thresholds to measure
the impact on a specific transmission facility caused by an
interconnection request and publish these thresholds, along with the
corresponding scope of the resulting network upgrades; and (4)
establish a 4% impact threshold for NRIS and a 20% impact threshold for
ERIS, unless there is preexisting loading on the facility.\899\ Pine
Gate further requests that the Commission provide transmission
providers guidance on the scope of the network upgrade required to
accommodate an interconnection request. Pine Gate states that, if a
network upgrade benefits other types of customers, interconnection
customers should receive transmission credits or other compensation if
the additional transmission capacity created is used for market
dispatch or by wholesale transmission customers.\900\ Pine Gate states
that, if the Commission does not adopt Pine Gate's proposed
enhancements as part of a final rule in this proceeding, then the
Commission should establish a technical conference to explore these
issues.
---------------------------------------------------------------------------

    \898\ Pine Gate Initial Comments at 16-17.
    \899\ Id. at 18-19.
    \900\ Id. at 20.
---------------------------------------------------------------------------

iv. Miscellaneous
    448. Pennsylvania Commission states that limiting the scope of each
cluster to those interconnection customers most likely to share the
same network upgrades may reduce the need for the proportional impact
network upgrade cost allocation method.\901\ According to Pennsylvania
Commission, instead of determining the degree to which interconnection
requests cause specific network upgrades on the back end through cost
allocation, clustering by electrical relevance may accomplish the same
goal, making sure that interconnection customers are sharing the costs
of network upgrades that they cause and from which they benefit.
Pennsylvania Commission contends that the Commission should examine
whether limiting the scope of a cluster or cost allocation, or a
combination of both, is the best method to share costs among
interconnection customers causing the same network upgrades.
---------------------------------------------------------------------------

    \901\ Pennsylvania Commission Initial Comments at 9.
---------------------------------------------------------------------------

    449. Several commenters state that the NOPR leaves unresolved the
fundamental question of more equitably sharing network upgrade costs
across all beneficiaries, including load.\902\ They argue, for example,
that policies requiring interconnection customers to pay for 100% of
network upgrade costs when the benefits of those upgrades are
distributed among other system users (i.e., participant funding) causes
interconnection customers to pay more than their appropriate share of
the costs.\903\ In contrast, Ameren claims that it is appropriate for
interconnection customers to bear responsibility for the cost of
network upgrades required for their interconnection requests.\904\
Ameren argues that, to ensure the full costs of interconnection are
identified and allocated, network upgrade costs associated with
affected systems must also be included in cluster network upgrade cost
allocation, and interconnection customers should be required to accept
the assigned costs. Ohio Commission Consumer Advocate emphasizes that
the Commission should not change the participant funding mechanisms in
RTO/ISO markets,\905\ while PPL argues that the Commission should allow
non-RTO/ISO transmission providers the option to propose allocating the
costs of network upgrades to interconnection customers without credits
as RTOs/ISOs do.\906\
---------------------------------------------------------------------------

    \902\ ACORE Initial Comments at 8-9; AEE Initial Comments at 14-
15; Interwest Initial Comments at 5; Northwest and Intermountain
Initial Comments at 8; Public Interest Organizations Initial
Comments at 31-33.
    \903\ AEE Initial Comments at 14 (citing Joint Supplemental
Comments of American Clean Power Association, Advanced Energy
Economy, and Solar Energy Industries Association, Docket No. RM21-
17-000, at 7-8 (filed June 1, 2022)).
    \904\ Ameren Initial Comments at 12.
    \905\ Ohio Commission Consumer Advocate Initial Comments at 9.
    \906\ PPL Initial Comments at 13.
---------------------------------------------------------------------------

    450. New York State Department and Shell argue that the Commission
should discontinue the historical practice of allowing interconnection
customers essentially free use of headroom on ratepayer-funded network
facilities.\907\ New York State Department states that this occurs when
transmission ratepayers fund upgrades to the transmission system that
create headroom, from which interconnection customers later benefit
without having to pay for access or use.\908\ In contrast, Invenergy
asserts that the Commission needs to ensure that the transmission
planning and interconnection models are consistent, so that
interconnection customers are not required to pay for the cost of
resolving overloads and other transmission system issues that exist
without the proposed interconnection.\909\
---------------------------------------------------------------------------

    \907\ New York State Department Initial Comments at 9; Shell
Reply Comments at 27-28.
    \908\ New York State Department Initial Comments at 9.
    \909\ Invenergy Initial Comments at 21.
---------------------------------------------------------------------------

    451. AEE encourages the Commission to ensure that its proposal
increases cost transparency and establishes a pathway for
interconnection customers to access accurate information about their
network upgrade costs in a timely manner.\910\ For instance, AEE asks
that the Commission also provide guidance regarding which party must
pay if network upgrade costs significantly exceed estimates. AEE states
that one approach to minimizing the construction time and cost of
network upgrades, and consequently the interconnection process as a
whole, is to provide a third-party construction option in the pro forma
LGIA that would allow the interconnection customer to elect for stand
alone network upgrades to be bid out and potentially built by third
parties.\911\
---------------------------------------------------------------------------

    \910\ AEE Initial Comments at 15.
    \911\ Id. at 15-16 (citing Comments of AEE, Docket No. RM21-17-
000, at 47-49 (filed Oct. 12, 2021)).
---------------------------------------------------------------------------

    452. Pine Gate recommends that the Commission require transmission
providers to analyze more holistically the other underlying needs
driving identified network upgrades to the transmission system.\912\
Pine Gate states that the Commission should require transmission
providers to only allocate to interconnection customers the costs
associated with accelerating the construction of the upgrade to
accommodate the interconnection customer's anticipated commercial
operation date.\913\
---------------------------------------------------------------------------

    \912\ Pine Gate Initial Comments at 17.
    \913\ Id.; Fervo Energy Reply Comments at 5.
---------------------------------------------------------------------------

c. Commission Determination
    453. We adopt the NOPR proposal, with modifications, to add new
proposed section 4.2.3, now section 4.2.1, to the pro forma LGIP to
require transmission providers to allocate

network upgrade costs based on a proportional impact method.\914\ Based
on the record, we modify the NOPR proposal and add definitions for
substation network upgrades and system network upgrades in the pro
forma LGIP and pro forma LGIA. In addition, we modify the definitions
of proportional impact method and stand alone network upgrades proposed
in the NOPR. We also modify proposed section 4.2.1 of the pro forma
LGIP to require transmission providers to allocate the costs of network
upgrades located at substations equally among each generating facility
interconnecting to the same substation (i.e., on a per capita basis),
and to revise the information that a transmission provider's tariff
must include regarding the proportional impact method.
---------------------------------------------------------------------------

    \914\ ``Proportional Impact Method shall mean a technical
analysis conducted by Transmission Provider to determine the degree
to which each Generating Facility in the Cluster Study contributes
to the need for a specific System Network Upgrade.'' Pro forma LGIP
section 1.
---------------------------------------------------------------------------

    454. We also modify the requirement in proposed section 4.2.1 of
the pro forma LGIP for transmission providers to directly assign the
cost of shared transmission provider's interconnection facilities to
interconnection customers on a per capita basis (i.e., on a per
generating facility basis). Specifically, we modify proposed section
4.2.1 of the pro forma LGIP to make the new provisions applicable to
the interconnection customer's interconnection facilities as well as to
the transmission provider's interconnection facilities. We also modify
this section to provide that interconnection customers may agree to
share interconnection facilities, and that the per capita allocation
will apply only where interconnection customers agree to share
interconnection facilities. We also modify this section to allow the
interconnection customers that share interconnection facilities to
choose a different cost sharing arrangement upon mutual agreement.
    455. We find that adopting the modified NOPR proposal will ensure
just and reasonable rates as transmission providers transition to the
cluster study process required by this final rule. We find that the
cost allocation method adopted herein will allow transmission providers
to allocate network upgrade costs among several interconnection
customers that may benefit from (and cause the need for) certain
network upgrades. We also find that allocating shared network upgrade
costs among a cluster of interconnection customers will reduce the
frequency of an individual interconnection customer being allocated the
costs of a large network upgrade that benefits subsequent
interconnection customers; reduce the incentive of interconnection
customers to submit multiple speculative interconnection requests to
avoid shouldering the cost of large network upgrades that may be
triggered by a single interconnection customer in the existing serial
study process; and reduce the number of cascading withdrawals and
restudies, thereby improving the efficiency of the interconnection
process and reducing interconnection queue processing delays.
    456. We conclude that a proportional impact method appropriately
reflects the Commission's interconnection pricing policy for facilities
designated as network upgrades needed for the interconnection of the
cluster. However, we are persuaded to adopt a different cost allocation
method for substations at the point of interconnection that are
designated as network upgrades and needed only to facilitate the
interconnection of certain generating facilities within the cluster
seeking interconnection to the specific substation, as demonstrated by
commenters.\915\
---------------------------------------------------------------------------

    \915\ Xcel Initial Comments at 26; Invenergy Initial Comments at
21-22.
---------------------------------------------------------------------------

    457. In Order No. 2003, the Commission reasoned that ``it is
appropriate for the Interconnection Customer to pay the initial full
cost for Interconnection Facilities and Network Upgrades that would not
be needed but for the interconnection'' (i.e., ``but for''
policy).\916\ Hence, under the serial study process in the existing pro
forma LGIP, the transmission provider allocates network upgrade costs
by assigning the initial full cost responsibility for all network
upgrades identified in a study to a single interconnection customer
that causes those upgrades. However, in transitioning to a cluster
study process in this final rule, the Commission must establish a
method for allocating network upgrade costs among all interconnection
customers within a cluster. Based on the record in this proceeding, we
find that a proportional impact method is the appropriate application
of the Commission's interconnection pricing policy when allocating the
costs of network upgrades needed for an entire cluster of proposed
generating facilities because a proportional impact method allows
transmission providers to assess a generating facility's individual
contribution to the need for the network upgrades identified for the
cluster. However, the need for substation network upgrades is only
generated by a specific generating facility seeking interconnection at
a specific substation and not by all the generating facilities in the
cluster. It would be inconsistent with the Commission's interconnection
pricing policy to allocate the costs of the substation network upgrades
to interconnection customers in the cluster that are interconnecting at
other substations because, in the case of a cluster of new
interconnection requests, only the generating facilities
interconnecting to the same substation generate the need for network
upgrades at that substation.
---------------------------------------------------------------------------

    \916\ See id. P 694; Nev. Power Co., 182 FERC ] 61,048, at PP
50-51 (2023) (describing the cost allocation requirements for
network upgrades as the Commission's Order No. 2003 ``but for
requirements'').
---------------------------------------------------------------------------

    458. As explained above, the cost of substation network upgrades
must be initially allocated only to those interconnection customers
seeking to interconnect at the same substation,\917\ while the cost of
system network upgrades for all interconnection customers in a cluster
must be initially allocated based on the technical analyses to be
specified under the transmission provider's proportional impact method.
To facilitate these differing cost allocation methods, we modify the
definitions in section 1 of the pro forma LGIP and article 1 of the pro
forma LGIA to distinguish substation network upgrades (including all
switching stations) \918\ from system network upgrades.\919\ Using
these definitions, we further modify the pro forma LGIP and pro forma
LGIA to draw this distinction and to ensure that the costs for the two
types of network upgrades are allocated consistent with the
Commission's interconnection pricing policy, which establishes the
principles for allocating the costs of network upgrades.
---------------------------------------------------------------------------

    \917\ For clarity, we note that we are referring to the
transmission provider's substation immediately beyond the point of
interconnection as defined in section 1 of the pro forma LGIP:
``Point of Interconnection shall mean the point . . . where the
interconnection facilities connect to the transmission provider's
transmission system.'' Pro forma LGIP section 1 (Definitions).
    \918\ Substation network upgrades shall mean the network
upgrades required at the substation located at the point of
interconnection.
    \919\ System network upgrades shall mean the network upgrades
required beyond the substation located at the point of
interconnection.
---------------------------------------------------------------------------

    459. We note that we are not modifying the pro forma LGIP's
definition of facilities needed beyond the point of interconnection as
network upgrades; rather, we are providing greater specificity with
regard to how the costs of the two distinct types of network upgrades
identified within a

cluster study should be initially allocated. We find that this approach
will also lead to greater transparency and ease of administering the
cluster study process by establishing distinct guidelines for how the
costs of the two types of network upgrades will be initially allocated
within a cluster. Also, as commenters note, in instances where a point
of interconnection is shared among more than one interconnection
request within a cluster, the cost of the substation network upgrades
is more directly impacted by the number of generating facilities
proposing to interconnect there because the cost of the equipment used
to interconnect generating facilities to substations does not vary
based on the electrical characteristics of the interconnecting
generating facilities (e.g., the MW size of the generating facility,
fuel type, or services provided).
    460. To further implement this modification of the NOPR proposal,
we modify the definition of stand alone network upgrades proposed in
the NOPR to recognize that (1) a substation network upgrade may only be
considered a stand alone network upgrade if it is needed to
interconnect only one generating facility in the cluster and no other
interconnection customer in that cluster is required to interconnect to
the same substation network upgrades, and (2) the proportional impact
analysis will be used in determining whether a system network upgrade
is only needed for one generating facility in the cluster and can be
considered a stand alone network upgrade. Our revisions also seek to
prevent lengthy disputes over which interconnection customer has the
right to exercise the option to build in instances where a network
upgrade could qualify under the existing definition of a stand alone
network upgrade, but the network upgrade is needed for multiple
interconnection customers' generating facilities.
    461. Several commenters request that the Commission provide more
specificity and guidance regarding the specific thresholds and metrics
that transmission providers are expected to submit on compliance.\920\
In this final rule, we modify the proposed requirement in pro forma
LGIP section 4.2.1 for transmission providers to revise their LGIPs on
compliance to include specific thresholds and metrics. Instead, we
direct transmission providers on compliance to provide tariff
provisions that describe, for each type of system network upgrade that
a transmission provider would identify in the cluster study process
(e.g., voltage support network upgrades or short circuit network
upgrades), how the costs of each system network upgrade type will be
allocated among the interconnection customers within the cluster.
Transmission providers' revisions on compliance must provide that costs
for a discrete network upgrade identified in the cluster study process
(e.g., reconductoring a portion of a transmission line to accommodate
the interconnection of several generating facilities in the cluster)
are allocated to only the interconnection customers in the cluster that
are shown through technical analyses to contribute to the need for the
discrete network upgrade. For example, the transmission provider must
propose tariff provisions similar to the following: (1) voltage support
related network upgrades shall be allocated using a voltage impact
analysis, which will identify each generating facility's contribution
to the voltage violation; (2) short circuit network upgrade costs
within a cluster will be allocated based on the impact from each
generating facility within the cluster, on the constrained facilities
under the most constraining fault in the relevant study case(s); or (3)
the estimated costs of short circuit related general reliability
network upgrades identified through a cluster study shall be assigned
to all interconnection requests in that group study pro rata on the
basis of the short circuit duty contribution of each generating
facility.
---------------------------------------------------------------------------

    \920\ Clean Energy Buyers Initial Comments at 9; Cypress Creek
Initial Comments at 19; EPSA Initial Comments at 8; Invenergy
Initial Comments at 21; Vistra Initial Comments at 12-13.
---------------------------------------------------------------------------

    462. PJM requests that the Commission clarify that transmission
providers may provide the detailed and specific technical information
in business practice manuals rather than in tariffs.\921\ In response,
we find that, as noted above, transmission providers must provide
tariff provisions that describe the method they will use for allocating
costs of each type of network upgrade, but specific metrics and
thresholds for implementing the allocation, or other specific technical
information, may be included in business practice manuals, or publicly
posted on the transmission provider's website. We agree with PJM that
such details are appropriate for business practice manuals, consistent
with Commission precedent applying the ``rule of reason'' to determine
whether a detail should be included in a tariff or business practice
manual. In particular, the technical information surrounding
implementation of the proportional impact method by a particular
transmission provider does not need to be included in the transmission
provider's tariff under the rule of reason because these provisions are
properly classified as implementation details that do not significantly
affect rates, terms, and conditions of service.\922\
---------------------------------------------------------------------------

    \921\ PJM Initial Comments at 37.
    \922\ See, e.g., N.Y. Indep. Sys. Operator, Inc., 179 FERC ]
61,102, at PP 105-114 (2022) (citing, inter alia, Energy Storage
Ass'n v. PJM Interconnection, L.L.C., 162 FERC ] 61,296, at P 103
(2018); City of Cleveland v. FERC, 773 F.2d, 1368, 1376-77 (D.C.
Cir. 1985)).
---------------------------------------------------------------------------

    463. Several commenters request that the Commission direct
transmission providers to use a specific type of proportional impact
method or distribution factor analysis and apply minimum distribution
factor thresholds that will be used to evaluate NRIS and ERIS
requests.\923\ We are unpersuaded that such level of prescription is
needed to ensure just, reasonable, and not unduly discriminatory or
preferential rates. Instead, we believe that flexibility for
transmission providers to develop such details as part of their
compliance filings--and in their business practice manuals, where
consistent with the rule of reason, as discussed above--is important to
ensure that the proportional impact method used by each transmission
provider reflects the characteristics of its region (e.g., types of
network upgrade facilities identified in the region, or preferred
analyses in the region for determining the share of the need for the
specific network upgrade type). For the same reason, we decline to
require transmission providers to use consistent, uniform thresholds to
measure impact, as requested by Pine Gate.\924\
---------------------------------------------------------------------------

    \923\ AEE Reply Comments at 10; AES Initial Comments at 8;
Invenergy Initial Comments at 21; Longroad Energy Initial Comments
at 9; Pattern Energy Initial Comments at 11-12; Pine Gate Initial
Comments at 16-19; SEIA Initial Comments at 11.
    \924\ Pine Gate Initial Comments at 19.
---------------------------------------------------------------------------

    464. Based on the record, we decline to require transmission
providers to use the proportional capacity method to allocate the costs
of all system network upgrades, given our decision to instead opt for
the proportional impact method and because it reflects the Commission's
interconnection pricing policy for facilities designated as network
upgrades needed for the interconnection of the cluster. Nonetheless, we
recognize that there may be a tradeoff between simplicity and accuracy
when considering proportional capacity versus proportional impact for
cost allocation for network upgrades. While we require transmission
providers to allocate network upgrade costs based on a proportional
impact method based on the record in this final rule, we

acknowledge that other allocation methods could potentially meet the
consistent with or superior to standard or the independent entity
variation standard if, among other things, they allocate network
upgrade costs in a manner consistent with the Commission's
interconnection pricing policy.
    465. We disagree with NV Energy and PacifiCorp's arguments that the
proportional impact method carries unmanageable time, restudy, and
reallocation risks.\925\ In response to concerns about restudy risk
resulting from withdrawals, we note that the Commission's new cluster
study process requires transmission providers to complete the process
within 150 calendar days, which we believe is sufficiently long for
transmission providers to be able to conduct the rounds of restudy and
reallocation that are needed to achieve a stable interconnection queue
and reduce the risk of further withdrawals before moving to the
individual facilities studies. Further, the proportional impact method
is currently used by most transmission providers that conduct cluster
studies, and several of these transmission providers have adopted study
timelines similar to what we adopt in this final rule.\926\
---------------------------------------------------------------------------

    \925\ NV Energy Initial Comments at 12; PacifiCorp Reply
Comments at 3.
    \926\ See Dominion Energy S.C., Inc., Docket No. ER22-301-000
(Dec. 28, 2021) (delegated order); Duke Energy Carolinas, LLC, 176
FERC ] 61,075 (2021); Pub. Serv. Co. of Colo., 169 FERC ] 61,182
(2019); Tri-State Generation & Transmission Ass'n, Inc., 173 FERC ]
61,015 (2020).
---------------------------------------------------------------------------

    466. We disagree with claims from NV Energy and PacifiCorp that the
proportional impact method must be conducted as if it were a serial
study in that each interconnection request must be studied
individually. When proposing a proportional impact method on
compliance, transmission providers have many methods to choose from and
should adopt a method that allows them to meet the timelines designated
in the cluster study process. In response to PPL,\927\ we confirm that
within the cluster study process, any network upgrade costs previously
allocated to a withdrawing interconnection customer that are still
required after the withdrawal may be reallocated among the remaining
interconnection customers in the cluster based on the relevant cost
allocation method applied to the network upgrade facility type.
---------------------------------------------------------------------------

    \927\ PPL Initial Comments at 14.
---------------------------------------------------------------------------

    467. Finally, several commenters suggest alternative reforms to the
Commission's network upgrade cost allocation policies: (1) limit the
use of cluster areas as an alternative to the proposed cost allocation
method within a cluster; \928\ (2) change the interconnection pricing
policy or participant funding regime (as allowed in certain RTOs/ISOs)
to limit participant funding and/or require assessment of whether
transmission customers benefit from and should pay for network
upgrades; \929\ (3) establish a process to eliminate the use of
headroom on network transmission facilities; \930\ and/or (4) provide a
third-party construction option.\931\ We find these requests to be
outside the scope of this proceeding and lacking in record support to
adequately consider whether to adopt them in this final rule.
---------------------------------------------------------------------------

    \928\ Pennsylvania Commission Initial Comments at 9.
    \929\ ACORE Initial Comments at 8-9; AEE Initial Comments at 14-
15; Ameren Initial Comments at 12; Interwest Initial Comments at 5;
Northwest and Intermountain Initial Comments at 8; Ohio Commission
Consumer Advocate Initial Comments at 12; PPL Initial Comments at
13; Public Interest Organizations Initial Comments at 31-33.
    \930\ New York State Department Initial Comments at 9; Shell
Reply Comments at 27-28.
    \931\ AEE Initial Comments at 15.
---------------------------------------------------------------------------

5. Shared Network Upgrades
a. NOPR Proposal
    468. In the NOPR, the Commission preliminarily found that the
absence of network upgrade cost sharing provisions in the pro forma
LGIP may pose a barrier to entry to generation development.\932\ The
Commission stated that absent cost sharing provisions among clusters,
interconnection customers may significantly benefit from earlier-in-
time network upgrades but not share in the cost of those network
upgrades in a manner that is roughly commensurate with benefits. The
Commission therefore proposed to require transmission providers to
allocate the costs of network upgrades between interconnection
customers in an earlier cluster and interconnection customers in a
subsequent cluster that benefit from the same network upgrade in a
manner that is roughly commensurate with the benefits received.\933\
Specifically, the Commission proposed that when the transmission
provider analyzes the network upgrades identified through its cluster
study process, if a generating facility of an interconnection customer
in a later cluster directly connects either to (1) a network upgrade in
service for less than five years or (2) a substation where the network
upgrade in service for less than five years terminates, then the
transmission provider would be required to designate the network
upgrade a shared network upgrade. Upon such a designation, the
interconnection customer in the later cluster would be required to
contribute a pro rata portion of the shared network upgrade's remaining
undepreciated capital cost based on the impact the interconnection
customer in the later cluster has on the network upgrade, as measured
using the same method the transmission provider used to determine the
impact of the interconnection customer(s) in the earlier cluster.
---------------------------------------------------------------------------

    \932\ NOPR, 179 FERC ] 61,194 at P 97.
    \933\ Id. P 98.
---------------------------------------------------------------------------

    469. The Commission proposed that if the new generating facility
does not directly connect to the network upgrade, then the transmission
provider would perform a power flow analysis with a two-step test to
measure the lower-queued interconnection customer's use of and benefit
from the network upgrade funded by interconnection customers from an
earlier cluster. Under the first step, the transmission provider would
determine if the impact of the interconnection customer in the later
cluster exceeds five MW and exceeds one percent of the network
upgrade's rating. Then, if those criteria are met, the transmission
provider would determine if the lower-queued interconnection customer's
impact either exceeds more than 5% of the network upgrade's facility
rating or if the transmission distribution factor is greater than 20%.
Finally, if either of these criteria were met, the transmission
provider would be required to designate that network upgrade a shared
network upgrade, and the interconnection customer in the later cluster
would be responsible for a pro rata share of the network upgrade's
remaining undepreciated capital cost based on the impact the
interconnection customer in the later cluster has on the network
upgrade, as measured using the same method the transmission provider
used to determine the impact of the interconnection customer(s) from
the earlier cluster.
    470. The Commission proposed to require the interconnection
customer in the later cluster to pay the transmission provider for the
interconnection customer's share of the shared network upgrade costs
through a one-time lump sum, which the transmission provider would
disburse to the appropriate interconnection customer(s) from the
earlier cluster.\934\ The Commission also proposed that, where
applicable, the interconnection customer from the earlier cluster or
the relevant transmission provider would be required to assign
transmission credits for the portion of the shared network

upgrade that the interconnection customer in the later cluster funded
to the interconnection customer in the later cluster. Additionally, the
Commission proposed to require that the interconnection customer in the
later cluster not be required to pay for its share of the cost of the
shared network upgrade until that shared network upgrade is in service.
The Commission also proposed to require transmission providers to
provide the list of shared network upgrades to interconnection
customers in subsequent clusters at the conclusion of the cluster study
and to list those network upgrades in the appendix of the relevant
interconnection customer's LGIA. The Commission acknowledged that there
could be scenarios where the network upgrade may be identified as both
a shared network upgrade and a contingent facility; and, thus a
designation of a network upgrade as a contingent facility does not
preclude it from also being a shared network upgrade if the network
upgrade meets the aforementioned criteria and passes the screens.\935\
---------------------------------------------------------------------------

    \934\ Id. P 99.
    \935\ Id. P 100.
---------------------------------------------------------------------------

b. Comments
i. Comments in Support
    471. Multiple commenters support the proposal.\936\ OMS states
that, while cost sharing arrangements can be resource intensive and
contentious, they can be crucial to facilitating an equitable
interconnection process.\937\ NARUC states that the proposal is a
logical extension of the cluster cost sharing concept and could spread
costs over even more interconnection customers benefitting from network
upgrades.\938\ A couple of commenters contend that the proposal will
provide more certainty and result in fewer withdrawals, thus reducing
associated restudies and study processing delays.\939\
---------------------------------------------------------------------------

    \936\ AES Initial Comments at 12; Avangrid Initial Comments at
32; Bonneville Initial Comments at 11; Interwest Initial Comments at
17; ISO-NE Initial Comments at 25; MISO Initial Comments at 47;
NARUC Initial Comments at 9; National Grid Initial Comments at 19;
NESCOE Initial Comments at 9-10; New Jersey Commission Initial
Comments at 15-16; NYTOs Initial Comments at 17; SEIA Initial
Comments at 12; Shell Initial Comments at 27; Vistra Initial
Comments at 1; Xcel Initial Comments at 27.
    \937\ OMS Initial Comments at 9.
    \938\ NARUC Initial Comments at 9.
    \939\ New Jersey Commission Initial Comments at 16; Omaha Public
Power Initial Comments at 5-6; SEIA Initial Comments at 2.
---------------------------------------------------------------------------

    472. Several commenters believe that the proposal will address the
issue of ``first movers/free riders'' when interconnection customers in
a later cluster study benefit from network upgrades assigned to
interconnection customers in earlier clusters.\940\ Shell claims that
avoiding first mover subsidization of free riders is particularly
important for offshore wind interconnections because of the potential
lack of onshore access points and, therefore, argues that the
Commission should be open to non-traditional cost allocation methods
when contemplating methods to mitigate first mover risk.\941\
---------------------------------------------------------------------------

    \940\ ELCON Initial Comments at 9; Longroad Energy Reply
Comments at 13; Pattern Energy Initial Comments at 18; SEIA Initial
Comments at 12; Shell Initial Comments at 27; Xcel Initial Comments
at 27; Vistra Initial Comments at 4.
    \941\ Shell Initial Comments at 27.
---------------------------------------------------------------------------

    473. Additionally, some commenters believe that the proposal is
consistent with the Commission's cost causation policy.\942\ Avangrid
asserts that, when surplus transmission capacity created by a recent
network upgrade is used by a later generating facility, the lower-
queued interconnection customer should share the costs in a way that is
commensurate with benefits like those allocated using the original
proportional impact method assessment.\943\
---------------------------------------------------------------------------

    \942\ Avangrid Initial Comments at 32; Omaha Public Power
Initial Comments at 5-6; Vistra Initial Comments at 5.
    \943\ Avangrid Initial Comments at 32.
---------------------------------------------------------------------------

    474. Xcel does not believe the proposal will have a significant
impact on the number of interconnection requests submitted but believes
that it will reduce barriers to entry for all interconnection
customers.\944\ Xcel believes that the proposal is appropriate where
there is participant funding.
---------------------------------------------------------------------------

    \944\ Xcel Initial Comments at 48.
---------------------------------------------------------------------------

ii. Comments in Opposition
    475. Some commenters oppose the proposal.\945\ Several commenters
assert that it will not yield many benefits and that the Commission
should focus on other reforms that are more likely to reduce network
upgrade costs and improve the equity of allocating them among
beneficiaries.\946\ Dominion and Fervo Energy argue that
interconnection customers in subsequent clusters do not ``cause'' the
costs to be incurred, and to the extent the interconnection customers
will benefit, they will contribute through their payment for
transmission service.\947\
---------------------------------------------------------------------------

    \945\ APS Initial Comments at 11; Dominion Initial Comments at
22, 28; Dominion Reply Comments at 17; Duke Southeast Utilities
Initial Comments at 9; EEI Reply Comments at 12-13; Enel Initial
Comments at 30; Indicated PJM TOs Initial Comments at 21; PacifiCorp
Initial Comments at 27; Pennsylvania Commission Initial Comments at
10; R Street Initial Comments 12; SPP Initial Comments at 8; U.S.
Chamber of Commerce Initial Comments at 8.
    \946\ AEE Initial Comments at 16; Dominion Initial Comments at
23-24; Dominion Reply Comments at 17; Enel Initial Comments at 30;
EEI Reply Comments at 12; Eversource Initial Comments at 15;
Indicated PJM TOs Reply Comments at 40; PacifiCorp Initial Comments
at 29; Pennsylvania Commission Initial Comments at 10; Pine Gate
Initial Comments at 20; SoCal Edison Initial Comments at 17; SPP
Initial Comments at 8; U.S. Chamber of Commerce Initial Comments at
8.
    \947\ Dominion Initial Comments at 23; Fervo Energy Reply
Comments at 5-6.
---------------------------------------------------------------------------

    476. Other commenters believe that the implementation of the
proposal will be administratively burdensome for transmission
providers.\948\ A few commenters believe that the proposal will lead to
increased disputes and FPA section 206 complaints at the Commission
over cost allocation assignments.\949\
---------------------------------------------------------------------------

    \948\ AECI Initial Comments at 5; AEE Initial Comments at 16;
APS Initial Comments at 11; CAISO Initial Comments at 15; Dominion
Initial Comments at 23-24; Dominion Reply Comments at 17; Enel
Initial Comments at 30; Indicated PJM TOs Initial Comments at 21-22;
National Grid Initial Comments at 19; PacifiCorp Initial Comments at
27, 29; Pine Gate Initial Comments at 22; PJM Initial Comments at
37-38; R Street Initial Comments at 12; SPP Initial Comments at 8;
U.S. Chamber of Commerce Initial Comments at 8.
    \949\ AECI Initial Comments at 5-6; Dominion Initial Comments at
23-24; Dominion Reply Comments at 18; Duke Southeast Utilities
Initial Comments at 10; Fervo Energy Reply Comments at 5; PacifiCorp
Initial Comments at 28; PJM Initial Comments at 37-38.
---------------------------------------------------------------------------

    477. Several commenters express concern that the proposal will lead
to interconnection study delays and/or restudies, which would undermine
the NOPR's goal to reduce interconnection study processing
timelines.\950\ A few commenters state that the proposal would require
transmission providers to track all in-service network upgrades on the
transmission system across all cluster studies over a five-year period,
which they contend would be onerous or nearly impossible.\951\ The U.S.
Chamber of Commerce claims that power flow studies conducted up to five
years after the in-service date of non-adjacent network upgrades will
inevitably fail to accurately divide the relevant interconnection costs
among disparate-in-time interconnection customers due to the many
coinciding yet unrelated system changes that will affect the outcomes
of such analyses.\952\ PacifiCorp contends that this requirement would
require transmission providers to track multiple requests for

each network upgrade on different timelines, the suspension or
withdrawal of which could trigger cascading revaluations and
corresponding LGIA amendments.\953\ Dominion contends that the NOPR's
proposal would complicate reviews and require additional time-consuming
analysis, which would only worsen for transmission providers with a
high volume of interconnection requests, such as RTOs/ISOs.\954\
---------------------------------------------------------------------------

    \950\ CAISO Initial Comments at 13; Dominion Initial Comments at
23; Dominion Reply Comments at 17; Indicated PJM TOs Reply Comments
at 40; PacifiCorp Initial Comments at 27-28; Pennsylvania Commission
Initial Comments at 10; SPP Initial Comments at 9.
    \951\ APS Initial Comments at 11-12; Dominion Initial Comments
at 22; Dominion Reply Comments at 17; PacifiCorp Initial Comments at
28; U.S. Chamber of Commerce Initial Comments at 8.
    \952\ U.S. Chamber of Commerce Initial Comments at 8.
    \953\ PacifiCorp Initial Comments at 28.
    \954\ Dominion Initial Comments at 23.
---------------------------------------------------------------------------

    478. Some commenters argue that the proposal will not create cost
certainty for interconnection customers in earlier clusters when
deciding whether to move forward with a generating facility because
there would be no guarantee that an interconnection customer in a
subsequent cluster would provide reimbursement.\955\ NextEra and PJM
argue that a benefit of not sharing costs between clusters is that all
the interconnection customers within a cluster simultaneously learn
their network upgrade costs and associated cost responsibility,
creating greater cost certainty.\956\
---------------------------------------------------------------------------

    \955\ AEE Initial Comments at 16; Clean Energy Associations
Initial Comments at 25; Dominion Initial Comments at 23-24; EEI
Initial Comments at 22; Enel Initial Comments at 30; Indicated PJM
TOs Initial Comments at 22-23; Indicated PJM TOs Reply Comments at
40; NARUC Initial Comments at 9; NextEra Initial Comments at 18;
Pine Gate Initial Comments at 22; PJM Initial Comments at 38; U.S.
Chamber of Commerce Initial Comments at 8; Xcel Initial Comments at
48.
    \956\ NextEra Initial Comments at 18-19; PJM Initial Comments at
38.
---------------------------------------------------------------------------

iii. Alternatives and Requests for Flexibility
    479. Several commenters recommend modifications to the
proposal.\957\ A few recommend that the Commission implement a minimum
threshold before a network upgrade would be evaluated as a potential
shared network upgrade.\958\ MISO and Xcel state that changes will be
necessary in RTO/ISO regions where a transmission owner may
unilaterally provide upfront funding for network upgrades to integrate
the cost allocation for such a funding mechanism with the shared
network upgrade proposal.\959\ ENGIE recommends that the Commission set
requirements in the interconnection process to identify interconnection
facilities and network upgrades that are necessary to interconnect the
generating facility, as well as network upgrades needed to mitigate
local transmission constraints, and asserts that interconnection
customers should not be responsible for the costs of distant and
minimally impacted network upgrades.\960\ Xcel also contends that the
interconnection customer in the subsequent cluster should enter into a
multiparty facilities service agreement to reimburse the
interconnection customers in the earlier cluster, rather than pay the
proposed lump sum payment to the transmission provider.\961\ Pattern
Energy recommends that the interconnection customer in the later
cluster be required to repay the earlier interconnection customer at
the time of execution of the subsequent interconnection customer's
interconnection agreement, and not when the relevant shared network
upgrades go into service.\962\
---------------------------------------------------------------------------

    \957\ Clean Energy Associations Initial Comments at 25-26; ENGIE
Reply Comments at 3-4; MISO Initial Comments at 48-49; Pattern
Energy Initial Comments at 18; Xcel Initial Comments at 29.
    \958\ ENGIE Reply Comments at 3-4; MISO Initial Comments at 48;
R Street Initial Comments 12; Xcel Initial Comments at 29.
    \959\ MISO Initial Comments at 48-49; Xcel Initial Comments at
29.
    \960\ ENGIE Reply Comments at 3-4.
    \961\ Xcel Initial Comments at 29.
    \962\ Pattern Energy Initial Comments at 18.
---------------------------------------------------------------------------

    480. A few commenters propose alternative methods for cost
allocation for shared network upgrades.\963\ For instance, Xcel argues
that the Commission should be clear that it will accept other proposals
to determine if a network upgrade is shareable to subsequent
interconnection requests.\964\
---------------------------------------------------------------------------

    \963\ Clean Energy Associations Initial Comments at 25; ENGIE
Reply Comments at 3; Longroad Energy Reply Comments at 13; Pine Gate
Initial Comments at 20, 23.
    \964\ Xcel Initial Comments at 28.
---------------------------------------------------------------------------

    481. Some commenters support regional flexibility for transmission
providers to implement any shared network upgrade mechanism.\965\ For
example, NESCOE suggests that allowing transmission providers,
especially RTOs/ISOs, some flexibility in coordinating with their
states on developing proposed approaches to sharing the costs
associated with network upgrades funded by interconnection customers in
earlier clusters could minimize the contentious nature of developing
cost sharing arrangements.\966\
---------------------------------------------------------------------------

    \965\ Bonneville Initial Comments at 11; CAISO Initial Comments
at 14; EEI Initial Comments at 22; Indicated PJM TOs Initial
Comments at 21; Indicated PJM TOs Reply Comments at 40; National
Grid Initial Comments at 19; NESCOE Initial Comments at 11; NESCOE
Reply Comments at 7; NRECA Initial Comments at 9, 24; NYISO Initial
Comments at 16; PJM Initial Comments at 37.
    \966\ NESCOE Initial Comments at 11.
---------------------------------------------------------------------------

    482. Other commenters recommend that the Commission not adopt the
shared network upgrade proposal in non-RTO/ISO regions where
interconnection customers provide upfront funds for the network
upgrades and receive reimbursement through transmission credits from
the transmission provider, plus interest (i.e., the interconnection
pricing policy established in Order No. 2003).\967\ Pine Gate states
that under the NOPR proposal, interconnection customers in later
clusters would potentially reimburse interconnection customers in
earlier clusters sooner than the transmission provider would have via
transmission credits, but with the same result.\968\ Enel asserts that
coupling shared network upgrades with transmission credits creates even
more administrative complexity, as an interconnection customer in a
later cluster providing funds to an interconnection customer in an
earlier cluster would necessitate a partial transfer of transmission
credits, potentially on a partially depreciated asset, which creates an
extremely complex payment, reimbursement, and multiparty crediting
system that would be administratively burdensome.\969\ Similarly, APS
and Duke Southeast Utilities express concern over an additional
complication in the event the earlier interconnection customer has
already been fully reimbursed for the network upgrades through
transmission credits.\970\ In contrast, Vistra contends that the shared
network upgrade proposal will be beneficial in regions with
transmission crediting as it will speed reimbursement relative to the
status quo.\971\ Vistra claims that, when an overlap exists between the
reimbursement of an interconnection customer through transmission
credits and the reimbursement mechanism in this proposal, this proposal
will appropriately charge interconnection customers in subsequent
clusters.
---------------------------------------------------------------------------

    \967\ Duke Southeast Utilities Initial Comments at 10-11; Enel
Initial Comments at 30; PacifiCorp Initial Comments at 26-28; Pine
Gate Initial Comments at 22.
    \968\ Pine Gate Initial Comments at 22.
    \969\ Enel Initial Comments at 30.
    \970\ APS Initial Comments at 12; Duke Southeast Utilities
Initial Comments at 10.
    \971\ Vistra Initial Comments at 5.
---------------------------------------------------------------------------

    483. Other commenters raise additional cost allocation concerns
with the shared network upgrade proposal. Enel argues that, in markets
where transmission credits do not apply, reimbursement for funding
network upgrades is often granted in the form of congestion hedging
mechanisms, and the repayment of network upgrade costs from a lower-
queued interconnection customer to a higher-queued interconnection
customer could create the need for a partial transfer of these

congestion hedging rights.\972\ SDG&E cautions against allowing
scenarios where an higher-queued interconnection customer with cost
responsibility terminates an executed LGIA but the network upgrades are
still needed for later interconnection customers, thus leaving the
transmission provider as the backstop for financing the network
upgrade.\973\ A few commenters argue that the Commission should limit
its proposal to share network upgrade costs between clusters to areas
whether interconnection customers are not already reimbursed for
network upgrade costs.\974\
---------------------------------------------------------------------------

    \972\ Enel Initial Comments at 30.
    \973\ SDG&E Initial Comments at 6.
    \974\ CAISO Initial Comments at 13; SoCal Edison Initial
Comments at 16.
---------------------------------------------------------------------------

    484. Several commenters note that some RTOs/ISOs have similar
existing cost allocation mechanisms to the NOPR proposal and request
that, in those instances, the Commission defer to those transmission
providers when the existing mechanisms are accomplishing the final
rule's objectives.\975\ On a similar note, PJM and Indicated PJM TOs
request that the Commission not require PJM to implement cost sharing
between its clusters.\976\
---------------------------------------------------------------------------

    \975\ Ameren Initial Comments at 13; APPA-LPPC Initial Comments
at 17; ISO-NE Initial Comments at 26; MISO Initial Comments at 47-
48; NYISO Initial Comments at 15; NYTOs Initial Comments at 17; OMS
Initial Comments at 9; SDG&E Initial Comments at 5.
    \976\ Indicated PJM TOs Initial Comments at 23; PJM Initial
Comments at 37.
---------------------------------------------------------------------------

    485. Several commenters request various clarifications of the
proposal and provide their thoughts on specific aspects.\977\