propose to rename section 4.2 of the pro forma LGIP ``General Study
Process'' and revise it to provide that interconnection studies shall
be performed within the cluster study process.
    73. We propose to revise subsection 4.4.1 of the pro forma LGIP to
make clear that: (1) the modifications previously permitted prior to
return of the executed system impact study agreement are now permitted
to be made prior to return of the executed cluster study agreement; and
(2) for plant increases, the incremental increase will be studied with
the next cluster study for purposes of cost allocation and study
analysis.
    74. We propose to delete section 6 (Interconnection Feasibility
Study) of the pro forma LGIP (and all subsections). As explained above,
we propose to adopt the new section 6 (Interconnection Information
Access) of the pro forma LGIP to establish a mechanism for the
interconnection customer to evaluate the feasibility of a prospective
generating facility. We propose to revise section 7 (Interconnection
System Impact Study) of the pro forma LGIP to make clear that the
system impact study will now be conducted on a clustered basis, and
that the transmission provider must complete the cluster study within
150 days of the closing of the customer engagement window. We further
propose revisions to sections 3.4.2 and 8.1 of the pro forma LGIP to
include the financial commitments and readiness requirements that must
be met for the interconnection customer to remain in the
interconnection queue following the completion of the cluster study.
Those requirements are discussed in greater detail below. We propose
additional revisions to delete section 7.5 (Meeting with Transmission
Provider) of the pro forma LGIP and adopt the new section 7.5 (Cluster
Study Re-Studies) of the pro forma LGIP to include provisions governing
clustered re-studies where an interconnection customer in the cluster
or a higher-queued cluster withdraws its interconnection request.
Specifically, we propose to require transmission providers to conduct a
re-study of the cluster within 150 days of informing the cluster of the
need for re-study.
    75. We propose revisions to the facilities study provisions in
section 8 (Interconnection Facilities Study) of the pro forma LGIP to
make clear that re-studies can be triggered by a higher or equally
queued interconnection project withdrawing from the interconnection
queue or modification of a higher or equally queued interconnection
project

pursuant to section 4.4 (Modifications) of the pro forma LGIP.
    76. We also propose revisions to section 11.1 (Tender) of the pro
forma LGIP to clarify the procedures for executing the LGIA. We propose
revisions to section 11.3 (Execution and Filing) of the pro forma LGIP
to provide that the interconnection customer must submit to the
transmission provider at the same time it submits the executed LGIA
demonstration of continued site control, the requisite deposit, and
reasonable evidence of achieving milestones in the development of the
generating facility. An interconnection customer that requests that the
transmission provider file an unexecuted LGIA with the Commission must
submit the aforementioned information within 15 days of the Commission
issuing an order on the unexecuted LGIA filing, or its interconnection
request will be deemed withdrawn. We propose revisions to the system
impact study agreement and facilities study agreement to be consistent
with the new cluster study process. We propose to add several new
definitions to section 1 of the pro forma LGIP and article 1 of the pro
forma LGIA that relate to the new first-ready, first-served cluster
study process and to modify a number of other definitions.
    77. We seek comment on whether the Commission should require
transmission providers to conduct cluster studies on subgroups of
interconnection customers based on areas of geographic and electric
relevance, and, if so, whether the Commission should adopt provisions
governing how cluster areas should be formed to ensure that cluster
areas are formed in a transparent and not unduly discriminatory
manner.\139\
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    \139\ Commenters that believe that the Commission should adopt
provisions governing how cluster areas should be formed should also
explain how to define such a cluster area (e.g., based on geographic
proximity, geographic constraints such as bodies of water or
mountain ranges, system topology, and/or major transmission system
constraints).
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    78. We seek comment on whether the pro forma LGIP should specify
how cluster studies must be rerun after re-study is triggered or
whether there are provisions the Commission could adopt to improve the
efficacy of the re-study process, such as preventing excessive re-study
by limiting the transmission provider to two re-studies per month
within the 150-day cluster re-study period.
    79. We seek comment on whether the Commission should maintain an
option in the pro forma LGIP for some interconnection requests to be
processed outside of the annual cluster study process, and if so, in
what circumstances and on what timeframe (for completion of the study),
and on what priority compared to any active clusters.
3. Allocation of Cluster Study Costs
a. Background
    80. Under the pro forma LGIP, interconnection studies are conducted
for each individual interconnection request and study costs are paid by
the interconnection customer. Transitioning to a first-ready, first-
served cluster study process would require transmission providers to
establish a method to allocate the shared cost of clustered
interconnection studies among the interconnection customers in the
cluster.
    81. The Commission has accepted a variety of approaches to
allocating the costs of cluster studies, most of which allocate costs
using two factors: (1) the total MW size requested in a cluster; and
(2) the number of interconnection requests in the cluster. Approaches
among transmission providers vary with regard to the weight assigned to
each of these factors. For example, Duke and Dominion allocate 90% of
the applicable study costs to interconnection customers on a pro rata
basis based on requested MWs included in the applicable cluster, and
10% on a per capita basis based on the number of interconnection
requests included in the applicable cluster.\140\ SPP, PNM, PSCo,
PacifiCorp, and Tri-State allocate 50% of the study costs based on
requested MWs, and 50% based on the number of interconnection
requests.\141\ CAISO, NYISO, and MISO only use one of the two factors
in their allocation method. CAISO and NYISO allocate all study costs
equally based on the number of interconnection requests within the
cluster,\142\ while MISO allocates all study costs pro rata based on
the number of MWs requested.\143\
---------------------------------------------------------------------------

    \140\ See Duke, 176 FERC ] 61,075 at P 18; Dominion, Docket No.
ER22-301-000 (Dec. 28, 2021) (delegated order).
    \141\ See SPP, OATT, attach. V (4.0.0), section 4.2.5; PNM, 136
FERC ] 61,231 at P 24; PSCo, 169 FERC ] 61,182 at P 32; PacifiCorp,
171 FERC ] 61,112 at P 13; Tri-State, 174 FERC ] 61,021 at P 33.
    \142\ CAISO, CAISO eTariff, OATT, app. DD, section 3 (14.0.0),
section <IP_ADDRESS>; NYISO, NYISO Tariffs, attach. X, section 30.13
(5.0.0), section 30.13.3.
    \143\ MISO, FERC Electric Tariff, OATT, attach. X, (155.0.0)
section 3.3.1.
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b. Proposal
    82. We propose to revise section 13.3 (Obligation for Study Costs)
of the pro forma LGIP to allocate the shared costs of cluster studies
as follows: 90% of the applicable study costs to interconnection
customers on a pro rata basis based on requested MWs included in the
applicable cluster, and 10% of the applicable study costs to
interconnection customers on a per capita basis based on the number of
interconnection requests included in the applicable cluster.\144\ We
preliminarily find 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.
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    \144\ If an interconnection customer withdraws its
interconnection request prior to the start of the cluster study,
that customer would be required to pay the actual costs of
processing its interconnection request but would not be assessed a
withdrawal penalty.
---------------------------------------------------------------------------

    83. We seek 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.
4. Allocation of Cluster Network Upgrade Costs
a. Background
    84. As discussed above, under the serial first-come, first-served
study process in the pro forma LGIP, transmission providers study
interconnection requests individually and in the order in which they
are received. If a study identifies a need for network upgrades in
response to an individual interconnection customer request, the
transmission provider allocates the initial cost of those network
upgrades to the individual interconnection customer. The pro forma LGIP
allows transmission providers to perform clustered system impact
studies but does not explain how transmission providers should allocate
network upgrade costs among interconnection customers within a cluster.
    85. Several of the transmission providers that have adopted a
cluster first-ready, first-served study process have also adopted
methods for allocating network upgrade costs that differ from their
previously existing cost allocation mechanisms in one of two ways: (1)
proportional capacity (based on the proposed generating facility's MW
capacity in proportion to the cluster's total MW capacity); or (2)
proportional impact (determined based

on a distribution factor analysis). Several transmission providers also
separate network upgrades into two categories prior to allocating costs
based on the proportional capacity or proportional impact method: (1)
station equipment, including all equipment located in the substation
immediately beyond the point of interconnection to which the generating
facility is connected (called station equipment network upgrades); and
(2) all other network upgrades, including equipment located beyond the
substation, such as transmission lines, transformers, voltage support,
and distantly located breakers (called system network upgrades).\145\
These methods allocate station equipment network upgrade costs based on
the number of generating facilities interconnecting at an individual
station (i.e., allocated equally to each interconnection customer
interconnecting to the substation).
---------------------------------------------------------------------------

    \145\ E.g., PNM, 136 FERC ] 61,231 at P 25.
---------------------------------------------------------------------------

    86. For network upgrades beyond the transmission provider's
substation, PNM and PacifiCorp use the proportional capacity
method.\146\ PacifiCorp explained in its interconnection queue reform
proposal that the proportional capacity method is better for PacifiCorp
given the size of its service territory, and that PacifiCorp uses a
cluster area approach in which it clusters projects by electrical
relevance, which prevents interconnection customers from bearing the
costs of network upgrades in distant areas of PacifiCorp's transmission
system.\147\
---------------------------------------------------------------------------

    \146\ Id.; PacifiCorp, 171 FERC ] 61,112 at P 18.
    \147\ PacifiCorp, Transmittal, Docket No. ER20-924-000, at n.107
(filed Jan. 31, 2020).
---------------------------------------------------------------------------

    87. CAISO, MISO, SPP, NYISO, PSCo, Tri-State, Duke, and Dominion
use the proportional impact method by performing a distribution factor
analysis.\148\ Relative to other transmission providers, Tri-State
includes a more comprehensive explanation of its distribution factor
analysis method in its tariff. Specifically, Tri-State's tariff
provides that: (1) thermal network upgrade costs are allocated based on
the impact (in MWs) from each generating facility within the cluster or
cluster area; (2) voltage network upgrade costs are allocated based on
the voltage impact from each generating facility within the cluster or
cluster area on the most constrained bus under the most constraining
contingency in the definitive interconnection study case(s); (3)
transient stability network upgrade costs within a cluster or cluster
area are allocated based on the pro rata share of the total MW requests
of all generating facilities causing instability; (4) short circuit
network upgrade costs are allocated based on the impact (in
kiloamperes) from each generating facility within the cluster or
cluster area, on the constrained facilities under the most constraining
fault in the definitive interconnection study case(s); and (5) in
instances when a network upgrade resolves multiple types of constraints
(such as thermal and voltage or thermal and voltage and transient
stability), the costs are allocated within a cluster or cluster area
based on a ratio share of the total cost of the independent mitigation
types to equitably allocate the cost to all generating facilities
contributing to constraints.\149\
---------------------------------------------------------------------------

    \148\ PSCo, 169 FERC ] 61,182 at P 34; Tri-State, 174 FERC ]
61,021 at P 38; Duke, 176 FERC ] 61,075 at P 11; Dominion, Docket
No. ER22-301-000 (Dec. 28, 2021) (delegated order).
    \149\ Tri-State LGIP section 4.2.4.b.
---------------------------------------------------------------------------

b. Proposal
    88. We propose to revise the pro forma LGIP to include new
subsection 4.2.3 to require transmission providers to allocate network
upgrade costs to interconnection customers within a cluster using a
proportional impact method. Therefore, we propose to establish the
definition ``Proportional Impact Method'' in the pro forma LGIP,\150\
and require transmission providers to revise their LGIPs to include the
specific technical parameters and thresholds of the method for cost
allocation. We preliminarily find that this approach will ensure just
and reasonable Commission-jurisdictional rates because it will allow
the transmission provider to allocate network upgrade costs among
several interconnection customers that may benefit from (and cause the
need for) certain network upgrades.\151\ By allocating shared network
upgrade costs among a cluster of interconnection customers, we expect
that this reform will reduce the frequency of an individual customer
being allocated a large network upgrade that benefits subsequent
interconnection customers, reduce the incentive to submit multiple
speculative requests, and reduce the amount of cascading withdrawals
and re-studies. We believe that a proportional impact method will
accurately reflect the level of contribution of an interconnection
request to the need for the network upgrade.
---------------------------------------------------------------------------

    \150\ We propose to revise section 1 of the pro forma LGIP to
provide that Proportional Impact Method shall mean a technical
analysis conducted by the transmission provider to determine the
degree to which each generating facility in the cluster contributes
to the need for a specific network upgrade.
    \151\ Tri-State, 174 FERC ] 61,021 at P 38.
---------------------------------------------------------------------------

    89. We seek comment on 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.
Conversely, we seek comment on 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. Additionally, we seek comment on
alternative methods to allocate the cost of network upgrades within a
cluster such as the proportional capacity method as discussed above.
While such a method does not assign cost based on level of contribution
of an interconnection request to the need for a network upgrade, we
seek comment on whether this method can be sufficiently accurate, in
certain instances, in a manner consistent with or superior to the
proposed method. For instance, we seek comment on whether the
proportional capacity method may be appropriate when a transmission
provider with a relatively small service territory clusters projects by
electrical relevance. Conversely, we seek comment on 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.
5. Shared Network Upgrades
a. Background
    90. There are no existing provisions in the pro forma LGIP that
require transmission providers to share network upgrade costs between
earlier-in-time and later-in-time interconnection customers (e.g.,
customers studied in separate clusters). However, in MISO and NYISO,
the Commission has approved tariff provisions that require
interconnection customers in later cluster studies that benefit from
network upgrades completed prior to that later-in-time interconnection
customer commencing commercial operation to partially reimburse the
interconnection customers in an earlier cluster study that were
initially responsible for the facilities' construction.\152\
---------------------------------------------------------------------------

    \152\ See NYISO, NYISO Tariffs, attach. S, section 25 (16.0.0),
section 25.7.2; MISO, FERC Electric Tariff, MISO OATT, attach. FF
section III (81.0.0), section III.A.2.d.2.
---------------------------------------------------------------------------

    91. MISO tests all network upgrades in service for less than five
years to

determine whether they qualify for cost sharing. MISO requires
interconnection customers in a later cluster study to share costs if
they (1) connect to that network upgrade or (2) pass a two-part power
flow screening.\153\ If the test reveals that more than five MW of the
later-in-time interconnection customer's generating facility uses the
network upgrade with a network upgrade rating exceeding one percent,
MISO performs an additional analysis. If the results of the second
analysis conclude that the interconnection customer generating
facility's impact exceeds more than five percent of the network
upgrade's facility rating, or that the transmission distribution factor
(TDF) \154\ is greater than 20%, the interconnection customer in the
later cluster study will reimburse interconnection customers from the
earlier cluster study based on the share of the cost of the network
upgrade allocated to each interconnection customer. MISO allocates the
costs of the shared network upgrades using the pro rata share of the MW
contribution on all constraints from each project.
---------------------------------------------------------------------------

    \153\ MISO Business Practice Manual No. 15, section <IP_ADDRESS>.11,
version 23 (May 2021), https://cdn.misoenergy.org/BPM%20015%20-%20Generation%20Interconnection49574.zip
    \154\ TDF measures the energy the interconnection customer has
requested to inject onto the transmission system, expressed as the
percent of the flows across a given transmission facility.
---------------------------------------------------------------------------

    92. NYISO accounts for excess capacity created by network upgrades
and requires that interconnection customers in a later cluster study
reimburse the interconnection customers from an earlier cluster study
for the use of these facilities. NYISO tracks any excess capacity, or
headroom,\155\ created by network upgrades and determines eligibility
for cost sharing using two methods. When technically feasible, a later-
in-time interconnection customer's use of headroom is measured in terms
of the interconnection customer's electrical impact. Otherwise,
headroom usage is based on the total number of interconnection
customers using a given network upgrade. The headroom is available for
10 years or until it is depleted.\156\
---------------------------------------------------------------------------

    \155\ NYISO defines headroom as ``the functional or electrical
capacity of the System Upgrade Facility or the electrical capacity
of the System Deliverability Upgrade that is in excess of the
functional or electrical capacity actually used by the Developer's
Project.'' NYISO, NYISO Tariffs, attach. S, section 25.1 (12.0.0).
    \156\ See id. section 25.8.7.
---------------------------------------------------------------------------

b. Relevant ANOPR Comments
    93. Multiple commenters support the concept of cost sharing
approaches. The National Association of Regulatory Utility
Commissioners (NARUC), for example, contends that the Commission should
encourage improvements to the participant funding model through sharing
the costs of clusters of similarly situated interconnection
customers.\157\
---------------------------------------------------------------------------

    \157\ NARUC, Comments, Docket No. RM21-17-000, at 23 (filed Oct.
12, 2021).
---------------------------------------------------------------------------

    94. MISO and NYISO each highlight the advantages of their existing
network upgrade cost sharing approaches. MISO claims that its cost
sharing method appropriately balances the interconnection customers'
interests.\158\ NYISO asserts that its group-based facilities study
minimizes later-in-time interconnection customers benefiting without
paying for the use of a network upgrade at the outset.\159\ NYISO also
states that its headroom accounting process partly addresses the issue
caused by later-in-time interconnection customers benefiting from
preexisting network upgrades.
---------------------------------------------------------------------------

    \158\ MISO, Comments, Docket No. RM21-17-000, at 87-88 (filed
Oct. 12, 2021).
    \159\ NYISO, Comments, Docket No. RM21-17-000, at 45 (filed Oct.
12, 2021).
---------------------------------------------------------------------------

    95. The Michigan Commission asserts that MISO has not made frequent
use of its shared network upgrade process and suggests that the
Commission explore whether analyzing network upgrades up to 20 years
post-construction would encourage the development of higher-cost
network upgrades in transmission constrained areas.\160\
---------------------------------------------------------------------------

    \160\ Michigan Comm'n, Comments, Docket No. RM21-17-000, at 21-
22 (filed Oct. 12, 2021).
---------------------------------------------------------------------------

    96. Some commenters argue that a network upgrade sharing
arrangement would be too complicated to execute and lead to stakeholder
disagreements. EDF asserts that, while a study-based cost allocation
might offer a more precise representation of benefits, such approaches
are time-consuming and can be prone to stakeholder disagreement over
the study's assumptions and results; EDF believes that any cost sharing
percentage for generators should be commensurate with the value of the
reimbursement generators receive.\161\ TAPS states that, while cost
sharing arrangements make sense conceptually, developing a cost sharing
process can be resource-intensive and highly contentious.\162\
---------------------------------------------------------------------------

    \161\ EDF Renewables, Inc., Comments, Docket No. RM21-17-000, at
13 (filed Oct. 12, 2021).
    \162\ Transmission Access Policy Study Group (TAPS), Comments,
Docket No. RM21-17-000, at 47-48 (filed Oct. 12, 2021).
---------------------------------------------------------------------------

c. Need for Reform
    97. We preliminarily find that the absence of network upgrade cost
sharing provisions in the pro forma LGIP poses a barrier to entry to
generation development. 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.\163\
As a result, individual interconnection customers may be responsible
for the entire cost of network upgrades and may be reluctant to move
forward with the development of an interconnection request if there is
no opportunity to recover some of the costs associated with the
construction of significant network upgrades that are likely to benefit
interconnection customers in subsequent cluster studies.
---------------------------------------------------------------------------

    \163\ See May Joint Task Force Tr. 135:6-7 (Andrew French) (``I
do think costs should be shared between clusters.'')
---------------------------------------------------------------------------

d. Proposal
    98. We propose to revise the pro forma LGIP and pro forma LGIA to
require transmission providers to allocate the costs for network
upgrade costs between interconnection customers in an earlier cluster
study and interconnection customers in a subsequent cluster study that
benefit from the same network upgrade in a manner that is roughly
commensurate with the benefits received. First, we propose to require
that, as part of the first-ready, first-served cluster study process
that we also propose in this NOPR, the transmission provider analyze
all network upgrades identified through the transmission provider's
study process, and, if a generating facility of an interconnection
customer in a later cluster study 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, and the
interconnection customer in the later cluster study 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 study 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 study. Second, 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
later-in-time interconnection customer's use of and benefit from the
network upgrade

funded by interconnection customers from an earlier cluster study.
Under the first step, the transmission provider would determine if the
impact of the interconnection customer in the later cluster study
exceeds 5 MW and exceeds one percent of the network upgrade's rating,
which we believe would reasonably identify interconnection customers
that benefit from the network upgrade. Then, if those criteria are met,
the transmission provider would determine if the later-in-time
interconnection customer's impact either exceeds more than five percent
of the network upgrade's facility rating or if the TDF is greater than
20%.\164\ 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 study 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 study 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 study.
---------------------------------------------------------------------------

    \164\ Midwest Indep. Transmission Sys. Operator, Inc., 133 FERC
] 61,221, at P 336 (2010) (finding that the 20% TDF screen is an
appropriate measure of benefits for shared network upgrades that
strikes an appropriate balance between cost sharing and guarding
against overcharging late-coming generating facilities).
---------------------------------------------------------------------------

    99. We propose to require the interconnection customer in the later
cluster study 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 study.
Where applicable, the interconnection customer from the earlier cluster
study 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 study funded to the
interconnection customer in the later cluster study. Additionally, we
propose to require that the interconnection customer in the later study
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. We
propose to require transmission providers to provide the list of shared
network upgrades to interconnection customers in subsequent cluster
studies at the conclusion of the cluster study and to list those
network upgrades in the LGIA.
    100. As noted above, an interconnection customer in a later cluster
study that otherwise meets the criteria described above would only bear
some of the network upgrade costs for a network upgrade that was in
service before the commercial operation date of the generating facility
of the interconnection customer in the later cluster study. Thus, there
could be scenarios where the network upgrade may be identified as both
a shared network upgrade and a contingent facility pursuant to section
3.8 of the pro forma LGIP; and, therefore 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.\165\
---------------------------------------------------------------------------

    \165\ Contingent facilities include ``those unbuilt . . .
Network Upgrades upon which the Interconnection Request's costs,
timing, and study findings are dependent, and if delayed or not
built, could cause a need for Re-Studies of the Interconnection
Request or a reassessment of the Interconnection Facilities and/or
Network Upgrades and/or costs and timing.'' Pro forma LGIP section
1. Pursuant to section 3.8 of the pro forma LGIP, transmission
providers must have a method for identifying contingent facilities
to be provided to the interconnection customer at the conclusion of
the system impact study and including in the LGIA. Id. section 3.8.
---------------------------------------------------------------------------

    101. We preliminarily find that requiring transmission providers to
develop a method to share network upgrade costs among interconnection
customers in earlier and later cluster studies will result in just and
reasonable Commission-jurisdictional rates by allowing for allocation
of costs of network upgrades in a manner more closely aligned to the
distribution of benefits than the status quo.\166\ Specifically, to the
extent that interconnection customers in later cluster studies benefit
from pre-existing network upgrades, we preliminarily find that it is
just and reasonable for those interconnection customers to share a
portion of those network upgrade costs.\167\
---------------------------------------------------------------------------

    \166\ See, e.g., Midwest Indep. Transmission Sys. Operator,
Inc., 133 FERC ] 61,221 at PP 55, 336 (accepting shared network
upgrades as just and reasonable and agreeing that the proper test
for cost sharing with regard to an already-constructed upgrade is
not what effect a late-coming generating facility would have had on
the system as it existed prior to the network upgrade, but rather
whether that late-coming generating facility will actually benefit
from the network upgrade).
    \167\ Id. P 336.
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6. Increased Financial Commitments and Readiness Requirements
a. Need for Reform
    102. The pro forma LGIP allows an interconnection customer to
proceed through the generator interconnection process without having
shown evidence to the transmission provider of meaningful progress
toward achieving commercial viability (e.g., a power purchase agreement
or site control). We are concerned that without requiring this type of
evidence, interconnection customers will continue to submit multiple
speculative interconnection requests and later withdraw those requests,
triggering rounds of re-studies. While we believe that our proposal to
require transmission providers to implement a first-ready, first-served
cluster study process will substantially improve transmission
providers' ability to manage their interconnection queues, we recognize
that the sheer volume of interconnection requests in interconnection
queues nationwide are overwhelming many transmission providers'
resources.\168\ Although the optional informational interconnection
study that we also propose in this NOPR would provide a mechanism for
prospective interconnection customers to obtain key information on
potential points of interconnection for proposed generating facilities,
prospective interconnection customers may still prefer to submit an
interconnection request to establish a queue position rather than
investing in and waiting for the results of an optional informational
interconnection study.
---------------------------------------------------------------------------

    \168\ See, e.g., Tri-State Generation and Transmission
Association, Inc., Transmittal Letter, Docket No. ER20-2593-000, at
3, 14, and 17 (filed Jul. 31, 2020); Transmittal Letter, Docket No.
ER11-3522-000, at 3 (filed May 5, 2011); PacifiCorp, Transmittal
Letter, Docket No. ER20-924-000, at 5 (filed Jan. 31, 2020).
---------------------------------------------------------------------------

    103. Therefore, in addition to the reforms that we propose to
implement a first-ready, first-served cluster study process, we also
propose a set of reforms to adopt more stringent financial commitments
and readiness requirements for interconnection customers to remain in
the interconnection queue to discourage speculative interconnection
requests and allow transmission providers to focus on processing viable
interconnection requests and to better approximate the cost of the
interconnection study process.\169\ These

proposed reforms pertain to (1) increased study deposits, (2)
demonstration of site control, (3) commercial readiness, and (4)
withdrawal penalties.
---------------------------------------------------------------------------

    \169\ See May Joint Task Force Tr. 38:7-8 (Matthew Nelson)
(``[W]hat we hope to do is try to make sure that being in the queue
means something[.]''); id 47:1-4 (Clifford Rechtschaffen)
(cautioning that clustering is important but must be accompanied by
other reforms to interconnection queue processing to address
existing problems).
---------------------------------------------------------------------------

b. Proposed Reforms
i. Increased Study Deposits and LGIA Deposit
(a) Background
    104. Under the serial first-come, first-served interconnection
study process in the pro forma LGIP, an interconnection customer must
submit the following study deposits: \170\
---------------------------------------------------------------------------

    \170\ Pro forma LGIP sections 6.1, 7.2, 8.1.
---------------------------------------------------------------------------

     $10,000 deposit with its interconnection request, which is
used for the feasibility study,
     $50,000 deposit when executing the system impact study
agreement, and
     $100,000 deposit when executing the facilities study
agreement.
    105. Several transmission providers have increased the study
deposit requirements in a tiered fashion to recognize that
interconnection requests with higher generating facility capacities
cost more to study. In accepting PNM's tiered approach, the Commission
stated that increasing the study deposit in a tiered fashion is
reasonable because it recognizes that larger proposed generating
facilities within a cluster likely carry a greater risk (such as risk
triggering the need for substantial network upgrades and triggering re-
studies when withdrawing from the queue).\171\ The Commission has
accepted maximum study deposits as high as $250,000 for interconnection
requests of 200 MW and greater and accepted proposals requiring study
deposits at multiple points throughout the interconnection study
process. For example, PSCo, Tri-State, Dominion, and Duke require four
study deposits throughout their cluster study processes, and an
additional deposit upon LGIA execution. In accepting PSCo's study
deposit framework, the Commission reasoned that the study deposits
represented the total approximate cost of PSCo's reformed cluster study
process and that this framework was consistent with Order No. 2003's
requirement that interconnection customers pay the actual costs of
their studies.\172\
---------------------------------------------------------------------------

    \171\ PNM, 136 FERC ] 61,231 at P 80.
    \172\ PSCo, 169 FERC ] 61,182 at P 36 (citing Order No. 2003,
104 FERC ] 61,103 at P 37).
---------------------------------------------------------------------------

 (b) Proposal
    106. We propose to adopt the following study deposit framework in
the pro forma LGIP:

----------------------------------------------------------------------------------------------------------------
Size of proposed  generating facility  associated with
                interconnection request                                     Amount of deposit
----------------------------------------------------------------------------------------------------------------
>20 MW <80 MW.........................................                                      $35,000 + $1,000/MW.
>80 MW <200 MW........................................                                                 $150,000.
>200 MW...............................................                                                 $250,000.
----------------------------------------------------------------------------------------------------------------

    107. We propose to require transmission providers to collect this
study deposit before each phase of the new first-ready, first-served
cluster study process (i.e., cluster study, cluster re-study, and
facilities study).\173\ We propose to require the interconnection
customer to provide an initial study deposit along with its
interconnection request which will be used to pay for the cluster
study.\174\ We propose to require the interconnection customer to
provide the second study deposit of the same amount within 20 days of
receiving the cluster study report from the transmission provider.\175\
This second study deposit will cover the cost of any clustered re-
studies. We propose to require the interconnection customer to provide
the third study deposit of the same amount along with its executed
facilities study agreement.\176\ Study deposits would be refundable,
and the transmission provider would refund any portion of the study
deposits above the applicable study costs and withdrawal penalties once
the interconnection customer executes the LGIA, requests the filing of
an unexecuted LGIA and submits the corresponding payment discussed
below, or withdraws from the queue.\177\
---------------------------------------------------------------------------

    \173\ Proposed pro forma LGIP section 3.1.1.
    \174\ Id. section <IP_ADDRESS>.
    \175\ Id. section <IP_ADDRESS>.
    \176\ Id. section <IP_ADDRESS>.
    \177\ Consistent with Order No. 2003, interconnection customers
would be responsible for actual study costs, and the study deposits
would be subject to true-up. Order No. 2003, 104 FERC ] 61,103 at P
37; pro forma LGIP section 8.1.
---------------------------------------------------------------------------

    108. We also propose to require interconnection customers to submit
a deposit equal to nine times the amount of its study deposit when
executing the LGIA or requesting the filing of an unexecuted LGIA.\178\
This deposit would be fully refunded once the generating facility
achieves commercial operation, but if the interconnection customer
withdraws after executing the LGIA or after requesting the filing of an
unexecuted LGIA, this deposit would be refunded subject to the
withdrawal penalty discussed below.
---------------------------------------------------------------------------

    \178\ Proposed pro forma LGIP section <IP_ADDRESS>.
---------------------------------------------------------------------------

    109. We believe that increasing the total study deposit amounts
submitted in the interconnection study process would better approximate
the cost of the interconnection study process and disincentivize
interconnection customers from submitting interconnection requests for
speculative, non-commercially viable generating facilities. As the
Commission recognized in the 2008 Technical Conference Order,
``relatively small deposit amounts, coupled with the incentives
produced by a first-come, first-served approach to allocating capacity,
provides an incentive for developers to secure a place in the queue
even for projects that may not be commercially viable.'' \179\
Conversely, the Commission has specifically found that increased study
deposits ``better identif[y] viable projects that are more ready to
proceed with construction and commercial operation while discouraging
speculative projects that could delay the cluster study process.''
\180\ The Commission has similarly explained ``that increasing the
deposit in a tiered fashion . . . is reasonable because it recognizes
that larger projects likely carry a greater risk.'' \181\ Accordingly,
we propose to revise section 3 of the pro forma LGIP to implement these
proposed increased study deposit reforms.
---------------------------------------------------------------------------

    \179\ 2008 Technical Conference Order, 122 FERC ] 61,252 at P
15.
    \180\ PNM, 136 FERC ] 61,231 at P 80; see also PSCo, 169 FERC ]
61,182 at PP 36, 49.
    \181\ PNM, 136 FERC ] 61,231 at P 80.
---------------------------------------------------------------------------

    110. We seek comment on whether the proposed study deposit amounts
accurately estimate the cost of conducting cluster studies, such that
interconnection customers are not required to submit deposits that are
likely to far exceed actual study costs. We also seek comment on
whether the Commission should adopt additional provisions or a
different framework that would require larger proposed

generating facilities to provide a higher deposit amount--such as a per
MW framework.
ii. Demonstration of Site Control
(a) Background
    111. The pro forma LGIP defines site control as documentation
demonstrating: (1) ownership of, a leasehold interest in, or a right to
develop a site for the purpose of constructing the generating facility;
(2) an option to purchase or acquire a leasehold site for such purpose;
or (3) an exclusivity or other business relationship between the
interconnection customer and the entity having the right to sell,
lease, or grant the interconnection customer the right to possess or
occupy a site for such purpose.\182\ Interconnection customers are
required to submit a demonstration of site control along with the
interconnection request or submit a $10,000 deposit in lieu of such a
demonstration.\183\ The in-lieu-of deposit allows the interconnection
customer to proceed through the generator interconnection process
without providing evidence of site control. At the end of the study
process, within 15 days after receipt of the draft LGIA, the
interconnection customer must provide evidence of continued site
control or post $250,000 of non-refundable security that will be
applied toward future construction costs. The pro forma LGIA allows the
interconnection customer to suspend its LGIA for up to three years
before providing the additional security or demonstration of site
control.\184\
---------------------------------------------------------------------------

    \182\ Pro forma LGIP section 1.
    \183\ Id. section 3.4.1.
    \184\ Pro forma LGIA art. 5.16.
---------------------------------------------------------------------------

    112. The Commission has accepted several interconnection queue
reform proposals that have increased the initial $10,000 deposit in
lieu of site control. For example, Nevada Power increased the initial
deposit amount to $50,000 \185\ and Arizona Public Service Company and
El Paso Electric increased the amount of the initial deposit in lieu of
site control to match their increased study deposits--$160,000 for
interconnection requests less than 75 MW, and $250,000 for
interconnection requests for 75 MW and greater.\186\ All of these
transmission providers maintain the pro forma LGIP provision allowing
the interconnection customer to post $250,000 of non-refundable
security in lieu of site control at LGIA execution.
---------------------------------------------------------------------------

    \185\ NV Energy, Inc., 142 FERC ] 61,165, at P 25 (2013).
    \186\ Ariz. Pub. Serv. Co., 137 FERC ] 61,099, at P 11 (2011);
El Paso Elec. Serv. Co., 137 FERC ] 61,101, at P 11 (2011).
---------------------------------------------------------------------------

    113. PacifiCorp allows interconnection customers to submit a
$10,000 deposit in lieu of site control to begin the cluster study
process but requires that the interconnection customer demonstrate
exclusive site control before proceeding to the facilities study.\187\
Duke and Dominion adopted a similar approach of requiring that the
interconnection customer demonstrate exclusive site control before
proceeding to the facilities study but increased the deposit amount to
$20,000 plus $500 per MW.\188\ These transmission providers have
removed the option to post $250,000 of non-refundable security in lieu
of site control at LGIA execution and instead require proof of site
control without exception.
---------------------------------------------------------------------------

    \187\ PacifiCorp, Transmission OATT and Service Agreements,
attach. W, section 5 (3.0.0), section 5.2.
    \188\ Duke, Tariffs, Rate Schedules and Service Agreements,
OATT, attach. J (18.0.0), section 4.4.2; Dominion, OATT and Service
Agreements, attach. M (4.5.0), section 4.4.2.
---------------------------------------------------------------------------

    114. PNM,\189\ PSCo,\190\ and MISO have eliminated the deposit in
lieu of site control. However, MISO allows a deposit in lieu of site
control of $10,000 per MW where regulatory limitations prohibit the
procurement of site control.\191\ This deposit is subject to a floor of
$500,000 and a ceiling of $2,000,000. The cash in lieu deposit is only
available to customers at the start of the study process:
interconnection customers must demonstrate 100% site control prior to
MISO conducting the facilities study.\192\ To cut down on multiple
speculative projects leasing the same site in order to remain in the
queue, MISO also requires that interconnection customers demonstrate an
``exclusive right to develop the site'' of a generating facility or,
where facilities are to be co-located, a right that is ``sufficient to
accommodate the final design of the facility and account for any other
projects that will utilize all or part of the same site.'' \193\
---------------------------------------------------------------------------

    \189\ PNM, 136 FERC ] 61,231 at P 81.
    \190\ PSCo, 169 FERC ] 61,182 at P 58. Site control requirements
for PSCo are as follows: (1) before entering Phase 1, demonstration
of 50% site control and 0% site control of interconnection
customer's interconnection facilities is required; (2) before
entering Phase 2, demonstration of 50% site control and 0% site
control of interconnection customer's interconnection facilities is
required; (3) before entering Phase 1, demonstration of 60% site
control and 0% site control of interconnection customer's
interconnection facilities is required; (4) before entering Phase 4,
demonstration of 75% site control and 0% site control of
interconnection customer's interconnection facilities is required;
(5) before executing an LGIA, demonstration of 90% site control and
50% site control of interconnection customer's interconnection
facilities is required. PSCo, Transmission and Service Agreements
Tariff, Xcel Energy Operating Cos. Joint OATT, attach. N (0.8.0),
section 7.7.6.
    \191\ In order to demonstrate regulatory limitations to securing
site control, MISO requires the interconnection customer to submit:
(1) a signed affidavit from an officer of the company indicating
that site control is unobtainable due to regulatory requirements;
and (2) documentation sufficiently describing and explaining the
source and effects of such regulatory restrictions, including a
description of any conditions that must be met in order to satisfy
the regulatory restrictions and the anticipated time by which the
interconnection customer expects to satisfy the regulatory
restrictions. MISO, FERC Electric Tariff, MISO OATT, attach. X
(155.0.0), section <IP_ADDRESS>.
    \192\ Midcontinent Indep. Sys. Operator, Inc., 169 FERC ]
61,173, at P 27 (2019).
    \193\ Id. P 48; see also Midcontinent Indep. Sys. Operator,
Inc., 166 FERC ] 61,187 (2019).
---------------------------------------------------------------------------

(b) Proposal
    115. We believe that more stringent site control requirements will
help prevent interconnection customers from submitting interconnection
requests for speculative, non-commercially viable proposed generating
facilities.\194\ We preliminarily find that an interconnection customer
securing the exclusive land right necessary to construct its proposed
generating facility (or for co-located resources, demonstration of
shared land use) is sufficient evidence of the interconnection
customer's commitment to construct the generating facility.
---------------------------------------------------------------------------

    \194\ See, e.g., PNM, 136 FERC ] 61,231 at P 81 (accepting PNM's
increased deposit requirement and revised site control); PSCo, 169
FERC ] 61,182 at P 58 (stating that removing the $10,000 deposit
option ``provides interconnection customers with the flexibility to
demonstrate their viability while also balancing the goal of
ensuring viable projects continue through the queue'').
---------------------------------------------------------------------------

    116. We propose to revise the pro forma LGIP to require
interconnection customers to demonstrate 100% site control for their
proposed generating facilities when they submit their interconnection
request. We propose to have transmission providers include in their
tariff specific acreage requirements for each generating facility
technology type.
    117. To cut down on multiple interconnection customers leasing the
same site in order to remain in the queue, we propose to revise the pro
forma LGIP to require interconnection customers to demonstrate the
exclusive land right (where the land rights are exclusive to the
interconnection customer, not necessarily the individual project) to
develop, construct, operate, and maintain its generating facility or,
where facilities are co-located, to demonstrate a shared land use right
to develop, construct, operate, and maintain co-located facilities.
    118. We propose to include a limited option for interconnection
customers to submit a deposit in lieu of site control

when they submit their interconnection request only when regulatory
limitations prohibit the interconnection customer from obtaining site
control.\195\ In such instances, the interconnection customer would
submit an initial deposit in lieu of site control of $10,000 per MW,
subject to a floor of $500,000 and a ceiling of $2,000,000, which would
be applied toward any interconnection studies or withdrawal penalty, if
applicable. Such an interconnection customer must demonstrate 100% site
control prior to the facilities study.
---------------------------------------------------------------------------

    \195\ For example, in MISO, the Commission found that 100% site
control for the interconnection customer's interconnection
facilities, the transmission owner's interconnection facilities, and
network upgrades at the point of interconnection is impractical
because those facilities often are subject to additional state
siting and permitting requirements that do not apply to generating
facilities. Midcontinent Indep. Sys. Operator, Inc., 169 FERC ]
61,173 at P 40.
---------------------------------------------------------------------------

    119. In compliance with any final rule in this proceeding, we also
propose that, after notifying the transmission provider of a change to
the interconnection customer's site control demonstration, the
transmission provider give the interconnection customer 10 business
days to demonstrate satisfaction with the applicable requirement after
notification. We propose to implement these requirements through
revisions to sections 3.4.1 and 11.3 of the pro forma LGIP, as set
forth in Appendix B to this NOPR.
    120. We believe that strengthening the site control requirements of
the pro forma LGIP to include a demonstration of 100% site control
would help prevent speculative interconnection requests. We recognize
that requiring site control effectively bars entry into the queue until
land is acquired, and that this may prevent early-stage projects from
entering the queue. We nevertheless believe this proposed reform to be
just and reasonable because it will address the concerns with
interconnection queue backlogs and study delays explained in the Need
for Reform by reducing the number of interconnection requests being
submitted and ensure that interconnection customers in the queue are
ready to proceed.
    121. We seek comment on whether there are other specific situations
in which the Commission should accept a deposit in lieu of site
control.
    122. We seek comment on whether the definition of ``site control,''
including the requirement to obtain an exclusive land right (or, for
co-located resources, a shared land right), should be broadened or
refined to account for circumstances that may arise in, for example,
the siting and permitting of offshore resources in bodies of water and/
or submerged land. Further, for circumstances where interconnection
customers are proposing to develop generating facilities on sites owned
or physically controlled by a state governmental entity and/or federal
governmental entity, there may be a need to craft a different site
control requirement that acknowledges that the interconnection
customer, that has to comply with regulatory requirements, may not be
able to demonstrate site control as proposed in this NOPR until later.
For this reason, we seek comment on whether and how the definition of
``site control'' should be adjusted for interconnection customers
(including both onshore and offshore) to account for any regulatory
requirements they may have associated with proposed generating
facilities developed on sites owned or physically controlled by a state
governmental entity and/or a federal governmental entity. We also seek
comment on the appropriate stage in developing such sites when the
Commission should view completion of such stage as indicative of an
interconnection customer's request being non-speculative and whether
there are substantive differences among interconnection customers
(including both onshore and offshore) developing sites owned or
physically controlled by a state governmental entity and/or a federal
governmental entity.
    123. We also seek comment on whether the Commission should allow
transmission providers to accept demonstrations of less than 100% site
control in the initial phases of the interconnection study process,
outside of when regulatory limitations prohibit the interconnection
customer from obtaining site control. Additionally, we seek comment on
whether the Commission should instead adopt site control provisions
that allow a deposit in lieu of site control to enter the generator
interconnection process and be evaluated under the first-ready, first-
served cluster study process described above but require
interconnection customers to demonstrate site control to enter the
facilities study.
iii. Commercial Readiness
(a) Background
    124. Generally, at least in bilateral markets, an interconnection
customer does not proceed to construct a generating facility unless it
has executed some form of off-take agreement, such as a contract for
the sale of electric energy or capacity from the generating facility.
Transmission providers often use the terms ``ready'' or ``commercially
viable'' to describe projects that have demonstrated commercial
progress by executing such an agreement.\196\ Aside from a
demonstration of site control or the $10,000 deposit in lieu of site
control, the pro forma LGIP does not require interconnection customers
to demonstrate progress towards achieving commercial readiness
throughout the interconnection study process. Rather, section 11.3 of
the pro forma LGIP only requires demonstrations of commercial progress
within 15 days after receipt of the final LGIA, after the transmission
provider has completed its studies of the interconnection request. If
interconnection customers cannot meet this deadline, the pro forma LGIA
allows them to suspend their LGIAs for up to three years: that
suspension may include a decision by the interconnection customer to
pause work on their proposed generating facilities and network
upgrades.\197\ Under this approach, interconnection customers are able
to submit interconnection requests and progress through the
interconnection queue for only $160,000 in study deposits, subject to
true-up based on actual study costs and then suspend their LGIAs for an
additional three year time period for no cost.\198\ In Order 2003, the
Commission allowed suspension for a three year time period to allow
generation projects the flexibility necessary to accommodate permitting
and other delays that are particularly likely to affect large
projects.\199\
---------------------------------------------------------------------------

    \196\ See, e.g., PSCo, Transmission and Service Agreements
Tariff, Xcel Energy Operating Cos. Joint OATT, attach. N, (0.8.0)
Sec.  7.7.6; PacifiCorp, Transmission OATT and Service Agreements,
OATT, pt. IV.38 (6.0.0), section 38.4.1.
    \197\ Pro forma LGIA art. 5.16.
    \198\ See pro forma LGIP sections 3.4.1, 6.1, 7.2, 8.1
(providing for: $10,000 for the Interconnection Feasibility Study,
$50,000 for the Interconnection System Impact Study, and $100,000
for the Interconnection Facilities Study).
    \199\ Order No. 2003, 104 FERC ] 61,103 at P 410.
---------------------------------------------------------------------------

    125. PSCo, PacifiCorp, Tri-State, Dominion, and Duke have
implemented frameworks that require interconnection customers to
demonstrate commercial readiness early in the generator interconnection
process to incentivize developers to submit ready or near-ready
proposed generating facilities into the interconnection queue and to
discourage the inclusion of speculative interconnection requests in the
interconnection queue. These transmission providers offer several
options to demonstrate commercial readiness. Notably, the commercial
readiness requirements become more stringent as the interconnection
customer proceeds to the later phases of the interconnection study
process:

     Executed term sheet in early phases, or executed contract
or power purchase agreement in later phases;
     Reasonable evidence of being selected in a resource plan
or offered into a resource solicitation plan in early phases, or proof
of applying for certificate of public convenience and necessity, if
required, in later phases; or
     Provisional LGIA filed executed or unexecuted at the
Commission in early phases or accepted at the Commission in later
phases.\200\
---------------------------------------------------------------------------

    \200\ PSCo, Transmission and Service Agreements Tariff, Xcel
Energy Operating Cos. Joint OATT, attach. N (0.8.0), section 7.7;
PacifiCorp, Transmission OATT and Service Agreementts, OATT, pt.
IV.38 (6.0.0), section 38.4.1; Tri-State, Tri-State OATT, attach. N
(7.0.0), section 7.7; Dominion, OATT and Service Agreements, attach.
M (4.5.0), section 10.1; Duke, Tariffs, Rate Schedules and Service
Agreements, OATT, attach. J (18.0.0), section 10.11 .
---------------------------------------------------------------------------

    126. As an alternative, PSCo, PacifiCorp, Tri-State, Dominion, and
Duke allow interconnection customers that cannot provide these non-
financial forms of readiness to instead provide additional deposit
funds to proceed through the interconnection study process. Because
PacifiCorp's cluster study process has fewer phases than PSCo, Tri-
State, Dominion, and Duke, PacifiCorp offers the option to submit a
deposit in lieu of readiness of $3,000/MW at the interconnection
request phase, and for the later phase, a deposit equal to the network
upgrade costs allocated to the interconnection customer in the most
recent cluster study.\201\ To contrast, in PSCo, Tri-State, Dominion,
and Duke, an interconnection customer that cannot provide a readiness
demonstration must provide additional deposits equal to:
---------------------------------------------------------------------------

    \201\ PacifiCorp, Transmission OATT and Service Agreements,
OATT, pt. IV.38 (6.0.0), section 38.4.1(v).
---------------------------------------------------------------------------

     Two times the study deposit amount to enter the phase 1
cluster study;
     Three times the study deposit amount after the phase 1
report meeting to enter the phase 2 cluster study;
     Five times the study deposit amount after the phase 2
report meeting; and
     Seven times the study deposit amount after receipt of the
facilities study agreement.\202\
---------------------------------------------------------------------------

    \202\ PSCo, Transmission and Service Agreements Tariff, Xcel
Energy Operating Cos. Joint OATT, attach. N (0.8.0), section 7.7.5;
Tri-State, Tri-State OATT, attach. N (7.0.0), section 7.7.5;
Dominion, OATT and Service Agreements, attach. M (4.5.0), section
10.1.6; Duke, Tariffs, Rate Schedules and Service Agreements, OATT,
attach. J (18.0.0), section 10.11.6.
---------------------------------------------------------------------------

    127. As explained earlier, we are concerned with the significant
interconnection queue backlogs and study delays, which we believe are
caused in part by the minimal requirements for submitting
interconnection requests and the tendency for non-viable projects to
linger in interconnection queues. We have learned through
interconnection queue reform filings that interconnection customers
typically do not actually construct generating facilities unless they
have entered into an off-take agreement for the output of such
facilities, at least in bilateral market areas.\203\ On the other hand,
interconnection customers that do not enter into such agreements
frequently withdraw from the interconnection queue, sometimes late in
the study process or even after the conclusion of the study process,
triggering the types of delays and re-studies for commercially viable
projects that raise concerns for us. Thus, we believe that the existing
pro forma LGIP requirements may be insufficient because they do not
require customers to demonstrate commercial readiness early enough in
the study process to deter interconnection customers from submitting
interconnection requests for, and continuing in the interconnection
queue, speculative proposed generating facilities.
---------------------------------------------------------------------------

    \203\ PNM, Transmittal Letter, Docket No. ER11-3522-000, at 10-
12 (filed May 5, 2011); PacifiCorp, Transmittal Letter, Docket No.
ER20-924-000, at 51 (filed Jan. 31, 2020).
---------------------------------------------------------------------------

(b) Proposal
    128. We propose to revise the pro forma LGIP to include a
commercial readiness framework. One major benefit of the frameworks
adopted by PSCo, PacifiCorp, Tri-State, Dominion, and Duke is that the
financial requirement in lieu of readiness increases throughout the
study process, which encourages interconnection customers that are not
ready to proceed to withdraw from the interconnection queue earlier in
the study process while also providing them the flexibility to enter
and remain in the interconnection queue without an off-take agreement.
We believe that such a mechanism would reduce the number of times an
interconnection customer executes and suspends an LGIA for a
speculative interconnection request, only to later withdraw the
request, which impacts the remaining interconnection customers in the
interconnection queue by causing re-studies and shifting network
upgrade costs to lower-queued interconnection customers. This proposed
reform should also reduce the strain on transmission providers and
enable viable interconnection requests to progress more quickly through
a less congested interconnection queue, thereby remedying the unjust
and unreasonable Commission-jurisdictional rates discussed in our need
for reform.
    129. Therefore, we propose to establish the defined terms
``Commercial Readiness Demonstration'' \204\ and ``Commercial Readiness
Deposit'' \205\ in the pro forma LGIP. We also propose to add to
sections 3.4.2, 7.5 and 8.1 of the pro forma LGIP the following options
as acceptable commercial readiness demonstration options to enter into
the cluster study and cluster re-study:
---------------------------------------------------------------------------

    \204\ We propose to revise section 1 of the pro forma LGIP to
provide that Commercial Readiness Demonstration shall have the
meaning set forth in Sections 3.4.2, 7.5, and 8.1 of this LGIP.
    \205\ We propose to revise section 1 of the pro forma LGIP to
provide that Commercial Readiness Deposit shall mean a deposit paid
in lieu of submitting a Commercial Readiness Demonstration, as set
forth in Sections 3.4.2, 7.5, and 8.1 of this LGIP.
---------------------------------------------------------------------------

     Executed term sheet (or comparable evidence) related to a
contract, binding upon the parties to the contract, for sale of (1) the
constructed generating facility, (2) the generating facility's energy
or capacity, or (3) the generating facility's ancillary services; where
the term of sale is not less than five years.
     Reasonable evidence that the project has been selected in
a resource plan or resource solicitation process by or for a load
serving entity, is being developed by a load-serving entity (LSE), or
is being developed for purposes of a sale to a commercial, industrial,
or other large end-use customer.
     Provisional LGIA which has been filed at the Commission
(executed or unexecuted), which is not suspended and includes a
commitment to construct the generating facility.
    130. We propose to add to section 8.1 of the pro forma LGIP that
the following may serve as commercial readiness demonstration options
to enter the facilities study, and must be provided with the executed
facilities study agreement:
     Executed contract (as opposed to term sheet), binding upon
the parties to the contract, for sale of (1) the constructed generating
facility, (2) the generating facility's energy or capacity, or (3) the
generating facility's ancillary services; where the term of sale is not
less than five years.
     Reasonable evidence that the project has been selected in
a resource plan or resource solicitation process by or for a load
serving entity, is being developed by an LSE, or is being developed for
purposes of a sale to a commercial, industrial, or other large end-use
customer.

     Provisional LGIA accepted for filing by the Commission,
which is not suspended, with reasonable evidence that the generating
facility and interconnection facilities have commenced design and
engineering.
    131. We also propose to require the interconnection customer to
inform the transmission provider of any material change to its
commercial readiness demonstration. We propose to require the
transmission provider to give the interconnection customer 10 business
days to demonstrate satisfaction with the applicable requirement after
notification of a change to the interconnection request's commercial
readiness demonstration. The interconnection customer would have the
option to submit a commercial readiness deposit, discussed further
below, within the 10-day cure period if the change to the commercial
readiness demonstration meant that the interconnection request no
longer satisfied the criteria.
    132. The Commission has previously accepted interconnection queue
reform proposals that allow interconnection customers to submit
additional refundable deposits in lieu of a demonstration of commercial
readiness. In accepting these proposals, the Commission has found that
the demonstrations of commercial readiness and alternative deposit in
lieu of commercial readiness framework provide interconnection
customers with the flexibility to employ a variety of business
models.\206\ We believe that this approach is appropriate for all
transmission providers and therefore propose to allow interconnection
customers the option to submit a Commercial Readiness Deposit in lieu
of demonstrating commercial readiness through the commercial readiness
demonstration options required to enter a cluster study, cluster re-
study, and facilities study. We note that, outside of RTOs/ISOs,
transmission providers may be able to provide certain contractual
arrangements to their own projects or other preferred interconnection
customers, such as the term sheet option discussed above, which could
lead to unduly discriminatory behavior. This deposit in lieu of
demonstrating commercial readiness may potentially prevent any undue
discrimination in the generator interconnection process, consistent
with the adoption of a standard set of procedures in the first
instance.\207\
---------------------------------------------------------------------------

    \206\ See, e.g., PSCo, 169 FERC ] 61,182 at P 50; PacifiCorp,
171 FERC ] 61,112 at P 102.
    \207\ Order No. 2003, 104 FERC ] 61,103 at PP 1-2.
---------------------------------------------------------------------------

    133. We propose to revise the pro forma LGIP to include a framework
to allow interconnection customers to provide a commercial readiness
deposit in lieu of meeting commercial readiness requirements in the
following amounts:
     Two times the study deposit amount to enter the initial
cluster study phase;
     Five times the study deposit amount after the initial
cluster study phase and before the system impact re-study phase; and
     Seven times the study deposit after receipt of the
facilities study agreement.\208\
---------------------------------------------------------------------------

    \208\ See PSCo, Transmission and Service Agreements Tariff, Xcel
Energy Operating Cos. Joint OATT, attach. N (0.8.0), section 7.7.5;
Tri-State, Tri-State OATT, attach. N (7.0.0), section 7.7.5;
Dominion, OATT and Service Agreements, attach. M (4.5.0), section
10.1.6; Duke, Tariffs, Rate Schedules and Service Agreements, Duke
OATT, attach. J (18.0.0), section 10.11.6.
---------------------------------------------------------------------------

    134. The commercial readiness deposit is separate from the study
deposit. The commercial readiness deposit is returned if the
interconnection customer later makes a commercial readiness
demonstration. If the interconnection customer withdraws from the
interconnection queue, the commercial readiness deposit is applied
toward any incurred withdrawal penalties. As described below in section
III.A.1.iv, we propose that withdrawal penalties will be higher for
interconnection customers that made a deposit in lieu of a
demonstration of commercial readiness.
    135. Additionally, we propose revisions to the list of development
milestones in section 11.3 of the pro forma LGIP to clarify the
following: (1) a contract for the supply or transportation of fuel and
a contract for the supply of cooling water will not be accepted for
wind, storage, or solar photovoltaic resources; (2) comparable evidence
of a contract for the sale of energy or capacity will be accepted; and
(3) any of the commercial readiness demonstration options accepted to
enter the facilities study will be accepted along with the executed
LGIA or within 15 days of the Commission issuing an order on the
unexecuted LGIA filing, while a commercial readiness deposit will not
be accepted.
    136. We propose this framework because we believe that it will
allow interconnection customers to calculate the exact deposit that
will be required prior to entering the interconnection queue, as it is
based on multiples of the study deposit, and the study deposit is based
on the size of the proposed generating facility, as chosen by the
interconnection customer, leading to predictability in the deposit
amount. We believe this increased transparency of the deposit amount
early in the generator interconnection process will discourage
speculative requests from entering the queue.
    137. We seek comment on whether the Commission should also
establish, as another alternative demonstration of commercial
readiness, evidence of a commitment to participate in RTO/ISO markets,
a site specific purchase order for generating equipment specific to the
interconnection request, or a statement signed by an officer or
authorized agent of the interconnection customer attesting that the
generating facility included is to be supplied with major electric
generating components (such as wind turbines) with a manufacturer's
blanket purchase agreement to which the interconnection customer is a
party.
iv. Withdrawal Penalties
(a) Background
    138. The pro forma LGIP does not require transmission providers to
assess withdrawal penalties when an interconnection customer withdraws
from the interconnection queue. Under the pro forma LGIP, withdrawing
interconnection customers need only pay the actual study costs that the
transmission provider incurred. Specifically, section 3.7 of the pro
forma LGIP states that ``[a]n Interconnection Customer that withdraws
or is deemed to have withdrawn its Interconnection Request shall pay to
Transmission Provider all costs that Transmission Provider prudently
incurs with respect to that Interconnection Request prior to
Transmission Provider's receipt of [Interconnection Customer's written
notice of such withdrawal to Transmission Provider].''
    139. The Commission has accepted several transmission providers'
proposals to assess withdrawal penalties on interconnection customers
that withdraw from a cluster study process and thereby delay the timing
or increase the interconnection costs for other proposed generating
facilities in the same cluster, reasoning that such penalties decrease
the number of late-stage withdrawals and mitigate potential harm to
other interconnection customers.\209\ The Commission found that
withdrawal penalties provide an incentive to interconnection customers
to ensure that their interconnection-

related decisions consider the costs associated with an interconnection
customer withdrawing from the queue.\210\
---------------------------------------------------------------------------

    \209\ See e.g., PacifiCorp, 171 FERC ] 61,112; PSCo, 169 FERC ]
61,182; Tri-State, 174 FERC ] 61,021; see also May Joint Task Force
Tr. 31:19-32:1 (Kimberly Duffley) (describing Duke's withdrawal
penalty requirements, stating that ``North Carolina is optimistic
that these revisions will allow for the efficient interconnection of
generation projects.'').
    \210\ PacifiCorp, 171 FERC ] 61,112 at P 112.
---------------------------------------------------------------------------

(b) Proposal
    140. As explained below, we propose to revise the pro forma LGIP to
require transmission providers to assess withdrawal penalties to
interconnection customers in certain circumstances. We preliminarily
find that withdrawal penalties are needed to account for the harms that
can occur when interconnection customers withdraw from the
interconnection queue, as detailed in the Need for Reform for this
NOPR. We believe that withdrawal penalties--as we propose to require
below--will encourage interconnection customers to make every effort to
ensure their proposed projects are viable and all interconnection
requirements are met in a timely fashion, thereby limiting the
potential for situations where an interconnection customer must
withdraw at a late stage of the generator interconnection process and
remedying the unjust and unreasonable Commission-jurisdictional rates
discussed in our Need for Reform.
    141. More specifically, we propose to revise the pro forma LGIP to
require transmission providers to assess withdrawal penalties to
interconnection customers that choose to withdraw at any point in the
interconnection study process or do not otherwise reach commercial
operation unless: (1) the withdrawal does not delay the timing of other
proposed generating facilities in the same cluster; (2) the withdrawal
does not increase the cost of network upgrades for other proposed
generating facilities in the same cluster; (3) the interconnection
customer withdraws after receiving the most recent cluster study report
and the costs assigned to the interconnection customer have increased
25% compared to the previous cluster study report; or (4) the
interconnection customer withdraws after receiving the individual
facilities study report and the costs assigned to the interconnection
customer have increased by more than 100% compared to costs identified
in the cluster study report. Thus, under this proposal, interconnection
customers would be exempt from a withdrawal penalty if the withdrawal
does not harm other interconnection customers or if the withdrawal
follows a significant unanticipated increase in network upgrade cost
estimates.
    142. The proposed withdrawal penalty will increase as the
interconnection customer moves through the study process and will also
increase if a commercial readiness deposit is provided in lieu of a
demonstration of commercial readiness.\211\ For an interconnection
customer that provides a commercial readiness deposit in lieu of a
demonstration of commercial readiness, we propose that its withdrawal
penalty will be higher and increase as the interconnection customer
progresses in the interconnection study process. This will help
dissuade interconnection customers from submitting interconnection
requests for speculative, non-commercially viable proposed generating
facilities or from remaining in the interconnection queue despite the
non-viability of the proposed generating facility.
---------------------------------------------------------------------------

    \211\ See May Joint Task Force Tr. 75:23-76:1 (Kimberly Duffley)
(``I think one of the best practices of the new system that DEP &
DEC have implemented is the increase of withdrawal penalties as the
interconnection moves through the process.'')
---------------------------------------------------------------------------

    143. We propose that the withdrawal penalty for an interconnection
customer that provides a commercial readiness deposit in lieu of a
demonstration of commercial readiness will be the greater of the study
deposit or: (1) two times the study cost if the customer withdraws
during the cluster study or after receipt of a cluster study report,
capped at $1,000,000; (2) three times the study cost if the customer
withdraws during the cluster re-study or after receipt of any
applicable re-study reports, capped at $1,500,000; (3) five times the
study cost if the customer withdraws during the facilities study, after
receipt of the individual facilities study report, or after receipt of
the draft LGIA, capped at $2,000,000; or (4) nine times the study costs
if the customer withdraws before achieving commercial operation and
after executing the LGIA or filing an unexecuted LGIA. We also propose
that the withdrawal penalty revenues be used to fund studies conducted
under the cluster study process.
    144. The table below summarizes the proposed withdrawal penalty
structure for both interconnection requests that have demonstrated
commercial readiness and those that have not (by instead submitting a
deposit in lieu of commercial readiness).

----------------------------------------------------------------------------------------------------------------
                                                                    Total withdrawal
         Phase of withdrawal             Commercial readiness     penalty (if greater     Withdrawal penalty cap
                                       demonstration provided?    than study deposit)
----------------------------------------------------------------------------------------------------------------
1....................................  Yes....................  1 times study costs....  No Cap.
2....................................  Yes....................  1 times study costs....  No Cap.
3....................................  Yes....................  1 times study costs....  No Cap.
LGIA.................................  Yes....................  9 times study costs....  No Cap.
1....................................  No.....................  2 times study costs....  $1 million.
2....................................  No.....................  3 times study costs....  $1.5 million.
3....................................  No.....................  5 times study costs....  $2 million.
LGIA.................................  No.....................  9 times study costs....  No Cap.
----------------------------------------------------------------------------------------------------------------

    145. Accordingly, we propose to add the defined term ``Withdrawal
Penalty'' and revise section 3.7 of the pro forma LGIP, as set forth in
Appendix B to this NOPR.
    146. We seek comment on how to define the circumstances in which a
withdrawal is deemed to have delayed the timing or increased the cost
of network upgrades for other proposed generating facilities in the
same cluster, including what criteria should be used to determine
whether the withdrawal caused the delay or increased cost, and whether
to establish a threshold for when a delay or increase in cost will
trigger a withdrawal penalty (and if so, what that threshold should
be).
    147. We seek comment on whether the Commission should consider
exceptions to the proposed withdrawal penalties beyond those we propose
in this NOPR.
    148. In addition, we seek comment on whether withdrawal penalties
that increase with proposed generating facility size (as measured by
MW) would more effectively deter withdrawals that cause the greatest
harm. Specifically, we seek comment on whether a correlation exists
between the size of a withdrawing proposed

generating facility and the relative level of harm (in terms of delays
and increased cost) to other interconnection customers as a result of
the withdrawal.
7. Transition Process
a. Need for Reform
    149. Requiring transmission providers both to utilize a first-
ready, first-served cluster study process and to adopt more stringent
financial commitments and readiness requirements to remain in the
interconnection queue should significantly improve interconnection
queue management in the future. However, we are mindful that many
providers currently face significant backlogs of existing
interconnection customers. Absent a transition process, the need to
study all existing interconnection requests under existing rules could
substantially delay the transmission provider's ability to use and
benefit from the new cluster study process and commercial readiness
requirements, thus diminishing the effectiveness of these reforms in
the near term. Therefore, we are proposing that transmission providers
be required to implement a transition process whereby most existing
interconnection customers will be subject to the new study process,
financial commitments, and readiness requirements, while certain late-
stage customers will be allowed to finish the interconnection process
under the existing rules.
b. Proposed Reform
i. Background
    150. The transmission providers that have proposed to adopt a
first-ready, first-served cluster study process have proposed a
transition process to provide an orderly move to the new approach and
to resolve their interconnection queue backlogs.
    151. Following the 2008 Technical Conference Order, the Commission
accepted several RTO/ISO proposals to implement a one-time transition
process as the RTOs/ISOs moved to a first-ready, first-served cluster
study process. To expedite interconnection queue processing, each of
these transition plans applied a cluster study process to the majority
of the interconnection requests in the interconnection queue. CAISO and
SPP created a large transitional cluster study group (or a pair of
study groups) yet continued to study later-stage interconnection
customers under the preexisting serial first-come, first-served study
process (i.e., grandfathered). Specifically, CAISO grandfathered all
interconnection customers slated to receive a system impact study by
the date of CAISO's filing with the Commission (as well as those
meeting selected readiness requirements),\212\ while SPP grandfathered
all interconnection customers with executed facilities study
agreements.\213\ MISO gave existing interconnection customers 60 days
to meet new commercial readiness requirements, although interconnection
requests for which the facilities study had already commenced were only
subject to new suspension procedures. All projects in MISO's
interconnection queue at the start of the transition were slated for
cluster study unless they were determined to be electrically remote.
However, the size of cluster study groups was not addressed in MISO's
filing.\214\
---------------------------------------------------------------------------

    \212\ CAISO also grandfathered interconnection customers with a
power purchase agreement approved by the California Public Utilities
Commission or pending with it, and interconnection customers seeking
to interconnect to a new transmission line, with sufficient
capacity, that had received land-use approval. See Cal. Ind. Sys.
Operator Corp., 124 FERC ] 61,031, at PP 1, 11, 12 (2008).
    \213\ SPP also allowed interconnection customers that had
received a system impact study but not yet executed a facilities
study agreement to opt out of the new cluster study process. See Sw.
Power Pool, Inc., 126 FERC ] 61,012, at P 6 (2009).
    \214\ See Midwest Ind. Sys. Operator, Inc., 124 FERC ] 61,183 at
PP 84, 90, 112, 114.
---------------------------------------------------------------------------

    152. Recent non-RTO/ISO interconnection queue reform filings gave
existing interconnection customers three options: transitional serial
study, transitional cluster study, or withdrawal from the
interconnection queue.\215\ Eligibility for the transitional studies
was based on study status and/or commercial readiness demonstrations,
as discussed further below. In accepting PSCo's interconnection queue
reform filing, the Commission found that PSCo's transition process
``consider[s] the interests of interconnection customers whose requests
are far along in the process'' while allowing a transmission provider
to resolve its interconnection queue backlog.\216\
---------------------------------------------------------------------------

    \215\ See, e.g., Duke, 176 FERC ] 61,075 at P 20; PSCo, 169 FERC
] 61,182 at P 64; Tri-State, 174 FERC ] 61,021 at P 17.
    \216\ PSCo, 169 FERC ] 61,182 at P 7.
---------------------------------------------------------------------------

    153. As discussed above, in the interconnection queue reform
filings immediately following the 2008 Technical Conference Order, the
Commission approved transition plans that grandfathered interconnection
customers that had executed a system impact study agreement or a
facilities study agreement.\217\ However, in more recent
interconnection queue reform filings, only late-stage interconnection
customers have been consistently given a path to executing an LGIA
under the existing interconnection procedures. Specifically, a
grandfathering threshold based on the execution of a facilities study
agreement has been more common. For example, transmission providers may
require receipt of a facilities study agreement by the interconnection
customer \218\ or receipt of a completed system impact study as well as
execution of a facilities study agreement for an interconnection
customer to qualify for grandfathering.\219\
---------------------------------------------------------------------------

    \217\ See, e.g., id. P 58; Midwest Indep. Sys. Operator, Inc.,
124 FERC ] 61,183 at P 90; Sw. Power Pool, Inc., 129 FERC ] 61,226
at P 28.
    \218\ See PacifiCorp, 171 FERC ] 61,112 at P 115.
    \219\ PSCo, 169 FERC ] 61,182 at P 65; 2020 Tri-State Order, 173
FERC ] 61,015 at P 54.
---------------------------------------------------------------------------

    154. The Commission has also allowed transmission providers to
apply the new commercial readiness requirements in their
interconnection queue reforms to existing interconnection customers.
For example, to qualify for a transitional serial study, several
transmission providers have required interconnection customers to:
execute a transitional facilities study agreement; provide a deposit
equivalent to 100% of the costs identified in the system impact study
for interconnection facilities and network upgrades; demonstrate
exclusive site control; and demonstrate commercial readiness.\220\ To
qualify for the transitional cluster study, the Commission has approved
transition plans that require interconnection customers to: execute a
transitional cluster study agreement; provide a $5 million deposit;
\221\ demonstrate exclusive site control for the generating facility;
and demonstrate commercial readiness.\222\ The Commission has also
approved less stringent requirements for transitional cluster study
eligibility. For example, Duke's transition plan imposes lower cost
security deposit requirements for ready interconnection customers and
allows the use of cash deposits in lieu of site control (for the first
phase of the

transitional cluster study) or commercial readiness.\223\
---------------------------------------------------------------------------

    \220\ See, e.g., PSCo, 169 FERC ] 61,182 at P 65; 2020 Tri-State
Order, 173 FERC ] 61,015 at PP 17-18 (describing transitional study
requirements but rejecting the filing due to insufficient time
period to meet them); Tri-State, 174 FERC ] 61,021 at P 45.
    \221\ In its interconnection queue reform filing, PSCo stated
that this value is ``likely at the low end of the potential cost''
of interconnection, based on a review of interconnection costs from
2003 to 2017, estimates of transmission investments in PSCo's
Resource Planning Process, and the experience of a neighboring
facility. PSCo, Transmittal Letter, Docket No. ER19-2774-000, at 86-
87 (filed Sept. 9, 2019).
    \222\ See, e.g., PSCo, 169 FERC ] 61,182 at P 65; 2020 Tri-State
Order, 173 FERC ] 61,015 at P 56 (order describing $5 million
deposit yet rejecting filing for other reasons); Tri-State, 174 FERC
] 61,021 at P 45.
    \223\ See Duke, Transmittal Letter, Docket No. ER21-1579-000, at
48, 52 (filed Apr. 1, 2021). In its interconnection queue reform
proposal, Duke stated that it selected these lower thresholds d in
response to stakeholder feedback. See Duke, 176 FERC ] 61,075 at P
51 (approving these provisions).
---------------------------------------------------------------------------

    155. The Commission has also made it clear that existing
interconnection customers must be given sufficient time to meet new
requirements. For example, the Commission rejected Tri-State's initial
transition process proposal because it would have given interconnection
customers just 10 calendar days after the filing's effective date to
meet new requirements.\224\ Commission-approved transition processes
commonly allow interconnection customers between 30-60 days after a
filing's effective date (or the provision of written notice) to meet
new commercial readiness requirements.\225\
---------------------------------------------------------------------------

    \224\ Tri-State, 174 FERC ] 61,021 at P 43.
    \225\ See, e.g., Midwest Indep. Sys. Operator, Inc., 124 FERC ]
61,183 at P 84; PSCo, 169 FERC ] 61,182 at P 65; Tri-State, 174 FERC
] 61,021 at P 60.
---------------------------------------------------------------------------

ii. Proposal
    156. We propose to revise the pro forma LGIP to require
transmission providers to establish a transition process for moving to
a first-ready, first-served cluster study process, as proposed in this
NOPR.\226\ Specifically, we propose to require transmission providers
to offer existing eligible, interconnection customers the options, for
each project in the queue, to either enter a transitional serial
interconnection facilities study or a transitional cluster study, with
commercial readiness requirements, or to permit them to withdraw from
the interconnection queue without penalty.
---------------------------------------------------------------------------

    \226\ We note that this proposed reform may not be applicable to
transmission providers that already employ a cluster study approach.
---------------------------------------------------------------------------

    157. We believe that this approach would provide an efficient way
to prioritize and process interconnection requests in the
interconnection queue based on how far they have advanced through the
interconnection study process on the effective date of these reforms
and their commercial readiness to continue that process. We also
believe that this proposal strikes an appropriate balance between
respecting previous expectations of interconnection customers and
ensuring that the interconnection requests that continue under the
transition process pose an acceptably low risk of withdrawal from the
interconnection queue, which should help reduce the likelihood of re-
studies. Accordingly, we propose to revise section 5 of the pro forma
LGIP to specify how interconnection customers can elect to enter a
transitional serial study or transitional cluster study or withdraw
from the interconnection queue without penalty, as set forth in
Appendix B to this NOPR.
    158. Our proposed transitional serial study process will allow
late-stage interconnection customers that have executed a facilities
study agreement by the deadline discussed below to continue under the
existing serial study process, enter into an LGIA, and interconnect,
provided they are ready to move forward to commercial operation. To
proceed to the transitional serial study, eligible interconnection
customers would be required to execute a transitional serial
interconnection facilities study agreement to codify their choice. At
the time of execution of such agreement, the interconnection customer
would be required to provide a deposit equal to 100% of the
interconnection facility and network upgrade costs allocated to the
interconnection customer in the system impact study report. If the
customer reaches commercial operation, this deposit would be used
towards construction costs of the same facilities. If the customer
withdraws, the deposit would be refunded after the final invoice for
study costs and the withdrawal penalty are settled. The transitional
serial study withdrawal penalty would equal nine times the study cost
because all future interconnection requests may be harmed if the
transitional projects do not reach commercial operation. Specifically,
these transitional projects would be included in the base case of the
transitional cluster study, so a transitional serial project
withdrawing could cause the entire first cluster to be re-studied.
Transitional serial projects would also be required to provide evidence
of exclusive site control for the entire generating facility and
demonstrate commercial readiness through one of the following: (1) an
executed term sheet (or comparable evidence) related to a contract for
the sale of the generating facility or its energy/ancillary services;
(2) reasonable evidence that the generating facility is included in a
resource planning entity's resource plan, has received a contract via a
resource solicitation process, or is being developed for a large end-
use customer; or (3) a provisional LGIA that is not suspended and
includes a commitment to build the generating facility. We propose that
the deadline for the interconnection customer to meet all the
provisions above will be 60 days after the effective date of a
transmission provider's compliance filing with the final rule. Finally,
we propose that the transitional serial studies be completed by the
transmission provider within 90 days after the deadline for eligibility
requirements to be satisfied.
    159. Existing interconnection customers that opt for the
transitional cluster study would have to execute a transitional cluster
study agreement to codify their choice. The costs of this study and the
identified facilities would be allocated as the costs are allocated for
future clusters as set forth in the final rule in this proceeding. The
transitional cluster will be subject to an expedited combined system
impact and interconnection facilities study. Transitional cluster study
projects would be required to select Energy Resource Interconnection
Service (ERIS) \227\ or NRIS.\228\ To ensure that interconnection
customers are ready to move forward, interconnection customers opting
for a transitional cluster study would be required to make a $5 million
deposit. We draw on the evidence provided by PSCo in proposing this
value; specifically, it is equivalent to a reasonable estimate of the
costs that would be allocated to the customer via the transitional
cluster study. We propose to subject this deposit to the same
conditions as the transitional serial study deposit. Transitional
cluster study projects also would be required to produce evidence of
exclusive site control for the entire generating facility and
demonstrate commercial readiness through one of the same three options
described above for transitional serial studies. Once again, we propose
to set the deadline for satisfying these requirements as 60 days after
the effective date of a transmission provider's compliance filing with
any final rule. Finally, we propose that the transitional cluster study
be completed by the transmission provider within 300 days after the
deadline for eligibility requirements to be satisfied.
---------------------------------------------------------------------------

    \227\ ERIS allows the interconnection customer to connect its
generating facility to the transmission provider's transmission
system to be eligible to deliver the generating facility's electric
output using the existing firm or nonfirm capacity of the
transmission provider's transmission system on an as available
basis. ERIS in and of itself does not convey transmission service.
Pro forma LGIP section 1.
    \228\ See supra note 99.
---------------------------------------------------------------------------

    160. We seek comment on whether certain interconnection customers
with a pending interconnection request prior to the issuance of a final
rule in this proceeding should be allowed to

proceed to LGIA execution without entering the transition process, for
example, interconnection customers with an executed facilities study
agreement. We seek comment on whether the Commission should require
transmission providers to accept any additional commercial readiness
demonstrations for entry into the transition process, and whether
existing interconnection customers should be permitted to enter the
transitional cluster study process by posting a deposit in lieu of
demonstrating commercial readiness. We seek comment on whether five
million dollars is a reasonable estimate of the costs that would be
allocated to the customer via the transitional cluster study.

B. Reforms To Increase the Speed of Interconnection Queue Processing

1. Elimination of the Reasonable Efforts Standard
a. Background
    161. The pro forma LGIP requires transmission providers to use
reasonable efforts to process interconnection requests in a timely
manner. Reasonable efforts are defined as ``actions that are timely and
consistent with Good Utility Practice and are substantially equivalent
to those a Party would use to protect its own interests.'' \229\
---------------------------------------------------------------------------

    \229\ Order No. 2003, 104 FERC ] 61,103 at P 67; pro forma LGIP
section 1.
---------------------------------------------------------------------------

    162. Specifically, section 2.2 of the pro forma LGIP requires
transmission providers to use reasonable efforts in processing and
analyzing interconnection requests. Sections 6.3, 7.4, and 8.3 of the
pro forma LGIP require transmission providers to use reasonable efforts
to complete feasibility studies within 45 days, system impact studies
within 90 days, and facilities studies within 90 or 180 days, depending
on the requested accuracy of the cost estimate. The pro forma LGIP does
not include any penalties or financial consequences if a transmission
provider fails to meet these deadlines.
    163. In the Order No. 845 proceeding, some commenters advocated for
the elimination of the reasonable efforts standard and imposition of
firm study deadlines.\230\ The Commission declined to do so, explaining
that the record in that proceeding did not support such action.\231\
Further, the Commission reasoned that ``reliance on improved reporting
is a preferable approach to encourage timely processing of
interconnection studies, rather than moving to a regime of firm study
deadlines.'' \232\
---------------------------------------------------------------------------

    \230\ Order No. 845, 163 FERC ] 61,043 at P 315.
    \231\ Id. P 322.
    \232\ Id. P 323.
---------------------------------------------------------------------------

    164. To improve reporting, the Commission required transmission
providers to post interconnection study metrics on a quarterly basis to
increase the transparency of interconnection study completion
timeframes.\233\ The Commission also adopted a filed report requirement
pursuant to which transmission providers that exceed study deadlines
for more than 25% of any study type for two consecutive quarters must
file informational reports at the Commission.\234\ In adopting these
requirements, the Commission reasoned that the increased transparency
should provide for improved interconnection queue management.\235\ The
Commission also explained that the informational requirements could
highlight systemic problems in interconnection study processing and
could be useful to the Commission in determining if additional action
is required to address interconnection study delays in the future.\236\
---------------------------------------------------------------------------

    \233\ Id. P 305.
    \234\ Id. PP 290, 305.
    \235\ Id. P 306.
    \236\ Id. PP 309, 323.
---------------------------------------------------------------------------

b. Need for Reform
    165. The transmission provider reporting requirements adopted in
Order No. 845 indicate that the failure to timely complete
interconnection studies is a significant problem nationwide. Appendix A
to this NOPR compiles the interconnection study metrics that
transmission providers publicly posted in 2021 in compliance with Order
No. 845. The data shows that almost 1,900 interconnection studies were
delayed as of the end of Q4 2021. Additionally, in February 2022, the
following transmission providers submitted required informational
reports to the Commission because they exceeded an interconnection
study deadline for more than 25% of any study type for two consecutive
quarters: Arizona Public Service Company, Avista, Dominion, Duke, FP&L,
ISO-NE, LG&E/KU, MISO, Northwestern Corp, NYISO, PacifiCorp, PJM, PNM,
Puget Sound, Tri-State, and Tucson Electric.\237\ Common explanations
for these study delays include the high volume of interconnection
requests,\238\ re-studies caused by withdrawal of higher-queued
interconnection requests,\239\ and coordination among transmission
owners, affected systems, and interconnection customers.\240\
---------------------------------------------------------------------------

    \237\ Arizona Pub. Serv. Co., Filing, Docket No. ER19-1939-000
(filed Feb. 14, 2022); Avista Corp., Filing, Docket No. ER19-1959-
000 (filed Feb. 11, 2022); Dominion, Filing, Docket No. ER19-1946-
000 (filed Feb. 14, 2022); Duke, Filing, Docket No. ER19-1507-000
(filed Feb. 14, 2022); FP&L, Filing, ER20-1384-000 (filed Feb. 14,
2022); ISO-NE, Filing, Docket No. ER19-1951-000 (filed Feb. 14,
2022); LG&E/KU, Filing, Docket No. ER19-1916-000 (filed Feb. 14,
2022); Midcontinent Indep. Sys. Operator, Inc., Filing, Docket No.
ER19-1960-004 (filed Feb. 11, 2022); NorthWestern Corp., Filing,
Docket No. ER19-1943-000 (filed Feb. 14, 2022); NYISO, Filing,
Docket No. ER19-1949-000 (filed Feb. 14, 2022); PacifiCorp., Filing,
Docket No. ER19-1948-000 (filed Feb. 9, 2022); PJM Interconnection,
L.L.C., Filing, Docket No. ER19-1958-003 (filed Feb. 14, 2022); PNM,
Filing, Docket No. ER19-1955-000 (filed Feb. 15, 2022); Puget Sound,
Filing, Docket No. ER19-1947-000 (filed Feb. 15, 2022); Tri-State,
Filing, Docket No. ER20-687-000 (filed Feb. 2, 2022); Tucson
Electric, Filing, Docket No. ER19-1934-000 (filed Feb. 14, 2022).
    \238\ See, e.g., Dominion, Filing, Docket No. ER19-1946-000, at
3 (filed Feb. 14, 2022); ISO-NE, Filing, Docket No. ER19-1951-000,
at 5 (filed Feb. 14, 2022); LG&E/KU, Filing, Docket No. ER19-1916-
000, at 2 (filed Feb. 14, 2022); NYISO, Filing, Docket No. ER19-
1949-000, at 5 (filed Feb. 14, 2022); PJM Interconnection, L.L.C.,
Filing, Docket No. ER19-1958-003, at 1-2, 5-6 (filed Feb. 14, 2022).
    \239\ See, e.g., ISO-NE, Filing, Docket No. ER19-1951-000, at 5
(filed Feb. 14, 2022); NorthWestern Corp., Filing, Docket No. ER19-
1943-000, at 2 (filed Feb. 14, 2022).
    \240\ See, e.g., ISO-NE, Filing, Docket No. ER19-1951-000, at 5
(filed Feb. 14, 2022); Midcontinent Indep. Sys. Operator, Inc.,
Filing, Docket No. ER19-1960-004, at 9-12, 14-15 (filed Feb. 11,
2022); NYISO, Filing, Docket No. ER19-1949-000, at 4 (filed Feb. 14,
2022); PJM Interconnection, LLC, Filing, Docket No. ER19-1958-003,
at 13-15 (filed Feb. 14, 2022).
---------------------------------------------------------------------------

    166. Overall, the data demonstrate that nearly all transmission
providers across the country regularly fail to meet interconnection
study deadlines. Importantly, the data show that many of the
transmission providers that have implemented some of the reforms that
we propose in this NOPR, such as a first-ready, first-served cluster
study process, still often fail to meet interconnection study
deadlines. We believe that this indicates the potential need for
further reforms to better ensure that transmission providers meet
interconnection study deadlines. In particular, we believe that the
reasonable efforts standard in the pro forma LGIP contributes to
interconnection study delays because transmission providers do not face
any consequence for missing study deadlines.\241\
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    \241\ May Joint Task Force Tr. 89:6-25 (Ted LeVar) (encouraging
FERC to examine ``appropriate consequences to the transmission
providers when they don't comply with the tariffs,'' including by
missing study deadlines).
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    167. The timely provision of interconnection service is critical to
maintaining just and reasonable rates. As such, this NOPR proposes
reforms to remedy several well-established sources of delay, such as
speculative

interconnection requests, affected systems coordination, and serial
interconnection queues. While we expect that these reforms will yield a
more efficient process, we also believe that it is appropriate to
establish mechanisms to hold transmission providers accountable for the
timely execution of their duties under the tariff. The data collected
pursuant to Order No. 845 indicates that the reasonable efforts
standard does not provide a meaningful incentive for the transmission
providers to complete their studies within the deadlines established in
their tariffs. Indeed, the fact that the Commission has never found a
transmission provider to have violated the reasonable efforts standard
despite wide-spread study delays further heightens this concern.\242\
Accordingly, we preliminary find that use of the reasonable efforts
standard results in rates that are unjust and unreasonable.
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    \242\ See, e.g., EDF v. MISO, 163 FERC ] 61,003, at P 47, order
on reh'g, 165 FERC ] 61,071, at PP 7-12 (2018); California Indep.
Sys. Operator Corp., 124 FERC ] 61,292 at PP 188-189, 199.
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c. Proposal
    168. We propose to revise the pro forma LGIP to eliminate the
reasonable efforts standard for transmission providers completing
interconnection studies, and instead impose firm study deadlines and
establish penalties that would apply when transmission providers fail
to meet these deadlines.\243\ Specifically, we propose to revise
sections 2.2, 3.5.4(i), 7.4, 8.3, and Attachment A to Appendix 4 of the
pro forma LGIP to remove the phrase ``reasonable efforts'' in relation
to the completion of cluster studies and facilities studies.
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    \243\ This proposal would not affect the application of the
reasonable efforts standard in other contexts, such as construction
of network upgrades or legally ordered disclosure of confidential
information. Pro forma LGIP sections 12.2.2, 13.1.6.
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    169. Furthermore, we propose to add a new section 3.9 to the pro
forma LGIP to impose financial penalties on transmission providers that
fail to meet study deadlines \244\ for cluster studies, cluster re-
studies, facilities studies, and affected system studies,\245\ except
in situations where force majeure is determined to be applicable. By
cluster studies,\246\ we mean those that are part of the first-ready,
first-served cluster study process that we propose in this NOPR, and we
exclude the proposed transitional cluster study process from this
meaning. Specifically, we propose to require transmission providers
that do not complete a cluster, cluster re-study, facilities, or
affected system study by the deadline specified in the pro forma LGIP
to pay a penalty of $500 per day that the study is late. For example, a
transmission provider that misses a study deadline by 150 days would be
penalized $75,000. We believe that $500 per day is an appropriate
penalty because (1) it is in line with the penalties applied in the
context of studies performed for transmission service requests, and (2)
it is high enough to incent transmission providers to comply with study
deadlines, without being unnecessarily punitive.\247\ Such penalties
would be distributed to the delayed interconnection customers on a pro
rata basis to offset their study costs. Consistent with other
penalties, we propose that such penalties would not be recoverable in
transmission rates.\248\
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    \244\ See Preventing Undue Discrimination & Preference in
Transmission Service, Order No. 890, 72 FR 12266 (Mar. 15, 2007),
118 FERC ] 61,119, at P 1340 (2007) (imposing penalties when
transmission providers fail to meet study deadlines for transmission
service request).
    \245\ Specifically, we propose to penalize transmission
providers when they fail to meet study deadlines for studying
interconnection requests on an affected transmission system.
    \246\ See supra PP 64-76.
    \247\ See Order No. 890, 118 FERC ] 61,119 at P 1347.
    \248\ See Order No. 890, 118 FERC ] 61,119 at P 1357 (``We will
prohibit all jurisdictional transmission providers from recovering
penalties for late studies from transmission customers); Order No.
2003, 104 FERC ] 61,103 at P 884 (``[B]ecause liquidated damages
liability will not have to be paid unless the Transmission Provider
is at fault, we conclude that these damages will not be considered
just and reasonable costs of service and will not be recoverable in
transmission rates.'').
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    170. We propose to cap penalties at 100% of the total study deposit
received for the late study to provide a safeguard against overly large
penalties that may be considered punitive. We further propose that no
financial penalties on transmission providers that fail to meet study
deadlines shall be assessed until one cluster study cycle (that is not
a transitional study cycle) after the effective date accepted on
compliance for implementing the reforms proposed herein. Thus, for
example, once the reforms proposed herein become effective, a
transmission provider would not be subject to penalties until after the
completion of (1) the transition process, and (2) the first cluster
study cycle applying the first-ready, first-served cluster study
process. We also propose a 10-day grace period such that no penalties
will be assessed for a study that is delayed by 10 business days or
less. However, for studies that are delayed by more than 10 business
days, the penalty would be calculated based on the first business day
the study was late. For example, a transmission provider whose study
was delayed by 11 business days would pay a $5,500 penalty.
Additionally, we propose to permit the transmission provider to extend
the deadline or a particular study by 30 days by mutual agreement of
the transmission provider and all interconnection customers in the
relevant study. In such a scenario, we propose that no penalties will
be assessed for missing the original deadline. Finally, we propose to
require transmission providers to post to its OASIS or a public website
on a quarterly basis (1) the total amount of such penalties from the
previous quarter, and (2) the highest amount of such penalties to a
single interconnection request from the previous quarter.
    171. We recognize that the application of penalties for late
interconnection studies in the context of RTOs/ISOs may raise several
unique issues. Consistent with our findings in Order No. 890, we
continue to believe that penalties are appropriate in certain
circumstances to incent compliance with tariff deadlines,
notwithstanding the RTO's/ISO's status as a not-for-profit entity. As
the Commission explained in Order No. 890, ``we believe that all
entities administering the tariff should operate under the same rules,
reporting obligations, and performance metrics . . . Non-profit
transmission providers have other sources of money to pay penalties
beyond the revenue they collect for sales of transmission service.''
\249\ Similarly, in Order No. 672-A, the Commission noted ``it is not
arbitrary and capricious to treat all operators alike, including RTOs
and ISOs, in terms of their liability for violation of a Reliability
Standard.'' \250\ We continue to believe it is appropriate to apply
penalties to RTOs/ISOs in a similar manner to other transmission
providers.
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    \249\ Id. P 1357.
    \250\ Rules Concerning Certification of the Elec. Reliability
Org.; & Procs. for the Establishment, Approval, & Enforcement of
Elec. Reliability Standards, Order No. 672-A, 71 FR 19814 (Apr. 18,
2006), 114 FERC ] 61,104, at P 56 (2006).
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    172. In the context of reliability penalties, the Commission has
recognized that, as not-for-profit entities, RTOs/ISOs may need to seek
to recover from other entities the costs of monetary penalties imposed
on the RTO/ISO.\251\ As such, the Commission has approved tariff
provisions creating mechanisms to permit RTOs/ISOs to recover monetary
penalties imposed by NERC for violations of reliability

standards from entities that are responsible for, or contributed to,
such violations, or from a broader set of entities.\252\ We recognize
that similar tariff provisions are likely to be necessary to permit
RTOs/ISOs to recover the costs of penalties they are obligated to pay
for failing to meet interconnection study deadlines. Therefore, to
ensure that RTOs/ISOs will be able to pay any such penalties, we
propose to require RTOs/ISOs to propose tariff provisions that require
the RTO/ISO to submit requests to recover the costs of specific
interconnection study penalties under FPA section 205. Similar to the
ability of RTOs/ISOs to seek to directly assign monetary penalties for
violations of reliability standards to other responsible entities,
RTOs/ISOs may include a provision that the RTO/ISO may make a FPA
section 205 filing seeking to allocate such penalties to the
appropriate transmission owner that is responsible for, or contributed
to, the delay.\253\ However, given the complexity recognized above
regarding assigning monetary penalties to RTOs/ISOs for late
interconnection studies, we seek comment on whether there is a more
appropriate method for assigning such penalties in RTOs/ISOs. More
generally, we seek comment on whether penalties will effectively incent
more timely completion of interconnection studies in RTOs/ISOs, and/or
whether monetary penalties may have adverse consequences (e.g.,
incenting timeliness over accuracy or increased waiver requests).
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    \251\ Reliability Standard Compliance & Enf't in Regions with
Reg'l Transmission Organizations or Indep. Sys. Operators, 122 FERC
] 61,247 (2008) (Reliability Penalty Guidance Order).
    \252\ Midcontinent Indep. Sys. Operator, Inc., 147 FERC ] 61,022
(2014); Cal. Indep. Sys. Operator Corp., 138 FERC ] 61,156 (2012);
N.Y. Indep. Sys. Operator, Inc., 127 FERC ] 61,196 (2009).
    \253\ See Reliability Penalty Guidance Order, 122 FERC ] 61,247
at P 23.
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    173. Additionally, we seek comment on the proposed penalty
structure, including whether the penalty amount for a cluster study
should be $500 per day or whether an approach that accounts for the
number of interconnection customers affected, such as $100 per day per
customer in the delayed study, would be more appropriate. We further
seek comment on how and when the Commission should require transmission
providers to communicate to interconnection customers the status of
studies that may be delayed. Additionally, we seek comment on whether
to include exceptions to the penalty other than force majeure, and if
so, what those exceptions should be. Lastly, to improve transparency,
we seek comment on whether Commission staff should issue periodic
reports summarizing the status of transmission providers' queues and
timeliness of interconnection studies based on information collected
through existing reporting requirements,\254\ and whether this periodic
report should be in addition to or a substitute for the proposed
monetary penalties discussed above.
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    \254\ Order No. 845, 163 FERC ] 61,043 at P 305.
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2. Affected Systems
a. Background
    174. In Order No. 2003, the Commission found that the transmission
system with which a generating facility directly interconnects (the
host transmission system) must allow any affected system \255\ to
participate in the process when conducting interconnection studies, as
well as incorporate the legitimate safety and reliability needs of the
affected system. However, the Commission rejected a request to require
that an affected system operator \256\ participate in the host
transmission provider's generator interconnection process.\257\
Instead, section 3.6 of the pro forma LGIP requires the host
transmission provider to coordinate required interconnection studies
with affected system operators and, if possible, to include those
results within the host transmission provider's applicable results in
the LGIP study process.
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    \255\ An affected system is an electric system other than the
transmission provider's transmission system that may be affected by
the proposed interconnection. Pro forma LGIP section 1; pro forma
LGIA art. 1.
    \256\ An affected system operator is an entity that operates an
affected system. Pro forma LGIP section 1; pro forma LGIA art. 1.
    \257\ Order No. 2003, 104 FERC ] 61,103 at P 121.
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    175. Specifically, the pro forma LGIP requires that host
transmission providers: (1) coordinate the conduct of any studies
required to determine the impact of an interconnection request on an
affected system with the affected system operator and, if possible,
include those study results in the transmission provider's applicable
interconnection study; and (2) include affected system operators in all
meetings held with the interconnection customer.\258\ The pro forma
LGIP further requires affected system operators to ``cooperate with
[Host] Transmission Provider . . . in all matters related to the
conduct of studies and the determination of modifications to Affected
Systems.'' \259\
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    \258\ See pro forma LGIP section 3.6.
    \259\ Id.
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    176. The affected system operator is not bound by the terms of the
host transmission provider's pro forma LGIP, is not a party to any
study agreement, and is not otherwise required to meet any deadlines to
complete the affected system study. Additionally, in Order No. 2003,
the Commission explicitly stated that a host transmission provider may
proceed with the generator interconnection process even if an affected
system operator does not provide information in a timely manner by not
taking into account any information that could have been provided by
the affected system operator, provided that the interconnection itself
(as distinct from any future delivery service) will not endanger
reliability.\260\ The Commission also stated that neither the pro forma
LGIP nor the pro forma LGIA is intended to expose the host transmission
provider to liability resulting from delays by the affected system
operator.\261\
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    \260\ Order No. 2003, 104 FERC ] 61,103 at P 121; see also Order
No. 2003-A, 106 FERC ] 61,220 at P 114 (clarifying on rehearing that
delays by an affected system operator are not an acceptable reason
to deviate from the timetables established in Order No. 2003 unless
the interconnection will endanger reliability).
    \261\ Order No. 2003, 104 FERC ] 61,103 at P 121.
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    177. The Commission did not specifically require in Order No. 2003
that host transmission providers post their process for coordinating