[Federal Register Volume 81, Number 121 (Thursday, June 23, 2016)]
[Rules and Regulations]
[Pages 40793-40809]
[FR Doc No: 2016-14764]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 35

[Docket No. RM16-1-000; Order No. 827]

Reactive Power Requirements for Non-Synchronous Generation

AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) is
eliminating the exemptions for wind generators from the requirement to
provide reactive power by revising the pro forma Large Generator
Interconnection Agreement (LGIA), Appendix G to the pro forma LGIA, and
the pro forma Small Generator Interconnection Agreement (SGIA). As a
result, all newly interconnecting non-synchronous generators will be
required to provide reactive power at the high-side of the generator
substation as a condition of interconnection as set forth in their LGIA
or SGIA as of the effective date of this Final Rule.

DATES: This Final Rule will become effective September 21, 2016.

FOR FURTHER INFORMATION CONTACT: Brian Bak (Technical Information),
Office of Energy Policy and Innovation, Federal Energy Regulatory
Commission, 888 First Street NE., Washington, DC 20426,<PHONE_NUMBER>,
<EMAIL_ADDRESS>    Gretchen Kershaw (Legal Information), Office of the General
Counsel, Federal Energy Regulatory Commission, 888 First Street NE.,
Washington, DC 20426,<PHONE_NUMBER><EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Table of Contents

                                                               Paragraph

I. Background...............................................           6
II. Need for Reform.........................................          11
III. Discussion.............................................          13
    A. Reactive Power Requirement for Non-Synchronous                 16
     Generators.............................................
        1. NOPR Proposal....................................          16
        2. Comments.........................................          17
        3. Commission Determination.........................          21
    B. Power Factor Range, Point of Measurement, and Dynamic          26
     Reactive Power Capability Requirements.................
        1. NOPR Proposal....................................          26
        2. Comments.........................................          27
        3. Commission Determination.........................          34
    C. Real Power Output Level..............................          41
        1. NOPR Proposal....................................          41
        2. Comments.........................................          42
        3. Commission Determination.........................          47
    D. Compensation.........................................          50
        1. NOPR Proposal....................................          50
        2. Comments.........................................          51

        3. Commission Determination.........................          52
    E. Application of the Final Rule........................          53
        1. NOPR Proposal....................................          53
        2. Comments.........................................          54
        3. Commission Determination.........................          59
            a. Newly Interconnecting Non-Synchronous                  60
             Generators.....................................
            b. Upgrades to Existing Non-Synchronous                   64
             Generators.....................................
    F. Regional Flexibility.................................          68
    G. Miscellaneous Comments...............................          70
IV. Compliance and Implementation...........................          74
V. Information Collection Statement.........................          78
VI. Regulatory Flexibility Act Certification................          83
VII. Environmental Analysis.................................          86
VIII. Document Availability.................................          87
IX. Effective Date and Congressional Notification...........          90

Order No. 827

Final Rule

    1. The Federal Energy Regulatory Commission (Commission) is
eliminating the exemptions for wind generators from the requirement to
provide reactive power by revising the pro forma Large Generator
Interconnection Agreement (LGIA), Appendix G to the pro forma LGIA, and
the pro forma Small Generator Interconnection Agreement (SGIA). Under
this Final Rule, newly interconnecting non-synchronous generators that
have not yet executed a Facilities Study Agreement as of the effective
date of this Final Rule will be required to provide dynamic reactive
power within the range of 0.95 leading to 0.95 lagging at the high-side
of the generator substation. This Final Rule revises the pro forma LGIA
and pro forma SGIA to establish reactive power requirements for non-
synchronous generation. Specifically, the pro forma LGIA will include
the following (the pro forma SGIA will include similar language): \1\
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    \1\ See Section IV of this Final Rule, Compliance and
Implementation, for the specific changes to the pro forma LGIA and
pro forma SGIA.

    Non-Synchronous Generation. Interconnection Customer shall
design the Large Generating Facility to maintain a composite power
delivery at continuous rated power output at the high-side of the
generator substation at a power factor within the range of 0.95
leading to 0.95 lagging, unless the Transmission Provider has
established a different power factor range that applies to all non-
synchronous generators in the Control Area on a comparable basis.
This power factor range standard shall be dynamic and can be met
using, for example, power electronics designed to supply this level
of reactive capability (taking into account any limitations due to
voltage level, real power output, etc.) or fixed and switched
capacitors, or a combination of the two. This requirement shall only
apply to newly interconnecting non-synchronous generators that have
not yet executed a Facilities Study Agreement as of the effective
date of the Final Rule establishing this requirement (Order No.
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827).

    2. Section 35.28(f)(1) of the Commission's regulations requires
every public utility with an open access transmission tariff (OATT) on
file to also have on file the pro forma LGIA and pro forma SGIA
``required by Commission rulemaking proceedings promulgating and
amending such interconnection procedures and agreements.'' \2\ As a
result of this Final Rule, all newly interconnecting non-synchronous
generators will be required to provide reactive power as a condition of
interconnection pursuant to the pro forma LGIA and pro forma SGIA.
These reactive power requirements will apply to any new non-synchronous
generator seeking to interconnect to the transmission system that has
not yet executed a Facilities Study Agreement as of the effective date
of this Final Rule.
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    \2\ 18 CFR 35.28(f)(1) (2015).
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    3. The existing pro forma LGIA and pro forma SGIA both require, as
a condition of interconnection, an interconnecting generator to design
its Generating Facility \3\ ``to maintain a composite power delivery at
continuous rated power output at the Point of Interconnection at a
power factor \4\ within the range of 0.95 leading to 0.95 lagging'' \5\
(the reactive power requirement).
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    \3\ The pro forma LGIA defines ``Generating Facility'' as an
``Interconnection Customer's device for the production of
electricity identified in the Interconnection Request,'' excluding
the Interconnection Customer's Interconnection Facilities. The pro
forma LGIA further defines ``Large Generating Facility'' as a
``Generating Facility having a Generating Facility Capacity of more
than 20 MW.'' The pro forma SGIA defines ``Small Generating
Facility'' as an ``Interconnection Customer's device for the
production and/or storage for later injection of electricity
identified in the Interconnection Request,'' excluding the
Interconnection Customer's Interconnection Facilities. For purposes
of this Final Rule, unless otherwise noted, ``Generating Facility''
refers to both a Large Generating Facility and a Small Generating
Facility.
    \4\ The power factor of an alternating current transmission
system is the ratio of real power to apparent power. Reliable
operation of a transmission system requires system operators to
maintain a tight control of voltages (at all points) on the
transmission system. The ability to vary the ratio of real power to
apparent power (i.e., adjust the power factor) allows system
operators to maintain scheduled voltages within allowed for
tolerances on the transmission system and maintain the reliability
of the transmission system. The Commission established a required
power factor range in Order No. 2003 of 0.95 leading to 0.95
lagging, but allowed transmission providers to establish different
requirements to be applied on a comparable basis. See
Standardization of Generator Interconnection Agreements and
Procedures, Order No. 2003, FERC Stats. & Regs. ] 31,146, at P 542
(2003), order on reh'g, Order No. 2003-A, FERC Stats. & Regs. ]
31,160, order on reh'g, Order No. 2003-B, FERC Stats. & Regs. ]
31,171 (2004), order on reh'g, Order No. 2003-C, FERC Stats. & Regs.
] 31,190 (2005), aff'd sub nom. Nat'l Ass'n of Regulatory Util.
Comm'rs v. FERC, 475 F.3d 1277 (D.C. Cir. 2007), cert. denied, 552
U.S. 1230 (2008).
    \5\ Section 9.6.1 of the pro forma LGIA and section 1.8.1 of the
pro forma SGIA.
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    4. As discussed below, however, wind generators have been exempt
from the general requirement to provide reactive power absent a study
finding that the provision of reactive power is necessary to ensure
safety or reliability. The Commission exempted wind generators from the
uniform reactive power requirement because, historically, the costs to
design and build a wind generator that could provide reactive power
were high and could have created an obstacle to the development of wind
generation.\6\ Due to technological advancements, the cost of providing
reactive power no longer presents an obstacle to the development of
wind generation.\7\ The resulting decline in the cost to wind
generators of providing

reactive power renders the current absolute exemptions unjust,
unreasonable, and unduly discriminatory and preferential. Further, the
growing penetration of wind generators on some systems increases the
potential for a deficiency in reactive power.\8\
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    \6\ Interconnection for Wind Energy, Order No. 661, FERC Stats.
& Regs. ] 31,186, at P 51, order on reh'g, Order No. 661-A, FERC
Stats. & Regs. ] 31,198 (2005).
    \7\ See, e.g., Payment for Reactive Power, Commission Staff
Report, Docket No. AD14-7, app. 2, at 1-3 (Apr. 22, 2014).
    \8\ See, e.g., PJM Interconnection, L.L.C., 151 FERC ] 61,097,
at P 7 (2015); CAISO Comments at 2-3 (explaining that, in 2014,
CAISO had over 11,000 MW of interconnected variable energy
resources, the majority of which are non-synchronous generators, but
expects to have over 20,000 MW of such resources interconnected by
2024).
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    5. Given these changes, the Commission finds under section 206 of
the Federal Power Act (FPA) \9\ that wind generators should not have an
exemption from the reactive power requirement which is unavailable to
other generators. While we find that requiring non-synchronous
generators to provide dynamic reactive power is now reasonable, we
recognize that distinctions between non-synchronous and synchronous
generators still exist and that these differences justify requiring
non-synchronous generators to provide dynamic reactive power at a
different location than synchronous generators: Non-synchronous
generators will be required to provide dynamic reactive power at the
high-side of the generator substation, as opposed to the Point of
Interconnection. The reactive power requirements we adopt here for
newly interconnecting non-synchronous generators provide just and
reasonable terms, which recognize the technical differences of non-
synchronous generators from synchronous generators. These requirements
also benefit customers by ensuring that reliability is protected
without adding unnecessary obstacles to further development of non-
synchronous generators.
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    \9\ 16 U.S.C. 824d-e (2012).
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I. Background

    6. Transmission providers require reactive power to control system
voltage for efficient and reliable operation of an alternating current
transmission system. At times, transmission providers need generators
to either supply or consume reactive power. Starting with Order No.
888,\10\ which included provisions regarding reactive power from
generators as an ancillary service in Schedule 2 of the pro forma OATT,
the Commission issued a series of orders intended to ensure that
sufficient reactive power is available to maintain the reliability of
the bulk power system.
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    \10\ Promoting Wholesale Competition Through Open Access Non-
Discriminatory Transmission Services by Public Utilities; Recovery
of Stranded Costs by Public Utilities and Transmitting Utilities,
Order No. 888, FERC Stats. & Regs. ] 31,036 (1996), order on reh'g,
Order No. 888-A, FERC Stats. & Regs. ] 31,048, order on reh'g, Order
No. 888-B, 81 FERC ] 61,248 (1997), order on reh'g, Order No. 888-C,
82 FERC ] 61,046 (1998), aff'd in relevant part sub nom.
Transmission Access Policy Study Group v. FERC, 225 F.3d 667 (D.C.
Circuit 2000), aff'd sub nom. New York v. FERC, 535 U.S. 1 (2002).
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    7. Starting with Order No. 2003, the Commission adopted standard
procedures and a standard agreement for the interconnection of Large
Generating Facilities (the pro forma LGIA), which included the reactive
power requirement.\11\ Under this requirement, large generators must
design their Large Generating Facilities to provide 0.95 leading to
0.95 lagging reactive power at the Point of Interconnection.
Synchronous generators have met this requirement by providing dynamic
reactive power at the Point of Interconnection, utilizing the inherent
dynamic reactive power capability of synchronous generators. The
Commission recognized in Order No. 2003-A that the pro forma LGIA was
``designed around the needs of large synchronous generators and that
generators relying on newer technologies may find that either a
specific requirement is inapplicable or that it calls for a slightly
different approach'' because such generators ``may have unique
electrical characteristics.'' \12\ Therefore, the Commission exempted
wind generators from this reactive power requirement.\13\
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    \11\ Order No. 2003, FERC Stats. & Regs. ] 31,146 at PP 1, 542.
    \12\ Order No. 2003-A, FERC Stats. & Regs. ] 31,160 at P 407 &
n.85.
    \13\ Id. Article 9.6.1 of the pro forma LGIA provides:
``Interconnection Customer shall design the Large Generating
Facility to maintain a composite power delivery at continuous rated
power output at the Point of Interconnection at a power factor
within the range of 0.95 leading to 0.95 lagging, unless
Transmission Provider has established different requirements that
apply to all generators in the Control Area on a comparable basis.
The requirements of this paragraph shall not apply to wind
generators.''
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    8. In June 2005, the Commission issued Order No. 661,\14\
establishing interconnection requirements in Appendix G to the pro
forma LGIA for large wind generators.\15\ Recognizing that, unlike
traditional synchronous generators, wind generators had to ``install
costly equipment'' to maintain reactive power capability, the
Commission in Order No. 661 preserved the exemption for large wind
generators from the reactive power requirement unless the transmission
provider shows, through a System Impact Study, that reactive power
capability is required to ensure safety or reliability.\16\ The
Commission explained that this qualified exemption from the reactive
power requirement for large wind generators would provide certainty to
the industry and ``remove unnecessary obstacles to the increased growth
of wind generation.'' \17\
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    \14\ Interconnection for Wind Energy, Order No. 661, FERC Stats.
& Regs. ] 31,186, Appendix B (Appendix G--Interconnection
Requirements for a Wind Generating Plant), order on reh'g, Order No.
661-A, FERC Stats. & Regs. ] 31,198 (2005).
    \15\ Id. P 1.
    \16\ Id. PP 50-51. Appendix G states: ``A wind generating plant
shall maintain a power factor within the range of 0.95 leading to
0.95 lagging, measured at the Point of Interconnection as defined in
this LGIA, if the Transmission Provider's System Impact Study shows
that such a requirement is necessary to ensure safety or
reliability.''
    \17\ Id. P 50.
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    9. In May 2005, the Commission issued Order No. 2006,\18\ in which
it adopted standard procedures and a standard agreement for the
interconnection of Small Generating Facilities (pro forma SGIA).\19\ In
Order No. 2006, the Commission completely exempted small wind
generators from the reactive power requirement.\20\ The Commission
reasoned that, similar to large wind generators, small wind generators
would face increased costs to provide reactive power that could create
an obstacle to the development of small wind generators. Additionally,
the Commission reasoned that small wind generators would ``have minimal
impact on the Transmission Provider's electric system'' and therefore
the reliability requirements for large wind generators that were
eventually imposed in Order No. 661 were not needed for small wind
generators.\21\
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    \18\ Standardization of Small Generator Interconnection
Agreements and Procedures, Order No. 2006, FERC Stats. & Regs. ]
31,180, Attachment F (Small Generator Interconnection Agreement),
order on reh'g, Order No. 2006-A, FERC Stats. & Regs. ] 31,196
(2005), order granting clarification, Order No. 2006-B, FERC Stats.
& Regs. ] 31,221 (2006).
    \19\ Id. P 1.
    \20\ Id. P 387. Section 1.8.1 of the pro forma SGIA states:
``The Interconnection Customer shall design its Small Generating
Facility to maintain a composite power delivery at continuous rated
power output at the Point of Interconnection at a power factor
within the range of 0.95 leading to 0.95 lagging, unless the
Transmission Provider has established different requirements that
apply to all similarly situated generators in the control area on a
comparable basis. The requirements of this paragraph shall not apply
to wind generators.''
    \21\ Id. P 24.
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    10. Since the Commission provided these exemptions from the
reactive power requirement for wind generators, the equipment needed
for a wind generator to provide reactive power has become more
commercially available and less costly, such that the cost of
installing equipment that is capable of providing reactive power is
comparable

to the costs of a traditional generator.\22\ Recognizing these factors,
the Commission recently accepted a proposal by PJM Interconnection,
L.L.C. (PJM), effectively removing the wind generator exemptions from
the PJM tariff.\23\ Specifically, the Commission granted PJM an
``independent entity variation'' from Order No. 661 in accepting PJM's
proposal to require interconnection customers seeking to interconnect
non-synchronous generators,\24\ including wind generators, to use
``enhanced inverters'' with the capability to provide reactive
power.\25\ The Commission observed that, ``[a]lthough there are still
technical differences between non-synchronous generators [such as wind
generators] and traditional generators, with regard to the provision of
reactive power, those differences have significantly diminished since
the Commission issued Order No. 661.'' \26\ The Commission agreed with
PJM ``that the technology has changed both in availability and in cost
since the Commission rejected [the California Independent System
Operator's] proposal in 2010,'' such that ``PJM's proposal will not
present a barrier to non-synchronous resources.'' \27\
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    \22\ See, e.g., Payment for Reactive Power, Commission Staff
Report, Docket No. AD14-7, app. 1, at 6, app. 2, at 4-5 (Apr. 22,
2014).
    \23\ PJM Interconnection, L.L.C., 151 FERC ] 61,097 at P 28.
    \24\ Non-synchronous generators are ``connected to the bulk
power system through power electronics, but do not produce power at
system frequency (60 Hz).'' They ``do not operate in the same way as
traditional generators and respond differently to network
disturbances.'' Id. P 1 n.3 (citing Order No. 661, FERC Stats. &
Regs. ] 31,198 at P 3 n.4). Wind and solar photovoltaic generators
are two examples of non-synchronous generators.
    \25\ Id. PP 1, 6.
    \26\ Id. P 28.
    \27\ Id.
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II. Need for Reform

    11. Based upon this information, on November 19, 2015, the
Commission issued a Proposal to Revise Standard Generator
Interconnection Agreements (NOPR) that proposed to eliminate the
exemptions for wind generators from the requirement to provide reactive
power as contained in the pro forma LGIA, Appendix G to the pro forma
LGIA, and the pro forma SGIA.\28\ In the NOPR, the Commission sought
comment on: Whether to remove the exemptions for wind generators from
the reactive power requirement; whether the current power factor range
of 0.95 leading to 0.95 lagging, as set forth in the existing pro forma
LGIA and pro forma SGIA, is reasonable given the technology used by
non-synchronous generators; whether newly interconnecting non-
synchronous generators should only be required to produce reactive
power when the generator's real power output is greater than 10 percent
of nameplate capacity; and whether the existing methods used to
determine reactive power compensation are appropriate for wind
generators and, if not, what alternatives would be appropriate.\29\
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    \28\ Reactive Power Requirements for Non-Synchronous Generation,
Notice of Proposed Rulemaking, 80 Fed Reg. 73,683 (Nov. 25, 2015),
FERC Stats. & Regs. ] 32,712 (2015).
    \29\ Id. P 18.
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    12. In response to the NOPR, 24 entities submitted comments,\30\
most of which generally support the proposed elimination of the
exemptions. However, some commenters seek clarification of various
issues that fall into six broad categories: (1) Comments regarding
where the reactive power requirement should be measured (the Point of
Interconnection, the generator terminals, or elsewhere); (2) comments
contesting the proposal to require fully dynamic reactive power
capability; (3) comments contesting the proposal to require non-
synchronous generators to maintain the required power factor range only
when the generator's real power output exceeds 10 percent of its
nameplate capacity; (4) comments on compensation methods for reactive
power; (5) comments seeking clarification as to which non-synchronous
resources the Final Rule will apply; and (6) comments on the need for
regional flexibility.
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    \30\ See Appendix A for a list of entities that submitted
comments and the shortened names used throughout this Final Rule to
describe those entities.
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III. Discussion

    13. The Commission finds that, given the changes to the cost of
providing reactive power by non-synchronous generators, as well as the
growing penetration of such generators, the reactive power requirements
in the pro forma LGIA and pro forma SGIA are no longer just and
reasonable and are unduly discriminatory and preferential and, thus,
need to be revised. We have determined in this Final Rule to apply
comparable reactive power requirements to non-synchronous generators
and synchronous generators. We recognize technological differences
between non-synchronous and synchronous generators still remain.
Because of the configuration and means of producing power of
synchronous generators, these generators provide dynamic reactive power
at the Point of Interconnection. Many commenters point out, however,
that the advancements in technology do not permit some non-synchronous
generators to provide dynamic reactive power at reasonable cost at the
Point of Interconnection. Recognizing the differences between the two
categories of generation, we have determined to require non-synchronous
generators to provide dynamic reactive power at the high-side of the
generator substation.\31\
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    \31\ This measurement point is different from Order No. 2003
requirement, which measures the power factor at the Point of
Interconnection. As an example, the generator substation would be
the substation for a wind generator that separates the low-voltage
collector system from the higher voltage elements of the
Interconnection Customer Interconnection Facilities that bring the
generator's energy to the Point of Interconnection. Both the pro
forma Large Generator Interconnection Procedures and the pro forma
Small Generator Interconnection Procedures require interconnecting
generators to provide a simplified one-line diagram of the plant and
station facilities, which will be appended to the interconnection
agreement.
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    14. The requirements adopted by this Final Rule are intended to
ensure that all generators, both synchronous and non-synchronous, are
treated in a not unduly discriminatory or preferential manner, as
required by sections 205 and 206 of the FPA, and to ensure sufficient
reactive power is available on the bulk power system as more non-
synchronous generators seek to interconnect and more synchronous
generators retire.
    15. We discuss below the issues raised in the comments.

A. Reactive Power Requirement for Non-Synchronous Generators

1. NOPR Proposal
    16. In the NOPR, the Commission proposed to eliminate the
exemptions for wind generators from the reactive power requirement, and
thereby to require that all newly interconnecting non-synchronous
generators provide reactive power as a condition of
interconnection.\32\
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    \32\ NOPR, FERC Stats. & Regs. ] 32,712 at P 12.
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2. Comments

    17. Most commenters agree that the current exemptions for wind
generators from the reactive power requirement are unjust,
unreasonable, and unduly discriminatory and preferential due to
increases in the number and size of non-synchronous generators, and
advances in non-synchronous generator technology.\33\ Commenters
contend that operation and planning of the bulk power system requires
adequate levels of voltage support, and that exempting wind generators
from the reactive power requirement may inhibit the proper

operation of the bulk power system.\34\ Specifically, commenters assert
that non-synchronous generators are increasingly replacing synchronous
generators, which is resulting in a decrease in the amount of dynamic
reactive power available to the transmission system.\35\ Commenters
also contend that the inverters used by most non-synchronous generators
today are manufactured with the inherent capability to produce reactive
power.\36\ Therefore, commenters generally support the Commission's
proposal to create comparable reactive power requirements for non-
synchronous and synchronous generators.\37\ While the Public Interest
Organizations support the removal of the exemptions for wind generators
from the reactive power requirement, they ask that the Commission not
impose unduly burdensome requirements on non-synchronous
generators.\38\
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    \33\ EEI Comments at 5; Indicated NYTOs Comments at 2-3; ISO/RTO
Council Comments at 4; ISO-NE Comments at 9-10; MISO Comments at 2.
    \34\ CAISO Comments at 2-5; ISO/RTO Council Comments at 5; ISO-
NE Comments at 9; NERC Comments at 5-6; Six Cities Comments at 3-4.
    \35\ CAISO Comments at 2-3; EEI Comments at 4-5; ITC Comments at
1-2; SCE Comments at 2; SDG&E Comments at 2.
    \36\ CAISO Comments at 3; ISO/RTO Council Comments at 5; MISO
Comments at 2-3; NaturEner Comments at 2; NERC Comments at 9; SCE
Comments at 2.
    \37\ CAISO Comments at 3; EEI Comments at 6-7; EPSA Comments at
3; Idaho Power Comments at 1; Indicated NYTOs Comments at 2; ISO/RTO
Council Comments at 4; ISO-NE Comments at 7-8; ITC Comments at 1;
Lincoln Comments at 1-2; MISO Comments at 1-2; NEPOOL Initial
Comments at 6; SCE Comments at 2; SDG&E Comments at 3.
    \38\ Public Interest Organizations Comments at 1.
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    18. Commenters argue that it is more effective to have a standard
reactive power requirement for wind generators than requiring
transmission providers to show through a System Impact Study the need
for reactive power from an interconnecting wind generator on a case-by-
case basis because a System Impact Study may not reflect the future
needs of the transmission system.\39\ CAISO explains that deficiencies
in reactive power support may only become apparent when there are high
levels of variable energy resources and low demand, or when certain
transmission infrastructure or synchronous generators are out of
service.\40\ Because System Impact Studies do not study all conditions,
CAISO contends they may not capture these deficiencies before a wind
generator interconnects to the transmission system.\41\ Therefore,
CAISO, as well as the ISO/RTO Council, assert that transmission
providers may need to remedy deficiencies in reactive power support
that were not identified through a System Impact Study through
authorization and development of transmission infrastructure
upgrades.\42\
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    \39\ CAISO Comments at 4-5; EEI Comments at 5-6; ISO/RTO Council
Comments at 5; ISO-NE Comments at 2.
    \40\ CAISO Comments at 4.
    \41\ Id.
    \42\ CAISO Comments at 4; ISO/RTO Council Comments at 5.
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    19. Commenters argue that relying on transmission system upgrades
after a wind generator interconnects, or relying on more recently
interconnected generation resources, to meet reactive power
deficiencies may shift the cost of providing reactive power from one
interconnection customer to another. Specifically, if a System Impact
Study does not show that an earlier interconnecting wind generator
needs to provide reactive power, but, as a result of the combination of
existing and new wind generators, a System Impact Study for a later
interconnecting wind generator does make that showing, the newer
interconnecting wind generator would have the entire burden of
supplying reactive power instead of sharing equally with the other wind
generators creating the need for reactive power.\43\ Further,
commenters assert that requiring transmission providers to show through
a System Impact Study the need for reactive power from interconnecting
wind generators leads to delays and increased costs in processing
interconnection requests.\44\ Commenters argue that a uniform reactive
power requirement for non-synchronous generators may result in reduced
costs for wind development by allowing standardization of components
and equipment.\45\ Additionally, ISO-NE argues that the difficulty in
demonstrating a need for reactive power through a System Impact Study
has resulted in some wind generators not being required to install
reactive power equipment and, consequently, not being able to deliver
real power during certain system conditions as a result of insufficient
reactive power capability.\46\ According to ISO-NE., this situation has
resulted in transmission system operators needing to curtail wind
generators as a result of unstudied real-time system
characteristics.\47\
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    \43\ ISO/RTO Council Comments at 5; Union of Concerned
Scientists Comments at 4-5.
    \44\ ISO-NE Comments at 2, 4, 10; NEPOOL Initial Comments at 5.
    \45\ Indicated NYTOs Comments at 2; Joint NYTOs Comments at 2.
    \46\ ISO-NE Comments at 5.
    \47\ Id. at 6.
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    20. Several independent system operators (ISOs) and regional
transmission organizations (RTOs) have been developing new reactive
power requirements and procedures to address deficiencies in the
current method of requiring transmission providers to show through a
System Impact Study that reactive power from an interconnecting wind
generator is necessary to ensure safety or reliability.\48\
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    \48\ CAISO Comments at 1-2; ISO-NE Comments at 6; NEPOOL Initial
Comments at 4.
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3. Commission Determination
    21. Based on the comments filed in response to the NOPR, and the
record in the PJM and ISO-NE proceedings accepting PJM's and ISO-NE's
reactive power requirements for non-synchronous generators,\49\ the
Commission adopts in this Final Rule reactive power requirements for
newly interconnecting non-synchronous generators, as discussed in
greater detail below. We find the continued exemptions from the
reactive power requirement in the pro forma LGIA and the pro forma SGIA
for newly interconnecting wind generators to be unjust, unreasonable,
and unduly discriminatory and preferential.
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    \49\ On April 15, 2016, after issuing the NOPR and receiving
comments, the Commission approved ISO-NE's proposal to eliminate the
exemptions for wind generators from the reactive power requirement.
ISO New England Inc., 155 FERC ] 61,031 (2016). The Commission
previously accepted PJM's similar proposal. See PJM Interconnection,
L.L.C., 151 FERC ] 61,097 (2015).
---------------------------------------------------------------------------

    22. Non-synchronous generators other than wind generators currently
are not exempt from the reactive power requirement in the pro forma
LGIA and pro forma SGIA,\50\ although the Commission has treated other
types of non-synchronous generators in the same manner as wind
generators on a case-by-case basis.\51\ We proposed in the NOPR \52\ to
apply the Final Rule to all non-synchronous generators, and received no
adverse comments. This Final Rule will apply to all newly

interconnecting non-synchronous generators that have not yet executed a
Facilities Study Agreement as of the effective date of this Final Rule.
---------------------------------------------------------------------------

    \50\ Order Nos. 2003, 661, and 2006 explicitly exempted only
wind generators from the reactive power requirement. See Order No.
661, FERC Stats. & Regs. ] 31,186 at P 106 (``While we are not
applying the Final Rule Appendix G to non-wind technologies, we may
do this in the future, or take other generic or case-specific
actions, if another technology emerges for which a different set of
interconnection requirements is necessary.'').
    \51\ See Nevada Power Co., 130 FERC ] 61,147, at P 27 (2010)
(``[C]onsistent with our requirements for all wind facilities in
Order No. 661, the Commission will require based on the facts of
this case, that, before Nevada Power may require El Dorado's solar
facility to be capable of providing reactive power, Nevada Power
must show, through a system impact study, that such a requirement is
necessary to ensure the safety or reliability of the grid.''); id. P
24 (``We agree . . . that this is not the appropriate proceeding in
which to make a generic determination on whether to extend to solar
generators wind power's exemption from the requirement to provide
reactive power support.'').
    \52\ E.g., NOPR, FERC Stats. & Regs. ] 32,712 at P 17.
---------------------------------------------------------------------------

    23. Older wind turbine generators consumed reactive power, but,
because they did not use inverters like other non-synchronous
generators, they lacked the capability to produce and control reactive
power without the use of costly equipment.\53\ Based on technological
improvements since the Commission created the exemptions for wind
generators, requiring newly interconnecting wind generators to provide
reactive power is not the obstacle to the development of wind
generation that it was when the Commission issued Order Nos. 2003, 661,
and 2006.\54\ In particular, the wind turbines being installed today
are generally Type III and Type IV inverter-based turbines,\55\ which
are capable of producing and controlling dynamic reactive power, which
was not the case in 2005 when the Commission exempted wind generators
from the reactive power requirement in Order No. 661.\56\
---------------------------------------------------------------------------

    \53\ Order No. 661, FERC Stats. & Regs. ] 31,186 at PP 50-51.
    \54\ As discussed above, in exempting wind generators from the
reactive power requirement, the Commission sought to avoid creating
an obstacle to the development of wind generation. For example, in
Order No. 661, the Commission was concerned with ``remov[ing]
unnecessary obstacles to the increased growth of wind generation.''
Id. P 50.
    \55\ A Type III wind turbine is a non-synchronous wound-rotor
generator that has a three phase AC field applied to the rotor from
a partially-rated power-electronics converter. A Type IV wind
turbine is an AC generator in which the stator windings are
connected to the power system through a fully-rated power-
electronics converter. Both Type III and Type IV wind turbines have
inherent reactive power capabilities.
    \56\ Id. PP 50-51.
---------------------------------------------------------------------------

    24. We therefore conclude that improvements in technology, and the
corresponding declining costs for newly interconnecting wind generators
to provide reactive power, make it unjust, unreasonable, and unduly
discriminatory and preferential to exempt such non-synchronous
generators from the reactive power requirement when other types of
generators are not exempt. Further, requiring all newly interconnecting
non-synchronous generators to design their Generating Facilities to
maintain the required power factor range ensures they are subject to
comparable requirements as other generators.\57\
---------------------------------------------------------------------------

    \57\ See, e.g., Sw. Power Pool, Inc., 119 FERC ] 61,199, at P 29
(``Providing reactive power within the [standard power factor range]
is an obligation of a generator, and is as much an obligation of a
generator as, for example, operating in accordance with Good Utility
Practice.''), order on reh'g, 121 FERC ] 61,196 (2007).
---------------------------------------------------------------------------

    25. The Commission also is concerned that, as the penetration of
non-synchronous generators continues to grow, exempting a class of
generators from providing reactive power could create reliability
concerns, especially if those generators represent a substantial amount
of total generation in a particular region, or if many of the resources
that currently provide reactive power are retired from operation. In
addition, as noted above, maintaining the exemptions for wind
generators places an undue burden on synchronous generators to supply
reactive power without a reasonable technological or cost-based
distinction between synchronous and non-synchronous generators.\58\
Therefore, the Commission concludes that the continued exemptions from
the reactive power requirement for newly interconnecting wind
generators are unjust, unreasonable, and unduly discriminatory and
preferential. For these reasons, the Commission revises the pro forma
LGIA, Appendix G to the pro forma LGIA, and the pro forma SGIA to
eliminate the exemptions for wind generators from the reactive power
requirement.\59\
---------------------------------------------------------------------------

    \58\ See PJM Interconnection, L.L.C., 151 FERC ] 61,097 at P 7;
Payment for Reactive Power, Commission Staff Report, Docket No.
AD14-7, app. 1 (Apr. 22, 2014).
    \59\ The Final Rule does not revise any regulatory text. The
Final Rule revises the pro forma LGIA and pro forma SGIA in
accordance with section 35.28(f)(1) of the Commission's regulations,
which provides: ``Every public utility that is required to have on
file a non-discriminatory open access transmission tariff under this
section must amend such tariff by adding the standard
interconnection procedures and agreement and the standard small
generator interconnection procedures and agreement required by
Commission rulemaking proceedings promulgating and amending such
interconnection procedures and agreements, or such other
interconnection procedures and agreements as may be required by
Commission rulemaking proceedings promulgating and amending the
standard interconnection procedures and agreement and the standard
small generator interconnection procedures and agreement.'' 18 CFR
35.28(f)(1) (2015). See Integration of Variable Energy Resources,
Order No. 764, FERC Stats. & Regs. ] 31,331, at PP 343-345 (adopting
this regulatory text effective September 11, 2012), order on reh'g
and clarification, Order No. 764-A, 141 FERC ] 61,232 (2012), order
on clarification and reh'g, Order No. 764-B, 144 FERC ] 61,222
(2013). While not revising regulatory text, the Commission is using
the process provided for rulemaking proceedings, as defined in 5
U.S.C. 551(4)-(5) (2012).
---------------------------------------------------------------------------

B. Power Factor Range, Point of Measurement, and Dynamic Reactive Power
Capability Requirements

1. NOPR Proposal
    26. The Commission proposed in the NOPR as part of the reactive
power requirements for non-synchronous generators to require all newly
interconnecting non-synchronous generators to design their Generating
Facilities to maintain a composite power delivery at continuous rated
power output at the Point of Interconnection at a power factor within
the range of 0.95 leading to 0.95 lagging.\60\ Further, the Commission
proposed to require that the reactive power capability installed by
non-synchronous generators be dynamic.\61\
---------------------------------------------------------------------------

    \60\ NOPR, FERC Stats. & Regs. ] 32,712 at P 16.
    \61\ Id. P 14.
---------------------------------------------------------------------------

2. Comments
    27. Several commenters support the Commission's proposal to measure
the reactive power requirement at the Point of Interconnection.\62\
Commenters note that measuring the reactive power requirement at the
Point of Interconnection is consistent with the current requirement in
the pro forma LGIA for measuring the reactive power requirement where a
transmission provider's System Impact Study shows the need for reactive
power from an interconnecting wind generator.\63\ Midwest Energy argues
that transmission providers are only concerned with power factor and
voltage at the Point of Interconnection.\64\ CAISO asserts that
measuring the reactive power requirement at the Point of
Interconnection gives interconnection customers flexibility in how they
design their generator projects to meet the reactive power
requirement.\65\ CAISO states that inverter manufacturers informed
CAISO that current inverters used by most non-synchronous generators
are capable of producing 0.95 leading and 0.95 lagging reactive power
at full real power output at the generator's Point of
Interconnection.\66\ NextEra acknowledges that the common approach
within ISOs/RTOs is to measure reactive power at the Point of
Interconnection, but suggests that if reactive power is measured at the
Point of Interconnection, then the Commission should maintain the
flexibility for non-synchronous generators to meet that requirement
using static reactive power devices if agreed to by the transmission
provider, as provided for in Appendix G to the pro forma LGIA.\67\
NaturEner asserts that, depending on the length of the collector
system, transformer substation characteristics, and the length of the

Interconnection Customer Interconnection Facilities from the generator
terminals to the Point of Interconnection, it may not be possible for
non-synchronous generators to meet the 0.95 leading to 0.95 lagging
reactive power requirement at the Point of Interconnection without
installing additional equipment.\68\
---------------------------------------------------------------------------

    \62\ CAISO Comments at 6; EEI Comments at 8; Indicated NYTOs
Comments at 4; Midwest Energy Comments at 9; NERC Comments at 9.
    \63\ CAISO Comments at 6; EEI Comments at 7.
    \64\ Midwest Energy Comments at 9.
    \65\ CAISO Comments at 6.
    \66\ Id. at 3.
    \67\ NextEra Comments at 10-11.
    \68\ NaturEner Comments at 3.
---------------------------------------------------------------------------

    28. On the other hand, some commenters disagree with the NOPR
proposal and argue that the reactive power requirement should be
measured at the generator terminals rather than at the Point of
Interconnection for non-synchronous generators. They assert that
measuring at the Point of Interconnection would result in significantly
higher costs for non-synchronous generators than measuring at the
generator terminals. They also argue that, because of the often
significant distance between non-synchronous generator terminals and
the Point of Interconnection, measuring the reactive power requirement
for non-synchronous generators at the generator terminals would result
in a reactive power requirement that is comparable to measuring at the
Point of Interconnection for synchronous generators.\69\ AWEA and LSA
contend that synchronous and non-synchronous generators are not
similarly situated due to the fact that non-synchronous generators are
typically located geographically and electrically farther from the
Point of Interconnection than synchronous generators.\70\ Therefore,
AWEA and LSA request that non-synchronous generators have the option to
meet the reactive power requirement at the generator terminals, even if
the requirement at that point is more stringent (e.g., 0.95 leading to
0.90 lagging) than at the Point of Interconnection.\71\ AWEA and LSA
note that they supported the independent entity variation from Order
No. 661 in PJM in part because the reactive power requirement is
measured at the generator terminals.\72\
---------------------------------------------------------------------------

    \69\ AWEA and LSA Comments at 12; Joint NYTOs Comments at 3-4;
Public Interest Organizations Comments at 2; Union of Concerned
Scientists Comments at 3.
    \70\ AWEA and LSA Comments at 12.
    \71\ Id. at 10, 12-13.
    \72\ Id. at 10-11.
---------------------------------------------------------------------------

    29. Some commenters argue that, due to the configuration of typical
non-synchronous generators, additional investment is required to
supplement the inherent dynamic reactive power capability of the
generators to meet the reactive power requirement at the Point of
Interconnection; therefore, they assert that requiring measurement at
the Point of Interconnection would reset the costs for non-synchronous
generators to a level higher than that which the Commission considered
in approving PJM's independent entity variation.\73\ In addition to
equipment investment, AWEA and LSA contend that, in many situations,
providing excess reactive power at the generator terminals to meet the
reactive power requirement at the Point of Interconnection would result
in a large decrease in real power output, and accompanying lost
opportunity costs and lost zero-emission, zero-fuel cost energy.\74\
Similarly, NaturEner argues that the proposed power factor range of
0.95 leading to 0.95 lagging is only reasonable if the reactive power
requirement is measured at the generator terminals.\75\ NaturEner
contends that measuring the reactive power requirement at the generator
terminals will result in sufficient voltage control at the Point of
Interconnection.\76\ Alternatively, NaturEner also suggests that it
would be reasonable to require a power factor range of 0.95 leading to
0.95 lagging at the generator substation.\77\ Finally, NaturEner argues
that any additional reactive power needs could be determined in a
System Impact Study.\78\
---------------------------------------------------------------------------

    \73\ AWEA and LSA Comments at 10-12; NextEra Comments at 9;
Union of Concerned Scientists Comments at 3-4.
    \74\ AWEA and LSA Comments at 11.
    \75\ NaturEner Comments at 3.
    \76\ Id. at 3-4.
    \77\ Id. at 3.
    \78\ Id. at 4; see also Midwest Energy Comments at 10.
---------------------------------------------------------------------------

    30. While CAISO allows synchronous generators to provide reactive
power at the generator terminals, CAISO does not support providing this
option to non-synchronous generators. CAISO argues that measuring the
reactive power requirement at the generator terminals is inappropriate
for non-synchronous generators because non-synchronous generators often
use multiple transformers, collection circuits, and substations to
transmit real power across lengthy Interconnection Customer
Interconnection Facilities from the generator terminal to the Point of
Interconnection, reducing the amount of reactive power that reaches the
transmission system. In contrast, CAISO explains that the configuration
of synchronous generators typically involves a single transformer and
short Interconnection Customer Interconnection Facilities from the
generator terminal to the Point of Interconnection, making measuring
the reactive power requirement at the generator terminals for
synchronous generators appropriate for ensuring that sufficient
reactive power is provided to the transmission system.\79\
---------------------------------------------------------------------------

    \79\ CAISO Comments at 6-7.
---------------------------------------------------------------------------

    31. As to the Commission's proposal to require fully dynamic
reactive power capability, commenters in support argue that requiring
dynamic reactive power capability allows generators to operate across a
broader range of operating conditions than allowing static reactive
power devices.\80\ ISO-NE asserts that requiring fully dynamic reactive
power capability is consistent with the historic requirement that
synchronous generators provide dynamic reactive power.\81\ ISO-NE
contends that generators are more effective at providing dynamic
reactive power compared to transmission infrastructure.\82\
---------------------------------------------------------------------------

    \80\ EEI Comments at 8; ISO-NE Comments at 8.
    \81\ ISO-NE Comments at 8.
    \82\ Id. at 9.
---------------------------------------------------------------------------

    32. Conversely, other commenters disagree with the proposal to
require fully dynamic reactive power capability. SDG&E contends that
such a requirement is not necessary and that allowing non-synchronous
generators to use static reactive power devices to meet the reactive
power requirement will provide flexibility to generator developers and
keep costs at a reasonable level.\83\ SDG&E suggests that the dynamic
reactive power capability requirement only be for 0.985 leading to
0.985 lagging reactive power capability.\84\ Other commenters assert
that the existing pro forma LGIA and pro forma SGIA neither define
``dynamic'' reactive power capability, nor specify a mix of static
versus dynamic reactive power capability that a generator must
maintain, and that the Commission should not specify such a mix in this
proceeding.\85\ Rather, AWEA and LSA argue that it would be
discriminatory to require non-synchronous generators to maintain fully
dynamic reactive power capability because their configuration results
in significant loss of dynamic reactive power from the generator
terminal to the Point of Interconnection. Instead, AWEA and LSA argue
that static reactive power devices are necessary and effective to
supplement the dynamic reactive power capability of the generator to
provide reactive power at the Point of Interconnection.\86\
---------------------------------------------------------------------------

    \83\ SDG&E Comments at 3-4.
    \84\ Id. at 4.
    \85\ AWEA and LSA Comments at 8; EEI Comments at 8; Midwest
Energy Comments at 5; NextEra Comments at 6.
    \86\ AWEA and LSA Comments at 9; see also Midwest Energy
Comments at 6.
---------------------------------------------------------------------------

    33. NextEra argues that if the proposed reactive power requirement
is

for fully dynamic reactive power capability, then measuring the
requirement at the generator terminals for non-synchronous generators
is required to ensure comparable treatment to synchronous
generators.\87\ NextEra contends that the cost of providing reactive
power is manageable at the Point of Interconnection if the flexibility
provided in section 9.6.1 of the pro forma LGIA is maintained and the
reactive power requirement can be met with static reactive power
devices, but that the requirement could be cost-prohibitive if non-
synchronous generators are required to install dynamic reactive power
devices.\88\ Commenters request that the Commission clarify that it did
not intend to specify that a non-synchronous generator must meet the
reactive power requirement with only dynamic reactive power
capability.\89\ Specifically, NextEra argues that the Commission should
not remove paragraph A.ii of Appendix G to the pro forma LGIA because
it provides important provisions regarding the types of devices that
can be used to meet the reactive power requirement.\90\
---------------------------------------------------------------------------

    \87\ NextEra Comments at 9-10.
    \88\ Id. at 9; NextEra Supplemental Comments at 4.
    \89\ AWEA and LSA Comments at 9; Midwest Energy Comments at 6;
NextEra Comments at 7.
    \90\ NextEra Comments at 8.
---------------------------------------------------------------------------

3. Commission Determination
    34. We will require the reactive power requirements in the pro
forma LGIA and pro forma SGIA for non-synchronous generators to be
measured at the high-side of the generator substation. Newly
interconnecting non-synchronous generators will be required to design
their Generating Facilities to maintain a composite power delivery at
continuous rated power output at the high-side of the generator
substation. At that point, the non-synchronous generator must provide
dynamic reactive power within the power factor range of 0.95 leading to
0.95 lagging, unless the transmission provider has established a
different power factor range that applies to all non-synchronous
generators in the transmission provider's control area on a comparable
basis.\91\ To ensure there is no undue discrimination, we clarify that
the ability of a transmission provider to establish different
requirements is limited to establishing a different power factor range,
and not to the other reactive power requirements.
---------------------------------------------------------------------------

    \91\ Under these provisions, transmission providers may
establish a different power factor range for synchronous or non-
synchronous generators as long as the requirement applies to all
generators in each class on a comparable basis. See Order No. 2003,
FERC Stats. & Regs. ] 31,146 at P 542 (``We adopt the power factor
requirement of 0.95 leading to 0.95 lagging because it is a common
practice in some NERC regions. If a Transmission Provider wants to
adopt a different power factor requirement, Final Rule LGIA Article
9.6.1 permits it to do so as long as the power factor requirement
applies to all generators on a comparable basis.'').
---------------------------------------------------------------------------

    35. Non-synchronous generators may meet the dynamic reactive power
requirement by utilizing a combination of the inherent dynamic reactive
power capability of the inverter, dynamic reactive power devices (e.g.,
Static VAR Compensators), and static reactive power devices (e.g.,
capacitors) to make up for losses. In developing this reactive power
requirement for non-synchronous generators, the Commission is balancing
the costs to newly-interconnecting non-synchronous generators of
providing reactive power with the benefits to the transmission system
of having another source of reactive power.
    36. Although the Commission in the NOPR considered measuring the
reactive power requirements for non-synchronous generators at the Point
of Interconnection, we are persuaded by commenters' arguments that
requiring fully dynamic reactive power capability at the Point of
Interconnection may result in significantly increased costs for non-
synchronous generators in meeting the reactive power requirements.\92\
These added costs will ultimately be borne by customers, whether
through reactive power payments in regions that compensate for reactive
power capability, or through elevated prices for capacity or energy in
regions that do not compensate for reactive power capability. In
contrast, measuring the reactive power requirements at the high-side of
the generator substation, rather than at the Point of Interconnection,
will be less expensive for non-synchronous generators because a greater
amount of the inherent dynamic reactive power capability of the
inverters associated with non-synchronous generators will be available
at the high-side of the generator substation than at the Point of
Interconnection.
---------------------------------------------------------------------------

    \92\ See, e.g., NaturEner Comments at 3 (``Based on the above
technological and cost-based reasons, NaturEner believes the +/-
0.95 requirement is reasonable if the Proposed Rule is refined to
measure the requirement at the wind turbine terminals (or as an
alternative at the wind farm substation), and not at the Point of
Interconnection.'').
---------------------------------------------------------------------------

    37. In adopting the Point of Interconnection as the point of
measurement for large wind plants in Order No. 661, the Commission
balanced the case-by-case reactive power requirement with the needs of
the transmission system.\93\ Here, we remove the case-by-case approach,
and require that all newly interconnecting non-synchronous generators
provide reactive power as a condition of interconnection. By requiring
all newly interconnecting non-synchronous generators to provide
reactive power, we are increasing the amount of reactive power
available to meet transmission system needs, and, at the same time,
balancing the costs to non-synchronous generators of providing that
reactive power by measuring the requirements at the high-side of the
generator substation.
---------------------------------------------------------------------------

    \93\ Order No. 661, FERC Stats. & Regs. ] 31,186 at P 59.
---------------------------------------------------------------------------

    38. Similarly, in Order No. 661, the Commission was not convinced
that dynamic reactive power capability was needed from every wind
generator, and so adopted the case-by-case approach.\94\ However, with
the increasing penetration of wind generation and retirement of
traditional synchronous generators, which provided dynamic reactive
power capability to the transmission system, we now find it is
necessary to require dynamic reactive power capability from all new
generators. The dynamic reactive power capability may be achieved at
the high-side of the generator substation at lower cost compared to
dynamic reactive power at the Point of Interconnection by systems using
a combination of dynamic capability from the inverters plus static
reactive power devices to make up for losses. Therefore, this Final
Rule gives non-synchronous generators the flexibility to use static
reactive power devices to make up for losses that occur between the
inverters and the high-side of the generator substation, so long as the
generators maintain 0.95 leading to 0.95 lagging dynamic reactive power
capability at the high-side of the generator substation.
---------------------------------------------------------------------------

    \94\ Id. P 66.
---------------------------------------------------------------------------

    39. While measuring the reactive power requirements at the Point of
Interconnection would provide the greatest amount of reactive power to
the transmission system, the costs associated with providing that level
of reactive power do not justify the added benefit to the transmission
system.\95\ In

fact, one of the reasons for undertaking this rulemaking proceeding was
the Commission recognized that the cost of providing reactive power may
no longer present an obstacle to the development of wind generation. On
the other hand, measuring the reactive power requirements at the
Generating Facilities would likely result in very little reactive power
being provided to the transmission system but would be relatively
inexpensive to implement for the non-synchronous generator. The high-
side of the generator substation represents a middle ground. It is
located beyond the low voltage collector systems where significant
reactive power losses occur, resulting in more reactive power provided
to the transmission system than a requirement at the Generating
Facilities, while being less expensive to implement than a requirement
at the Point of Interconnection. We find that measuring the reactive
power requirements at the high-side of the generator substation
reasonably balances the need for reactive power for the transmission
system with the costs to non-synchronous generators of providing
reactive power.
---------------------------------------------------------------------------

    \95\ See ISO New England Inc., Tariff Filing, Transmittal
Letter, Docket No. ER16-946-000, at 17 (filed Feb. 16, 2016)
(``[T]he proposed requirements provide for the reactive capability
to be measured at the high-side of the station transformer rather
than at the Point of Interconnection to account for the long
generator leads through which many wind generators are
interconnecting to the New England system--as long as approximately
50-80 miles between the generator collector transformer and the
Point of Interconnection. There is no benefit to the generator, and
little benefit to the system, to force the generator to provide
voltage support all the way to a Point of Interconnection that is
very remote, and it is not necessarily even achievable to
effectively transfer such quantities of reactive power over such
distances.''); see also NextEra Supplemental Comments at 3-4.
---------------------------------------------------------------------------

    40. We find establishing dynamic reactive power requirements at the
high-side of the generator substation preferable to the suggestion in
the comments that, at relative equal cost, reactive power could be
provided at the Point of Interconnection as long as the inherent
dynamic reactive power produced by the generator can be enhanced with
static reactive power capability. By establishing dynamic reactive
power requirements at the high-side of the generator substation, non-
synchronous generators will be able to provide faster responding and
more continuously variable reactive power capability than if they
provide static reactive power capability at the Point of
Interconnection. In addition, requiring dynamic reactive power
capability allows generators to operate across a broader range of
operating conditions than allowing static reactive power
enhancements.\96\
---------------------------------------------------------------------------

    \96\ EEI Comments at 8; ISO-NE Comments at 8; see also ISO New
England Inc., Tariff Filing, Transmittal Letter, Docket No. ER16-
946-000, at 19 (filed Feb. 16, 2016) (``[I]n New England's
experience, the implementation of the reactive power exemption has
disadvantaged wind generators seeking to interconnect, putting
burdens on the study process not experienced for conventional
generators and compromising their ability to operate through various
system conditions once interconnected, a situation that leads system
operators to curtail wind farm output for system reliability
reasons.'').
---------------------------------------------------------------------------

C. Real Power Output Level

1. NOPR Proposal
    41. The NOPR proposed to require newly interconnecting non-
synchronous generators to design their Generating Facilities to
maintain the required power factor range only when the generator's real
power output exceeds 10 percent of its nameplate capacity.\97\ The
proposed pro forma LGIA would state: ``Non-synchronous generators shall
only be required to maintain the above power factor when their output
is above 10 percent of the Generating Facility Capacity.'' \98\ The
Commission stated its understanding that the inverters used by non-
synchronous generators were not capable of producing reactive power
when operating below 10 percent of nameplate capacity.\99\
---------------------------------------------------------------------------

    \97\ NOPR, FERC Stats. & Regs. ] 32,712 at P 15 (citing Order
No. 661, FERC Stats. & Regs. ] 31,186 at P 46).
    \98\ Id. P 16. The Commission proposed similar revisions to the
pro forma SGIA: ``Non-synchronous generators shall only be required
to maintain the above power factor when their output is above 10
percent of the generator nameplate capacity.'' Id.
    \99\ Id. P 15 (citing Order No. 661, FERC Stats. & Regs. ]
31,186 at P 46).
---------------------------------------------------------------------------

2. Comments
    42. Several commenters support the 10 percent exemption given
current inverter technology.\100\ EEI notes that the Commission uses
both ``generator nameplate capacity'' and ``Generator Facility
Capacity'' in reference to the 10 percent exemption, and requests that
the Commission clarify that the correct term is ``Generator Facility
Capacity.'' \101\ The ISO/RTO Council states that its ISO/RTO members
do not uniformly agree that the 10 percent exemption is appropriate and
want to be able to establish rules based on their individual
situations.\102\ Similarly, the Indicated NYTOs support the Commission
allowing regional variation on the 10 percent exemption within a
reasonable range based on existing regional requirements (up to an
exemption for below 25 percent real power output).\103\
---------------------------------------------------------------------------

    \100\ EEI Comments at 9; NaturEner Comments at 4; NERC Comments
at 10; SCE Comments at 3; NextEra Comments at 11.
    \101\ EEI Comments at 9-10.
    \102\ ISO/RTO Council Comments at 3.
    \103\ Indicated NYTOs Comments at 4.
---------------------------------------------------------------------------

    43. AWEA and LSA and the Joint NYTOs argue that the 10 percent
exemption should be increased to 25 percent, consistent with what the
Commission approved in PJM.\104\ AWEA and LSA assert that the ability
of non-synchronous generators to provide reactive power can be reduced
when individual generators within the plant are not producing real
power, such that the 10 percent operating threshold is
insufficient.\105\
---------------------------------------------------------------------------

    \104\ AWEA and LSA Comments at 13; Joint NYTOs Comments at 3.
    \105\ AWEA and LSA Comments at 13.
---------------------------------------------------------------------------

    44. Other commenters oppose the 10 percent exemption, arguing that
it is not necessary given the technology available to non-synchronous
generators.\106\ These commenters contend that some inverters can
produce reactive power at zero real power output.\107\ Additionally,
ISO-NE argues that requiring non-synchronous generators to be capable
of providing reactive power at all output levels will further
technological development and advancement.\108\ ISO-NE asserts that if
the Commission adopts the 10 percent exemption, it should limit the
exemption to only wind generators because non-synchronous generators
other than wind generators have not had an exemption from the reactive
power requirement and it is inappropriate to create a new exemption for
these generators.\109\
---------------------------------------------------------------------------

    \106\ ISO-NE Comments at 13; Midwest Energy Comments at 9; MISO
Comments at 3.
    \107\ ISO-NE Comments at 14; NaturEner Comments at 4.
    \108\ ISO-NE Comments at 14.
    \109\ Id. at 14-15.
---------------------------------------------------------------------------

    45. MISO requests that non-synchronous generators be required to
produce reactive power at low and zero-voltage conditions to ensure the
robustness of the transmission system.\110\ Similarly, Midwest Energy
argues that the Commission has not fully considered the high levels of
reactive power generated by lightly loaded interconnection facilities
associated with non-synchronous generators.\111\ Midwest Energy
explains that its largest events of excess reactive power production
have occurred when non-synchronous generators are producing less than
10 percent of their nameplate capacity. Midwest Energy asserts that it
may be necessary for non-synchronous generators to install static
inductors to absorb reactive power in these situations. Therefore,
according to Midwest Energy, requiring non-synchronous generators to
provide reactive power at all levels of real power output would prevent
potential high voltage reliability concerns.\112\
---------------------------------------------------------------------------

    \110\ MISO Comments at 3.
    \111\ Midwest Energy Comments at 2-3.
    \112\ Id. at 8.
---------------------------------------------------------------------------

    46. AWEA and LSA request clarification regarding the proposal in
the NOPR that non-synchronous generators be required to maintain a
``composite power delivery at continuous rated power output at the
Point of Interconnection at a power

factor within the range of 0.95 leading to 0.95 lagging.'' \113\ AWEA
and LSA argue that this language can be interpreted as either requiring
non-synchronous generators to provide reactive power proportionate to
the actual output of the generator, or to provide reactive power within
the full power factor range based on the maximum output of the
generator no matter the actual output of the generator.\114\ AWEA and
LSA contend that the first interpretation--a reactive power requirement
proportionate to actual output--is the most reasonable
interpretation.\115\ NERC asserts that the second interpretation is
correct.\116\
---------------------------------------------------------------------------

    \113\ AWEA and LSA Comments at 5; NOPR, FERC Stats. & Regs. ]
32,712 at P 16.
    \114\ AWEA and LSA Comments at 5-7 (explaining that the first
interpretation will result in a triangular PQ curve, while the
latter will result in a rectangular PQ curve); see also NERC
Comments at 9.
    \115\ AWEA and LSA Comments at 6.
    \116\ NERC Comments at 9.
---------------------------------------------------------------------------

3. Commission Determination
    47. We will not adopt the 10 percent exemption proposed in the NOPR
in this Final Rule and will instead require all newly interconnecting
non-synchronous generators to design their Generating Facilities to
meet the reactive power requirements at all levels of real power
output, as is already required of synchronous generators.\117\ Although
several commenters support the 10 percent exemption,\118\ and some
commenters support increasing that threshold to 25 percent,\119\ we
find, on balance, that requiring non-synchronous generators to provide
reactive power at all levels of real power output appropriately
recognizes the capabilities of existing non-synchronous generation
technologies and creates requirements that are comparable to the
existing requirement for synchronous generators. Additionally, by
maintaining the reactive power requirement at all output levels, non-
synchronous generators will mitigate potential over-voltage concerns on
lightly loaded Interconnection Customer Interconnection Facilities of a
non-synchronous generator when operating at low real power output.
---------------------------------------------------------------------------

    \117\ Section 9.6.1 of the pro forma LGIA and section 1.8.1 of
the pro forma SGIA.
    \118\ EEI Comments at 9; NaturEner Comments at 4; NERC Comments
at 10; SCE Comments at 3; NextEra Comments at 11.
    \119\ AWEA and LSA Comments at 13; Joint NYTOs Comments at 3.
---------------------------------------------------------------------------

    48. While some commenters argue that technical limitations exist
that prevent non-synchronous generators from providing adequate
reactive power at lower levels of real power output, and note that the
Commission approved a 25 percent exemption in PJM, several commenters
indicate that non-synchronous generators are capable of providing
reactive power at all levels of real power output.\120\ Although the
Commission approved a 25 percent exemption in PJM, that was pursuant to
a section 205 filing with broad stakeholder support. We now act on a
more comprehensive record and take action generically to apply to all
transmission providers.\121\ Moreover, while not all non-synchronous
generators are currently designed to maintain reactive power capability
at all levels of real power output, modern inverters can be designed to
provide this capability. We agree with ISO-NE's comments that imposing
this requirement will help encourage further technological development,
such that the bulk power system will ultimately receive higher quality
and more reliable reactive power service from all generators.
---------------------------------------------------------------------------

    \120\ ISO-NE Comments at 13; Midwest Energy Comments at 9; MISO
Comments at 3.
    \121\ As discussed below, to the extent an ISO or RTO seeks to
maintain an existing exemption, it can include such a request in its
compliance filing as an independent entity variation and the
Commission will consider the request at that time based on the
arguments provided.
---------------------------------------------------------------------------

    49. As for AWEA and LSA's and NERC's requested clarifications, we
clarify that the amount of reactive power required from non-synchronous
generators should be proportionate to the actual output of the
generator, such that a 100 MW generator would be required to provide
approximately 33 MVAR of reactive power when operating at maximum
output (100 MW), and approximately 3.3 MVAR when operating at 10 MW,
and so on. This addresses some commenters' concerns that sometimes not
all non-synchronous generators at a particular location are operating
at a given time (e.g., only 50 of 100 wind turbines are actually
spinning or \1/3\ of solar panels are covered by clouds), without
creating an unnecessary exemption for non-synchronous generators.

D. Compensation

1. NOPR Proposal
    50. The Commission stated in the NOPR that non-synchronous
generators are eligible for the same payments for reactive power as all
other generators, consistent with the compensation provisions of the
pro forma LGIA and pro forma SGIA.\122\ The Commission proposed that
any compensation for such non-synchronous generators would be based on
the cost of providing reactive power, but noted that the cost to a wind
generator of providing reactive power may not be easily estimated using
existing methods that are applied to synchronous generators.\123\
Therefore, the Commission sought comment on whether these existing
methods are appropriate for wind generators and, if not, what
alternatives would be appropriate.\124\
---------------------------------------------------------------------------

    \122\ NOPR, FERC Stats. & Regs. ] 32,712 at P 12 (citing Order
No. 2003-A, FERC Stats. & Regs. ] 31,160 at P 416); see also
sections 9.6.3 and 11.6 of the pro forma LGIA and sections 1.8.2 and
1.8.3 of the pro forma SGIA.
    \123\ NOPR, FERC Stats. & Regs. ] 32,712 at P 12 (citing Payment
for Reactive Power, Commission Staff Report, Docket No. AD14-7, app.
2 (Apr. 22, 2014)).
    \124\ Id. P 18 (citation omitted).
---------------------------------------------------------------------------

2. Comments
    51. Several commenters support the Commission's proposal to require
transmission providers to compensate non-synchronous generators for
reactive power on a comparable basis as synchronous generators,
provided that non-synchronous generators provide comparable reactive
power service.\125\ Other commenters seek clarification, or ask that
the Commission outline principles for compensation.\126\ Other
commenters argue that the Commission should not mandate a uniform
approach to reactive power compensation.\127\ Finally, while some
commenters ask that the Commission address the issue of reactive power
compensation, they assert that addressing reactive power compensation
in this rulemaking is outside the scope of the proceeding.\128\
---------------------------------------------------------------------------

    \125\ CAISO Comments at 9; EEI Comments at 10; ISO/RTO Council
Comments at 7; MISO Comments at 3-4.
    \126\ ISO/RTO Council Comments at 7; SDG&E Comments at 4-5; AWEA
and LSA Comments at 2-5; Public Interest Organizations Comments at
2-3; NextEra Comments at 14.
    \127\ Indicated NYTOs Comments at 4; ISO/RTO Council Comments at
7; SDG&E Comments at 4; CAISO Comments at 8-9; Joint NYTOs Comments
at 4; SCE Comments at 3; Six Cities Comments at 2, 5-6.
    \128\ EPSA Comments at 6; NextEra Comments at 14.
---------------------------------------------------------------------------

3. Commission Determination
    52. We will not change the Commission's existing policies on
compensation for reactive power. Sections 9.6.3 and 11.6 of the
currently-effective pro forma LGIA and sections 1.8.2 and 1.8.3 of the
currently-effective pro forma SGIA provide that the transmission
provider must compensate the interconnecting generator for reactive
power service when the transmission provider requests that the
interconnecting generator operate outside of the specified reactive
power range. These sections also provide that if the transmission
provider

compensates its own or affiliated generators for reactive power service
within the specified reactive power range, it must compensate all
generators for this service, and at what rate such compensation should
be provided. While the Commission asked for comments on principles for
compensating non-synchronous generators for reactive power, the
comments, aside from noting that the current AEP methodology \129\ does
not translate to non-synchronous generation, did not provide a
sufficient record for determining a new method. Therefore, any non-
synchronous generator seeking reactive power compensation would need to
propose a method for calculating that compensation as part of its
filing. We note, however, that Commission staff is convening a workshop
to explore reactive power compensation issues in the markets operated
by ISOs/RTOs on June 30, 2016.\130\
---------------------------------------------------------------------------

    \129\ See Am. Elec. Power Serv. Corp., Opinion No. 440, 88 FERC
] 61,141, at 61,456-57 (1999).
    \130\ See Reactive Supply Compensation in Markets Operated by
Regional Transmission Organizations and Independent System
Operators, Notice of Workshop, Docket No. AD16-17-000 (issued Mar.
17, 2016).
---------------------------------------------------------------------------

E. Application of the Final Rule

1. NOPR Proposal
    53. As a transition mechanism, the Commission proposed in the NOPR
to apply the reactive power requirements in this Final Rule to all
newly interconnecting non-synchronous generators that, as of the
effective date of this Final Rule, either: (1) Have not executed an
interconnection agreement; or (2) requested that an interconnection
agreement be filed unexecuted that is still pending before the
Commission. The Commission also proposed to apply the reactive power
requirements to all existing non-synchronous generators making upgrades
that require new interconnection requests after the effective date of
the Final Rule. The Commission stated that it did not believe it would
be reasonable or necessary to require all existing wind generators to
provide reactive power because not all such generators are capable of
providing reactive power without incurring substantial costs to install
new equipment. However, the Commission proposed to require existing
wind generators that make upgrades that require new interconnection
requests to conform to the new reactive power requirements.\131\
---------------------------------------------------------------------------

    \131\ NOPR, FERC Stats. & Regs. ] 32,712 at P 17.
---------------------------------------------------------------------------

2. Comments
    54. CAISO and MISO support the Commission's proposed application of
the new reactive power requirements to new and existing non-synchronous
generators.\132\ CAISO contends that interconnection customers should
be required to adhere to the conditions of interconnection at the time
they execute an interconnection agreement. CAISO states that, in its
own reactive power stakeholder initiative, it proposed to apply a new
reactive power requirement to its April 2016 interconnection queue
cluster and to all future clusters. CAISO explains that, depending on
the timing of the Final Rule, the new reactive power requirements would
apply to this same group of interconnecting generators because they
will not execute their interconnection agreements for at least one year
after the study process begins. CAISO states that applying reactive
power requirements to these interconnecting generators would ensure
these generators do not lean on existing generators to provide reactive
power.\133\
---------------------------------------------------------------------------

    \132\ CAISO Comments at 5-6; MISO Comments at 5-6.
    \133\ CAISO Comments at 5-6.
---------------------------------------------------------------------------

    55. In contrast, some commenters argue that the Commission should
not apply the new reactive power requirements to generators that have
begun or have already received their System Impact Study, depending on
the requirements of the Final Rule.\134\ AWEA and LSA contend that
applying the proposed reactive power requirements to non-synchronous
generators that have begun their System Impact Study, or that have been
in the interconnection queue for some period of time without starting
their System Impact Study, may result in sizable costs and fundamental
unfairness. AWEA and LSA argue that such non-synchronous generators may
not have been designed to meet the new reactive power requirements and,
therefore, may incur substantial equipment costs to meet those
requirements.\135\
---------------------------------------------------------------------------

    \134\ AWEA and LSA Comments at 14; NextEra Comments at 13.
    \135\ AWEA and LSA Comments at 14-15.
---------------------------------------------------------------------------

    56. NextEra argues that the proposed application of the Final Rule
to non-synchronous generators that have not yet executed an
interconnection agreement is unreasonable if the Commission requires
fully dynamic reactive power capability measured at the Point of
Interconnection.\136\ NextEra asserts that requiring fully dynamic
reactive power capability at the Point of Interconnection would be a
significant change to the status quo and would render some investments
made by non-synchronous generators that have already received the
results of their System Impact Study, but have not yet executed an
interconnection agreement, useless. According to NextEra, such a major
shift could also impose delays and additional costs related to the
redesign, purchase, and installation of additional equipment.\137\
NextEra contends that if the Commission allows for the use of static
reactive power devices to supplement the dynamic reactive power
capability of non-synchronous generators at the Point of
Interconnection, the Commission would merely be formalizing what is
already common practice, and, therefore, that the proposed application
of the Final Rule would be reasonable. However, if the Commission
requires fully dynamic reactive power capability at the Point of
Interconnection, NextEra asks that the Final Rule not apply to non-
synchronous generators that have received their System Impact
Study.\138\
---------------------------------------------------------------------------

    \136\ NextEra Comments at 11.
    \137\ Id. at 12-13.
    \138\ Id. at 12.
---------------------------------------------------------------------------

    57. Some commenters also oppose the Commission's proposal to apply
the reactive power requirements to existing non-synchronous generators
making upgrades that require new interconnection requests.\139\ AWEA
and LSA assert that most upgrades do not involve fundamental changes to
the original technology, or to the hardware, but instead simply involve
software upgrades.\140\ Lincoln argues that applying the new reactive
power requirements to wind generators making upgrades could result in
financial detriment to entities that have previously entered into
binding contracts to purchase wind generation by exposing those
entities to unforeseen expenses not contemplated when they entered into
the contracts.\141\ AWEA and LSA request that the new reactive power
requirements only apply to upgrades on a case-by-case basis, depending
on the outcome of the relevant interconnection study, and only to the
incremental capacity requested through the upgrade.\142\ AWEA and LSA
also request that the Commission clarify what constitutes a ``Material
change'' to a generator that would trigger a new interconnection
study.\143\
---------------------------------------------------------------------------

    \139\ AWEA and LSA Comments at 14; Lincoln Comments at 2.
    \140\ AWEA and LSA Comments at 14.
    \141\ Lincoln Comments at 2.
    \142\ AWEA and LSA Comments at 14-15.
    \143\ Id. at 15.
---------------------------------------------------------------------------

    58. SDG&E requests that the Commission clarify that the proposed

reactive power requirements would apply to all non-synchronous
generators and not to just wind generators.\144\
---------------------------------------------------------------------------

    \144\ SDG&E Comments at 1, 3.
---------------------------------------------------------------------------

3. Commission Determination
    59. We will apply the requirements of this Final Rule to all newly
interconnecting non-synchronous generators that have not yet executed a
Facilities Study Agreement \145\ as of the effective date of this Final
Rule. We will not apply the requirements of this Final Rule to existing
non-synchronous generators making upgrades to their Generating
Facilities that require new interconnection requests. However, such a
generator may be required to provide reactive power if a transmission
provider determines through that generator's System Impact Study that a
reactive power requirement is necessary to ensure safety or
reliability. The transition mechanism we establish in this Final Rule
allows non-synchronous generators currently in the process of
interconnecting to complete the interconnection process without
unreasonable delay or expense.
---------------------------------------------------------------------------

    \145\ The pro forma Large Generator Interconnection Procedures
contain a standard ``Interconnection Facilities Study Agreement'' as
Appendix 4. Similarly, the pro forma Small Generator Interconnection
Procedures contain a standard ``Facilities Study Agreement'' as
Attachment 8.
---------------------------------------------------------------------------

a. Newly Interconnecting Non-Synchronous Generators
    60. While the Commission proposed in the NOPR to apply the
requirements of the Final Rule to all newly interconnecting non-
synchronous generators that have not yet executed an interconnection
agreement as of the effective date of the Final Rule, or requested that
one be filed unexecuted that is still pending, we agree with AWEA and
LSA, and NextEra,\146\ that applying the Final Rule as proposed may
unduly burden non-synchronous generators that have completed their
System Impact Study. Such non-synchronous generators may have already
purchased equipment needed to interconnect prior to executing an
interconnection agreement (or requesting that one be filed unexecuted
that is still pending).\147\ We are especially concerned with applying
new reactive power requirements to non-synchronous generators that have
advanced in the interconnection process in light of our decision to
measure the reactive power requirements at the high-side of the
generator substation, rather than at the Point of Interconnection.
Because the Point of Interconnection has been the industry standard
under Appendix G to the pro forma LGIA, non-synchronous generators that
have completed their System Impact Study may have relied on that
standard in designing their Generating Facilities, thereby creating an
undue burden on such generators.\148\
---------------------------------------------------------------------------

    \146\ AWEA and LSA Comments at 14; NextEra Comments at 13.
    \147\ AWEA and LSA explain that many non-synchronous generators
will have already chosen their collector array cable and transformer
or inverter before receiving an interconnection agreement. Rather
than being able to choose equipment that could reduce reactive
losses, the only compliance option for non-synchronous generators
that are ``significantly advanced'' in the interconnection process
to meet the requirements of the Final Rule would be to install
potentially expensive reactive power devices. AWEA and LSA Comments
at 15.
    \148\ NextEra Comments at 12-13.
---------------------------------------------------------------------------

    61. To avoid these undue burdens, we will apply the requirements of
this Final Rule to all newly interconnecting non-synchronous generators
that have not yet executed a Facilities Study Agreement as of the
effective date of this Final Rule. Pursuant to the pro forma Large
Generator Interconnection Procedures and to the pro forma Small
Generator Interconnection Procedures, and simultaneous with the
delivery of the System Impact Study, the transmission provider provides
a draft Facilities Study Agreement to an interconnecting
generator.\149\ The executing of the Facilities Study Agreement
immediately follows the completion of the System Impact Study. The
execution of the Facilities Study Agreement, and the subsequent
completion of the Facilities Study, represents the time in the
interconnection process when the transmission provider and generator
developer agree to the general technical requirements that will be
needed for the generator to reliably interconnect to the transmission
system.\150\ This point in the interconnection process is early enough
in the development of a generation project such that the project
developer likely has not purchased equipment to interconnect their
project because they have not yet reached an agreement with the
transmission provider on the interconnection requirements of the
project, which occurs after the completion of the System Impact Study.
In choosing to apply the reactive power requirements of this Final Rule
to projects that have not executed a Facilities Study Agreement, the
Commission is ensuring that a majority of newly interconnecting non-
synchronous generators are subject to the requirements of this Final
Rule without subjecting projects to additional costs after the
interconnection requirements of the project have been established.\151\
Further, as discussed in the Commission's determination in Section
III.B, Power Factor Range, Point of Measurement, and Dynamic Reactive
Power Capability Requirements, the new reactive power requirement for
non-synchronous generators will be measured at the high-side of the
generator substation and should not result in the increased costs of
providing dynamic reactive power at the Point of Interconnection that
would substantially affect the financial viability of a non-synchronous
generator in the interconnection queue that AWEA and LSA raise in their
comments.
---------------------------------------------------------------------------

    \149\ Section 8.1 of the pro forma Large Generator
Interconnection Procedures state that, simultaneous with the
delivery of the System Impact Study, the transmission provider must
provide the interconnection customer with an Interconnection
Facilities Study Agreement. Likewise, section 3.5 of the pro forma
Small Generator Interconnection Procedures state that a transmission
provider must provide an interconnection customer a Facilities Study
Agreement along with the completed System Impact Study report.
    \150\ Section 7.3 of the pro forma Large Generator
Interconnection Procedures explains that the System Impact Study
will ``provide the requirements or potential impediments to
providing the requested interconnection service, including a
preliminary indication of the cost and length of time that would be
necessary to correct any problems identified in those analyses and
implement the interconnection,'' along with ``a list of facilities
that are required as a result of the Interconnection Request and a
non-binding good faith estimate of cost responsibility and a non-
binding good faith estimated time to construct.'' Section 5.0 of the
System Impact Study Agreement attached to the pro forma Small
Generator Interconnection Procedures as Attachment 7 provides the
same.
    \151\ See, e.g., Neptune Regional Transmission Sys., LLC v. PJM
Interconnection, L.L.C., 110 FERC ] 61,098, at P 23 (``Each customer
knows that subsequent cost allocations will be determined by
circumstances that are known as of the time its System Impact Study
is conducted. Projects may drop out of the queue and customers may
move up the queue, but the cost allocation system insulates an
interconnection customer from costs arising from events occurring
after its System Impact Study is completed, other than costs arising
from changes from higher-queued generators. . . . If an
interconnection customer were to be held financially responsible for
the costs of events occurring after its System Impact Study is
completed it would be impossible for the customer to make reasoned
business decisions.''), order on reh'g, 111 FERC ] 61,455 (2005),
aff'd sub nom. Pub. Serv. Elec. and Gas Co. v. FERC, 485 F.3d 1164
(D.C. Cir. 2007).
---------------------------------------------------------------------------

    62. In addition, using the execution of a Facilities Study
Agreement as the point in the interconnection process for transitioning
to the requirements of this Final Rule represents a clearly defined
point to avoid confusion in applicability. To further ensure clarity
for newly interconnecting non-synchronous generators, we include in the
revisions to section 9.6.1 to the pro forma LGIA and section 1.8.1 to
pro

forma SGIA this transition mechanism,\152\ which we require
transmission providers to adopt, as part of their compliance with this
Final Rule.\153\
---------------------------------------------------------------------------

    \152\ See infra P 74 (providing the amended text of section
9.6.1 to the pro forma LGIA and section 1.8.1 to the pro forma
SGIA).
    \153\ In West Deptford Energy, LLC v. FERC, 766 F.3d 10, 20
(D.C. Cir. 2014), the court explained that the tariff provisions in
effect at the time an interconnection agreement is executed apply to
that interconnection customer, ``unless the amended tariff has a
grandfathering provision.''
---------------------------------------------------------------------------

    63. We also amend Appendix G to the pro forma LGIA, which public
utility transmission providers are required to adopt, as part of their
compliance with this Final Rule. Appendix G to the pro forma LGIA
applies only to wind generators.\154\ Those newly interconnecting wind
generators that have executed a Facilities Study Agreement as of the
effective date of this Final Rule will be subject to the amended
Appendix G.\155\ If Appendix G is not applicable to any newly
interconnecting wind generators, the public utility transmission
provider or RTO/ISO should remove Appendix G from its LGIA as part of
its compliance filing. When all newly interconnecting wind generators
that have executed Facilities Study Agreements as of the effective date
of this Final Rule finalize their LGIAs and Appendix G is no longer
necessary, we encourage the public utility transmission providers and
RTOs/ISOs to file, or to include as part of, an FPA section 205 filing
a proposal to remove Appendix G from their LGIA.
---------------------------------------------------------------------------

    \154\ See Order No. 661, FERC Stats. & Regs. ] 31,186, Appendix
B (Appendix G--Interconnection Requirements for a Wind Generating
Plant).
    \155\ See infra P 74 (providing the amended text of paragraph
A.ii of Appendix G to the pro forma LGIA).
---------------------------------------------------------------------------

b. Upgrades to Existing Non-Synchronous Generators
    64. Some commenters raise concerns with applying the requirements
of this Final Rule to existing non-synchronous generators making
upgrades that require new interconnection requests.\156\ Generally,
such generators would otherwise be exempt from the reactive power
requirement. Lincoln argues that the proposed application of the new
reactive power requirements to existing non-synchronous generators
making upgrades could expose entities with existing power purchase
agreements to unforeseen expenses.\157\ As noted by AWEA and LSA, most
upgrades that require new interconnection requests do not involve
fundamental changes to the original technology, or to the hardware, but
instead simply involve software upgrades.\158\
---------------------------------------------------------------------------

    \156\ AWEA and LSA Comments at 14; Lincoln Comments at 2.
    \157\ Lincoln Comments at 2.
    \158\ AWEA and LSA Comments at 14.
---------------------------------------------------------------------------

    65. We recognize that there are a variety of triggering points for
a new interconnection request in the various transmission provider
regions, and the fact that an existing non-synchronous generator making
an upgrade may not be installing new equipment. We also acknowledge, as
the Commission did in the NOPR, that not all existing wind generators
are capable of providing reactive power without incurring substantial
costs to install new equipment.\159\ Therefore, we will not apply the
requirements of this Final Rule to existing non-synchronous generators
making upgrades that require new interconnection requests.\160\ Rather,
we will maintain the existing approach in Appendix G to the pro forma
LGIA for existing non-synchronous generators making upgrades to their
Generating Facilities that require new interconnection requests after
the effective date of this Final Rule, meaning that those upgrades will
be exempt from the requirement to provide reactive power unless the
transmission provider's System Impact Study shows that provision of
reactive power by that generator is necessary to ensure safety or
reliability.
---------------------------------------------------------------------------

    \159\ NOPR, FERC Stats. & Regs. ] 32,712 at P 17.
    \160\ Given our determination not to adopt the NOPR proposal, we
find moot AWEA and LSA's request that the Commission clarify what
constitutes a ``Material change'' to a generator that would trigger
a new interconnection study. We note that, on May 13, 2016,
Commission staff held a technical conference on generator
interconnection issues, exploring triggers for restudies, among
other things. See Review of Generator Interconnection Agreements and
Procedures, Supplemental Notice of Technical Conference, Docket Nos.
RM16-12-000, RM15-21-000 (issued May 4, 2016); Review of Generator
Interconnection Agreements and Procedures, Notice Inviting Post-
Technical Conference Comments, Docket Nos. RM16-12-000, RM15-21-000
(issued June 3, 2016) (Question 1.10: ``Should interconnection
procedures be more specific about what constitutes a material
modification to a generator interconnection request? Is it clear to
interconnection customers what types of modifications to their
interconnection requests would and would not affect their place in
the queue? Do transmission owners and RTO/ISOs exercise any level of
discretion in determining whether a customer has made a material
modification? What is the range and nature of that discretion?
Please reference provisions in interconnection procedures, as
applicable, in your answer.'').
---------------------------------------------------------------------------

    66. We decline AWEA and LSA's request that the reactive power
requirement apply only to the incremental capacity that results from an
upgrade in the event the System Impact Study shows the need for
reactive power.\161\ If a transmission provider's System Impact Study
shows the need for reactive power as a result of an upgrade, the
transmission provider should have the flexibility to require reactive
power capability consistent with the needs identified in the study,
including the ability to apply the reactive power requirements of this
Final Rule to all of the generator's capacity. Otherwise, allowing a
transmission provider to apply the reactive power requirements only to
the incremental capacity that results from an upgrade would undermine
the Commission's goal of ensuring adequate reactive power support for
the transmission system.\162\ Therefore, we will give transmission
providers the flexibility to apply the reactive power requirements to
all of an existing non-synchronous generator's capacity when that
generator makes an upgrade that requires a new interconnection request,
and the System Impact Study shows the need for reactive power.\163\
---------------------------------------------------------------------------

    \161\ AWEA and LSA Comments at 14-15.
    \162\ NOPR, FERC Stats. & Regs. ] 32,712 at P 11 (explaining the
Commission's concern that the growing penetration of wind generators
increases the potential for a deficiency in reactive power, and
resulting local reliability issues).
    \163\ As with the existing approach, should an existing non-
synchronous generator disagree with the transmission provider that
the System Impact Study shows a need for reactive power as a result
of the upgrade, it may challenge the transmission provider's
conclusion through dispute resolution or appeal to the Commission.
See Order No. 661, FERC Stats. & Regs. ] 31,186 at P 51.
---------------------------------------------------------------------------

    67. We require transmission providers to propose, as part of their
compliance with this Final Rule, tariff revisions implementing the
transition mechanism laid out above for existing non-synchronous
generators making upgrades to their Generating Facilities that require
new interconnection requests.

F. Regional Flexibility

    68. Multiple commenters request that the Commission recognize
independent entity variations for ISOs/RTOs and regional differences
for transmission providers outside of ISOs/RTOs in evaluating
compliance with the Final Rule.\164\
---------------------------------------------------------------------------

    \164\ EEI Comments at 11; Indicated NYTOs Comments at 3; ISO-NE
Comments at 11-12; ISO/RTO Council Comments at 3; Joint NYTOs
Comments at 3; NEPOOL Initial Comments at 6; NEPOOL Supplemental
Comments at 3-4.
---------------------------------------------------------------------------

    69. We apply here all three of the methods for proposing variations
adopted in Order No. 2003: (1) Variations based on Regional Entity
reliability requirements; (2) variations that are ``consistent with or
superior to'' the Final Rule; and (3) ``independent

entity variations'' from ISOs/RTOs.\165\ If a transmission provider
seeks to justify variations from the requirements of this Final Rule,
it may do so in its compliance filing. A transmission provider may
propose to include standards developed by NERC or a Regional Entity in
its own standard interconnection agreement. The Commission is mindful
of the work being done by these organizations in developing standards
for the interconnection of non-synchronous generators, and we strongly
encourage all interested parties to continue to participate in
developing these standards.
---------------------------------------------------------------------------

    \165\ Order No. 2003, FERC Stats. & Regs. ] 31,146 at PP 824-
827; see also Order No. 661, FERC Stats. & Regs. ] 31,186 at P 109.
---------------------------------------------------------------------------

G. Miscellaneous Comments

    70. CAISO argues that the Commission should allow transmission
providers to propose additional technical requirements for
interconnecting non-synchronous generators related to voltage support,
such as requiring automatic voltage control.\166\ Transmission
providers may propose additional technical requirements, to the extent
they believe those are necessary, in a separate filing pursuant to
section 205 of the FPA.
---------------------------------------------------------------------------

    \166\ CAISO Comments at 8.
---------------------------------------------------------------------------

    71. MATL requests clarification that the Commission will continue
to accept tariff arrangements that require customers on merchant
transmission lines to self-supply ancillary services. MATL specifically
requests that this clarification be included in the final rule
compliance obligation, and in similar future proceedings.\167\ We
clarify that merchant transmission lines that have received exemptions
from providing ancillary services will not be affected by this Final
Rule. Therefore, those entities that do not have reactive power
requirements in their Commission-approved OATTs will not need to submit
a compliance filing in response to this Final Rule.
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    \167\ MATL Comments at 5.
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    72. SCE requests that the Commission expand the scope of the
rulemaking proceeding to include low voltage ride-through requirements
for synchronous and non-synchronous Generating Facilities smaller than
20 MW.\168\ We decline to expand the scope of the rulemaking proceeding
to include low voltage ride-through requirements for synchronous and
non-synchronous Generating Facilities smaller than 20 MW. We note that
the Commission has issued a Notice of Proposed Rulemaking, Requirements
for Frequency and Voltage Ride Through Capability of Small Generating
Facilities, to consider these issues.\169\
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    \168\ SCE Comments at 4.
    \169\ See Requirements for Frequency and Voltage Ride Through
Capability of Small Generating Facilities, Notice of Proposed
Rulemaking, 81 FR 15481 (Mar. 23, 2016), 154 FERC ] 61,222 (2016).
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    73. AWEA and LSA request that the Commission limit the reactive
power requirements to a specific range of voltage at the Point of
Interconnection.\170\ NERC also recommends that the Commission clarify
the reactive power requirements by providing a reactive capability
versus voltage characteristic diagram.\171\ We find the request to
specify a voltage range for the reactive power requirements to be
outside the scope of this proceeding. The existing pro forma LGIA and
pro forma SGIA do not specify a voltage range for the reactive power
requirement for synchronous generators, and the Commission does not
have a sufficient record on which to create such a requirement.
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    \170\ AWEA and LSA Comments at 7 (explaining the range of
voltage and providing a proposed Q-V curve).
    \171\ NERC Comments at 9-10.
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IV. Compliance and Implementation

    74. Section 35.28(f)(1) of the Commission's regulations requires
every public utility with a non-discriminatory OATT on file to also
have on file the pro forma LGIA and pro forma SGIA ``required by
Commission rulemaking proceedings promulgating and amending such
interconnection procedures and agreements.'' \172\ The Commission
hereby revises section 9.6.1 of the pro forma LGIA to read:
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    \172\ 18 CFR 35.28(f)(1) (2015).

    9.6.1 Power Factor Design Criteria
    <IP_ADDRESS> Synchronous Generation. Interconnection Customer shall
design the Large Generating Facility to maintain a composite power
delivery at continuous rated power output at the Point of
Interconnection at a power factor within the range of 0.95 leading
to 0.95 lagging, unless the Transmission Provider has established
different requirements that apply to all synchronous generators in
the Control Area on a comparable basis. [The requirements of this
paragraph shall not apply to wind generators.] (Bracketed text is
deleted.)
    <IP_ADDRESS> Non-Synchronous Generation. Interconnection Customer
shall design the Large Generating Facility to maintain a composite
power delivery at continuous rated power output at the high-side of
the generator substation at a power factor within the range of 0.95
leading to 0.95 lagging, unless the Transmission Provider has
established a different power factor range that applies to all non-
synchronous generators in the Control Area on a comparable basis.
This power factor range standard shall be dynamic and can be met
using, for example, power electronics designed to supply this level
of reactive capability (taking into account any limitations due to
voltage level, real power output, etc.) or fixed and switched
capacitors, or a combination of the two. This requirement shall only
apply to newly interconnecting non-synchronous generators that have
not yet executed a Facilities Study Agreement as of the effective
date of the Final Rule establishing this requirement (Order No.
827).

    The Commission similarly revises section 1.8.1 of the pro forma
SGIA to read:

    1.8.1 Power Factor Design Criteria
    <IP_ADDRESS> Synchronous Generation. The Interconnection Customer
shall design its Small Generating Facility to maintain a composite
power delivery at continuous rated power output at the Point of
Interconnection at a power factor within the range of 0.95 leading
to 0.95 lagging, unless the Transmission Provider has established
different requirements that apply to all similarly situated
synchronous generators in the control area on a comparable basis.
[The requirements of this paragraph shall not apply to wind
generators.] (Bracketed text is deleted.)
    <IP_ADDRESS> Non-Synchronous Generation. The Interconnection Customer
shall design its Small Generating Facility to maintain a composite
power delivery at continuous rated power output at the high-side of
the generator substation at a power factor within the range of 0.95
leading to 0.95 lagging, unless the Transmission Provider has
established a different power factor range that applies to all
similarly situated non-synchronous generators in the control area on
a comparable basis. This power factor range standard shall be
dynamic and can be met using, for example, power electronics
designed to supply this level of reactive capability (taking into
account any limitations due to voltage level, real power output,
etc.) or fixed and switched capacitors, or a combination of the two.
This requirement shall only apply to newly interconnecting non-
synchronous generators that have not yet executed a Facilities Study
Agreement as of the effective date of the Final Rule establishing
this requirement (Order No. 827).

    In addition, the Commission revises paragraph A.ii of Appendix G to
the pro forma LGIA, ``Technical Standards Applicable to a Wind
Generation Plant,'' as follows: \173\
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    \173\ The full text of the pro forma LGIA will be posted on the
Commission's internet page at: http://www.ferc.gov/industries/electric/indus-act/gi/stnd-gen.asp. The full text of the pro forma
SGIA will be posted on the Commission's internet page at: http://www.ferc.gov/industries/electric/indus-act/gi/small-gen.asp.

    The following reactive power requirements apply only to a newly
interconnecting wind generating plant that has executed a Facilities
Study Agreement as of the effective date of the Final Rule
establishing the reactive power requirements for non-

synchronous generators in section 9.6.1 of this LGIA (Order No.
827). A wind generating plant to which this provision applies shall
maintain a power factor within the range of 0.95 leading to 0.95
lagging, measured at the Point of Interconnection as defined in this
LGIA, if the Transmission Provider's System Impact Study shows that
such a requirement is necessary to ensure safety or reliability. The
power factor range standard can be met by using, for example, power
electronics designed to supply this level of reactive capability
(taking into account any limitations due to voltage level, real
power output, etc.) or fixed and switched capacitors if agreed to by
the Transmission Provider, or a combination of the two. The
Interconnection Customer shall not disable power factor equipment
while the wind plant is in operation. Wind plants shall also be able
to provide sufficient dynamic voltage support in lieu of the power
system stabilizer and automatic voltage regulation at the generator
excitation system if the System Impact Study shows this to be
required for system safety or reliability.\174\
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    \174\ Section A.ii of Appendix G to the pro forma LGIA.

    75. As in Order Nos. 2003 \175\ and 661,\176\ the Commission is
requiring all public utility \177\ transmission providers to adopt the
requirements of this Final Rule as revisions (as discussed above) to
the LGIA and SGIA in their OATTs within 90 days after the publication
of this Final Rule in the Federal Register.\178\ Transmission providers
that are not public utilities also must adopt the requirements of this
Final Rule as a condition of maintaining the status of their safe
harbor tariff or otherwise satisfying the reciprocity requirement of
Order No. 888.\179\ As discussed above, we are not requiring changes to
interconnection agreements already in effect, but are applying the
requirements of this Final Rule to newly interconnecting non-
synchronous generators that have not yet executed a Facilities Study
Agreement. The requirements of this Final Rule also do not apply to
existing non-synchronous generators making upgrades to their Generating
Facilities that require new interconnection requests.
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    \175\ Order No. 2003, FERC Stats. & Regs. ] 31,146 at P 910.
    \176\ Order No. 661, FERC Stats. & Regs. ] 31,186 at P 121.
    \177\ For purposes of this Final Rule, a public utility is a
utility that owns, controls, or operates facilities used for
transmitting electric energy in interstate commerce, as defined by
the FPA. See 16 U.S.C. 824(e) (2012). A non-public utility that
seeks voluntary compliance with the reciprocity condition of an OATT
may satisfy that condition by filing an OATT, which includes the pro
forma LGIA and pro forma SGIA.
    \178\ MISO requests that the Commission extend the requirements
of this Final Rule to the MISO pro forma Generator Interconnection
Agreement and not just to the Commission's pro forma LGIA and pro
forma SGIA. MISO Comments at 4-6. As stated, each public utility
transmission provider subject to this Final Rule is directed to
adopt the requirements of this Final Rule as revisions to the
standard interconnection agreements in its OATT.
    \179\ Order No. 888, FERC Stats. & Regs. ] 31,036 at 31,760-63.
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    76. In some cases, public utility transmission providers may have
provisions in the currently effective LGIAs and SGIAs in their OATTs
related to the provision of reactive power by non-synchronous
generators that the Commission has deemed to be consistent with or
superior to the pro forma LGIA and pro forma SGIA. Where the relevant
provisions of the pro forma LGIA and pro forma SGIA are modified by
this Final Rule, public utility transmission providers must either
comply with this Final Rule or demonstrate that their previously-
approved LGIA and SGIA variations continue to be consistent with or
superior to the pro forma LGIA and pro forma SGIA as modified by this
Final Rule.
    77. In addition, some ISOs/RTOs may have provisions in the
currently effective LGIAs and SGIAs in their OATTs related to the
provision of reactive power by non-synchronous generators that the
Commission has accepted as an independent entity variation to the pro
forma LGIA and pro forma SGIA. Where the relevant provisions of the pro
forma LGIA and pro forma SGIA are modified by this Final Rule, ISOs/
RTOs must either comply with this Final Rule or demonstrate that their
previously-approved LGIA and SGIA variations continue to justify an
independent entity variation from the pro forma LGIA and pro forma SGIA
as modified by this Final Rule.

V. Information Collection Statement

    78. The following collection of information contained in this Final
Rule is subject to review by the Office of Management and Budget (OMB)
regulations under section 3507(d) of the Paperwork Reduction Act of
1995.\180\ OMB's regulations require approval of certain information
collection requirements imposed by agency rules.\181\ Upon approval of
a collection of information, OMB will assign an OMB control number and
expiration date. Respondents subject to the filing requirements of this
Final Rule will not be penalized for failing to respond to this
collection of information unless the collection of information displays
a valid OMB control number.
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    \180\ 44 U.S.C. 3507(d) (2012).
    \181\ 5 CFR 1320.11 (2015).
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    79. The reforms adopted in this Final Rule revise the Commission's
pro forma LGIA and pro forma SGIA in accordance with section
35.28(f)(1) of the Commission's regulations.\182\ This Final Rule
requires each public utility transmission provider to revise its pro
forma LGIA and pro forma SGIA to: (1) Eliminate the exemptions for wind
generators from the requirement to provide reactive power; and (2)
require that all newly interconnecting non-synchronous generators that
have not yet executed a Facilities Study Agreement provide reactive
power as a condition of interconnection as set forth in their LGIA or
SGIA as of the effective date of this Final Rule. The reforms adopted
in this Final Rule require filings of pro forma LGIAs and pro forma
SGIAs with the Commission. The Commission anticipates the revisions
required by this Final Rule, once implemented, will not significantly
change currently existing burdens on an ongoing basis. With regard to
those public utility transmission providers that believe that they
already comply with the revisions adopted in this Final Rule, they can
demonstrate their compliance in the filing required 90 days after the
effective date of this Final Rule. The Commission will submit the
proposed reporting requirements to OMB for its review and approval
under section 3507(d) of the Paperwork Reduction Act.\183\
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    \182\ 18 CFR 35.28(f)(1) (2015).
    \183\ 44 U.S.C. 3507(d) (2012).
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    80. While the Commission expects the revisions adopted in this
Final Rule will provide significant benefits, the Commission
understands that implementation can be a complex and costly endeavor.
The Commission solicited comments on the accuracy of provided burden
and cost estimates and any suggested methods for minimizing the
respondents' burdens. The Commission did not receive any comments
concerning its burden or cost estimates. Therefore, the Commission
retains the estimates proposed in the NOPR, with minor changes to
reflect updated estimates.
    Burden Estimate: The Commission believes that the burden estimates
below are representative of the average burden on respondents. The
estimated burden and cost for the requirements adopted in this Final
Rule follow.\184\
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    \184\ Commission staff estimates that industry is similarly
situated in terms of hourly cost (wages plus benefits). Based on the
Commission's average cost (wages plus benefits) for 2015, $72/hour
is used.

                                                       FERC 516B Revisions in Final Rule in RM16-1
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Number of     Annual number of                                                            Total annual  burden
                                       respondents      responses per   Total number of  responses  Average burden (hrs.) and   hours  and total  annual
                                          \185\          respondent                                   cost ($) per response            cost  ($)
                                                 (1)               (2)  (1) * (2) = (3)...........  (4)......................  (3) * (4) = (5)
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Conforming LGIA changes to                       132                 1  132.......................  7.5......................  990 hours.
 incorporate revisions.                                                                             $540.....................  $71,280.
Conforming SGIA changes to                       118                 1  118.......................  7.5......................  885 hours.
 incorporate revisions.                                                                             $540.....................  $63,720.
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